Company directors and officers will require advice on how Crowd Sourced Funding operates including:
Accountants/business advisers are well placed to be able to supply these services to SME companies.
The ESS BIZTOOLS’ Crowd Sourced Funding Equity Raising Package will assist you to deliver an outstanding professional service for your clients.
A new opportunity for small/medium enterprises, inventors and entrepreneurs has emerged with the passing by the Australian Senate of the Australian government’s Crowd Sourced Funding Amendments to the Corporations Act.
SMEs and others now have three distinct opportunities where they can raise capital from the public without producing a prospectus. These opportunities for capital raising are
The opportunity to raise capital utilising Crowd Sourced Funding has been a dream for many SMEs, inventors and entrepreneurs over recent years. Whilst there has been some criticism of certain aspects of the legislation thousands of small/medium enterprises, inventors and entrepreneurs are expected to avail themselves of the opportunity to raise capital in this unique fashion.
Most of the entities seeking to raise capital using the Crowd Sourced Funding process are expected to be small/medium sized businesses. These types of businesses are traditionally the clients of small to medium-sized accountancy businesses all around Australia. Small/medium sized accountants who gear up for the opportunity of being able to service this new emerging market will be able to create a significant “new income stream”.
The government has decided that only unlisted public companies will be able to raise capital from the “crowd” utilising the crowdfunding methodology. This will mean that many proprietary limited companies will be interested in converting their current companies into an unlisted public company.
The Federal Treasurer has tabled legislation in Parliament which would enable propriety Limited companies to be able to use Crowd Sourced Funding to be able to raise capital. The registration introduces the concept of two classes of shareholders within a propriety limited company - the original shareholders and the "Crowd Sourced Funding Shareholders".
The legislation has not yet been passed by Parliament - the legislation is expected to be debated in the Parliamentary session commencing in February 2018.
Based on the implementation timeframe that was allowed for the first stage of Crowd Sourced Funding Equity Raising and Early Stage Innovation Companies, it is not expected that Crowd Sourced Funding Equity Raising for propriety limited companies will be available until October/November 2018 at the earliest.
The material incorporated within this product package relates to the law which requires a propriety limited company to be converted to an unlisted public company if the company’s directors wish to raise capital as a Crowd Sourced Funding Company.
An eligible unlisted public company, which is able to raise capital utilising crowd sourced funding, will have a group turnover under $25 million per annum and gross group assets valued at under $25 million.
ASIC announced the first group of businesses licensed as Crowd Sourced Funding Intermediaries in January 2018. With the announcement of the names of the intermediaries, raising capital by utilising Crowd Sourced Funding is now an option available to eligible small/medium enterprise companies.
The legislation has introduced a series of exemptions from the more onerous requirements for a public company which will apply for up to 5 years from the date that a proprietary limited company has converted to an unlisted public company.
These exemptions relate to:
The audit exemption will expire if the company raises more than an aggregate of $1 million in capital.
The legislation introduces some new titles to corporate law relating to the “gatekeepers” who are referred to as “CSF Intermediaries”. The Intermediaries are businesses with financial services licenses which are expressly authorised by a further license to provide a crowd funding service. In this role the Intermediary will check the CSF Offer Document and the other documentation required to be produced and will then list the company’s Offer Document onto the Intermediary’s website where it can remain for up to 3 months or such lesser time that has been stipulated in the Offer Document.
The legislation includes a restriction on the amount of money that a “retail investor” can invest in a company raising capital by Crowd-Sourced Funding to $10,000 every 12 months. The legislation does not identify any minimum investment amount.
There is no restriction on the amount of investment from a “sophisticated investor” (defined in Section 708(8) of the Corporations Act).
Companies will be able to raise capital by utilising a mixture of crowdfunding and raising capital utilising section 708 of the Corporations Act, if they wish.
Obviously the benefit from this legislation for small/medium enterprises, entrepreneurs and inventors is that there is an opportunity to raise money for business expansion without having to utilise personal funds, second mortgages on houses, credit cards or borrowings from relatives etc.
However companies will need to be able to produce adequate documents which will form part of the CSF Offer Document to convince firstly the CSF Intermediary and then the “crowd” that the company is in an “investment ready state” and that the company’s directors and management team understand modern corporate practice and the immense responsibility of using other people’s money in their business activities. Some of these companies will grow into very large corporations which will have significant benefits for their founders and investors.
However this “fairy tale” ending will not be achieved unless there has been strong discipline shown in the preparation of the documentation that is going to be required to be submitted to the “gatekeeper”.
The “Crowd Sourced Funding Equity Raising Package” will assist your accountancy/business advisory business to advise your clients adequately to understand the various components of the Crowd Sourced Funding opportunity and will place you in an ideal position to work with your clients in the preparation of the various documents required for the Crowd Sourced Funding Offer Document.
Enable Funding (formerly ASSOB – Australian Small Scale Offer Board) has forecast that the new crowd sourced funding capital raising market will soar from $119 million in 2016 (primarily S708 capital raising and some early-stage innovation company capital raising) to $1.5 billion in 2021, which would result in a tenfold increase. (Click here)
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