The Senate has passed the Turnbull government’s crowd-sourced funding Bill , introducing a regulatory framework for crowd-sourced equity funding.
The new framework is expected to come into effect from September this year.
The new fundraising regime enables small unlisted public companies to seek 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 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 changes were originally announced in 2015 as government's response to the Murray Financial System Inquiry (FSI).
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 framework is open to unlisted public companies with less than $25 million of gross assets, 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.
There is some concern the framework is not available to proprietary companies, which make up the vast majority of Australian business. To qualify, they would have to convert to unlisted public companies.