Legislative changes to Crowd- sourced equity funding
Legislative changes to crowd funding have recently occured. Deborah Johns, Partner at Platnium Supporter Gilbert + Tobin and Heads Over Heels Advisory Board member, has recently published an article highlighting these changes, entitled ‘The wisdom of crowd-sourced equity funding’.
In this article Deborah highlights the changes to crowdfunding legislation as per the Corporations Amendment (Crowd-sourced Funding) Act 2017 (Cth) (Act) which received Royal Assent on the 28th of March, 2017.
Here is an excerpt:
The Act, sets out requirements for eligible companies and eligible offers, requirements for how the offer must be made and obligations on CSF intermediaries (ie, the platform operators) and in respect of the platforms. It has the following key features:
- the offers must be made by “eligible CSF companies” – only unlisted public companies with less than A$25 million in consolidated gross assets and less than A$25 million in annual revenue are able to access the CSF regime;
- the offer must meet certain requirements, including a fundraising cap of A$5 million in any 12 month period;
- the offer must be made via a “CSF offer document” which will involve reduced disclosure requirements, and must be published on the platform of a single CSF intermediary;
- CSF intermediaries must be licensed to provide crowd funding services, and must comply with further requirements on intermediaries to undertake gatekeeper obligations such as due diligence on the CSF offer companies;
- the platform must:
- prominently display generic risk warnings to investors, cooling off periods (5 business days) and fee arrangements;
- include an application facility; and
- at all times, while the offer is open or suspended, operate a Q&A facility;
- investment caps for retail investors of A$10,000 per issuer per 12 month period (with CSF intermediaries being obliged to reject applications if, having regard to CSF offers for which they are the responsible intermediary, the cap is breached), and requires investors to provide a risk acknowledgement statement;
- restrictions on advertising of CSF offers, with advertising permitted provided certain mandatory statements are included – however, there are exceptions for publications on the CSF intermediary’s platform;
- eligible new public companies (including a proprietary company that converts to a public company limited by shares) are provided with temporary relief from reporting and corporate governance requirements (including AGMs, audited financial reports and half-yearly reporting) for a maximum period of five years;
- amendments to the Australian Securities and Investments Commission Act 2001 (Cth) to place the provisions introduced by the Act within the purview of ASIC; and
- the introduction of civil penalties and criminal offences for CSF intermediaries who fail to comply with obligations imposed under the Act.
The article also highlights Licensing requirements that are required including:
- Australian Financial Services Licence
- Australian Market Licence