Call to make crowdfunding legislation a priority

Australias fintech industry today called for the speedy approval and implementation of private company equity crowdfunding legislation to help more Australian small-to-medium sized businesses to access the funds they need to grow.Legislation supporting crowdfunding for private companies was introduced to the Australian Parliaments House of Representatives in September 2017, but for reasons that are not clear has not progressed since this time.FinTech Australia chair Stuart Stoyan called on Federal Parliamentarians to work together to give priority to the legislation when Parliament returns next week on 5 February 2018.He also called on legislation to commence effective immediately after passing the Australian Parliament, rather than the proposed six month delay, given the significant amount of preparatory work that has already taken place.The legislation is expected to provide a major new fund-raising tool accessible by hundreds of thousands of Australian businesses, who will be able to crowdsource up to $5 million a year from retail investors, capped at $10,000 per retail investor, in return for equity in their company.The legislation will also build on the highly successful launch of crowdfunding for unlisted public companies. On 10 January, the Australian Government announced the first seven companies that had been licensed by ASIC to offer this service, including FinTech Australia members Equitise, Birchal and OnMarket.Given that some 99 per cent of Australias companies are private companies, and just one per cent are public companies, the legislative amendments before the Australian Parliament are seen as vital to open up new funding opportunities.Our inquiries show that this legislation has in-principle support across the political spectrum so we see no reason why it cannot progress in a speedy manner, Mr Stoyan said.Australias crowdfunding system has had an agonising and long gestation, dating all the way back to 2013 when an independent government review was launched into the issue.Its now time to bring a complete crowdfunding regime to life and therefore give businesses a vital new source of funds which are currently not available.The successful launch of crowdfunding for public companies has underlined the huge potential of crowdfunding for the much larger pool of private companies across the nation.FinTech Australias call was supported by OnMarket CEO Ben Bucknell.Equity crowdfunding will give our small and medium sized businesses the tools to grow by giving them access to the funding they need. The next important step is to extend it to include private companies to give Australians the choice to invest in both public and private companies and grow more Australian businesses of the future.Jonny Wilkinson, Co-founder of Equitise said, Its been great to see the equity crowdfunding regime finally live in Australia, and we have already delivered a fantastic raise for one of our first startups using the new regime. But in order to make it work best for as many companies as possible, we urgently need the amendments to be passed as soon as possible.We urge all involved to prioritise this important amendment, so we can give even more Australian companies the opportunity to raise funds and fuel their growth.Matt Vitale, Co-Founder and General Counsel of Birchal, said: "Birchal is thrilled to be among the first cohort of platforms licensed to operate equity crowdfunding platforms in Australia.Birchal supports Fintech Australia's call for additional legislation to be passed as a priority. In addition to opening up the regime to vastly more Australian businesses, it will definitely be more efficient. Birchal has several companies in the midst of converting to public, which currently takes over a month before an offer can be made."The fintech industrys call comes after the Reserve Bank of Australia stated in December last year that crowdfunding could form an important part of attempts to improve finance availability to small businesses.Christopher Kent, the RBAs Assistant Governor (Financial Markets), stated in a speech on 13 December that there had been a reduction in the risk appetite of lenders to small businesses following the global financial crisis, particularly among major banks.Entrepreneurs starting or expanding a small business are typically more reliant on external finance, which remains difficult to obtain, he said.Lending to small businesses is dominated by the major banks and, there is less competition in this market. Interest rates paid by small businesses are also much higher than those paid by large businesses.Mr Kent said that crowdfunding platforms had the potential to make a difference.Crowdfunding platforms have the potential to make financing more accessible for start-up businesses, although their use has been limited to date, he said. Crowdsourced equity funding platforms typically involve a large number of investors taking a small equity stake in a business.Mr Stoyan said that the expected six-month implementation period was unnecessary, given that the Australian Treasury was already seeking feedback on the regulations to support the new expanded crowd-funding regime.The Australian Government is already working on the finer details of the expansion of crowdfunding to private companies and therefore we think the legislation should be amended to refer to a shorter commencement period, he said.