Crowd funding moves forward while legislation stalls
By summoning Parliament to resume on 18 April rather than 10 May as scheduled, the Governor General terminated the current session of Parliament and declared a new one. This process, known as prorogation, terminates all pending business before both houses of Parliament. So the crowd funding bill has officially lapsed.
The bill was outstanding business before the Senate and can only be restored to its previous status at the request of the House of Representatives. As at the date of this article, the House has requested the Senate re-introduce only two bills, and neither has anything to do with crowd funding.
Peer-to-peer lending or debt-based crowd funding moving forward
Notwithstanding this delay, debt-based crowd funding, through peer-to-peer lending or market place lending is moving forward. Property and development related crowd funding, and SME crowd funding, typically involving the use of an on-line platform matching borrowers and lenders is fast becoming a useful form of alternative finance for developers and SMEs.
As mentioned in our last update, peer-to-peer lending or market place lending may be undertaken within the existing parameters of the Corporations Act, and this type of crowd funding is not reliant upon the new equity-based crowd funding legislation becoming law. Debt-based crowd funding through market place lending is therefore moving forward.
Proposed broadening of new crowd funding legislation
When the crowd funding bill is resumed in the Senate, the Opposition has indicated they will move for three amendments which, if passed, will broaden the range of companies that can crowd fund.
|Current bill||Proposed amendments|
|Crowd funding restricted to public companies limited by shares.||Any company type can crowd fund as long as they have an agreement with a financial services licensee (which authorises the licensee to provide a crowd funding service).|
|The consolidated gross assets of the company must be less than $5 million||Increased to $10 million|
|The consolidated annual revenue of the company must be less than $5 million||Increased to $10 million|
Are those amendments workable?
The caps on gross assets and annual revenue are workable as they don’t materially alter how the law would accommodate crowd funding.
The extension from public companies to proprietary companies is workable but would require a re-think of some corporations law settings. For example, the Corporations Act provides that a proprietary company cannot have more than 50 non-employee shareholders and cannot make offers of shares to the public.
To shift key settings like that to accommodate crowd funding could require various consequential amendments to the Corporations Act, rendering the legislative process more involved and extending the likely commencement date of any legislation.
 Corporations Amendment (Crowd-Sourced Funding) Bill 2015.