For an update on the changes to equity crowdfunding laws, see here.

Running an equity crowdfunding campaign is one of the methods of capital raising available to grow your business. Many businesses successfully grow and scale without ever requiring external capital. But if you do decide to raise capital, how much do you want to raise and what method will suit you best?

Equity Crowdfunding Explained

Equity crowdfunding is a new method of public capital raising. It enables a large number of retail investors to provide capital to startups and other small to medium-sized companies, in exchange for equity. What distinguishes equity crowdfunding from other traditional forms of capital raising is the number of investors in any given round.

Attracting a ‘crowd’ of investors means that you could bring on hundreds of new investors in one round. However, this is subject to the restrictions set out under the legislation. For example, eligible companies are permitted to raise up to a maximum of $5 million in any 12-month period.

Equity Crowdfunding Eligibility

To be eligible to make offers under the current equity crowdfunding regime, a company must ensure:

  • it is an unlisted public company;
  • its principal place of business is in Australia;
  • at least two out of three (the minimum) directors ordinarily reside in Australia;
  • its gross assets (the market value of the assets, including any goodwill) are less than $25 million, and the annual revenue is less than $25 million. This also applies to related parties such as holding companies and operating companies.
  • the purpose of the unlisted public company is not to invest in other entities (for example, investment funds or funds of funds).

An unlisted public company can have an unlimited number of shareholders. Most Australian companies are proprietary companies, which means they can have a maximum of 50 non-employee shareholders. Crowdfunding legislation may change in mid-2018 to allow proprietary companies also to crowdfund.

In addition, an unlisted public company is not listed on a registered exchange, such as the Australian Stock Exchange (ASX). Despite this, an unlisted public company is still subject to a range of regulations to protect investors under the Corporations Act 2001 (Cth).

Platforms for Equity Crowdfunding

Crowdfunding typically uses an online platform that acts as a meeting place for companies and investors. Equity crowdfunding platforms are known as ‘crowd-sourced funding (CFS) intermediaries’, because they facilitate the offer of shares in exchange for equity.  Examples of equity crowdfunding platforms that have been granted CSF intermediaries’ licences in Australia include OnMarket, Birchal and Equitise.

The Offer Document

The equity crowdfunding regime requires eligible unlisted public companies to use an offer document setting out:

  • particular details of the investment;
  • a prescribed risk warning; and
  • a five-day cooling-off period for investors.

The offer document is a less onerous and short-form version of the common disclosure requirements for public capital raising.  There is also an investor cap of $10,000 investment per year, per company by any particular investor.

ASIC has released a guide setting out the crowdfunding offer requirements and a template offer document.

Equity Crowdfunding Campaign Requirements

Successful crowdfunding requires more than just meeting the basic legal requirements. Your equity crowdfunding campaign will aim to attract many investors willing to make small investments in multiple companies. Some of your investors may be first time and/or retail investors who want to be convinced that your company is the right choice.

This means that all investors expect to hear an engaging pitch about your company’s story, ethos and opportunity. For crowdfunding investors, clear and accessible messaging is vital. You should be ready to provide details of:

  • branding and imagery;
  • product or service;
  • origin story and journey to date;
  • existing customers and future growth potential;
  • the need that you meet;
  • your team and their expertise;
  • business model;
  • industry and competitors; and
  • risks.

These requirements will vary between different crowdfunding platforms.

Other Legal Considerations

Misleading and Deceptive Conduct

When you make an offer to potential investors and encourage them to invest in your company, you will make a number of representations about your business, products or services, and the investment opportunity.

A representation is a statement of fact or a statement that creates an impression in the mind of a consumer. Under the Australian Consumer Law (ACL), you cannot make statements that are incorrect or likely to create a false impression.

You should consider having your marketing materials and the Offer Document reviewed by professional advisors to ensure they are legally compliant.

Consumer Guarantees

You should also ensure that your company’s products or services meet the consumer guarantees under the ACL.

As a business selling to Australian customers, you make some guarantees automatically. Your customers have rights under the ACL if you do not uphold the following guarantees:


You guarantee that your products: You guarantee that your services are:
  • are safe, lasting, and with no faults;
  • look acceptable; and
  • do all the things someone would normally expect them to do.
  • provided with acceptable care and skill, or technical knowledge, and provided by taking all necessary steps to avoid loss and damage;
  • fit for the purpose, or give the results, that you have agreed to; and
  • delivered within a reasonable time frame when there is no agreed end date.


To ensure you meet your ACL obligations, we recommend that you:

  • review your products and services to ensure you can uphold the statutory guarantees; and
  • consider having your business terms and conditions reviewed to ensure you are compliant.

Key Takeaways

Equity crowdfunding is an emerging method of equity capital raising in Australia, regulated by ASIC to protect investors and promote transparency.

Not all companies are eligible to raise capital using equity crowdfunding. Review the criteria and consider if an equity crowdfunding campaign is the best method for securing capital for your business. Also, look for a crowdfunding platform that is a licenced intermediary for equity crowdfunding.

If you want to chat about whether an equity crowdfunding campaign is right for your company, or have your offer document reviewed to ensure your materials are not false or misleading, contact LegalVision’s business lawyers today on 1300 544 755 or fill out the form on this page.

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