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A complete simplified overview of crowdfunding equity laws in Australia
OVERVIEW
Hi there! Thank you for your question on overcrowding equity laws in Australia. The short version is that the crowdsourced equity funding legislation will commence on 29 September 2017. Retail investors will be able to purchase up to $10,000 of equity in their favourite business ideas from September 2017, after crowd-sourced funding legislation passed the Senate. Six months after the CSF Bill receives royal assent the application of the CSF regime to proprietary companies will come into effect.
Below is a deep dive of my findings.
FINDINGS
We have provided laws governing the regulation and taxation of equity. The regulatory bill was recently passed and there are amendments still being made. We have included the rules, the amendment and what these laws mean for businesses in Australia.
* the crowdsourced equity funding legislation will commence on 29 September 2017
* To be able to access the benefits of the CSF regime, a proprietary company must have a minimum of two directors.
* CSF shareholders "will not be counted" as part of the shareholder cap of 50 non-employee shareholders for classification as a proprietary company.
* Proprietary companies that have public investment "in excess of $1 million from CSF offers will be required to have their annual financial reports audited."
* Six months after the CSF Bill receives royal assent the application of the CSF regime to proprietary companies will come into effect.
- the principal place of business is Australia;
- majority of the company directors ordinarily reside in Australia;
- not having a substantial purpose of investing in securities/schemes; - having consolidated gross assets and consolidated annual revenue of less than $25 million.
* The legislation for public unlisted companies will come into effect on 29 September, 2017. The key features include:
- a CSEF eligible proprietary company to have at least two directors;
- permission for proprietary companies to make CSEF offers;
- CSEF shareholders are not to counted toward the 50-member statutory limit for proprietary companies;
- The requirement to complete annual financial reports and for an audit where a CSEF raise more than $1 million.
- CSEF shareholders being subject to the related party transaction rules.
- Exemption from takeover provisions where a company that has made an allowance in its constitution for CSEF exit arrangements.
* From September 2017, retail investors will be able to purchase up to $10,000 of equity in their favourite business ideas, after crowd-sourced funding legislation passed the Senate.
* Unlisted public companies with annual turnover or gross assets of up to $25 million will be allowed, by legislation, "to advertise their business plans on licensed crowdfunding portals and raise up to $5 million a year to carry them out."
* In order to raise money, proprietary companies will be required to become unlisted public companies.
- Contributors provide money to the promoter "in return for a share or other equity interest in the company undertaking the project or venture."
- Providing a share or equity interest in the promoter may "confer certain rights to the contributor, including dividend rights, voting rights, and rights to returns of capital upon winding up."
- Dividends paid to contributors holding shares or other equity interests will be "non-deductible for the promoter, but they may be able to frank those distributions."
- The promoter will need to "consider whether withholding tax applies to distributions made to overseas shareholdings."
CONCLUSION
To wrap it up, review of the data revealed that the crowdsourced equity funding legislation will commence on 29 September 2017. Retail investors will be able to purchase up to $10,000 of equity in their favourite business ideas from September 2017, after crowd-sourced funding legislation passed the Senate. Six months after the CSF Bill receives royal assent the application of the CSF regime to proprietary companies will come into effect.
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