Unlisted public companies will soon be able to use crowd-sourced funding (CSF), following the passage today of the Corporations Amendment (Crowd-sourced Funding) Bill 2016 which will come into effect six months after assent ‒ so companies and intermediaries should start getting ready now.
Who can use crowd-sourced funding (and how)?
Apart from one change to the cooling-off period, the Crowd-sourced Funding Bill is unchanged from the version we examined in December 2016.
CSF is still only available to small unlisted public companies. While the Bill does not extend eligibility to use crowd-sourced funding to proprietary companies, the Government has announced that it will continue to consult on a CSF regime for proprietary companies in 2017.
Only companies with less than $25 million of gross assets and less than $25 million annual turnover will be able to access the scheme
The CSF available will remain capped at $5 million in any 12-month period (inclusive of any raisings under the small scale offerings exception).
Investment will also remain capped at $10,000 per company per 12-month period. There is no cap on investment across different companies.
The Senate introduced changes to the cooling-off period, which will now be 5 business days, instead of 48 hours.
Getting ready for crowd-funding
The Crowd-sourced Funding Bill leaves some crucial details to the Regulations, which are yet to be made (although draft Regulations were released for consultation in 2015).
Given this, eligible companies and CSF intermediary platforms should be seeking advice now so they understand what they can (and can't do) without the details in the Regulations being finalised.
They also of course should be keeping an eye out for the Regulations, and getting involved in any further consultation process.
Start-ups and other eligible companies should be reviewing their funding plans for the 12-24 months as a start, to see if there is any opportunity to use the new crowd-sourced funding regime. They should also remember:
- at this stage the CSF regime is only available to public companies - so they need to understand what this means in terms of costs of regulatory compliance and governance;
- companies will have to use a specific CSF offer document for offerings;
- companies can only have one CSF offer open at any one time;
- CFS offers will remain open for a maximum of three months;
- a CSF offer can only be published on a single platform; and
- making a CFS offer does not prevent the company from also offering securities of the same class in the normal way (keeping in mind the $5m cap referred to above).
CFS intermediary platforms should ensure that they have the specific financial services licences, and that they design the platforms not just to comply with the Bill, but also with any further requirements to be set out in the Regulations.