The federal government has put a timeline on its new legislative framework for equity crowdfunding, which will make it easier for small businesses and startups to raise capital through online crowdfunding platforms.
The proposed legislation will allow SMEs and startups to raise capital by offering equity to a large number of small-scale retail investors through platforms such as VentureCrowd and Equitise.
Currently, crowdsourced equity funding is only available to wholesale investors with more than $2.5 million in investable assets or annual earnings of around $250,000.
Small Business Minister Bruce Billson told SmartCompany he hopes to introduce legislation to allow retail investors to buy equity in private businesses during the spring session of Parliament.
“This is an important opportunity for small businesses, startups and those businesses going through an anticipated period of growth to access finance,” says Billson.
Billson says since the global financial crisis, consolidation in the bank and finance space had made it increasingly difficult for some businesses to get financing through traditional lenders.
“This is an important alternative source of funding that will sit alongside traditional funding models,” he says.
“We want to make available to Australian entrepreneurs and business leaders a wider range of affordable and accessible finance to support their enterprises and the Australian economy.”
Billson yesterday hosted a roundtable in Sydney with industry stakeholders, including Financial Services Council chief economist James Bond and Equitise co-founder Chris Gilbert, to address recommendations previously made by the Corporations and Markets Advisory Committee (CAMAC).
CAMAC recommended Australia introduce legislation allowing retail investors to invest up to $10,000 a year via equity crowdfunding, across at least four enterprises, and allow companies to raise up to $2 million per year on such platforms.
Billson says yesterday’s discussions canvassed the potential elements of a “sure footed” crowd-sourced equity funding model, as well as the role and remuneration of intermediaries in crowdfunding; how to consider secondary markets; and the need to keep a lid on compliance and regulatory costs so they are not disproportionate to the funds raised.
The roundtable also discussed whether there was a need to create a distinctive entity structure for crowdfunded enterprises or whether fine-tuning existing company law would be good starting point to legislation.
Billson says a second roundtable will be held with the Melbourne startup community in coming weeks.
“I was really encouraged by the vigour and willingness and expertise shared yesterday,” says Billson.
“We are now trying to tease out the details of work best for businesses and for the economy,” he added.