EQUITY CROWDFUNDING Corporations Amendment (Crowd-sourced Funding) Bill 2015 Corporations Amendment (Crowd-sourced Funding) Regulation 2015 Andrew Macpherson ACCREDITED SPECIALIST IN BUSINESS LAW DIRECTOR MACPHERSON GREENLEAF W: WWW.MACPHERSONGREENLEAF.COM E: [email protected]17 February 2016
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Equity Crowdfunding in Australia - Planned Regulation
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• Exemption from holding an annual general meeting
• Option to provide financial reports to shareholders online only
• No requirement to appoint an auditor
• No requirement to have audited financial reports until more than $1 million has been raised from CSF offers or other fundraising offers requiring disclosure
An issuer has corporate governance concessions for 5 years from the date of registration as a public company if at the end of each successive financial year it can show:
• It stated at registration it intends to crowd fund and to have reduced governance;
• It was an eligible CSF company (S738H) and at the end of the relevant financial year; and
• Completes a CSF offer within 12 months of registration
• CSF issuer criteriaPublic company limited by sharesPrincipal place of business Australia / majority of directors AustralianGross assets must be less than $5 millionConsolidated annual revenue must be less than $5 millionNo investing in securities or interests in other entities or MIS
• Type of securities: Fully paid ordinary shares
• Issuer cap: $5 million in any 12 month periodDivision 2 - Section
• Prepare a CSF offer document containing clear and concise information, presented in an effective manner
• Comply with the Regulation • Obtain the consents of persons associated with the offer document• Publish the offer document on the platform of a single CSF intermediary• Only one CSF offer open and no related party CSF offer
• Text
Division 3 – Sections 738J, 738K, 738L, 738M, and 738R
An intermediary must hold an AFSL to provide a CSF service. A person provides a CSF service if:• A CSF offer document relating to securities of a company is published on a
platform operated by the person• Applications may be made to the person for the issue, by an issuer company, of
securities pursuant to the offer
CSF service is provided to:• Potential investors who apply for securities through the intermediary’s platform • The issuer
INTERMEDIARIESThe responsibilities of an intermediary
Responsibilities of an intermediary include (but are not limited to):
• Fulfil gatekeeper obligations;• Provide an application facility;• Provide a communication facility; • Closure or suspension the offer as required;• Handle application money appropriately; and• Do not provide financial assistance to a retail client to purchase securities pursuant to the
Additional protections applicable to retail clients only are:
• An investor cap of $10,000 per issuer via an intermediary’s platform within a 12 month period
• The right to withdraw from a CSF offer within 5 business days of making an application• A prohibition on the company and its related parties, and the intermediary and its
associates, providing retail clients with financial assistance to acquire securities under CSF offers
• The requirement for an intermediary to obtain a risk acknowledgement from a consumer investor before accepting the CSF application
• Persons cannot advertise a CSF offer or publish a statement in relation to a CSF offer– Exception for publishers and the publication of certain reports and notices– Exception for statements made in good faith on the intermediary’s platform
• Persons cannot offer securities for issue or sale through an unsolicited meeting or telephone call
• ASIC has stop order powers for advertising and publications that are misleading, deceptive, or do not draw attention to the CSF offer document or the general CSF risk warning
1. CSF offer assessment and approval privatised2. Faster and simpler procedure3. Lower cost to the issuer companies?4. A quality assessment introduced?5. Investor limit per company but not limit on number of
companies6. Does not interfere with existing regime7. CSF offer has minimum template requirements
1. Confusion – retail client, retail investor, consumer investor2. Use of funds – not sufficiently clear on debts3. False and misleading – reliance – problem with pivots4. False and misleading – currently avoided with caveats5. False and misleading – contradicts “I recognise I could lose all my investment
and it would not affect my lifestyle if I lost my investment”6. Eligible issuer criteria – too limiting and do not advantage issuer, intermediary,
investor or Government7. Advertising – where is the harm?8. Persons who use a communication facility hosted by a CSF intermediary
should not have to prove that they acted in good faith: the onus should be on those alleging lack of good faith