Anger grows over crowdfund farce
Moody skyline: Dark clouds and cold steel as metaphors for regulatory uncertainty
Anger is growing over “farcical” delays to passing the equity crowdfunding bill that would extend the regime to private Australian companies, with the scheme now unlikely to come into effect until the end of the year.
There are also concerns that cuts to corporate regulator ASIC will further slow the implementation of the scheme, which has been in the works since early 2013.
Amendments to the Corporations Act allowing private companies to undertake a crowdsourced equity funding round were introduced to Parliament last September. Despite broad support by the Opposition, the bill was not passed in the House of Representatives until February this year.
It has now spent three months in the Senate, and would not be passed until June at the earliest, despite expectations that the bill expected would sail through when it does.
Labor supports the amendments, and has only been negotiating on reducing the six-month royal assent wait time after it is passed.
While Treasurer Scott Morrison has labelled the bill a “game-changer” and an “example of the Turnbull Government getting on with the job”, it has still not moved to pass the in the Senate, nine months after it was first introduced to Parliament, despite it enjoying widespread support from the Opposition and industry in general.
The Opposition had successfully negotiated with the government to move an amendment to cut the royal assent wait time from six months to four months, and had expected the bill to pass before the Easter break.
But with the next sitting week not until June, the regime won’t come into effect until October at the earliest.
Matt Vitale, co-founder of registered Australian equity crowdfunding platform Birchal, said the continual delays are becoming increasingly difficult to understand.
“It’s really frustrating and it’s a bit concerning too given it seems that support for the regime is evaporating,” Mr Vitale told InnovationAus.com.
“We’re at the coalface, and the companies that we’re speaking to are almost not believing us when we say it’s going to be a little bit longer. And we can’t understand why. It’s frustrating that they’re not just getting on with the job, Mr Vitale said.
But a spokesperson for the Treasurer said the government is still committed to the legislation, and had attempted to pass it quickly without debate, but was rejected by the Opposition and the Greens.
“The government is committed to the introduction of this crucial change and had scheduled to have the bill passed earlier this year,” the spokesperson told InnovationAus.com.
“The government attempted on several occasions late last year and earlier this year to have the bill considered as a non-controversial which would have ensured its speedy passage through Parliament but was denied this by the Greens and Labor, which ultimately delayed the bill’s passage,” they said.
“The government continues to consult over timing of implementation for the changes with the Australian Securities and Investments Commission. We hope that the bill will receive the support of the Parliament to ensure this crucial measure is implemented.”
It has now also been more than a year since the federal government announced its intention to expand the equity crowdfunding regime in last year’s budget. Currently, the regime is only open to publicly unlisted companies, effectively shutting out most Australian companies.
CrowdfundUp founder and managing director Jack Quigley said the protracted wait has been “frustrating” and led to several missed opportunities for local businesses and entrepreneurs.
“It’s been five years of working with government to see crowdsourced equity funding actually enter the market, and five years later we’re still sitting here without the actual outcome everyone was hoping for,” Mr Quigley told InnovationAus.com.
“In that time we’ve seen several well-funded companies come and go. A lot of innovative entrepreneurs see the power of equity crowdfunding. I’ve spoken to thousands of businesses looking to use it – that’s a lot of missed opportunities,” Mr Quigley said.
“I know people who have left and gone overseas. We’re losing great innovators and people because of political process.”
Despite introducing an effective equity crowdfunding regime being a central piece of the government's much-heralded National Innovation and Science Agenda in late 2015, the concept has now become a “political hot potato”, Mr Quigley said.
“It’s now in the too-hard basket, and it’s seen as not as important to the economy as other things. It’s been used as a key pillar of the Australian government’s support of innovation and FinTech for several years, and now it’s starting to get farcical at best,” he said.
“To go from the identification of its potential for the economy to actually having a working regime, any other industry would be appalled at a five-year turnaround.”
With the rise of initial coin offerings as another alternative fundraising methods for early-stage startups, the government may have missed the boat entirely on equity crowdfunding, Mr Husic said.
“[The government is going to] create another dodo, because equity crowdfunding is now being overtaken by an alternative financing vehicle in the form of initial coin offerings. So this is now just taking place on its own and it threatens to potentially outstrip what could be raised through equity crowdfunding anyway,” he said
“You drag it out so long that alternative vehicles for capital raisings emerge, which are less informative to investors and will require much more sophisticated investors to understand and interpret what’s going on.”