Crowdfunding Bill Falls Short
9 March 2016 at 10:34 am
Controversy surrounds the Federal Government’s crowd-sourced equity funding bill, which social businesses hoped would “democratise finance”.
The Corporations Amendment (Crowd-sourced Funding) Bill was introduced in December 2015 and passed the lower house this year. Last week a Senate committee released its findings on the bill, recommending it should be passed.
However, Labor senators released a dissenting report, accusing the committee of failing “to address the very real concerns raised” by stakeholders during the submissions process.
It’s claimed that one of the major shortcomings of the proposed legislation is that it blocks access by social business, with one of the provisions being that only unlisted public companies are eligible for crowd-sourced equity funding (CSEF).
In its submission, the Business Council for Co-operatives and Mutuals said that it does not support key aspects of the Bill because they “do not serve the capital needs of small or start up enterprises, particularly co-operative or social enterprise models” and they “impose unwarranted regulatory imposts on the disclosure regime for the offer of securities by co-operatives governed by state and territory laws”.
Social Business Australia told Pro Bono Australia News that another shortfall of the Bill is that it is only open to “sophisticated investors”, with more than $2.5 million in assets and $250,000 annual income.
“The policy intent of crowd sourced equity funding should be to ‘crowd in’ people who aren’t rich,” SBA said.
“To do this, the CSEF legislation should be supporting the development of community based platforms which enable and encourage investments from people with moderate incomes and assets into community or social enterprises.
“It should be removing barriers that prevent smaller investors investing relatively small amounts of money, usually with lower expected rates of return, from accessing community investment opportunities, not creating barriers.”
The organisation said that that social investment has become focussed mainly on the “investment activities of conventional financial institutions such as banks, community development finance institutions… and wealth-based philanthropy”.
In its dissenting report, Labor recommended that the government “embrace a lighter regulatory touch” and “remove a major barrier to small firms accessing the equity crowdfunding system”.
However, Labor said it would not block the Bill and instead recommended a review two years after it is enacted.
SBA said if the Bill passes with its current framework it would put the country on the backfoot globally.
“With this CSEF Bill, Australia will be left with many years of catching up to do before it can get anywhere near the ‘community capital’ revolution now sweeping other developed – and not so developed – nations. It is not agile, it is not innovative and it certainly isn’t creative,” SBA said.