Tuesday’s federal budget proposed extending crowdsourced equity funding (CSEF) to proprietary companies.
The senate in March passed the first law in Australia that allowed companies to raise capital through crowdsourcing. But the legislation, to become active in September, was criticised for only allowing unlisted public entities to raise money this way, which left out most early stage startups.
The 2017-18 budget on Tuesday night saw the release of draft legislation for private companies to access CSEF, which will open up the new source of capital to the typical technology startup. Such businesses will be allowed to have an unlimited number of CSEF shareholders.
Rob Hango-Zada, co-founder and executive officer of Shippit.com, said the draft proposal was “a massive win”.
“It allows small time investors to get in on the startup book in Australia and also allows startups to benefit from a consumer investor market without the need to find angels and high net worths to help them bridge funding gaps or make a break.”
Startups that access crowdfunding will have to meet certain conditions, such as having a minimum of two directors, financial reporting compliant with accounting standards, audit requirements, related-party transaction restrictions and minimum shareholder rights for exits.
PoweredLocal chief Michael Jankie said that the crowdsourcing expansion may well be “the greatest announcement for innovation in this budget”.
“Extending this to proprietary companies should see a larger amount of uptake and growth in innovative ideas that become companies,” he said.