On 9 May 2017, the Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Bill 2017 (Bill) was released for public consultation. If passed into law, the Bill will allow proprietary companies that meet eligibility requirements to access crowd-sourced funding (CSF).
As detailed in a recent blog post on the FinTech Law Watch, CSF will become available in Australia on 28 September 2017 due to the Corporations Amendment (Crowd Sourced Funding) 2016 (Cth) (Act). However, the Act limits the availability of crowd-sourced funding to public unlisted companies.
The Bill will extend the CSF regime to proprietary companies as well, removing the need for proprietary companies to transition to the public company type to be able to access CSF.
Here are some of the changes that the Bill proposes.
- CSF is available to proprietary companies that have at least 2 directors.
- There is no limit to the number of CSF shareholders that a proprietary company can have and remain a proprietary company (previously, a proprietary company could only have 50 non-employee shareholders).
- Proprietary companies that have CSF shareholders will have to prepare annual financial and directors’ reports in accordance with accounting standards.
- Proprietary companies that raise more than $1 million from CSF offers will have to have their annual financial reports audited.
- Proprietary companies that make a CSF offer will have to include details about the offer and the shareholders as part of their company registers.
- An exemption from the takeover rules in Chapter 6 if the company’s constitution provides a minimum level of protection for CSF investors to participate in an exit event (ie get ‘bought out’).
Other aspects of the Act will continue to apply, including that individuals seeking to invest via CSF can contribute up to $10,000 per company, per year.
We will be watching these developments.