The economics legislation committee tabled its report on the Corporations Amendment (Crowd-sourced Funding) Bill 2016 yesterday, which recommended the Senate pass the bill subject to a review of the legislation after two years.
Under the legislation, crowd-sourced funding will only be available to public companies. Proprietary companies will be required to become unlisted public companies in order to crowdfund – although they will be exempt from certain reporting requirements for up to five years.
The government report acknowledges that as at March 2015, approximately 99 per cent of all registered Australian companies were proprietary companies.
Reacting to the report, VentureCrowd chief operating officer Sunny Yu said that while legislation on crowd sourced funding is "long overdue", the bill is "limited in its application" and fails to address the realities of crowdfunding.
"We maintain that the public company requirement is unnecessary and creates significant burden and uncertainty for start-up businesses looking to access this alternative and innovative source of funding," Mr Yu said.
Start-up companies, which are most likely to need access to crowdfunding, are deliberately structured as proprietary companies in order to avoid the "unnecessary complexities and additional obligations placed on public companies", he said.
"The exemptions proposed in the bill for businesses converting to public companies to access crowd-sourced funding are temporary and do not address the risk that if they are unsuccessful in a crowdfunding campaign, they are still left with the obligations of being a public company," Mr Yu said.
"The government itself has acknowledged the need to extend the regime to proprietary companies, but we don't know how long this is going to take and until that happens it is just going to create further uncertainty for businesses."
Labor's dissenting report said there has been "limited scrutiny of a flawed bill in an effort to rush through legislation that is likely to be superseded by a revised framework".
"This is a remarkably poor approach by a government that has presented itself as business-friendly and wanting to avoid the imposition of red tape and extra business costs," said the dissenting report.
VentureCrowd's Mr Yu agreed with the "rushed" nature of the bill.
"It is unfortunate that the government has rushed to push this legislation through rather than introduce a comprehensive, workable solution," he said.
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