Make sure you're dividing the pieces of your company correctly. Source: Unsplash/Ross Sneddon

Ben Wood

Shares, registers, and agreements: The legal requirements of equity crowdfunding

Ben Wood
3 minute Read

For three years now, proprietary companies in Australia have been able to raise capital through crowd-sourced funding (CSF) in return for equity in the company, commonly referred to as equity crowdfunding. This process has enabled budding entrepreneurs across a vast range of industries, including music, fashion, financial services, fintech, property development, health and, of course, craft breweries, to get their businesses up and running

While there is clearly no shortage of interest in equity crowdfunding, the process is not without its challenges. There are several boxes that need to be ticked and obligations that must be met by businesses embarking on equity crowdfunding, so it is essential to know what you are getting into.

Who can use equity crowdfunding?

To be eligible, proprietary companies must:

  • Have at least two directors the majority of whom normally reside in Australia;
  • Have their principal place of business in Australia;
  • Have less than $25 million in both gross assets and annual turnover; and
  • Not have a substantial purpose of investing in securities or interests in other entities or schemes.

The company can then choose an intermediary platform to facilitate the raising of funds, using a CSF offer document hosted by the platform.

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