The government is making changes to make it easier and less expensive for small businesses, including start-ups, to raise equity from the general public, while ensuring adequate investor protection.
Australia’s current regulatory requirements create a barrier to widespread use of Crowd-sourced Equity Funding (CSEF). This means small innovative companies are missing out on funding that could help them develop their ideas.
Introducing laws to provide access to CSEF in Australia will provide a diverse range of funding options for businesses and will remove the competitive disadvantage compared to their international counterparts.
Crowd-sourced equity funding (CSEF) schemes exist in various countries, including in the UK and New Zealand. In the first 12 months following its launch, the New Zealand CSEF scheme enabled more than 20 innovative companies to raise over $12 million in combined funds.
What is it?
CSEF is a new fundraising approach that:
- Allows entrepreneurs to raise funds—up to $5 million per year—from a large number of individuals in return for equity in their company
- Gives companies, that become a public company to access CSEF a five year exemption from the normal reporting and disclosure requirements that apply to public companies.
Who is eligible?
- CSEF will be available to Australian public companies with a turnover and gross assets of less than $25 million.
- Individuals seeking to invest using a CSEF platform can contribute up to $10,000 per company, per year.
When is it happening?
- The Australian Parliament passed legislation to implement CSEF on 22 March 2017.
- The CSEF scheme will commence within six months of the legislation receiving Royal Assent.
- Regulations setting out the details of the scheme will be released soon.
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