Equity crowdfunding in Australia is a fundraising method that allows businesses, particularly startups and early-stage companies, to raise capital from a large number of investors through online platforms. It involves selling shares (or equity) in the company to a crowd of individual investors in exchange for their investment.
In Australia, equity crowdfunding is regulated by the Corporations Act 2001 and overseen by the Australian Securities and Investments Commission (ASIC). The regulatory framework for equity crowdfunding was introduced in 2017 to provide a more accessible funding option for small and innovative companies.
Key features of equity crowdfunding in Australia include:
Eligible Companies: Only unlisted companies with a majority of their operations based in Australia are eligible to participate in equity crowdfunding.
Retail Investors: Equity crowdfunding allows retail investors (ie individuals) to invest in private companies. However, there are certain investment limits to protect retail investors, such as caps on the amount an investor can invest in a single company and the overall amount an individual can invest in a 12-month period.
Licensed Intermediaries: Equity crowdfunding platforms, also known as intermediaries, must hold an Australian Financial Services (AFS) license to operate and facilitate investment transactions.
Disclosure Requirements: Companies seeking to raise funds through equity crowdfunding must prepare and disclose an offer document, known as a CSF offer document (Crowd-Sourced Funding offer document). The CSF offer document provides information about the company, its business plan, financials, risks, and the terms of the equity being offered.
Investor Protections: The regulatory framework imposes certain obligations on intermediaries and companies to ensure investor protections. This includes conducting due diligence on companies seeking funding, providing risk warnings, and having dispute resolution mechanisms in place.
Equity crowdfunding has provided an alternative avenue for companies to access capital from a diverse pool of investors. However, it is important for both investors and companies to understand the risks involved and conduct thorough research before participating in equity crowdfunding campaigns.