The Australian Senate on Monday passed the Corporations Amendment (Crowd-Sourced Funding) Bill 2016, enabling retail investors to take equity from businesses on the platform since September onward.
However, only unlisted public companies are allowed to raise funds from equity crowdfunding while about 99 per cent of Australian businesses are proprietary companies.
According to The Australian Financial Review, qualified public companies must have annual turnover or gross assets up to $25 million and raise up to $5 million a year on licensed portals.
Retail investors can pour their money up to $10,000 a year into an unlimited amount of projects.
FinTech Australia, a national association for the Australian FinTech Startup community, said, in a statement, the changes would provide a major new avenue to allow companies to grow and create jobs.
FinTech Australia CEO Danielle Szetho said, this new legislation represents an important step to open up early-stage capital markets, which will ultimately help businesses to grow and therefore create new employment opportunities.
“It also represents a substantial step forward in making the Australian regulatory environment internationally competitive, given concerns that Australia is falling behind the rest of the world when it comes to equity crowdfunding,” she said.
She emphasized that this regulation does not just benefit the startup community, but family-run enterprises are also interested in taking advantage of the platform.
Jonny Wilkinson, co-founder of FinTech Australia member Equitise, said he was aware of more than 20 companies who had been eagerly awaiting the passage of this legislation, so they could use it to raise funds.
“I have met a number of companies who have already converted to an unlisted public company in order to use this legislation to access funding and grow their shareholder base beyond 50 non-employee shareholders,” he said.
He added there are many more who are willing to convert in anticipation of the passing of this legislation.