During stakeholder consultation on crowdfunding, Federal Minister for Small Business Bruce Billson has reportedly indicated crowdfunding legislation will be tabled during the spring session of Parliament.
Reforms have been eagerly awaited since Treasury was handballed recommendations previously made by the now defunct Corporations and Markets Advisory Committee (CAMAC). A range of overseas models has been studied, with a spectrum of options including a ‘standalone’ regime or ‘bolt-on’ with new exemptions under the existing capital raising provisions of the Corporations Act. The Government needs to balance the benefit of cheap and easy access to capital for start-ups and small business, against the potential risk to investors in an environment where there may be limited disclosure or understanding of the risks.
One popular suggestion has been to allow retail investors to invest up to $10,000 a year via equity crowdfunding, in a specified maximum number of companies (four being the example given). Companies themselves may be subject to a cap as to how much they can raise via crowdfunding, with a $2 million per year limit consistent with some other current provisions. The legislation will need to clarify whether this cap is separate or should be aggregated with the limit under the current provisions.
Until legislation is passed, caution is required in considering any equity crowdfunding proposals.