Corporations and Markets Advisory Committee (CAMAC) recently delivered its report on Crowd Sourced Equity Funding to Finance Minister, Mathias Cormann, calling for the government to make it easier for Australian businesses to raise capital through online crowdfunding platforms.
The Corporations and Markets Advisory Committee (CAMAC) recently delivered its report on Crowd Sourced Equity Funding ("CSEF") to Finance Minister Mathias Cormann, calling for the government to make it easier for Australian businesses to raise capital through online crowdfunding platforms.
This report proposes a way forward for the introduction of CSEF in Australia and follows the publishing of discussion papers in September and December 2013 and submissions from respondents as highlighted in our January 2014 article.
The government's National Industry Investment and Competitiveness Agenda is due to be released in the coming months and, with this report, there is a compelling case for equity crowdfunding to feature in the government's future policy plan.
Startups and small to medium enterprises in other jurisdictions can use crowdsourced equity funding to raise capital by offering equity to large numbers of small-scale investors through online crowdfunding platforms, similar to rewards-based crowdsourcing platforms Kickstarter and Pozible.
But in Australia, CSEF is only available to wholesale investors with more than $2.5 million in investable assets or annual earnings of around $250,000. This amounts to around 200,000 individuals.
In one of the CAMAC's final reports before its functions are subsumed into the Department of Treasury, it said promoting crowdsourced equity funding would promote productivity and economic growth, as well as help keep entrepreneurs in Australia who might otherwise choose to establish their businesses in other markets.
The report provides a comprehensive analysis of moving forward with facilitating a market for equity crowdfunding in Australia, while ensuring appropriate safeguards for investors who might not have significant experience investing in high-risk ventures.
The report does however recommend that all companies which use CSEF platforms be required to either convert to a new type of company, called an 'exempt public company' or start out as one. This would require a private company to convert to an exempt public company involving considerable administrative and legal costs, whilst requiring startups to establish themselves as exempt public companies from the outset requiring significant foresight on behalf of the founders.
Whilst still not policy, the possibility of the introduction of a regulatory regime that supports CSEF in Australia is an exciting possibility that we consider will have significant benefit to Queensland's economy. We remain supportive of the introduction of CSEF in Australia and feel that the changes suggested by CAMAC will be beneficial and supportive of our entrepreneurs and early-stage technology companies.
For accounting advice regarding raising capital from all sources, be it, equity, debt or a hybrid of solutions, please speak to your Hanrick Curran Advisor or ask for Matthew Beasley or Matthew Green on 07 3218 3900.