As part of the 2015 Budget, the Government seeks to reform the law in order to help private companies raise capital by equity crowdfunding. A discussion paper was released on 4 August 2015 with details about the changes to come, but just how far has the Government come? Certainly, there has been some progress, but more reform is needed.


The Government seeks to make it easier for small businesses to access the capital they need by reforming the law and removing obstacles to crowd-sourced equity funding. This is part of the same set of reforms that has seen expanded tax concessions for Employee Share Schemes introduced in the 2015 Budget.

Are there unnecessary compliance costs and fundraising constraints under the Corporations Act for proprietary companies? If so, will these reforms fix the issues?

Why do we need reform?

Current laws do not facilitate equity crowd funding for Australian small business. The only way that private companies can issue shares to members of the public, at the moment, is through personal offers that result in up to $2m from up to 20 investors, in any 12 month period.

While this is a low-doc and low-reg path to raise funds, to maximise the exemption, a company must raise $100,000 per investor. This is not real crowdfunding. Real crowdfunding facilitates higher numbers of retail investors investing smaller amounts.

The Government’s proposed reforms would make it easier for public companies to raise capital from retail investors. To make a real difference, the reforms need to extend to the approx. 2.1 million proprietary companies across Australia.

Most small businesses cannot raise equity capital from wholesale investors. Many businesses have little access to debt finance. Small businesses need better access to retail investors, including family, friends, employees and others who know the business.

Reform will benefit the company and increase retail investors’ investment opportunities. Sensible offer disclosure and ongoing reporting requirements will increase transparency and help to protect investors.

The next steps are submission of comments (by end of August) and the draft legislation will be released later this year.


  • Would you like to raise capital? You need to understand the current exemptions that allow private companies, and unlisted public companies, to issue securities including shares and debentures.
  • You need to comply with the law and make sure that your offering document also complies.
  • You will also need a shareholders agreement for all shareholders, a subscription agreement for each individual investor, and you may need a vesting agreement if shares will vest over time.


LegalVision can help you with crowdfunding. LegalVision provides businesses and individuals with tailored online legal advice, including drafting online legal documents for capital raisings. We have lawyers with local and international capital raising experience to assist you. Call LegalVision on 1300 544 755.

Ursula Hogben
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