Crowd-sourced equity funding: First steps

Equity crowd funding has taken some first, tentative practical steps.  The new crowd-sourced funding (CSF) regime that started at the end of October 2017 - designed to reduce costs and red-tape for start-ups and SMEs looking to raise capital from a large number of small investors – is still being tweaked, as proprietary companies were excluded from eligibility.  This will be rectified with a bill currently before the Parliament. 

In the meantime, CSF intermediaries – the ASIC licensed companies that will operate the funding platform – have begun offering an investing service, but unsurprisingly without too much deal flow just yet. 

It usually pays to adopt a wait and see approach with new funding regimes, but for those keen for an alternative, low cost way to raise funds from retail investors, the current regime is worth considering.  If your business has less than $25 million in gross assets and $25 million in annual turnover and either is, or is prepared to become a public company, then the current CSF regime could be a way to tap up to $5m in any 12 month period.  There are also some corporate governance concessions – less red tape - for new companies established or converted for the purpose of using the CSF regime. 

For everyone else, once proprietary companies are included in the mix – likely during calendar year 2018 - equity crowd-funding should be included as a realistic capital raising option, particularly for regional businesses who often have trouble accessing capital markets.  As always with capital raising, start planning early!

Paul Gray
Principal Lawyer
T  03 5225 5231
E  pgray@ha.legal

or

Jesse Drever
Lawyer
T  03 5225 5226
E  jdrever@ha.legal