Dissenting Report by Labor Senators
Labor has long recognised the importance of early stage innovation to
drive economic growth in Australia.
Australia's start-ups have already proven their potential here and
abroad and we need to encourage the growth of successful start-ups—especially
considering that the majority of jobs to be created over the next decade and
beyond will be in companies that do not exist today.
That is why it is important to have policies in place that help grow as
many more of these companies as possible—policies that help remove some of the
barriers to growth, particularly a lack of capital.
While traditional sources of funding for early stage innovation and
start-ups have come from venture capital and angel investors, equity crowdfunding
has emerged as an alternative way of raising capital.
This Bill amends the Corporations Act 2001 and the Australian
Securities and Investments Commission Act 2001 to facilitate crowd-sourced
equity funding in Australia. A series of proposed regulations to help enact the
Bill were also released on 22 December 2015.
Labor has had a strong interest in the value of equity crowdfunding as a
way of supporting the capital needs of early stage businesses.
The origins of this Bill sit within a decision taken in 2013 by the
previous Labor Government: where the Corporations and Markets Advisory
Committee (CAMAC) was tasked to advise on the appropriate framework to allow
equity crowdfunding to operate in Australia.
Since then, Labor has consulted with the start-up community and heard
their views on what will make for a productive regulatory framework. These
consultations and the work of CAMAC have influenced Labor's approach to this
While we understand that equity crowdfunding will not be used by all start-ups
and small businesses, we recognise that the overall legal framework for equity
crowdfunding should trigger confidence in the value of this fundraising
mechanism for these small firms.
Having reviewed the submissions and taking note of the views expressed
at the Committee's public hearing, it is very clear that the Government's
proposals have drawn a mixed reaction.
While industry stakeholders have welcomed progress in bringing equity
crowdfunding laws closer to reality, many have expressed disappointment in the
Government approach, some arguing that it has completely ignored concerns about
aspects of the framework that will potentially add regulatory and financial
impost on start-ups and crowdfunding platforms.
Many stakeholders argued the Bill adopts a heavy regulatory approach
that will be costly and act as a disincentive, preventing many small businesses
from accessing the new system. We note claims made in the submissions and list
some of the concerns below. For example, one crowdfunding platform—CrowdfundUP—details
a repeated criticism of this Bill:
In its present form, the...Bill would not be attractive to start-up
companies due to the onerous requirement for a company to become a public
The Faculty of Law at the University of New South Wales stated:
Currently the Bill excludes over 99.7% of companies from
Additionally the Law Council argued that it:
...is concerned that the CSEF Bill is too complicated to be
easily understood by start-ups and early stage companies seeking to take
advantage of CSEF and may give rise to too high a regulatory burden for
intermediaries to readily embrace the establishment of CSEF platforms.
The Business Council of Co-operatives and Mutuals does not support the
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
unwarranted regulatory imposts on the disclosure regime for the offer of
securities by co-operatives governed by state and territory laws.
Notably, legal firm Pitcher Partners recommended changes to the Bill
...to ensure that (equity crowdfunding) platforms are
economically viable, it is important to consider expanding the customer base of
the proposed regime to existing and future private companies.
Again, the overall submissions—along with the public hearing into the
Bill—focussed on key shortcomings of the Government's proposed equity
crowdfunding framework. Specifically, there appeared to be considerable
concern around the demand for small firms to convert into unlisted public
companies in order to access crowdfunding. The concerns centre on the cost and
During the public hearing, Treasury did acknowledge the concerns
surrounding cost, recognising that start-ups and small businesses would be required
to absorb costs in the 'thousands' to take the necessary steps to convert into
a public company.
While we do accept the Bill provides limited regulatory relief from some
of the burdensome consequences of being a public company, some of the
submissions argue that this is hardly enough to overcome the cost.
The Government should embrace a lighter regulatory touch. It is for this
reason the Opposition submits a dissenting report, as the substantive report
failed to address the very real concerns raised with the Committee.
The Opposition believes it is important to usher in a new equity
crowdfunding framework in Australia. We do not intend to block the Bill.
However we do need to remove a major barrier to small firms accessing the
equity crowdfunding system.
Section 738H (1)(a) should be amended to remove the restriction that
limits crowdfunding to unlisted public companies. In its place, the Bill
should merely allow small firms to access the Bill's Corporations Law
exemptions from the point at which they enter into a legally enforceable
agreement with an intermediary (crowdfunding platform) to hold an equity
The second change that should be made to increase the number of firms
that can access equity crowdfunding would focus on lifting the assets and
turnover caps, taking them from $5m to $10m.
As the Committee heard, the current $5m cap on assets and turnovers
concentrates risk and encourages retail investors to place their money in the
highest risk early stage start-ups, losing all the benefits of diversification.
Labor agrees with the report recommendation to submit the equity
crowdfunding laws to a review two years after the Bill receives Royal Assent.
Senator Chris Ketter
Navigation: Previous Page | Contents | Next Page