Small businesses and start-ups have been given a capital funding boost thanks to the Federal Government’s introduction of legislation to facilitate crowd-sourced equity funding.
A statement from Federal Treasurer Scott Morrison annouced the Corporations Amendment (Crowd-sourced Funding) Bill 2016 enables unlisted public companies with less than $25 million in assets and annual turnover to facilitate crowd sourced equity funding, and the ability to raise up to $5 million in any 12-month period through crowdfunding platforms.
“Small companies that become public companies to use crowdfunding will be given a transition period of up to five years during which they will be eligible for exemptions from certain corporate governance and reporting requirements,” said Treasurer Morrison.
Morrison also reveals the Government is planning to extend crowd-sourced equity funding in the new year to proprietary companies, which already have lower corporate governance and reporting requirements.
According to Morrison, the Government has been focused on balanced the fundraising needs of businesses and investor protection.
“Companies will need to meet minimum disclosure requirements. Retail investors will have an investment cap of $10,000 per company per 12 month period and a cooling off period – allowing withdrawal from their investment for up to 48 hours after making a commitment,” the statement from Morrison said.
“Licenced crowdfunding intermediaries will play a gatekeeping role by conducting checks on the companies they list on their platforms.”
In addition, the bill also:
- Increases flexibility to support development of new and specialised financial markets, including crowd-sourced equity funding platforms
- Extends the Treasurer’s powers to exempt specialised, and emerging financial market operators from clearing and settlement licensing regimes.
- Allows licensing requirements to be tailored to the needs of each market.
The framework for the legislation will take effect six months from the date the Bill receives Royal Assent.
MYOB CEO, Tim Reed, has welcomed the announcement of the legislation.
“[This will] make it easier for technology start-ups and SMEs to work with government agencies,” he says.
But the benefits don’t end there according to Reed.
“Opening access to the Government’s technology budget for innovative smaller companies is a positive move on several fronts. Removing restrictions for smaller businesses will act as a stimulus for them to bring more focus to how technology can improve public services,” he says.
“It will also create more opportunities for these businesses to succeed, and has the potential to improve the lives of Australians across the nation by making it easier for them to interact with government.”