Australia: Corporate focus: Useful exemptions for private company fundraising

Last Updated: 29 June 2018
Article by Esteban Gomez and Trent Taylor

Most Read Contributor in Australia, September 2018

Early stage and emerging private companies are often hungry for capital. It is important they are aware the Corporations Act 2001 (Cth) (Corporations Act) strictly regulates how equity fundraising takes place. A number of useful exemptions from the disclosure requirements of the Corporations Act may be used by private companies raising equity capital to avoid the need for expensive and time consuming disclosure requirements, including preparing a prospectus.


Directors and executives of early stage and emerging companies seeking to raise new or further equity capital should be aware of the exemptions available at law which exist to facilitate fundraising in many circumstances.


In general terms, an Australian proprietary (or 'private') company must not engage in activity that would require disclosure to investors - for example, by the preparation and issue of a prospectus. The requirement to give disclosure is a key protection to ensure that retail investors are given sufficient information to make a decision on whether to invest in a company.

This rule is subject to a number of important exemptions available to private companies including as contained in section 708 of the Corporations Act. A number of the key exemptions are described below and these form the backbone of the exceptions for disclosure in connection with private company equity fundraising in Australia.

The '20/12/AU$2 million' or small scale offerings exemption

This exemption allows small scale offers to occur over rolling 12-month periods, as long as they do not result in more than 20 investors being issued shares and more than AU$2 million being raised. Offers must be personal, which means there must be some connection with a person who is likely to be interested in the offer.

The sophisticated investor exemption

This exemption encompasses the making of offers:

  1. where the minimum amount payable by the person is at least AU$500,000 (note that this can be expanded to include amounts previously paid by the person for shares in the same class); or
  2. it appears from a certificate given by a qualified accountant no more than two years before the offer is made that the person:
    1. has net assets of at least AU$2.5 million; or
    2. has a gross income for each of the last 2 financial years of at least AU$250,000,

(note that paragraph (b) can be expanded to include where the offer is made to a company or trust controlled by the person).

Any offer made to such a person is deemed to be made to a 'sophisticated investor' and does not require disclosure. However, note that the Australian Securities and Investments Commission (ASIC) has recently expressed concern over use of qualified accountant certificates to circumvent the disclosure protections afforded to retail investors, including by the use of trust or company structures. Care must be taken to ensure that certificates are provided within the law.

The professional investor exemption

This exemption covers offers made to a person who has or controls gross assets of at least AU$10 million, or who are otherwise 'professional investors' at law. A professional investor includes:

  • a financial services licensee
  • an Australian Prudential Regulatory Authority (APRA) body, such as a bank or insurance company
  • stock-exchange listed entities; and
  • pension funds with net assets of at least AU$10 million.

The senior manager exemption

This exemption covers offers to senior managers or their spouse, parent, child, brother or sister, or a body corporate controlled by any such person.

Central to the exemption is the definition of 'senior manager'. This definition is amended by legislative instrument so that it includes any person who is concerned in, or takes part in, the management of the company (regardless of designation and whether or not the person is a director or secretary of the company).

Certain offers to present holders

This exemption covers offers of shares for issue under a dividend reinvestment plan or bonus share plan.

Offers for no consideration

This exemption covers offers of shares where no consideration is to be provided for the issue or transfer of the shares.

Employee incentive schemes

By legislative instrument ASIC has provided conditional relief from disclosure and other requirements for offers made under certain employee incentive schemes. Among other requirements, offers cannot exceed AU$5,000 in value per participant in any 12-month period and 20 per cent of the issued capital on the company.

Related considerations

The above exemptions cannot be looked at in isolation. The following are a number of related considerations:

  • The Corporations Act regulates offers of securities received in Australia, regardless of where any resulting issue, sale or transfer occurs. Therefore, it is possible for overseas companies not otherwise captured by the Corporations Act to be captured by the disclosure and exemption requirements where making offers into this jurisdiction (although regulatory relief may be available). Conversely, offers received outside of Australia may not be captured, although they may be captured by overseas laws.
  • The Corporations Act regulates both offers for issue of new shares and offers for sale of existing shares. Accordingly, both must be considered including as recipients of issued shares may not be able to subsequently sell them without disclosure unless an exemption applies or regulatory relief is available. Notably, offers for sale within 12 months of issue are restricted, as are offers by controllers in certain circumstances. These 'on-sale' provisions are principally anti-avoidance measures where the shares were not originally issued with disclosure. Note that certain exemptions from disclosure (such as the small scale offerings exemption) only apply to an offer for issue of shares and so another available exemption or relief applying to on-sale must be considered and, if appropriate, relied upon.
  • Several exemptions may be combined over a number of proposed recipients of offers to ensure that all recipients are adequately covered. For example, certain offer recipients may be covered by the small scale offerings exemption, while others may separately qualify as sophisticated investors.
  • While an exemption from disclosure may apply, a proposed offeror must still comply with applicable advertising and securities hawking restrictions.


Early stage and emerging private companies hungry for capital need to be aware of how the Corporations Act strictly regulates the manner in which fundraising can occur. The exemptions outlined above may facilitate the raising of equity capital more efficiently and effectively as they provide a number of circumstances where the substantial financial and time cost requirement of preparing a disclosure document (such as a prospectus) does not need to be undertaken.

However, while a number of exemptions are available, compliance with specific exemption requirements must be taken seriously as significant penalties can apply to offers made without disclosure in circumstances where an exemption or regulatory relief is not available.

Transaction documents involving an issue or sale of shares should also take into account any available exemptions and ensure that appropriate warranties and confirmations are given.

What's next?

Recent Australian legislation regarding crowd sourced equity funding has been proposed to extend from public to private companies. If this occurs it will provide a further avenue for private companies to access funds from non-traditional sources.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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.

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”

Related Topics
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions