The Crowd-Sourced Equity Funding aims to help small businesses to crowd-source the funds they need to develop and grow.
Crowd-Sourced Equity Funding
The Crowd-Sourced Equity Funding is a new fundraising approach that:
- allows entrepreneurs to raise funds—up to $5 million per year—from a large number of individuals in return for equity in their company
- will give companies, that become a public company to access CSEF, a five year exemption from the normal reporting and disclosure requirements that apply to public companies.
Legislation to implement CSEF was introduced into Parliament on 3 December 2015. The CSEF scheme will commence within six months of the legislation receiving Royal Assent.
The Crowd-Sourced Equity Funding schemes currently operate in various countries around the world, including in the UK and in New Zealand. In the first 12 months following its launch, the New Zealand CSEF scheme enabled more than 20 innovative companies to raise over $12 million in combined funds.
Current regulatory requirements, however, present a barrier to widespread use of CSEF in Australia.
Introducing laws to facilitate CSEF in Australia will ensure that small innovative businesses have access to a more diverse range of funding options and are not put at a competitive disadvantage compared to their international counterparts.
Individuals seeking to invest in companies using Crowd-Sourced Equity Funding can contribute up to $10,000 per company, per year.
Crowd-Sourced Equity Funding will be available to Australian public companies with a turnover and gross assets of less than $5 million.
There is no limit on the total individuals can contribute across multiple companies. Companies that become a public company to access CSEF will receive up to a five year exemption from obligations to hold Annual General Meetings, produce audited financial statements and provide an annual report to shareholders.