Andrew Gee (Calare, National Party) Share this | Hansard source

I rise in support of the Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Bill 2017. As the House has already heard, this bill amends the Corporations Act 2001 to extend crowdsourced equity funding to proprietary companies. It will mean that all proprietary and unlisted public companies with an annual turnover or assets of up to $25 million will be able to raise up to $5 million annually in crowdsourced capital. Extending crowdsourced funding to proprietary companies is good for business and it is good for everyday Australians. Individual investors will be able to invest up to $10,000 per year per company. I believe that this bill demonstrates the government's commitment to supporting Australian businesses, both public and private, and to helping them operate at world-class levels.

We all know that strong businesses result in more jobs for Australians and better wages for Australians and that a strong business sector is the bedrock of a robust national economy. With the legislation that was passed in September 2017, publicly listed companies in Australia have been able to crowdsource funding. Several Australian financial services licences have been issued to platforms to act as intermediaries in the sector of capital raising. Interest in crowdsourced capital raising has, to date, being very strong. It's quite clear that there is certainly an investor appetite for this type of capital raising, and that should be extended to proprietary companies because it's already happening in other parts of the world.

I note that around 99 per cent of Australian companies are proprietary companies. So, while the work in this field by the government has been most welcome to date, the reality is that until now most Australian companies have been locked out of crowdsourced capital. That's all about to change with this legislation. Expanding crowdsourced funding to proprietary companies will let these firms retain their current company structures. So they do not have to change them in order to access the funds and the capital. This means that they can continue to be lean, flexible and responsive to market conditions, which is often why they're successful in the first place. It's the dynamism of the proprietary company structure which often leads them along the path to success.

I am encouraged by the extensive consultation that has occurred with businesses to get this legislation and the framework to the point that we see today. In fact, there have been two years of consultations with businesses and industry groups, as well as others in the sector, and this has all helped to shape a bill that recognises the needs of the market and will facilitate the market to get the capital to where it's needed.

These proposed amendments will open the door to a new type of equity for the vast majority of Australian companies. I think the important thing about it is that it will also foster enterprise and encourage many entrepreneurs, including younger entrepreneurs who may have difficulty raising capital, to turn their business ideas into reality. As anyone who has done it knows, starting a business is an extremely difficult thing. It's not enough just to have a good idea or a dream. A lack of capital is often one of the biggest hurdles that young entrepreneurs face, and it is one that can prove fatal. So access to capital is vital in the early stages of an enterprise when there are many costs that need to be borne and there is often little or no revenue. That is just the cold, hard truth of starting a business. If we can help our entrepreneurs overcome this handbrake on growth that is a lack of capital, they can then go on to produce wealth, jobs and prosperity for our country and, in particular, our country communities.

The fact is that traditional forms of finance may not be an option for start-ups. Finance can be extremely difficult to obtain, particularly in these economic times. They can also have a long lead time. Business loans for start-ups or expansion ventures can be notoriously difficult to come by, and loan repayments, if you can get a loan, drain scarce resources out of a new business at the time when those resources are most needed.

Increasing the attractiveness of equity crowdfunding will also increase the pool of potential investments, giving investors the opportunity to share in the risks and successes of these growing enterprises, and allowing proprietary companies to access crowdsourced equity funding opportunities will help our small to medium enterprises bring their ideas to life. I'd like to commend the minister for his careful work in balancing the regulatory requirements to protect investors and potential investors with important provisions that will ensure that our enterprises can access this type of capital for growth. ASIC's oversight of crowdsourced funding to date has helped with a smooth implementation of this new regime, and they will no doubt be working diligently to ensure that the implementation of this legislation is as smooth as possible. An increase in the number of directors to at least two helps to protect investors through transparency, succession planning and enhanced decision-making. Financial reporting in accordance with established accounting standards will help potential investors be able to make well-considered investment decisions.

I note that proprietary companies that raise $3 million or more will be required to maintain audited financial statements. This bill also increases the audit threshold for eligible public companies from $1 million to $3 million. Lifting the audit threshold is important because the cost of an audit can range anywhere from $10,000 to $20,000, and audit costs can be a major disincentive for firms to access this type of capital raising. Intermediaries regulated through an Australian financial services licence will be established in a fair, transparent and equitable way so everyone can see what's going on and investors will be able to make informed decisions. The restrictions on related-party transactions are also important to guarantee that investors have protection against fraud and bias.

I also note that the new legislation exempts users of equity crowdfunding from takeover rules and the 50-non-employee-shareholder cap that would otherwise apply to proprietary companies. To leave that restriction in place would mean that a proprietary company would only be permitted to have 50 non-employee shareholders, which would limit its ability to access the crowdsourced funding regime. All of these factors work together to create an environment that lets business thrive without unnecessary red tape but which also safeguards Australian investors from unscrupulous operators.

Crowdsourced funding is an increasingly popular method of capital raising overseas, and I think it's important that we give Australian companies the ability to reach their full potential in an increasingly competitive international environment. But we also need to give investors this choice and investment opportunity, which this legislation provides.

In conclusion, can I say that this bill will help Australian companies unlock untapped reservoirs of capital, and it certainly will fuel important growth and wealth and the prosperity that it brings. I commend this bill to the House.

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