On 22 March 2017 the Australian Parliament passed the much anticipated Corporations Amendment (Crowdsourced Funding) Bill 2016 (CSEF bill). The new crowd-sourced equity funding (CSEF) regime will commence on 29 September 2017.
CSEF involves an entity raising money by way of small contributions from a large number of participants, sourced through an online crowdfunding platform. CSEF has for the most part been excluded from the Australian fundraising landscape because of regulatory requirements.
Presently, there is a general prohibition on proprietary companies making public offers (outside of exemptions such as the small-scale exemption and professional/sophisticated investor exemption), as well as a cap of 50 non-employee shareholders for proprietary companies. In addition, there are onerous disclosure and compliance requirements of public companies who wish to raise money by way of a public offer, including restrictions on advertising and the requirement to issue a prospectus.
Following a number of years of consultation, Australia will now join the likes of other countries which support crowd-sourced equity funding such as the UK, Canada, USA and New Zealand. The introduction of the CSEF regime in Australia means that small innovative companies may now have access to CSEF as a funding option to expand and develop their business and ideas.