The Australian Parliament has passed the government’s legislation for the introduction of two new types of companies, from 1st July 2016. These companies are:
- Crowd Funding Companies (CFC)
- Early Stage Innovation Companies (ESIC)
Crowd Funding Companies
CFCs are public companies which will be able to raise up to $5M per annum from investors. For sophisticated investors, there is no restriction on the amount of the annual investment, however for retail investors, the limit is $10,000 per company per annum.
The CFC will have to appoint an intermediatory, which is an organisation that holds an Australian Financial Services Licence. They will act as the gatekeeper under the legislation
Early Stage Innovation Companies
These companies will require to have expenditure in the previous year of less than $1M and income of less than $200,000. To be deemed to be an ESIC, the company will have to pass a 100-point test to be eligible. The test includes:
- A review of expenditure on research and development.
- Whether the company has received an Accelerating Commercialisation Grant
- Whether the company has participated in an Accelerator Program.
- Whether in excess of $50,000 from arms-length investors has been raised.
- Whether the company has registered any patents or plant patent in the last 5 years.
- Whether the company has registered any innovation patents or registered designs over the last 5 years.
Alternatively, the company could qualify if it has focused on developing commercialisation, by one or more new or significantly improved products, processes, services, marketing or organisational methods. This will have to be certified by an independent “expert”.
Retail investors will be able to invest up to $50,000 per annum per company, whilst there will be no restrictions on investments by sophisticated investors.
Investors are able to claim a 20% tax rebate on their investments, to a maximum rebate of $200,000. Investors will be entitled to a CGT exemption if they hold the shares for more than 12 months and less than 10 years.
There are going to be tremendous opportunities for accountants in these new types of corporate entities. In both cases, these companies are going to need to prove that they’re “investment ready”, to satisfy the “gatekeeper”, in the case of CFCs and, in the case of ESIC, the marketplace in particular.
The companies will require business plans, budgets and cashflow forecasts, marketing plans, Intellectual Property strategies and commercialisation strategies. Perhaps they could get some assistance by applying for a government grant.
Many of these companies will be looking for experienced financial persons to be Directors, Company Secretaries and to perform a CFO services role in their companies.
ESS BIZTOOLS is releasing two new product modules in the next couple of weeks, to assist accountants/advisors to deliver business advisory services to clients relative to these new types of corporate vehicles. If you wish to receive an advanced notification on these product packages, please contact us on 1800 232 088 or send us an email at firstname.lastname@example.org.