It is good to see that the equity crowd funding laws have finally been cleared for Australia, with the Senate having passed the Bill on Monday. This was following finalisation of the debate on proposed cooling off rights for retail investors (which was ultimately extended from 48 hours to five days). The laws allow unlisted public companies with less than $25 million in assets and turnover to raise up to $5 million in funds in this way.
As per our earlier blogs, a key potential chink in the armour of the new laws is its limited application to public companies and not proprietary (private) companies, which represent 99% of small businesses.
This has been recognised by various stakeholders, including Labor, with Opposition digital economy spokesman Ed Husic suggesting that amendments will be required in the near term and suggesting that “any future changes will make today's new dodo of a system extinct within the year, as smaller business opt for a better alternative.”
However, Mr Husic’s concerns of a soon to be superseded system may be misplaced. While Finance Minister Mathias Cormann has insisted that work is already underway to extend the laws to proprietary companies, it is difficult to be filled with confidence given the time it has taken for the passage of the Bill on Monday (following two years of industry consultations, and nearly three years since the initial recommendations by CAMAC and equivalent laws were passed in New Zealand). It is also unlikely to be an easy process, requiring changes to the very nature of what a proprietary company represents under current laws.
In the meantime, the new laws are certainly an important first step to ensuring that Australia keeps up with its foreign counterparts when it comes to equity crowd funding. The new laws are expected to come into effect within the next six months.