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Crowd sourced funding – A guide for public companies

Shannon Ryan (Principal) and Andrew Tsirikis (Solicitor)

Legislation governing the crowd-sourced funding (CSF) regime for public companies is now in full effect with the following checklist being designed to assist those companies navigate their way through this process.

Eligible companies
To engage in CSF, your company must:

(1) be an unlisted public company limited by shares with assets and annual revenue caps of $25 million;

(2) have a majority of its directors ordinarily residing in Australia and have its principal place of residence in Australia; and

(3) not be an investment company.

Eligible offer
The offer of an eligible company must:

(1) be for the issue of fully-paid ordinary shares and not be used to raise funds to invest in other companies or loan to related parties; and

(2) not raise more than $5 million in any 12-month period.

Obligations
When making an eligible CSF offer, your company must:

(1) direct investors to general risk warnings;

(2) only offer via a CSF offer document published on a CSF intermediary’s platform; and

(3) notify the CSF intermediary if it becomes aware its CSF offer document is defective.

Prohibitions
When making an eligible CSF offer, your company must not:

(1) have more than one CSF offer open at a time;

(2) provide or arrange for any financial assistance to enable retail investors to invest in the CSF offer;

(3) engage in misleading and deceptive conduct;

(4) make a CSF offer for a company that has not been formed; and

(5) offer shares under a defective CSF offer document.

Additional obligations
• Retail investors can invest a maximum of $10,000 in any 12-month period and must be given a 5-day cooling off period.

• A risk warning statement must be provided to retail investors in the CSF offer document and on the CSF intermediary’s platform.

• Retail investors must acknowledge that they have read and understood the general risk warning before applying for shares under a CSF offer.

Refinements to CSF offer documents
The government has released exposure draft regulations which add flexibility to the structure and contents of CSF offer documents, including:

• allowing some required information to be presented in summary format with the rest of the details to be included in an appendix;

• clarifying that information can be presented in any order within each of the required sections of a CSF offer document; and

• clarifying that a CSF offer document can be presented online and can include additional information beyond what is required.