After Scottish beer company BrewDog crowdfunded more than $31 million in the UK and $8.7 million in the US, it’s no surprise that Australian businesses hope to follow suit.
But until now, crowdfunding by Australian companies wasn’t possible—at least without going public first.
If newly introduced legislation passes, it could change that by allowing private companies to raise as much as $3 million through crowdsourcing.
A look at the new law
Proposed by House of Representatives Treasurer Scott Morrison, the new Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Bill 2017 would allow private companies to crowdfund equity in the business. Individual investors could contribute as much as $10,000—a cap designed to limit risk—and organisations could raise as much as $3 million before requiring a full audit.
Businesses would need to meet a few requirements in order to be eligible under the new law. For one, they would need to have at least two directors in place, and they’d also need to be filing all appropriate financial reports for their transactions. Businesses participating in crowdfunding would be capped at $25 million in annual turnover/gross assets.
The law is intended to expand funding opportunities for small, medium and start-up businesses.
James Jansson, CEO and Cofounder of Tapview—a frictionless payments software company—explained the benefit to the ABC: “Companies like ours can make a lot of good things out of a very small amount of money. So $3 million without having to go through a full audit would improve our ability to serve our customers and survive through the very tough early stages of a start-up.”
New Zealand has allowed retail and crowdfunding for private companies since 2014, forcing businesses such as Equitise—an equity crowdfunding technology company—to operate outside Australian borders in order to raise enough capital. The new law could help make Australia more welcoming to new businesses.
Viv Stewart, CEO of VentureCrowd, put it best by telling the Financial Review, “Allowing proprietary to raise funds in this manner will unlock potential innovation in the Australian economy, as well as giving retail investors the ability to profit from early-stage investment opportunities.”
Ask us to help guide your business
Crowdfunding may help your start-up or small business, but don’t jump into it blindly. Before making a major financial decision, get in touch with one our experts. Acting as your financial business advisers, we’ll help guide you toward the right decisions for your company—and your bottom line.