Crowdfund laws frozen in time
Good times: Scott Morrison with Jost Stollman during the 2016 election campaign
Much-anticipated reforms extending equity crowdfunding to private companies have yet to move through the Parliament, nearly six months after the bills were first introduced.
The Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Bill 2017 would let private companies undertake an equity crowdfunding round without first converting into an unlisted public company.
The bill was introduced to the House last September last year and the first and second readings were quickly completed. But it has not been raised again, with no debate or third reading in the six months since.
Adding the six month assent period after the bill is passed, equity crowdfunding won’t be available to local startups until September at the earliest, more than 18 months since it was first announced.
The bill was left languishing in the lower house over the summer break, and was not been moved by the government in the first two sitting weeks of 2018. The bill was listed for debate as the last item on last Thursday – the final sitting day for a fortnight – but was delayed.
The continued delays in passing these reforms – which have bipartisan support – have been slammed by the Opposition.
“It’s been nearly four years since the government was handed up a framework to introduce equity crowdfunding laws in Australia and we still haven’t had the final framework brought to life,” shadow minister for the digital economy Ed Husic told InnovationAus.com.
“Amazingly this new round of changes were introduced in September, and in the first two weeks of Parliament the government still didn’t find a way to get them debated.”
The reform has been the subject of startup lobbying for several years, and one that Treasurer Scott Morrison said would be a “game-changer” for small businesses.
Currently, only unlisted public companies can access equity crowdfunding under legislation that passed at the start of last year.
This was also a tumultuous and extended process, with the equity crowdfunding legislation first introduced by the federal government in December 2016.
After outcry from the tech community and Opposition, the government announced in last year’s budget that the scheme would be extended to private companies, with draft legislation also unveiled.
New Fintech Australia chair Stuart Stoyan said the equity crowdfunding reforms should be a key focus from the government.
“Our inquiries show that this legislation has in-principle support across the political spectrum, so we see no reason why it cannot progress in a speedy manner,” Mr Stoyan said.
“Australia’s crowdfunding system has had an agonising and long gestation, dating all the way back to 2013 when an independent government review was launched into the issue.”
“It’s now time to bring a complete crowdfunding regime to life and therefore give businesses a vital new source of funds which are currently not available,” he said.
“The successful launch of crowdfunding for public companies has underlined the huge potential of crowdfunding for the much larger pool of private companies across the nation.”
Mr Stoyan said the six month wait after the bill passes is “unnecessary”, and FinTech Australia is lobbying the government to have this removed.
“The Australian government is already working on the finer details of the expansion of crowdfunding to private companies and therefore we think the legislation should be amended to refer to a shorter commencement period,” he said.
The first licences for equity crowdfunding intermediary platforms were granted by ASIC earlier this year, with seven companies included in the first batch.
Under the regime, eligible companies (currently only unlisted public companies) are able to raise up to $5 million from retail investors, who are able to invest up to $10,000 per company, per year.
Tyro Fintech Hub head Andrew Corbett-Jones said the delays are hurting some Australian startups and small businesses.
“This is a bit of a blow for those developing fintech business models that are dependent on equity crowdfunding. The most precious resource for a startup is time, and delays such as this will be crippling for some, even terminal,” Mr Corbett-Jones told InnovationAus.com late last year.
“No startup has the resources to coast in neutral for months waiting for the Parliament to rubber-stamp legislation that is all but inevitable.”