The government is calling for feedback on its equity crowdfunding bill

How happy are the crowd with the crowdfunding legislation? Shutterstock

The government is seeking feedback about its proposed equity crowdfunding legislation.

Venture capitalists reject 97-99% of pitches, so crowd-sourced equity funding has been held up as a way to bridge a perceived gap in business financing, by allowing companies to tap a larger cohort of retail investors.

The United Kingdom, United States and New Zealand already have legislation for crowdfunded equity, and the US saw more than $250 million raised through crowdfunding platforms in its first year alone. However, overall the results are mixed, especially for investors.

This may have influenced the government’s decision to put restrictions in its legislation – companies need to be public, must have less than $5 million in assets and can only raise $5 million per year. Investors are limited to investing $10,000 per year, must complete a “risk acknowledgement statement”, and must have significant assets to qualify to invest.

Many, in the startup community especially, were disappointed with the final legislation introduced to parliament.

“The Australian government has a consistent history of surveying the world, and instead of adopting best practices or even middle of the fairway, decides to instead implement something worse that everyone else, it’s employee share schemes all over again,” said Matt Barrie, CEO of Freelancer.

“We’ve waited two years for this legislation, but it’s clear the government hasn’t listened to the market. Though we welcome opening equity crowdfunding to mums and dads, there are too many restrictions to make it workable,” said Tim Heasley, chief operating officer of crowdfunding service VentureCrowd.

But now the government is calling for feedback on its legislation, with the closing date for submissions on January 29.

“All interested parties are invited to lodge a submission. While the Government remains open to receiving feedback on the legislation, feedback should focus on the exposure draft regulation and the explanatory material,” reads the call for submissions.

Anyone interested in submitting feedback on the crowdfunding legislation can do so electronically or through the post. More details can be found on the Treasury website.

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