The Government has released for public consultation draft legislation and associated explanatory materials to extend Crowd-sourced Equity Funding (CSEF) to proprietary companies. These changes are being progressed as part of the 2017-2018 Budget.
CSEF is an innovative type of fundraising that allows a large number of individuals to make small financial investments in exchange for an equity stake in the company. The Government has already passed legislation that will establish a CSEF regime for public companies, commencing 29 September 2017.
The draft legislation will amend the Corporations Act 2001 to extend the CSEF regime to proprietary companies, improving access to finance for start ups and innovative small businesses. These amendments remove the need for proprietary companies to transition to the public company type, reducing cost and compliance burdens. Investors will be protected by additional obligations that CSEF proprietary companies will be required to uphold. These obligations include: a minimum of two directors; financial reporting in accordance with accounting standards; audit requirements; restrictions on related party transactions; and minimum shareholder rights to participate in exit events.
All interested parties are invited to make a submission by Tuesday 6 June 2017. More information on the Government’s CSEF regime for public companies is available at http://www.asic.gov.au/regulatory-resources/financial-services/crowd-sourced-funding/.