Treasury has just released a Consultation Paper on the Government’s crowd-sourced equity funding (CSEF) framework for public companies. It asks for submissions on whether the CSEF framework should be extended to small proprietary companies. We are in favour of this!
We consider that the reforms are great news for small business. Why? The CSEF proposals aim to make it more flexible, quicker and easier for small companies to raise capital, with lower compliance costs. We assist many strong small businesses who would thrive with investment. We will keep you up to date when the draft CSEF legislation is released. The key points in the consultation paper are as follows:
Who can raise funds?
Public companies seeking to use CSEF need to have annual turnover and gross assets of less than $5 million.
What disclosure is required?
Public companies need to give potential investors a CSEF disclosure document. Clear guidance on disclosure is important to help companies understand what disclosure is required, to help investors get consistent information about companies, and to help outline the risks to investors. The CSEF disclosure document should be less detailed and therefore less time-consuming and expensive than a public offering disclosure document.
How much can be raised?
Public companies making a CSEF offer can raise up to $5 million in 12 months. This is an increase from the current small-scale offering exemption of $2 million in 12 months from non-wholesale investors. The $5 million cap includes capital raised under the current small-scale offerings exception e.g. family and friends, but does not include capital raised in other situations where a disclosure document is not required e.g. from sophisticated investors.
What type of shares can be issued?
There is a limit of one class of fully paid ordinary shares per CSEF round, and these shares must have equal price, terms and conditions.
What about compliance costs?
There are exemptions, aimed at reducing the cost of compliance for CSEF offers.
Next steps
Are you considering capital raising? Please contact LegalVision today to discuss. We have assisted companies with both private and public capital raising and we can discuss the new crowd-funding rules with you.