The Government is introducing legislation to the Parliament today to extend crowd-sourced equity funding to proprietary companies.
As part of this Bill, proprietary companies wanting to access equity crowdfunding will no longer have to convert to a public company entity. Instead founders will be able to crowdfund while retaining the greater flexibility of the proprietary model.
The extension will also increase the ability of retail investors to access early-stage investment opportunities. However, these companies will be required to comply with additional obligations to protect investors, including:
- a minimum of two directors;
- financial reporting in accordance with accounting standards;
- audited financial statements once the company raises more than $3 million from crowdfunding offers; and
- restrictions on related party transactions.
This extension to proprietary companies builds on the framework for public companies which will commence 29 September 2017. Many features of the public company framework, such as the obligations of intermediaries, investor and company caps and the process for making crowdfunding offers, will be the same for proprietary companies.
Earlier this week the Australian Securities and Investments Commission released information on licensing arrangements for prospective platforms which can be found here.
Source: The Commonwealth of Australia