While the CSF regime removes some of the existing regulatory barriers to capital raising, there are a number of other key considerations for eligible companies intending to utilise the CSF regime. Below are just a few:
- CSF intermediary platform requirements: Offers for a company’s securities must be made through an authorised CSF intermediary. At this point in time and apart from service fees, it is unclear whether a CSF intermediary will impose any other obligations on the company to be admitted onto their platform (e.g. due diligence, verification and CSF offer document sign off obligations).
- Disclosure requirements: The CSF offer document must contain certain information required by the regulations which are yet to be released.
- Liability: The Company and its individual directors and officers may be held liable for loss or damage suffered by a person due to a defective CSF offer document. Accordingly, it is important that you have a reasonable objective basis for the contents of the CSF offer document. In particular, you will need to be careful when providing financial forecasts and statements regarding future events.
- Restrictions on advertising: There will be restrictions on advertising for the CSF offer.
- How do you value your business: In practice, you will need to determine a pre-money valuation for your company to set an appropriate offer issue price.
- Setting a minimum size for investment: While there is a maximum investment cap of $10,000 per investor per offer, to avoid having many shareholders with small parcels and the associated administrative burden, you may want to consider setting a minimum subscription amount.
- Share buy-back mechanisms: Where certain requirements are met, companies utilising the CSF regime will be exempt from meeting higher corporate governance and reporting requirements applicable to public companies for a period of 5 years (e.g. annual audit and filing of financial statements). At the expiry of the 5 year period, the company may want to ensure that it has in place effective mechanisms to allow it to convert back to a proprietary company should the need arise (e.g. consider including share buy-back, share valuation mechanisms in the company’s constitutional documents).