The proposed Corporations Amendment (Crowd-Sourced Funding) Bill has been described by the Australian Labor Party as “cosmetic” and “continuing to lock out startups and small businesses”, according to a report by the Senate Economics Legislation Committee (ELC).
The proposed amendments have been met with mixed reactions from stakeholders, with many criticising the proposed bill for prohibiting privately-held companies from offering shares to the public via equity crowdfunding. Dr Marina Nehme, senior lecturer at UNSW Faculty of Law, noted that this excludes “over 99.7 percent of companies” in Australia.
“Such a reality defeats the purpose for introducing legislation to facilitate CSF as only a very small minority of companies will be able to raise funds through this mode of finance,” she said, according the ELC report.
Under the proposed bill, publicly-held companies are able to raise up to AU$5 million in any 12-month period through local equity crowdfunding platforms such as Equitise and VentureCrowd.
Startups and small businesses that decide to become public companies to take advantage of the new crowdsourced equity funding framework will be granted an exemption from certain corporate governance and reporting obligations for up to five years.
However, many stakeholders consider this to be inadequate, with Labor senators also calling it “self-defeating”.
“The failure to review alternate small business friendly models after this length of time is inexplicable,” said TMeffect, angel investment group.
In November, Treasurer Scott Morrison indicated in a statement that the government is discussing the possibility of extending crowdsourced equity funding in 2017 to proprietary companies; however, the incomplete nature of the current proposal poses a problem for startups and small businesses looking to access…