Crowd-sourced funding

Crowd-sourced funding is a financial service where start-ups and small businesses raise funds, generally from a large number of investors that invest small amounts of money.

The information on this page will assist:

  • intermediaries seeking to provide crowd-sourced funding (CSF) services, and
  • companies seeking to raise funds through crowd-sourced funding.

ASIC's MoneySmart website also has information for investors about crowd-sourced funding.

CSF legislation

The Corporations Amendment (Crowd-sourced Funding) Act 2017 amends the Corporations Act 2001, and makes minor amendments to the Australian Securities and Investments Commission Act 2001, to provide a legislative framework for crowd-sourced funding. Generally, the CSF regime reduces the regulatory requirements for public fundraising while maintaining appropriate investor protection measures. A provider of CSF services must hold an Australian financial services (AFS) licence.

The Act received Royal Assent on 28 March 2017 and takes effect from 29 September 2017. See:

After the legislation takes effect, we will be able to accept:

  • applications from intermediaries for an AFS licence with authorisation to provide CSF services after this date, and
  • applications to register new public companies to be eligible for the corporate governance exemptions under the CSF regime. Applications to convert existing proprietary companies to a public company may be lodged with ASIC before the new legislation takes effect.

ASIC guidance

As the regulator responsible for fundraising activities and financial services, we have engaged with Treasury and Government in the development of the CSF regime.

To further assist with the development of a CSF industry, we have published regulatory guidance for intermediaries seeking to provide CSF services and for companies seeking to raise funds on a platform of a CSF intermediary.

Regulatory Guide 261 Crowd-sourced funding: Guide for public companies (RG 261) will assist companies seeking to raise funds through CSF to understand and comply with their obligations in the new regime, particularly as many of these companies will not have experience in making public offers of their shares. ASIC has also published a template CSF offer document to help companies prepare their CSF offers.

Regulatory Guide 262 Crowd-sourced funding: Guide for intermediaries (RG 262) will assist intermediaries seeking to provide CSF services, particularly as this is a new type of financial service and there are unique gatekeeper obligations for operating platforms for CSF offers.

We have also provided relief for intermediaries and companies from certain requirements under the Corporations Act, to help facilitate CSF.

We consulted on this regulatory guidance and relief in June 2017 and have published Report 544 Response to submissions on CP 288 and CP 289 on crowd-sourced funding (REP 544) detailing our response to that consultation.

We have also consulted on the operation of a secondary financial market in shares issued by eligible CSF companies under CSF offers, as this will require an Australian market licence. The CSF legislation introduces new exemption powers that will enable a more tailored regulatory regime to facilitate the operation of specialised and emerging financial markets and clearing and settlement facilities, including in relation to shares of eligible CSF companies.

AFS licence for CSF intermediaries

Under the CSF regime, intermediaries will be required to hold an Australian financial services (AFS) licence with an authorisation to provide a crowd-funding service. The AFS licence obligations under the Corporations Act will apply, including, for example:

  • the obligation to act efficiently, honestly and fairly, and comply with the conditions on the licence and the financial services laws (s912A(1)(a),(b) and (c)) which will include:
    • an obligation to notify significant breaches (s912D)
    • to lodge annual financial statements and auditor's report (s989B)
  • conflicts of interest – having in place adequate arrangements to manage conflicts of interest (s912A(1)(aa))
  • resource requirements – unless a body regulated by APRA (other than certain RSE licensees), having adequate financial, human and technological resources (s912A(1)(d))
  • organisational competence – maintaining the competence to provide the financial services (s912A(1)(e))
  • risk management – unless a body regulated by APRA (other than certain RSE licensees), having adequate risk management systems (s912A(1)(h))
  • having adequate compensation arrangements (s912B), and
  • dispute resolution – if the financial services are provided to persons as retail clients, having an internal and external dispute resolution system that complies with s912A(2) (s912A(1)(g)).

If you wish to operate as a CSF intermediary, you will need to apply to ASIC for an AFS licence that authorises you to provide a crowd-funding service.

ASIC will begin accepting applications from potential CSF intermediaries for AFS licence authorisations to provide a crowd-funding service after 11am on 29 September

Companies making CSF offers

Under the CSF regime, eligible public companies will be able to make offers of their shares, via an intermediary CSF service, using an offer document.

Unlisted public companies with less than $25 million in assets and annual turnover will be eligible to raise funds under the CSF regime. Eligible companies will be able to make offers of ordinary shares to raise up to $5 million in any 12-month period.

Newly created or converted public companies making CSF offers will not have to comply with certain reporting, audit and AGM obligations that would usually apply to public companies, for up to five years.

There are obligations and investor protections that apply to CSF offers, together with corporate governance concessions for companies undertaking CSF offers, including:

  • an investor cap of $10,000 per annum per company for retail investors
  • the provision of a CSF offer document containing minimum information and a prescribed risk warning, and
  • a five-day cooling-off period.

How to register as a company that can use crowd-sourced funding

If you wish to register as a public company to raise funds under the CSF regime and rely on the corporate governance concessions, you will need to lodge a Form 201 Application for registration as an Australian company with ASIC from 29 September 2017.

How to convert to a company that can use crowd-sourced funding

To convert to a public company to raise funds under the CSF regime and rely on the corporate governance concessions, you will need to lodge a Form 206 Application for change of company type.

ASIC is required under the Corporations Act 2001 to publish a notice in the ASIC Gazette stating it intends to alter the details of the company registration.

One month after the notice is published the change of company type will take place. Due to the one month notice period, you may wish to lodge your Form 206 with ASIC before the new legislation takes effect.

A company that is registered as or converted to a public company before the new legislation takes effect will not have the benefit of the corporate government concessions and will be subject to the same requirements as other public companies.

Innovation Hub

ASIC’s Innovation Hub exists to foster innovation that could benefit consumers by helping Australian fintech start-ups navigate our regulatory system. CSF intermediaries may be eligible for assistance from ASIC's Innovation Hub in relation to the AFS licensing process and requirements. Please refer to Innovation Hub for more details.

Related links

What's new

Initial coin offerings

We have released guidance to help issuers of initial coin offerings (ICOs) consider their legal obligations when offering coins or tokens. 17-325MR. 28 September 2017

Crowd-sourced funding

We have released guidance for public companies and crowd-funding platform operators to support them in using the new crowd-sourced funding regime, which commences on 29 September 2017. 17-321MR. 21 September

More financial services releases

Podcast

Crowd-sourced funding

19 July 2017

ASIC Commissioner John Price joins the podcast to discuss recent law reform around crowd-sourced funding and ASIC's role in administering the new legislation.

Listen to the podcast 

 

Last updated: 21/09/2017 11:06