Government Proposing that Proprietary Companies Can Participate in Crowd-Sourced Funding

Government Proposing that Proprietary Companies Can Participate in Crowd-Sourced Funding

The Federal government has released an “Exposure Draft” which would enable Proprietary Companies to participate in Crowd-Sourced Funding.

The Crowd-Sourced Funding Legislation which enables Proprietary Companies to be converted to Unlisted Public Companies goes live on 29 September 2017.

If the legislation proposed in the “Exposure Draft” is passed by the Parliament that legislation would operate from six months after the legislation receives royal assent.

The government has called for comments on the “Exposure Draft” which close on 6 June 2017.

Key items contained in the “Exposure Draft”

  • Proprietary Companies which wish to participate in Crowd-Sourced Funding would be known as “CSF Proprietary Companies”;
  • CSF Proprietary Companies would require a minimum of two directors;
  • CSF Proprietary Companies would need to abide by financial reporting in accordance with accounting standards;
  • auditors will be required to be appointed if the company has raised in excess of $1 million;
  • there will be restrictions on related party transactions;
  • there will be minimum Shareholder rights to participate in exit events;
  • CSF Proprietary Companies will be able to exceed the fifty non-employee Shareholders cap;
  • A person will only be a CSF Shareholder if they purchase the securities as part of a CSF offer. If the securities are sold or transferred in any other way, the new holders of those securities will no longer be CSF Shareholders;
  • there will be additional reporting obligations for CSF Proprietary Companies;
  • the requirements for Crowd-Sourced Funding Companies relating to:
  • maximum capital raise in a twelve month period of $5 million;
  • maximum investment that a retail investor can make of $10,000 on a twelve 12 month period per company;
  • retail investor protection;
  • Intermediaries acting as the “Gatekeepers” for the legislation

will also apply for the CSF Proprietary Companies.

What this highlights very clearly is that there is going to be a lot of interest in Crowd-Sourced Funding by small/medium enterprises operators, inventors and entrepreneurs.

Investors who have traditionally not being able to invest in these type of companies might find these investment opportunities very interesting.

ESS BIZTOOLS/ESS BASIP have developed a full product package “Crowd-Sourced Funding Equity Raising Package” which will be updated to reflect the changes in the legislation when they are passed by Parliament.

It will probably be at least March/ April 2018 before companies are able to raise capital as CSF Proprietary Companies.  In the meanwhile how many of your clients might be interested in being in a position to raise capital under the law which commences operations on 29 September 2017?

Our suggestion is you start a conversation with your clients by presenting a seminar to acquaint your clients/prospects with the opportunities that are emerging in the marketplace.

 

You could sign up now for the Crowd-Sourced Funding Equity Raising Package which will be updated to incorporate changes when they are law for $399 (including GST).  Click here to subscribe.

Click here if you would like to talk to an ESS BASIP representative?

Peter Towers

Managing Director

ESS BIZTOOLS and ESS BASIP

Peter Towers
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