Unlisted public companies will soon be able to use crowd-sourced
funding (CSF), following the passage today of the
Corporations Amendment (Crowd-sourced Funding) Bill 2016 which will
come into effect six months after assent - so companies and
intermediaries should start getting ready now.
CSF is still only available to small unlisted public companies.
While the Bill does not extend eligibility to use crowd-sourced
funding to proprietary companies, the Government has announced that
it will continue to consult on a CSF regime for proprietary
companies in 2017.
Only companies with less than $25 million of gross assets and
less than $25 million annual turnover will be able to access the
The CSF available will remain capped at $5 million in any
12-month period (inclusive of any raisings under the small scale
Investment will also remain capped at $10,000 per company per
12-month period. There is no cap on investment across different
The Senate introduced changes to the cooling-off period, which
will now be 5 business days, instead of 48 hours.
Getting ready for crowd-funding
The Crowd-sourced Funding Bill leaves some crucial details to
the Regulations, which are yet to be made (although draft
Regulations were released for consultation in 2015).
Given this, eligible companies and CSF intermediary platforms
should be seeking advice now so they understand what they can (and
can't do) without the details in the Regulations being
They also of course should be keeping an eye out for the
Regulations, and getting involved in any further
Start-ups and other eligible companies should be
reviewing their funding plans for the 12-24 months
as a start, to see if there is any opportunity to use the new
crowd-sourced funding regime. They should also remember:
at this stage the CSF regime is only available to public
companies - so they need to understand what this means in terms of
costs of regulatory compliance and governance;
companies will have to use a specific CSF offer document for
companies can only have one CSF offer open at any one
CFS offers will remain open for a maximum of three months;
a CSF offer can only be published on a single platform;
making a CFS offer does not prevent the company from also
offering securities of the same class in the normal way (keeping in
mind the $5m cap referred to above).
CFS intermediary platforms should ensure that they have the
specific financial services licences, and that they design the
platforms not just to comply with the Bill, but also with any
further requirements to be set out in the Regulations.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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