Companies that have raised more than $3 million in capital are required to appoint an Auditor.
The legislation introduces some new titles to corporate law relating to the “gatekeepers” who are referred to as CSF Intermediaries. The Intermediaries are businesses with financial services licenses which are expressly authorised by a further license to provide a crowd funding service. In this role the Intermediary will check the CSF Offer Document and the other documentation required to be produced and will then list the company's Offer Document onto the Intermediary's website where it can remain for up to three months or such lesser time that has been stipulated in the Offer Document.
The legislation includes a restriction on the amount of money that a “retail investor” can invest in a company raising capital by Crowd-Sourced Funding to $10,000 every twelve months. The legislation does not identify any minimum investment amount.
There is no restriction on the amount of investment from a “sophisticated investor” (defined in section 708(8) of the Corporations Act).
Companies will be able to raise capital by utilising a mixture of crowdfunding and raising capital utilising section 708 of the Corporations Act, if they wish.
Obviously the benefit from this legislation for small/medium enterprises, entrepreneurs and inventors is that there is an opportunity to raise money for business expansion without having to utilise extensive personal funds, second mortgages on houses, credit cards or borrowings from relatives etc.
However, companies will need to be able to produce adequate documents which will form part of the CSF Offer Document to convince firstly the CSF Intermediary and the “crowd” that the company is in an “investment ready state” and that the company’s directors and management team understand modern corporate practice and the immense responsibility of using other people’s money in their business activities. Some of these companies will grow into very large corporations which will have significant benefits for their founders and investors.
However this “fairy tale” ending will not be achieved unless there has been strong discipline shown in the preparation of the documentation that is going to be required to be submitted to the “gatekeeper”.
The “Crowd Sourced Funding Equity Raising Package” will assist your accountancy/business advisory business to advise your clients adequately to understand the various components of the Crowd Sourced Funding opportunity and will place you in an ideal position to work with your clients in the preparation of the various document required for the Crowd Sourced Funding Offer Document.