Equity Crowdfunding in Australia - a second chance to get it right!
The passage of the "Corporations Amendment (Crowd-sourced funding) Bill 2015" (i.e. Equity Crowdfunding) has been put on hold/ cancelled ahead of the upcoming federal election. Whilst at first glance this would appear to be very disappointing- looking deeper at what the Bill actually contained I'm actually not sure that its' cancellation is a bad thing. My primary misgivings with the original proposal is that it would appear that the drafters' were simply trying to replicate a scaled-down version of the ASX rather than develop a quality equity based crowdfunding model. i.e. the requirement that the entities have to be "public" companies rather than Pty Ltd, and that an "Intermediary" holding a AFSL needs to handle the issue as well as the ASIC being required to sign-off on the offer document.
All of these things will add 10's of thousands to the cost of any funds raised (an industry expert that I was speaking to believes that to raise between $500k and $1m through this process you probably wouldn't get much change from $70k for fundraising charges and costs)
Whilst I definitely believe that there is a need for a Second Board market - especially in light of the recent changes proposed to the ASX (essentially doubling the size requirements of any listings), tying all of these compliance requirements to Equity Crowd Funding is not the answer. The whole purpose of Equity Crowd Funding - is to enable "investors" to efficiently back "startups" and "small ventures" for a share of the ownership in a clean, open, simple manner, not bog everything down in Red Tape.
Certainly there does need to be some regulation brought in to ensure that the system has integrity, but it needs to be seen and handled more as a progression of the current (Non equity) Crowd Funding arrangements that have been operating for several years now, rather than attempting to recreate the ASX.
David Prestney Founding Director - CFO CORP.
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