{"id":37460,"date":"2023-10-20T14:50:14","date_gmt":"2023-10-20T14:50:14","guid":{"rendered":"http:\/\/startupsmart.test\/2023\/10\/20\/turnbull-governments-equity-crowdfunding-reforms-lazy-and-lack-understanding-says-venturecrowds-tim-heasley-startupsmart\/"},"modified":"2023-10-20T14:50:14","modified_gmt":"2023-10-20T14:50:14","slug":"turnbull-governments-equity-crowdfunding-reforms-lazy-and-lack-understanding-says-venturecrowds-tim-heasley-startupsmart","status":"publish","type":"post","link":"https:\/\/www.startupsmart.com.au\/uncategorized\/turnbull-governments-equity-crowdfunding-reforms-lazy-and-lack-understanding-says-venturecrowds-tim-heasley-startupsmart\/","title":{"rendered":"Turnbull government\u2019s equity crowdfunding reforms \u201clazy\u201d and \u201clack understanding\u201d, says VentureCrowd\u2019s Tim Heasley – StartupSmart"},"content":{"rendered":"
\"\"<\/div>\n

The federal government\u2019s approach to equity crowdfunding has been labelled as \u201cabsolute nonsense\u201d and \u201clazy\u201d by the founder of Australia\u2019s first platform to offer the service.<\/p>\n

\u00a0<\/p>\n

It comes as the opposition says it hasn\u2019t been consulted on the reforms or seen the proposed legislation since the Cabinet reshuffle in September, despite offering bipartisan support and working closely with the government on the issue earlier this year.<\/p>\n

\u00a0<\/p>\n

During a speech to the Financial Services Council in Sydney on Monday<\/a>, new minister for small business Kelly O\u2019Dwyer outlined some aspects of how the government will loosen equity crowdfunding restrictions, and said the full legislation will be before Parliament by the end of the year.<\/p>\n

\u00a0<\/p>\n

Offering equity in exchange for funding through an intermediary crowdfunding platform will be restricted to \u201cpublic companies with annual turnover and gross assets of less than $5 million\u201d under the government\u2019s plan.<\/p>\n

\u00a0<\/p>\n

Startups will be forced to become \u201cexempt public companies\u201d to take part in the process and will be granted a holiday period where they will be excluded from the usual compliance requirements, O\u2019Dwyer told StartupSmart <\/i>in a statement.<\/p>\n

\u00a0<\/p>\n

These exempt public companies will then have to become full public companies after a set period of time.<\/p>\n

\u00a0<\/p>\n

\u201cCrowdsourced equity funding will be available for companies registered as a public company under the Corporations Act 2001, provided they fall within the assets and turnover cap,\u201d O\u2019Dwyer says.<\/p>\n

\u00a0<\/p>\n

\u201cThe government\u2019s legislation will remove many of the costs of becoming a public company, which were identified by stakeholders as key barriers to startups raising funds from the public.\u201d<\/p>\n

\u00a0<\/p>\n

The government also plans to impose a $5 million cap on the amount an issuer can raise annually through equity crowdfunding, and a five day \u201ccooling-off period\u201d for investors.<\/p>\n

\u00a0<\/p>\n

Under the current laws, equity crowdfunding is restricted to sophisticated investors with more than $2.5 million in investable assets or annual earnings of more than $250,000.<\/p>\n

\u00a0<\/p>\n

\u201cAn enormous missed opportunity\u201d<\/b><\/p>\n

\u00a0<\/p>\n

These reforms fall in line with the now-defunct Corporations and Markets Advisory Committee\u2019s (CAMAC) report on the topic from earlier this year, which also recommended caps for investors – $2500 per venture and a total of $10,000 annually.<\/p>\n

\u00a0<\/p>\n

O\u2019Dwyer did not comment on these caps during the speech.<\/p>\n

\u00a0<\/p>\n

Tim Heasley, the COO of Australia\u2019s first equity crowdfunding platform VentureCrowd,<\/a> says he is disappointed the government has taken on CAMAC\u2019s recommendations rather than engaging in larger reform to the Corporations Act.<\/p>\n

\u00a0<\/p>\n

Under the act, a proprietary business has a limit of 50 shareholders<\/a>, restricting the ability to take part in equity crowdfunding, and he says many startups won\u2019t take part in equity crowdfunding because they don\u2019t want to eventually become fully-fledged public companies.<\/p>\n

\u00a0<\/p>\n

\u201cThis is really is an enormous missed opportunity,\u201d Heasley tells StartupSmart.<\/i><\/p>\n


<\/i><\/p>\n

<\/i><\/p>\n

\u201cThis is forcing one regime into another regime just because of some provisions in the Corporations Act.\u201d<\/p>\n

\u00a0<\/p>\n

The idea of allowing proprietary companies to access equity crowdfunding without going public was floated in the government\u2019s consultation paper on the topic in August<\/a>, which discussed the possibility of increasing the shareholder limit on these private companies.<\/p>\n

\u00a0<\/p>\n

Making startups become \u201cexempt public companies\u201d to participate in the process will place too much pressure on these early-stage ventures, he says.<\/p>\n

\u00a0<\/p>\n

\u201cStartups really need to be completely concentrated on what they\u2019re doing,\u201d Heasley says.<\/p>\n

\u00a0<\/p>\n

\u201cIf they have to turn their startup into a public company then there a whole lot of costs.<\/p>\n

\u00a0<\/p>\n

\u201cDon\u2019t put all the burden on the poor startups. They\u2019re the ones trying to get innovation going in this country. We need to give startups a chance and they\u2019ve just made it a lot harder.<\/p>\n

\u00a0<\/p>\n

\u201cDo people in Canberra even think about these things?\u201d<\/p>\n

\u00a0<\/p>\n

A lack of understanding<\/b><\/p>\n

\u00a0<\/p>\n

Heasley says he\u2019s disappointed the government has not been taking the advice of the wider startup community.<\/p>\n

\u00a0<\/p>\n

\u201cIn my view it\u2019s laziness on the part of the Treasury,\u201d he says.<\/p>\n

\u00a0<\/p>\n

\u201cThey haven\u2019t bothered to put in the proper legislation. We\u2019ve made a number of submissions on this point.<\/p>\n

\u00a0<\/p>\n

\u201cAustralia has had years to look at this and now we\u2019re just blindly following the CAMAC model because it\u2019s the easiest way to go. It\u2019s the Treasury not doing the work \u2013 they\u2019re just blindly following a model which has been widely criticised.\u201d<\/p>\n

\u00a0<\/p>\n

<\/b><\/p>\n

In the speech from earlier this week, O\u2019Dwyer said the proposed changes will allow a \u201cmicrobrewery in Tasmania\u201d to be funded by \u201cmums and dads in places like Albury and Sydney\u201d.<\/p>\n

\u00a0<\/p>\n

Heasley says this comment shows a misunderstanding of what type of companies are calling out for equity crowdfunding.<\/p>\n

\u00a0<\/p>\n

\u201cThat just smacks of not even understanding what\u2019s going on,\u201d he says.<\/p>\n

\u00a0<\/p>\n

\u201cStartups aren\u2019t breweries in Tasmania, they\u2019re Atlassian or Freelancer. That\u2019s a fundamental lack of understanding.\u201d<\/p>\n

\u00a0<\/p>\n

Radio silence<\/b><\/p>\n


<\/b><\/p>\n

<\/b><\/p>\n

It was the former Labor government that originally commissioned the CAMAC report that seems to be forming the basis of the upcoming reforms.<\/p>\n

\u00a0<\/p>\n

The opposition had previously been working \u201cco-operatively and collaboratively\u201d with former small business minister Bruce Billson on the issue, shadow parliamentary secretary assisting with digital innovation and startups Ed Husic says, but communication has been non-existent since Malcolm Turnbull came to power.<\/p>\n

\u00a0<\/p>\n

Husic has now penned a letter to O\u2019Dwyer calling for a bipartisan approach on equity crowdfunding.<\/p>\n

\u00a0<\/p>\n

\u201cWe hope to maintain this dialogue with the new ministers responsible for this legislation \u2013 and the federal opposition extends its offer to continue working collaboratively on this issue,\u201d the letter says.<\/p>\n

\u00a0<\/p>\n

\u201cWe believe that equity crowdfunding adds positively to the range of funding options available to startups engaged in early-stage innovation.\u201d<\/p>\n

\u00a0<\/p>\n

Husic tells StartupSmart <\/i>that he\u2019ll wait to see the actual legislation before passing judgment on it.<\/p>\n

\u00a0<\/p>\n

\u201cPart of the reason why we\u2019re wanting to meet with [O\u2019Dwyer] is to get more detail from them about where their thinking is,\u201d he says.<\/p>\n

\u00a0<\/p>\n

\u201cThis has been circulating within government for a few months now but we\u2019re keen to see how much weight is being placed on some of these ideas.<\/p>\n

\u00a0<\/p>\n

\u201cWe\u2019re working in a co-operative and collaborative way, but we want to have some more concrete information before commenting.\u201d<\/p>\n

\u00a0<\/p>\n

Labor would be open to reconsidering limiting equity crowdfunding to public companies and the caps on investors, he says. The opposition has recently criticised the government<\/a> over the handling of equity crowdfunding reforms.<\/p>\n

\u00a0<\/p>\n

\u201cWe welcome the fact that CAMAC has done a lot of groundwork, but we\u2019re open to liberalising the caps in place around the amounts companies can raise and investors can put in, and to move away from the exempt public companies proposal,\u201d Husic says.<\/p>\n

\u00a0<\/p>\n

\u201cWe want to ensure that equity crowdfunding is as widely available as possible to startups and limiting it to public companies is something we\u2019d want to comb through the policy detail before taking a hard and fast position.<\/p>\n

\u00a0<\/p>\n

\u201cWe need to be as flexible as we can while realising we need enough investor protection in place. I\u2019d hate to think we\u2019d get too heavy-handed in that framework.\u201d<\/p>\n

\u00a0<\/p>\n

With the promise of bipartisan support and having had consultations with the community for over a year, Husic says it\u2019s about time the concrete legislation is presented to Parliament.<\/p>\n

\u00a0<\/p>\n

\u201cWe\u2019ve told them to get on with it and indicated we\u2019ll help with the process and work constructively with the government,\u201d he says.<\/p>\n

\u00a0<\/p>\n

“Given we\u2019ve allowed that to occur and given them leeway I\u2019m surprised it\u2019s taken them this long.<\/p>\n

\u00a0<\/p>\n

\u201cThe bottom line is that it\u2019s been operating in a number of countries for years. This is not something that\u2019s insurmountable. We should be able to get it happening.\u201d<\/p>\n

\u00a0<\/p>\n

Do you know more on this story or have a tip of your own? Raising capital or launching a startup? Let us know. Follow StartupSmart on <\/i>Facebook<\/i><\/a>, <\/i>Twitter<\/i><\/a>, and <\/i>LinkedIn<\/i><\/a>.<\/i><\/p>\n","protected":false},"excerpt":{"rendered":"

The federal government\u2019s approach to equity crowdfunding has been labelled as \u201cabsolute nonsense\u201d and \u201clazy\u201d by the founder of Australia\u2019s<\/p>\n","protected":false},"author":2,"featured_media":61924,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,3,4,1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/posts\/37460"}],"collection":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/comments?post=37460"}],"version-history":[{"count":0,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/posts\/37460\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/media\/61924"}],"wp:attachment":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/media?parent=37460"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/categories?post=37460"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/tags?post=37460"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}