The Corporations Amendment (Crowd-Sourced Funding) Bill has been reintroduced into Parliament on Thursday morning, after being shelved by the Australian government earlier this year.
The amended Bill [PDF] enables unlisted public companies with less than AU$25 million in gross assets and less than AU$25 million in annual turnover to raise capital via crowdsourced equity funding, which is a relatively new form of funding in Australia, allowing companies to raise funds from a large pool of investors through an online portal.
Under the new Bill, companies will be able to raise up to AU$5 million in any 12-month period through local equity crowdfunding platforms such as Equitise and VentureCrowd.
Where previous legislation limited the scope of equity crowdfunding to wholesale or sophisticated investors who earn at least AU$250,000 a year or have AU$2.5 million in assets, the new proposed Bill enables retail investors to invest up to AU$10,000 per company per year, with a 48-hour cooling-off period.
In addition, 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.
Licensed crowdfunding intermediaries will be required to conduct checks on the companies they list on their platforms.
While the new Bill still prohibits private companies from raising funds from the public, Treasurer Scott Morrison indicated in a statement that the government is discussing the possibility of extending crowdsourced equity funding in 2017 to proprietary companies.
Marina Nehme, senior lecturer at UNSW Faculty of Law, cautioned that extending crowdsourced equity funding to private companies might actually lead to their death.
"With increased regulation, the cost of running a private company will rise. This type of business may no longer meet the need of people who are currently running closely held companies -- which form the bulk of private companies," she wrote in an article.
The new crowdsourced equity funding framework will come into effect six months from the date the Bill receives royal assent.
"The legislation will complement the Turnbull government's existing financial sector and innovation policies including the push for an internationally competitive FinTech industry, new tax incentives for angel investors and startups, and changes to the tax treatment of crypto currencies," Morrison said in a statement on Thursday.
Jonny Wilkinson, co-founder of equity crowdfunding platform Equitise and member of the Treasurer's Fintech Advisory Group (FTAG), said that while more needs to be done around private companies, it's important to get a new framework into the market. He also said he's happy to see both major political parties getting behind the new crowdsourced equity funding framework.
"There has been a large amount of work from within Treasury and the treasurer's office, as well as tireless efforts from Ed Husic to get this through," Wilkinson said.
The federal government initially released a set of draft regulations on Australia's proposed crowdsourced equity funding framework in December last year; however, the Bill lapsed after Labor senators released a dissenting report, accusing the Senate committee of failing "to address the very real concerns raised" by stakeholders during the submissions process.
"The government has listened to stakeholders on how to best balance the fundraising needs of businesses and investor protection," Morrison said in a statement on Thursday.