Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Bill 2017
Following the release of draft legislation extending the crowd-sourced equity funding (CSF) regime to proprietary companies (discussed in our earlier update), the Government has introduced a Bill to Parliament based on the draft legislation. Key features of the Bill remain the same as the draft legislation, such as the exemption of proprietary companies making CSF offers from the takeover provisions of the Corporations Act 2001 (Cth) (Corporations Act) (although the Bill proposes the Government have power to impose regulations on the exemption) and the two director requirement. However, the Bill has been amended in some respects following consultation on the draft legislation. These changes include:
- Exemption of secondary transfers by CSF shareholders from the 50 shareholder cap: Proprietary companies are required to have less than 50 non-employee shareholders. The draft legislation provided that CSF shareholders who on sell their shares would become shareholders. However, sensibly, this has been amended with purchasers of CSF shares remaining CSF shareholders provided the company is not listed on a financial market. CSF shareholders can now exit their investment without the company inadvertently breaching the shareholder cap and forcing it to convert to a public company.
- Grandfathering public company reporting concessions of current regime: The Bill removes temporary concessions for public company reporting and governance obligations that are part of the current CSF regime. Public companies which make CSF offers and obtain access to those benefits will have those benefits those grandfathered.
- Increase in threshold at which proprietary companies must comply with reporting and record keeping obligations: The CSF fundraising threshold, at which additional financial reporting and record keeping obligations will apply to proprietary companies raising funds from CSF offers, has been raised from $1 million in funds raised to at least $3 million in funds raised. The threshold for compliance with the revised financial reporting regime, which grandfathered public companies will be required to comply with under the current CSF regime, will also be increased from $1 million to $3 million.
- Shorter withdrawal period: The Bill also amends the current CSF regime to reduce the withdrawal period for CSF investors when a company issues a supplementary or replacement offer document from one month to 14 days.
The proprietary company CSF regime will take effect six months after the date the bill receives royal assent. However, the Bill’s proposed changes to the current CSF framework, excluding the removal of grandfathered corporate governance concessions for public companies, will commence on royal assent.
ASIC publishes policy for assessing applications for CSF intermediary authorisations
ASIC has announced its policy for assessing applications for Australian financial services licence (AFSL) applicants seeking CSF intermediary authorisations. Applications can be made from 29 September 2017, when the CSF regime for public companies commences. Our most recent update on the current CSF regime and the AFSL application process which will apply can be found here. Key features of ASIC’s policy for assessing applications for a CSF intermediary authorisation on an AFSL include:
- considering CSF applications lodged between 29 September 2017 and 27 October 2017 in batches, where ASIC considers those applications will be positively assessed;
- refusing, or placing in batches for assessment, those applications that are lodged late in the period from 29 September 2017 and 27 October 2017, applications which are incomplete, inadequate, or do not contain mandatory information and supporting proof documentation; and
- publication of specific CSF authorisation questions to be answered in the AFSL application, a specific CSF authorisation proof and an amended adequacy of resources statement, relating to IT capacity, for CSF authorisation.
ASIC has developed this process to expedite the licensing process, while ensuring initial assessments are fair and equitable for all applicants, facilitating orderly entry to the market. ASIC notes that these arrangements will apply only to AFSL applications and will not extend to Australian market licence applications. Despite the ‘batch’ approach, ASIC will only discuss issues relating to AFSL applications with individual applicants.