Written by Rohan Harris, Principal, Rory Maguire, Special Counsel and Angela Liu, Law Graduate.
This article has been published in South African Institute of Financial Markets (SAIFM) Journal here.
CSF legislative pathway
CSF for public unlisted companies commenced on 29 September 2017 (through the Corporations Amendment (Crowd-sourced Funding) Act 2017 (Cth) (CSF Act)), allowing eligible unlisted public companies with less than $25 million in assets and annual revenue to raise up to $5 million a year through the use of CSF platforms operated by licenced intermediaries.
On 11 January 2018, ASIC issued the first Australian Financial Services licences to a number of intermediaries operating in the market. Intermediaries play an important role in CFS, acting as the conduit between start-ups and investors by operating the crowdfunding platform and performing checks on offering documents, start-ups and investors.
Start-ups have already begun raising capital via CSF campaigns with digital bank Xinja, one of the first start-ups to launch a CSF campaign, raised $500,000 in less than a day.
Extension of CSF to Pty Ltd companies
Given the CSF Act excluded proprietary limited (Pty Ltd) companies from accessing CSF, it was largely criticised given the majority of Australian companies are Pty Ltd companies. In response, on 14 September 2017, the Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Bill 2017 (CSF Pty Ltd Bill) was introduced, extending CSF to Pty Ltd companies subject to additional reporting requirements and accountability standards (see below). A copy of the CSF Pty Ltd Bill can be accessed here.
On 11 December 2017, the Government released exposure draft regulations (Corporations Amendment (Crowd‑sourced Funding) Regulations 2018 (draft CSF Regulations)) providing further detail on the proposed extension to Pty Ltd companies. A copy of the draft CSF Regulations can be accessed here. The draft CSF Regulations seek to simplify certain requirements for both public and private companies, including in relation to the structure and content of CSF offer documents (for which template documents have helpfully been provided by ASIC), and provide further details on the eligibility requirements and legislative exceptions for Pty Ltd companies.
Additional obligations for Pty Ltd companies
In summary, under the proposed legislation, Pty Ltd companies will be able to access CSF without the need to convert to an unlisted public company subject to additional obligations and exceptions, including:
Where to from here?
Now that CSF has taken off, we are likely to see a growing number of public unlisted companies launch their CSF campaigns. With the CSF Pty Ltd Bill expected to come into operation within 6 months of being passed, it likely that Pty Ltd companies will be able to access CSF from mid-2018.
Please contact Rohan Harris on (03) 9609 1522 or Rory Maguire on (03) 8602 7246 from our Corporate and Commercial team should you require further advice in relation to CSF or other capital raising matters.
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