Australia: Crowd-sourced funding regime finally gets Senate tick of approval

Last Updated: 30 March 2017
Article by Simone Collignon
Services: Corporate & Commercial
Industry Focus: Life Sciences & Healthcare

What you need to know

  • The Turnbull government's crowd-sourced funding bill has passed through the Senate, introducing a regulatory framework for crowd-sourced equity funding in Australia which is expected to come into effect from September 2017.
  • The new fundraising regime enables small unlisted public companies to seek out investors on licensed crowdfunding portals to raise up to $5 million a year and avoid barriers that small businesses and start-ups traditionally face when looking to raise capital (including onerous disclosure requirements under the Corporations Act 2001). Retail investors will be able to invest up to $10,000 per offer per year, in an unlimited number of businesses.
  • The new framework is intended to promote innovation and growth amongst small Australian businesses, following in the footsteps of the US, UK, New Zealand and others who already have formal crowdfunding investment regimes in place.

The Turnbull government's crowd-sourced funding bill has passed through the Senate, introducing a regulatory framework for crowd-sourced equity funding in Australia.

The Corporations Amendment (Crowd-sourced Funding) Bill 2016 passed on 20 March 2017 and is expected to come into effect by September this year. This was the government's second attempt at establishing a crowd-sourced funding regime, with passage of the bill coming after more than two years of government debate and industry consultations.

What will the crowd-sourced funding legislation do?

In short, the legislation will:

  • allow small unlisted public companies to advertise their business plans and seek out investors on licensed crowdfunding portals, enabling those companies to raise up to $5 million a year while avoiding barriers that small businesses and start-ups traditionally face when looking to raise further capital, including onerous disclosure requirements under Chapter 6D the Corporations Act 2001
  • give retail investors access to a broader range of investment opportunities, allowing them to invest up to $10,000 a year each into an unlimited number of businesses
  • provide new public companies that are eligible to crowd fund with temporary relief from certain reporting and corporate governance requirements (in effect, giving those companies a chance to adjust to the change from a proprietary to a public company so they can focus on the success of their businesses in the short-term rather than on the enhanced corporate governance requirements that come with converting to a public company)
  • enable the Minister to exempt certain financial market and clearing and settlement facility operators from specified parts of the Australian Market Licence and licensing regimes.

The new fundraising regime is part of the government's National Innovation and Science Agenda, released in December 2015, which promoted crowd-sourced funding as a means of enabling small businesses to raise equity from the public and therefore broaden Australia's innovation industry. Its introduction also complements favourable tax concessions for investors in early stage innovation companies, which the government introduced in July last year.

Treasurer Scott Morrison has repeatedly advocated for the changes as a means of offering start-ups and early stage companies greater choice in how they fund and finance their operations, saying in the Second Reading of the Bill that the new framework will "serve as both a complement and a source of competition to more traditional funding options for small businesses, including bank debt products."1 In adopting this framework, Australia is following in the footsteps of legislators in the US, UK, New Zealand and elsewhere who have already formally adopted crowd-sourced equity funding. One of the broader goals of this legislation is therefore to reduce the competitive disadvantage that local businesses currently experience, by making Australia a more competitive investment market in line with what is occurring overseas.

Mixed support from businesses and industry players

There has been support from sections of the business community, particularly existing crowdfunding platforms such as Equitise and CrowdfundUP, which have traditionally only been able to offer investment opportunities to 'sophisticated investors' with more than $2.5 million of assets outside the family home or income above $250,000 a year, or to retail investors under the 'small-scale offer' provisions of the Corporations Act (limited to 20 investors to raise a maximum of $2 million a year). Co-founder of online equity crowdfunding platform Equitise, Jonny Wilkinson, is reported here to have said he foresees "huge demand" from retail investors keen to invest in growth companies and that his company will launch offers as soon the crowdfunding framework is in place and licensing begins later this year.2

However not everyone is convinced. A number of industry players have expressed doubts about the regime's ability to truly promote innovation opportunities given that proprietary companies, which make up around 99% of Australian businesses, remain excluded and would be required to convert to unlisted public companies if they want to benefit from the new fundraising opportunities. Others see this as a reasonable measure, arguing that companies seeking to raise millions of dollars from investors should be willing to face and be held accountable by shareholders and therefore be transparent when it comes to company earnings and accounts. In any event, the legislation seeks to alleviate some of the regulatory burden by granting newly converted public companies a five year reprieve from (amongst other things) holding annual general meetings, auditing accounts and providing paper annual reports. Furthermore, the Treasurer has indicated that the government continues to explore options for proprietary companies and we should expect further amendments to be tabled later in 2017.

Who can participate?

The crowdfunding regime will be open to:

  • unlisted public companies with less than $25 million of gross assets and less than $25 million annual turnover and who are not subsidiaries of or related to a listed entity. These companies may raise up to $5 million in any 12 month period, provided that they must complete a crowd-sourced equity funding offer within either 12 months of registration as or conversion to a public company. To participate, the company must register with a licensed crowdfunding platform and any offer to investors must be contained in or accompanied by an offer document containing all of the information specified in the regulations (which are far less onerous than the existing disclosure requirements in the Corporations Act)
  • licensed crowdfunding platforms holding an Australian Financial Services Licence, who will be expected to act as 'gatekeepers' by undertaking due diligence on issuer companies and providing risk warnings to investors
  • 'retail' or 'mum and dad' investors, who will be able to invest up to $10,000 per offer in a 12 month period (though they can invest in an unlimited number of offers during that time), provided they have accepted a risk acknowledgement prior to submitting a crowd-sourced equity funding application. Investors will also benefit from a five day cooling-off period for each investment.

Further specifics on how the regime will operate in practice will be set out in the Regulations, which are yet to be released. Nevertheless eligible companies and crowdfunding platforms should give some thought as to whether they wish to participate in the regime and, if so, what measures they will need to take now to ensure they are ready once the framework is up and running later this year.

Key takeaways

The new crowd-sourced funding regime presents an exciting opportunity for small companies to access investors who have, until now, been largely unreachable because of the onerous disclosure requirements faced by companies seeking to raise capital via share issues. While crowd-sourced equity funding may not be (commercially) desirable or appropriate for every small business, it does offer these companies an alternative to traditional fundraising options, such as bank debt. If you are a small business looking for additional capital, then Australia's new crowd-sourced funding regime may be just what you need to take that next step in the growth of your business.


1 Federal Treasurer Scott Morrison, Second Reading of the Bill on 24 November 2016. The full reading is available at;query=Id%3A%22chamber%2Fhansardr%2Fd8b39000-045b-46aa-b142-3ba818466f26%2F0005%22.

2 Article on Business Insider Australia, 'Companies are queueing to use Australia's new equity crowdfunding laws' by Chris Pash, 21 March 2017. Full text available at

This article is intended to provide commentary and general information. It 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 article. Authors listed may not be admitted in all states and territories

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Simone Collignon
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.