Equity crowdfunding in Australia has long been delayed. Originally floated as an idea back in 2009, it took the Australian Government until March 2017 to finally pass the Corporations Amendment (Crowd-sourced Funding) Act 2017, and now faces a further six month delay before being available to private companies.
This is despite the best efforts of Ed Husic, the Shadow Minister for Employment Services, Workforce Participation and Future of Work, who introduced an amendment to the bill that would cut the six month period before the bill takes effect down to only three months. This amendment was promptly voted down by the Turnbull led Coalition before passing the lower house in its original form.
Without the amendment taking affect the Act only allows for unlisted public companies with annual turnover or gross assets of up to $25 million to participate in this new form of equity raising. These companies are able to raise up to $5 million in any 12-month period, with a cap of $10,000 per retail investor. Offers to invest in the company can only be made on one of the seven approved crowdfunding portals.
Despite the long and drawn out process required to get the equity crowdfunding legislation approved the original form of the Act immediately faced calls for an amendment. The requirement that companies adopt a public corporate structure was at odds with the how new businesses are typically structured. Estimates placed the number of companies adopting a private, rather than public, structure at 97 – 99%, effectively closing the door to equity crowdfunding to almost every business in the country.
With the amendment now passing the lower house it goes to the Senate where it is expected to pass with bipartisan approval. From there Australian companies interested in tapping equity crowdfunding as a source of finance for their business must wait a further six months or incur the added expensive of converting to a public corporate structure.