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Australian Proprietary Companies To Be Able To Access Crowd Sourced Funding

On 9 May 2017, Australian Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Bill 2017 (Bill) was released for public consultation. If passed into law, the Bill will allow proprietary companies that meet eligibility requirements to access crowd-sourced funding (CSF).

As detailed in a recent  post, CSF will become available in Australia on 28 September 2017 due to the Corporations Amendment (Crowd Sourced Funding) 2016 (Cth) (Act). However, the Act limits the availability of crowd-sourced funding to public unlisted companies.

The Bill will extend the CSF regime to proprietary companies as well, removing the need for proprietary companies to transition to the public company type to be able to access CSF.

Here are some of the changes that the Bill proposes.

  • CSF is available to proprietary companies that have at least 2 directors.

  • There is no limit to the number of CSF shareholders that a proprietary company can have and remain a proprietary company (previously, a proprietary company could only have 50 non-employee shareholders).

  • Proprietary companies that have CSF shareholders will have to prepare annual financial and directors’ reports in accordance with accounting standards.

  • Proprietary companies that raise more than $1 million from CSF offers will have to have their annual financial reports audited.

  • Proprietary companies that make a CSF offer will have to include details about the offer and the shareholders as part of their company registers.

  • An exemption from the takeover rules in Chapter 6 if the company’s constitution provides a minimum level of protection for CSF investors to participate in an exit event (ie get ‘bought out’).

Other aspects of the Act will continue to apply, including that individuals seeking to invest via CSF can contribute up to $10,000 per company, per year.

Copyright 2017 K & L Gates

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About this Author

Jim Bulling, KL Gates, financial services lawyer, funds management attorney
Partner

Mr. Bulling's practise focuses on banking and financial services and he acts for a range of entities in the financial services and funds management industry. His clients include Australian and international investment managers, banks, trustees of superannuation funds, wholesale and retail investment trusts, funds management companies and financial planning groups.

His main areas of focus include banking and financial product disclosure issues, financial services compliance issues, financial product distribution issues and superannuation and...

61-3-9640-4338
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 compliance and regulatory issues under the Australian Corporations Act 2001 (Cth).

61-3-9640-4209