Small Business Minister and Assistant Treasurer Kelly O’Dwyer in her office at Parliament House in Canberra. Picture: Author: Kym Smith. Source: News Corp Australia
The federal government is to introduce new legislation to allow crowd- sourced equity funding that will force crowdfunding platforms to register with the Australian Securities and Investments Commission and allow investors a five-day cooling-off period.
The legislation will allow start-ups and small companies, with a turnover of less than $5 million, to raise annually up to $5m in equity through crowdsourcing.
The Minister for Small Business and Assistant Treasurer, Kelly O’Dwyer, announced the details at a breakfast in Sydney yesterday hosted by the Financial Services Council.
Ms O’Dwyer said the purpose behind the changes would be to “allow mum and dad investors to make investments in start-ups and small businesses”.
It would also “allow small businesses access to the financial arrangements that are accessible to other small businesses around the world and which, up to this point, has not been able to be accessed in Australia”.
She said Canada, the UK, US and New Zealand already had legislation to allow their companies to raise equity through crowdfunding to finance or expand their businesses through licensed intermediaries.
Ms O’Dwyer said the new laws would be focused on public companies with an annual turnover and gross assets of less than $5m. While US legislation limits the maximum funds that an issuer can raise by crowd funding to $US1m ($1.4m) in any 12-month period, Ms O’Dwyer said the Australian scheme would have a higher cap of $5m.
“This means that the founders of a microbrewery in Tasmania can get their business off the ground with the investment of mums and dads in places like Albury and Sydney.”
She said the government would announce the full details of the proposed legislation in the innovation statement in early December.
“We see it as unlocking great benefits for business, for growth, for employment and also for mum and dad investors who are looking to make investments,” she said. “Traditionally, mum and dad investors have been very keen on putting their money into the stock market and into property and this will allow them the opportunity to invest in small- and medium-sized business in Australia.”
Ms O’Dwyer said the five-day cooling off period would be included in the legislation as “mum and dad investors do need time to consider the investments they have made”.
“There are cooling off periods that apply for all sorts of other investments and we believe it is appropriate for this sort of investment,” she said.
Ms O’Dwyer said the government was consulting with stakeholders and hoped to have the legislation into parliament before the end of the year.
“We are keen to get it in and operating as soon as possible,” Ms O’Dwyer said.
She added that the government was also consulting with the industry on “options to facilitate” crowd-sourced debt funding.