Crowdfunding laws pass through Parliament

Under the Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Bill 2017, crowdfunding will be extended to private Australian companies, opening the door for start-ups and other small businesses to raise funds from the public.

The legislation will come into effect by the end of October.

Previously, unlisted public companies with less than $25 million in annual turnover and assets could source and raise up to $5 million a year through crowdfunding platforms in any 12-month period.

Private companies would be required to convert to unlisted public company status before they could fundraise through crowdsourcing.

Treasurer Josh Frydenberg said in a statement that, as part of the changes, proprietary companies wanting to access equity crowdfunding will no longer have to convert to a public company entity.

Instead, founders will be able to crowdfund while retaining the greater flexibility of the corporate model.

“This is an exciting development for small businesses and start-ups and is another way that the Coalition government is creating a policy framework that encourages innovation and supports small businesses to grow,” Mr Frydenberg said.

“The extension will also increase the ability of individuals to access early-stage investment opportunities.”

The Australian Small Business and Family Enterprise Ombudsman Kate Carnell said that, with the new legislation, crowdfunding opens up competition in alternative sources of finance, which will help small businesses start, operate and grow.

“It also allows a safer environment for everyday investors – customers, friends, family and the general public interested in novel and exciting business ideas - and not just specialised investors," Ms Carnell said.

“We will monitor the progress of this new legislation and hope the impact on small businesses is a positive one.”

Last year, the Institute of Public Accountants chief executive Andrew Conway said crowdfunding would help bridge the “capital gap” faced by many young and emerging start-ups.

“Australia has a relatively poor global record of commercialising innovation and lags behind most advanced economies on this matter, so addressing the lack of funding for start-ups is critical,” Mr Conway said.

“It is these innovative firms that drive economic transformation, and which are much needed to respond to a dynamic, global environment.”