Australian government falls short in new guidelines for crowdfunding
The Australian federal government&rsquo;s proposed expansion of access to crowdfunding for businesses has disappointed the Crowd Funding Institute of Australia as the draft guidelines fail to address the issue of how to increase access for small proprietary companies.
The Australian federal government’s proposed expansion of access to crowdfunding for businesses falls short of the hoped-for system, according to Yahoo Finance. New draft guidelines issued by the Australian Treasury include increasing the amount companies are allowed to raise through crowdfunding to AUS $5 million, leaving open the issue of how to increase access for small proprietary companies. These businesses are limited to 50 non-employee shareholders and are unable to engage in capital raising that requires a disclosure document.

Matt Pinter, head of the Crowd Funding Institute of Australia, noted a regime based on public companies made little sense given equity crowdfunding is designed to foster innovation and boost small businesses: “The major disappointment is the proprietary structure being essentially parked. That doesn’t make sense because nearly all companies start as a proprietary structure.”

Communications Minister Malcolm Turnbull said in May that he wanted Australia to imitate New Zealand’s crowdfunding model, which demands fewer compliance obligations on companies. The Australian draft offers newly registered or converted public companies relief from some compliance costs, allowing annual reports to be issued online only and an exemption from holding an annual general meeting, according to Yahoo Finance. But Pinter, who is among the prominent crowdfunding figures set to discuss the draft proposals in Sydney next week, said Australia risks losing investors to other countries without firm action to help proprietary companies.

“If people are really looking to back a business and back investment, they should be able to and that investment is most likely going to be at an early stage company,” Pinter commented. “If we look at New Zealand, people are taking those kind of investments now under their crowdfunding regime.”

The government’s proposal to make intermediary platforms responsible for monitoring compliance is more favorable for small companies. Pinter said the success of reward-based crowdfunding on platforms such as Kickstarter, where entrepreneurs offer finished goods or services to those investing at the concept stage, shows investors are happy for those platforms to perform due diligence on their behalf.