Making it easier to access crowd-sourced equity funding 

What is the initiative?

The government has recently introduced the Corporations Amendment (Crowd Sourced Funding) Bill 2015. The Bill sets out a new disclosure regime for crowd-sourced equity funding (CSF), an emerging form of funding that allows businesses to raise funds from a large number of small-scale investors.

Barriers to CSF under the current law

Existing rules present barriers to small businesses and start ups raising funds through an offer of securities.  At present, proprietary companies are limited to 50 non-employee shareholders and cannot make public offers of securities. While public companies are not subject to these limits, they are subject to higher corporate governance and reporting obligations which may be unwieldly for small businesses.

Amendments to the Corporations Act

The Bill establishes a new disclosure regime by inserting new Part 6D.3A--Crowd-sourced Funding into Chapter 6D, largely replacing the stricter requirements in Part 6D.2 which prescribe when a disclosure document is required and in Part 6D.3 which sets out the prohibitions, liabilities and remedies that usually apply to offers of securities.

The CSF regime is intended to provide an additional funding option for small businesses and start-ups that may otherwise struggle to obtain affordable finance and also to provide additional investment opportunities to retail investors who may not have direct access to early stage financing.  However, the CSF regime recognises that small businesses and start ups generally involve higher risk and that such investments are likely to be relatively illiquid. It accordingly seeks to balance the reduction in barriers to funding with ensuring adequate protection for investors.

Under the proposed Bill, an offer for securities can be made under the CSF regime where:

  • the offer is for a primary issue of securities, that is, it applies to the issue (not sale) of securities of the company making the offer;  
  • the company is an eligible CSF company, that is, a company which:
    • is a public company limited by shares;
    • has its principal place of business in Australia;
    • has a majority of directors that ordinarily reside in Australia;
    • has consolidated gross assets of less than $5 million;
    • has consolidated annual revenue of less than $5 million;
    • is not, nor is any related party, a listed corporation; and
    • is not, nor is any related party, an investment company;  
  • the securities are of a class prescribed by the regulations;  
  • the company has not raised the "issuer cap" of $5 million in a 12 month period, that is, the maximum amount sought by the company under the offer plus all amounts raised under any other CSF offer made in the last 12 months or amounts raised in the last 12 months from either small scale personal offers or certain offers made via an Australian Financial Services Licence (AFSL) is less than $5 million; and  
  • the company does not intend to use the funds to invest in securities in other entities/schemes.

Investor protections

Certain protections apply to all investors which seek to ensure that investors can make informed decisions and protect them from excessive levels of risk.  Additionally, retail investors benefit from the following additional protections:

  • a retail investor is subject to a cap of $10,000 per company via a particular CSF intermediary within a 12-month period;  
  • a retail investor has unconditional cooling-off rights which allow them to withdraw their application within five business days of it being made;  
  • the issuer company and its related parties together with the CSF intermediary and its associates are prohibited from providing financial assistance or arranging to provide financial assistance to a retail investor; and  
  • a CSF intermediary must obtain a risk acknowledgment prior to accepting a CSF application from a retail investor.

Corporate governance concessions

In order to assist with the compliance costs of becoming a public company, eligible companies will also receive an exemption from their obligations under the Act to hold AGMs, produce audited financial statements and appoint an auditor, and have the option to provide financial reports to shareholders online.  These concessions are available to companies who indicate on their registration that they will satisfy the requirements to be eligible CSF company on registration and that they intend to make a CSF offer after registration and are available for up to 5 years following the date of registration.  Additionally, in order to be eligible for the concessions, the company must complete a CSF offer within 12 months of registration.

The Bill was introduced into Parliament on 3 December 2015 and was referred to the Senate Economics Legislation Committee. The committee is due to report by 22 February 2016.

The Incubator Support Programme

What is the initiative?

The Incubator Support Programme (ISP) is a new $8 million branch of the government's flagship Entrepreneur's Programme (EP) that will provide further incubation support to early-stage businesses. In line with the EP, this programme focuses on three key drivers:

  • Accelerating Commercialisation;
  • Business Management; and
  • Research Connections.

Incubators offer a different type of assistance and development to other start-up assistance methods. Typically, a "mother company provides services such as access to bank loans, networking activities and technology commercialisation assistance.

This programme takes a more market-oriented approach to nurturing young companies, with the aim of incubating innovation in a business environment to produce globally competitive businesses in a shorter period of time.

The ISP also offers two specific features:

  • access to a Commercialisation Adviser to unlock support from other government services and programmes; and
  • coordination of the Australian Innovation Network, an online portal to help entrepreneurs access information on start-up support opportunities, activities and events across Australia.


The ISP seeks to commercialise ideas in as short a period of time as possible. As a result, technology companies and other sectors with high innovation potential can benefit from broader incubator support in the form of mentoring, funding and office space. The NISA's support for programmes such as the ISP is designed to allow Australia to emulate well-established and successful programmes in the United States, Europe and Israel.  Improved commercialisation of early-stage businesses will facilitate greater acquisition activity, especially in markets where new technologies have a potentially game-changing disruptive effect, such as fintech and biotech.  Large industry incumbents need to be agile, seek to capitalise on new technology to deliver improved products and services and limit the risks that increased start-up activity pose to their competitive landscape. 

The ISP will start from 1 July 2016.

Faster research-industry collaborative project grants

What is the initiative?

Another key aspect of the NISA is the government's decision to fast-track the provision of industry-focused research project funding, designed to stimulate more collaboration between universities and businesses.  From 1 July 2016, the Australian Research Council's Linkage Projects scheme will be open to continuous applications, and decision-making will be fast-tracked.

The Linkage Projects scheme seeks to bring together researchers, business, industry and other stakeholders to develop solutions which help to generate economic, commercial, social and cultural benefit.  Currently, applicants are often required to wait up to 9 months for a decision on their application, so fast tracking of decisions and the acceptance of applications on a continual (rather than annual) basis will be of great assistance for researches and business partners alike.  Not only can research-industry collaboration support the development of new ideas, products and services, it can also present companies with to access work-ready researchers, the latest knowledge, technology and equipment as well as international knowledge networks.


Access to sufficient capital and finance is one of the biggest problems encountered by a new start-up. Traditional sources of finance are often hard to come by, as financiers are unwilling to take on the significant risks during the early days of a start-up, when the eventual product is still months or potentially years away from being brought to market.  Research grants represent a key component of the alternative sources of funding typically relied upon by start-ups, and the announcement of continuous rounds of research-industry collaboration grants will be gladly received by both start-ups and more established business alike. 

The continuous rounds will open from 1 July 2016.