Crowd-sourced funding (CSF) is a developing alternative to traditional capital funding methods, allowing eligible early stage / start-up companies to raise funds from a larger pool of investors without the need for costly disclosure documents such as a prospectus.
CSF took significant steps forward with the Corporations Amendment (Crowd Sourced Funding) 2016 (Cth) (Act) that establishes a regulatory framework to facilitate CSF by small, unlisted public companies in Australia receiving assent and coming into operation. The CSF regime takes effect from 28 September 2017.
The Act allows eligible unlisted public companies with an annual turnover or gross assets of up to $25 million to advertise their business plans on a licensed online crowd funding platform to raise up to $5 million in 12 month rolling periods. Investors receive a share of the company in return for their investment.
Potential investors who make an application in relation to a CSF offer are entitled to a cooling off period providing them an unconditional right to withdraw their application for shares within 5 days of making it, giving investors time to reconsider their decision to invest.
The new regime will be facilitated through a CSF intermediary, who acts as the “gatekeeper” between the company and the investor. All CSF offers must be made via the platform of the CSF intermediary. Those intending to operate as a CSF intermediary will be required to hold an Australian Financial Services Licence (with the appropriate authorisations) and may also be required to obtain an Australian Market Licence.
If you are considering becoming a CSF intermediary, please see our blog post “Looking to become a CSF intermediary under the new Australian crowd sourced funding regime?” .
If you are considering raising capital through the CSF regime, please see our blog post “Looking to raise capital under the new Australian crowd sourced funding regime?“.
You can also find additional information about the CSF regime for potential CSF intermediaries and companies on the ASIC website.