ASIC releases its guidance on equity crowd funding

On Friday, ASIC released its regulatory guide on equity crowd-sourced funding (CSF) for public companies, ahead of the new laws coming in on 29 September 2017, to assist companies seeking to raise funds through equity CSF to understand and comply with their obligations when using the new regime.

This was accompanied by a new regulatory guide for intermediaries involved in the operation of equity CSF platforms, including the process for licensing of such intermediaries, who have a unique ‘gatekeeper’ obligation for operating platforms for equity CSF offers.

See the following links for full copies of the ASIC Regulatory Guides:

• Regulatory Guide 261 - Crowd-sourced funding: Guide for public companies
• Regulatory Guide 262 - Crowd-sourced funding: Guide for intermediaries

The new guidance is an essential read for any person looking to embark on an equity CSF campaign, including the template CSF offer document to be used for such a process.

Further information on crowd funding can be found on ASIC’s website here, including information on applications:

• to register new public companies or convert existing proprietary companies to public companies, to be eligible to raise funds using CSF and to access the corporate governance concessions, and
• by intermediaries for an AFS licence with an authorisation to provide CSF services.

For a reminder on the new laws coming in at the end of the month, see our recent blog on three essential things to know on the new CSF regime.

Ben Wood and Reece Walker

Crowd funding update - catering for the remaining 99%

It was good to see the release of draft equity crowd-sourced funding (CSF) legislation for proprietary companies, as part of the 2017-18 Federal Budget package (on 11 May) – with the Government responding to a number of criticisms from various stakeholders (including Labor), following the finalisation of the CSF regime for public companies.  These new laws will be welcome to many, with proprietary companies representing over 99% of companies in the Australian market.

The new laws will remove the need for proprietary companies to transition to public companies.  Instead, investors will be protected by additional obligations, which are currently proposed to include a requirement to have a minimum of two directors, complete financial reporting in accordance with accounting standards (including audit requirements where more than $1 million is raised), and restrictions on related party transactions.  In return, the prospectus disclosure requirements for CSF offers will be relaxed and ‘CSF shareholders’ will not count towards the current shareholder limit (of 50 non-employee shareholders) which applies to proprietary companies.

For a copy of the exposure draft of the new laws click here, together with the accompanying explanatory memorandum here.

For further details on the existing and upcoming CSF laws for public companies (which will commence on 29 September 2017), see our earlier blog:

• Equity crowd funding finally past the post - but is it a dodo? 23 March 2017

You will need to move quickly to have your say on the new laws for proprietary companies – with submissions closing on Tuesday, 6 June 2017.  However, the likely timing of the further changes remains to be seen and, with the recent laws for public companies having taken nearly 3 years to pass, may be met with some scepticism.  It is one we will continue to watch closely.

Reece Walker and Ben Wood

Equity crowd funding finally past the post - but is it a dodo?

It is good to see that the equity crowd funding laws have finally been cleared for Australia, with the Senate having passed the Bill on Monday. This was following finalisation of the debate on proposed cooling off rights for retail investors (which was ultimately extended from 48 hours to five days). The laws allow unlisted public companies with less than $25 million in assets and turnover to raise up to $5 million in funds in this way.

As per our earlier blogs, a key potential chink in the armour of the new laws is its limited application to public companies and not proprietary (private) companies, which represent 99% of small businesses.

This has been recognised by various stakeholders, including Labor, with Opposition digital economy spokesman Ed Husic suggesting that amendments will be required in the near term and suggesting that “any future changes will make today's new dodo of a system extinct within the year, as smaller business opt for a better alternative.”

Crowd funding given the nod by Senate committee

We were pleased to see some progress on the crowd-sourced equity funding (CSEF) laws this week, with the most recent Bill passing the House of Representatives and a recommendation from the Senate committee that it be passed by the Upper House, subject to a review after two years.

Unfortunately it remains a contentious Bill, with Labor continuing to push for changes to the laws and releasing a dissenting report.  Labor does not pull any punches, describing the approach to the CSEF laws as having ‘limited scrutiny of a flawed bill in an effort to rush through legislation that is likely to be superseded by a revised framework’.  Even if the Bill is finally passed, it will continue to be an area to watch for further changes.

In particular, there are ongoing objections to the ‘public company’ requirement from an number of stakeholders and industry participants.

For a refresher on the anticipated rules for CSEF see our prior blogs:

• Equity crowd funding back on the agenda, and
• Crowd funding: no joy for start-ups?

Ben Wood and Reece Walker

Equity crowd funding back on the agenda

Following on from our post last year (Crowd funding: no joy for start-ups?) on crowd-sourced equity funding (CSEF), it is good to see that the Corporations Amendment (Crowd-sourced Funding) Bill 2016 (Cth) (2016 Bill) was presented before the House of Representatives on Thursday, 24 November 2016 by Treasurer Scott Morrison.  This is the second attempt by the Federal Government to introduce CSEF legislation after the Corporations Amendment (Crowd-sourced Funding) Bill 2015 (Cth) (2015 Bill) lapsed following the double dissolution from the election earlier this year.