Powered by MOMENTUM MEDIA
Powered by MOMENTUM MEDIA
subscribe to our newsletter

Fintech sector slams crowdfunding bill

The fintech sector has taken aim at the federal government’s proposed legislation on equity crowdfunding, with particular ire focused on the requirement for crowdfunders to become unlisted public companies.

The government has received 21 submissions on the Corporations Amendment (Crowd-sourced Funding) Bill 2015 [Provisions], with a number of fintech firms pointing to the bill’s shortcomings.

VentureCrowd was one of a number of respondents to argue against the requirement that equity crowdfunding recipients be public unlisted companies.

“This bill’s requirement that an equity crowdfunding start-up first becomes a public company imposes a significant (and unnecessary) regulatory, administrative and compliance burden on those start-ups,” VentureCrowd’s submission said.

It went on to point out that to become a public company, a start-up must spend “thousands of dollars on lawyers and accountants”, sign 50 or more shareholders and subscription agreements, arrange shareholder resolutions and AGMs, and maintain an up-to-date shareholder register.

Advertisement
Advertisement

“These tasks and expenses are well beyond the capacity and limited resources of a start-up,” the submission said.

“Even if the start-up can satisfactorily undertake those tasks and afford the expenses, the work and time involved will present a massive distraction from its core business.”

Equity crowdfunding business Equitise said in its submission that “forcing companies to become a public company to be eligible to use equity crowdfunding increases the cost and compliance, which will mean many companies will not participate”.

“The other problem with forcing a company to become public is it limits its future potential and means many investors will not participate in further funding due to the restrictions,” it said.

“We have spoken with several venture capital funds who have said they would not invest in a company if it had raised funds through equity crowdfunding and became a public company.”

PROMOTED FEATURES


Crowdfunding provider CrowdfundUP described the requirement to become a public company as “onerous”.

“The requirement that a company must become an unlisted public company in order to raise capital from the crowd places undue compliance costs, administration costs, and regulatory burdens on start-ups seeking to raise capital,” it said.

Commercial law firm King & Wood Mallesons said the public company regime is “not suitable” for equity crowdfunding, arguing that a “more flexible, graduated regulatory framework would make more sense”.”

“Most start-ups that have less than $5 million in existing assets and revenue and that are unlisted, are very early-stage businesses,” the firm’s submission stated.

“They are not suited to a public company reporting, and the costs of public company administration will increase ongoing costs at a time in their development when they can ill afford it.

“Many successful tech businesses will only convert to a public company just before IPO.

“We would encourage reconsideration of this restriction, even if a broader consultation on other implications must be conducted.”

[Related: Fintech adoption tipped to double in 2016]

Fintech sector slams crowdfunding bill
mortgagebusiness

Latest News

The non-major lender is looking to bring in digital signatures and a new home loan platform this year, as it looks to digitise the loan pro...

The non-bank lender has announced the appointment of a chief financial officer after the previous CFO stepped down from his role in March. ...

The non-bank lender has wound back its serviceability policy after reducing its risk appetite in response to the COVID-19 crisis. ...

FROM THE WEB
podcast

LATEST PODCAST: The beginning of the end of deferrals

Do you expect to see strong uptake of the HomeBuilder scheme?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.