Further to our article (here), on 14 September 2017 Treasurer Scott Morrison introduced the legislation to extend crowdsourced equity based funding (CSF) legislation to proprietary companies.
This is a particularly important development for innovative, early-stage businesses that may have difficulty accessing funding from traditional sources.
Under the current scheme, proprietary companies seeking to raise capital through crowdsourcing platforms have been required to convert their proprietary structure into a public company entity. If the legislation is passed, proprietary companies will be able to crowdfund while retaining the greater flexibility of a proprietary model.
However, if a proprietary company chooses to use the proposed new regime to raise CSF, it will be required to comply with additional obligations designed to protect investors, including, in summary:
- a minimum of two directors
- financial reporting in accordance with accounting standards
- audited financial statements once the company raises more than $3 million from crowdfunding offers
- restrictions on related party transactions.
The relevant legislation, the Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Bill 2017 (Cth), is currently before the House of Representatives.