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:
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.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.