Kelly O'Dwyer (Higgins, Liberal Party, Minister for Small Business) Share this | Hansard source

Firstly, I would like to thank those members who have contributed to this debate. The Corporations Amendment (Crowd-sourced Funding) Bill 2015 gives effect to the government's commitment to facilitate crowd-sourced equity funding in Australia by introducing a framework which will reduce the regulatory impediments for small businesses, particularly early-stage businesses, seeking to obtain equity finance.

The government consulted widely on the provisions contained in this bill. This process began in late 2014, following release of a discussion paper that sought to canvass stakeholder views on possible models for a crowd-sourced equity funding framework. These models included the framework adopted in New Zealand and the model recommended by the Corporations and Markets Advisory Committee, otherwise known as CAMAC, in its review of Australia's equity crowdfunding landscape. Over 40 submissions were received, and two stakeholder roundtables were hosted by Minister Billson to discuss the design of the framework. The government acknowledges the efforts of stakeholders to provide feedback and to help guide development of the framework in this bill.

A proposed framework for Australia, a hybrid of the New Zealand and CAMAC models, was outlined in a separate consultation paper in August 2015. Targeted consultation was undertaken on the draft legislation, and further public consultation was undertaken following the introduction of the legislation into Parliament. In line with the Corporations Agreement of 2002, the Commonwealth also sought and received the agreement of the states and territories to the amendments contained in this bill.

Overall, there was broad support for developing a framework that incorporates elements of the model recommended by CAMAC and a model adopted by New Zealand. The framework that the government has introduced into parliament reflects improvements suggested by stakeholders during consultations and seeks to ensure the balance between supporting investment and reducing compliance costs for the issuers of crowdsourced equity funding offers, while maintaining an appropriate level of investor protection.

For equity crowdfunding to be a viable funding source, it is important that the framework can operate effectively to benefit businesses and investors. Like in New Zealand, intermediaries will play an important role in the operation of Australia's equity crowdfunding market with the framework setting out certain obligations that are necessary for facilitating crowdsourced equity funding offers. Intermediaries will act as gatekeepers, ensuring that certain disclosure and other requirements are met by issuers before their offer is listed on the platform.

The crowdsourced equity funding framework proposed in this bill allows eligible companies to fundraise up to $5 million per year from retail investors with reduced disclosure obligations compared to traditional public equity fundraising. We are also streamlining public company corporate governance and reporting obligations for companies that become established as a public company in order to access crowdfunding.

In Australia, unlike other countries, the distinction between the rights and obligations of proprietary and public companies is an underlying rationale of our Corporations Act and applies to all companies. Australian proprietary companies are limited to 50 non-employee shareholders and as such have reduced reporting and governance arrangements than public companies. By providing a holiday for up to five years from the most onerous reporting and governance requirements for unlisted public companies, this framework facilitates equity funding from the 'crowd' while ensuring that the normal obligations that apply to all Australian companies with a larger number of shareholders apply once this time has passed. The government's approach in this matter was supported by the Productivity Commission's inquiry report into Business Set-Up, Transfer and Closure on 30 September 2015. The framework will provide a number of protections, including offer documents providing basic information about the offer and a per issuance investor cap, to ensure investors can make informed decisions without being subject to excessive levels of risk.

I acknowledge that some people found the limits on the fundraising threshold too low, while others argued that the investment limit should be higher than what is currently in the bill, or be removed altogether. The government has listened to stakeholder views on how to balance the fundraising needs of businesses while ensuring investors remain adequately protected. The bill also provides a regulation-making power that will allow these thresholds to be reviewed over time, as the market develops. To accommodate market developments, the bill also provides the minister with an exemption power to exempt certain market operators, including intermediaries, from specific obligations under the Australian Financial Market Licensing regime. This will enable the government to more readily tailor the regime to intermediaries operating in the crowdfunding market, as it matures. This exemption power will apply from the date this bill receives royal assent.

During the debate the issue of whether collective investment models, such as unit trusts or managed investment schemes, should be permitted to use the crowdsourced funding framework was raised. Under this structure, investors place their funds in trust with the managed investment scheme, which becomes the shareholder in small companies on the investors' behalf. Under the Corporations Act, managed investment schemes that accept investments from retail investors are subject to disclosure, licensing and other obligations that are specific to the risks of this investment structure. The crowdsourced funding framework would prevent a managed investment scheme from utilising the crowdsourced funding framework to raise funds from the public. This is because the reduced disclosure environment provided by the crowdfunding regime is not appropriate for more complex arrangements like a managed investment scheme.

The crowdsourced funding framework in this bill will take effect six months after it receives royal assent. Over this period, the Australian Securities and Investments Commission will put in place systems, processes and guidance to effectively administer the framework and provide additional certainty to industry. The government provided $7.8 million to the Australian Securities and Investments Commission in last year's budget to facilitate this.

This bill fulfils the government's 2015-16 budget commitment and our response to the Financial System Inquiry to introduce an equity crowdfunding framework. Its introduction will enable entrepreneurs of innovative early-stage businesses in Australia to obtain the capital they need to turn good ideas into commercial successes. It will also open a new form of investment class to provide an additional investment option for investors.

I commend the bill to the House.

Question agreed to.

Bill read a second time.

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