April 24, 2017

April 24, 2017

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Whats is the New Australian Crowd Sourced Funding Regime? PART 1

Crowd-sourced funding (CSF) is a developing alternative to traditional capital funding methods, allowing eligible early stage/start-up companies to raise funds from a larger pool of investors without the need for costly disclosure documents such as a prospectus.

CSF took significant steps forward with the Corporations Amendment (Crowd Sourced Funding) 2016 (Cth) (Act) that establishes a regulatory framework to facilitate CSF by small, unlisted public companies in Australia receiving assent and coming into operation. The CSF regime takes effect from 28 September 2017.

The Act allows eligible unlisted public companies with an annual turnover or gross assets of up to $25 million to advertise their business plans on a licensed online crowd funding platform to raise up to $5 million in 12 month rolling periods. Investors receive a share of the company in return for their investment.

Potential investors who make an application in relation to a CSF offer are entitled to a cooling off period providing them an unconditional right to withdraw their application for shares within 5 days of making it, giving investors time to reconsider their decision to invest.

The new regime will be facilitated through a CSF intermediary, who acts as the “gatekeeper” between the company and the investor. All CSF offers must be made via the platform of the CSF intermediary. Those intending to operate as a CSF intermediary will be required to hold an Australian Financial Services Licence (with the appropriate authorisations) and may also be required to obtain an Australian Market Licence.

Claire de Koeyer is co-author of this article. 

Part 2: Looking to Raise capital Under New Australian Crowd Sourced Funding Regime?

Part 3: Looking to Become Crowd Sourced Funding Intermediary Under New Australian CSF Regime? 

Copyright 2017 K & L Gates

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About this Author

Rania Seoud, KL Gates, Finance Transactions Lawyer, public capital markets attorney
Senior Associate

Ms. Seoud is a corporate and transactional lawyer with a focus on equity capital markets.

Ms. Seoud has experience in public capital markets, including initial public offerings (IPO) on the Australian Securities Exchange (ASX), rights issues, corporate governance, placements, corporate restructures, funds management, takeovers, mergers and general corporate law and ASX listing rule compliance advice. She also advises on private equity transactions for unlisted companies including mergers and acquisitions and private capital raisings, as well as...

61-3-9640-4209
Daniel Knight, KL Gates, financial services industry lawyer, retail fund managers attorney
Senior Associate

Mr. Knight is a commercial and regulatory lawyer with a focus on the financial services industry. He advises a range of wholesale and retail fund managers, banks, financial advisers, superannuation fund trustees and other financial services firms.

Mr. Knight concentrates on commercial transactions in the industry and on advising clients about Australian licensing, disclosure, and compliance obligations. He regularly advises international fund managers about offering their products in Australia.

Mr. Knight also has extensive experience advising multinational organisations about bribery, corruption, and anti-money laundering (AML) issues and the governance and compliance measures necessary to prevent these issues from arising.

61-3-9640-4324