A new report outlines the recommendations to enable a different capital raising method.
The key points of proposed crowdfunding laws are:
- Equity crowdfunding will have legislative sanction under the Corporations Act.
- Existing company structures will be adjusted to raise crowd equity, rather than create a new type of entity.
- Intermediaries, such as website operators, will be regulated and most likely must be licensed.
- Whilst crowdfunding has a natural home in the start-up space, the Federal Government is also considering making it available for mature enterprises.
- Basically, crowdfunding is a company seeking capital funds, particularly early stage capital, offering its equity to a potentially large number of investors (the crowd) in return for cash. Those investors are inevitably sought through a website, the operator of which acts as an intermediary between the crowd investors and the company seeking the capital.
The detail of the government’s legislative framework for crowdfunding has not yet been released but the CAMAC report put forward the following:
- Placing a cap on an issuer’s fundraising – no more than $2 million in any 12 month period.
- Introducing caps on investment levels – $2,500 per issuer, and $10,000 overall, in any 12 month period.
- Capital raising to occur via licensed intermediaries that are prohibited from providing investment advice, soliciting investors or having an interest in any issuing company.
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