Treasury has published a consultation paper Facilitating crowd-sourced equity funding and reducing compliance costs for small businesses.

The consultation paper:

• announces the Government’s crowd-sourced equity funding (CSEF) policy for public companies;
• examines ways to increase the ability of small proprietary companies to access finance to invest and grow without having to move into the more extensive disclosure and reporting regime of a public company;
• seeks views on whether the CSEF framework should be extended to proprietary companies and, if so, seeks feedback on the best approach; and
• examines the regulatory framework for small proprietary companies under the Corporations Act to identify ways to reduce compliance costs for such companies.

Regardless of whether the Government proceeds with CSEF for proprietary companies, the Government is committed to facilitating CSEF for public companies. The Government intends to develop CSEF legislation with the aim of introducing it to Parliament in the Spring parliamentary sittings of 2015.

Crowd-sourced equity funding framework for public companies
The policy proposes investment caps for retail investors of:

• $10,000 per offer per 12-month period; and
• $25,000 in aggregate CSEF investment per 12-month period, self-certified by investors.

Relief from certain public company compliance costs would be available to newly registered or converted public companies.

Reliefs include:
• exemptions from disclosing entity rules;
• allowing annual reports to be only provided online;
• exemption from holding an annual general meeting (AGM); and
• exemptions from the need to appoint an auditor and have financial accounts audited, subject to a cap of $1 million raised from CSEF or under a disclosure exemption.

Exemptions will be available for a period of up to five years, subject to annual turnover and gross assets thresholds of $5 million (excepting the audit exemption).

Issuer may raise up to $5 million in any 12 month period, inclusive of any raisings under the small scale offerings exception but excluding funds raised under existing prospectus exemptions for wholesale investors.