Australia is embarking on a scheme within its Corporations Act 2001, to foster seed capital through innovation. The aim is to make consumer investors more involved in startups, providing protection and a regime uniquely Australian. New zealand led the way in April, 2014. Malaysia introduced its own regime in July of last year and Singapore has long welcomed start-ups, its governance also undergoing change.

1. EQUITY CROWDFUNDING
Corporations Amendment (Crowd-sourced Funding) Bill 2015
Corporations Amendment (Crowd-sourced Funding) Regulation 2015
Andrew Macpherson
ACCREDITED SPECIALIST IN BUSINESS LAW
DIRECTOR
MACPHERSON GREENLEAF
W: WWW.MACPHERSONGREENLEAF.COM
E: AMACPHERSON@MACPHERSONGREENLEAF.COM

2. Agenda
 ASIC media release on regulation of crowdfunding in Australia
(August 2012)
 Corporations Amendment (Crowd-sourced Funding) Bill 2015
 Positives and concerns with the Bill
 Corporations Amendment (Crowd-Sourced Funding) Regulation 2015
 Positives and concerns with the draft Regulation
 Australian Financial Services Licence (AFSL)
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EQUITY CROWDFUNDING © MACPHERSON GREENLEAF 2016

3. SuperPi: Equity Crowdfunding (ECF) of Real Estate
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SuperPi One Pty Ltd
Trustee
Trust 1 Battery
Point
Unit Trust
SuperPi Ltd
EQUITY CROWDFUNDING © MACPHERSON GREENLEAF 2016

4. SensorBull:
System for Measuring Leg Drive
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SensorBull – a unique market!
Michael Cheika V Eddie Jones - Silence the haka!
EQUITY CROWDFUNDING © MACPHERSON GREENLEAF 2016

5. Equity Crowdfunding - Current
ASIC media release on crowd funding (August 2012) includes:
1. Chapter 6D Fundraising – disclosure registration
2. Financial products and services – PDS – AFSL
3. Management Investment Schemes (MIS) – AFSL
4. Markets licence – ASX – AFSL
5. Restrictions on publishing details of the offer
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6. Equity Crowdfunding - Current
 My start-up... …cost…yikes!
Disclosure
Financial
products
and services
Managed
InvestmentS
cheme
Market - in
equities
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7. Equity Crowdfunding - Current
 Start-up ECF today
S708(1) – Personal
offers
S708(8) –
Sophisticated
S708(10) - Consumer
Class
Order
2002/273Australian Small
Scale Offerings
Board ASSOB
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EQUITY CROWDFUNDING © MACPHERSON GREENLEAF 2016

8. Equity Crowdfunding Legislation - NEW
• Corporations Amendment (Crowd-sourced funding ) Bill 2015
introduced on 3 December 2015
• Provides for the addition of new fundraising provisions to the
Corporations Act 2001 – permits “consumer investors”
• Corporations Amendment (Crowd-sourced funding) Regulation 2015
• ECF intermediary Australian Financial Services License (AFSL)? –
capital requirements not published
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9. Equity Crowdfunding - PROPOSED
 CSF Crowd-sourced funding = ECF Equity crowdfunding
 CSF offer
 CSF offer document
 General CSF risk warning
 Platform and offer platform
 Maximum and minimum amounts to be raised specified
Eligible CSF
company
CSF
intermediary
Consumer
Investor
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EQUITY CROWDFUNDING © MACPHERSON GREENLEAF 2016

10. According to the Bill
Investor
 Acknowledgments – cooling off
 Limit $10k per offer
Intermediary
 Must be a public company
 Must have an AFSL
Issuer
 Must be a public company
 Reduced pc compliance
 $5m in 12 months
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11. ISSUERS
Corporate Governance Concessions
The corporate governance concessions are:
• Exemption from holding an annual general meeting
• Option to provide financial reports to shareholders online only
• No requirement to appoint an auditor
• No requirement to have audited financial reports until more
than $1 million has been raised from CSF offers or other
fundraising offers requiring disclosure
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12. ISSUERS
Corporate Governance
An issuer has corporate governance concessions for 5 years
from the date of registration as a public company if at the end of
each successive financial year it can show:
• It stated at registration it intends to crowd fund and to have
reduced governance;
• It was an eligible CSF company (S738H) and at the end of the
relevant financial year; and
• Completes a CSF offer within 12 months of registration
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13. ISSUERS
Prerequisites for a CSF offer
• CSF issuer criteria
Public company limited by shares
Principal place of business Australia / majority of directors Australian
Gross assets must be less than $5 million
Consolidated annual revenue must be less than $5 million
No investing in securities or interests in other entities or MIS
• Type of securities: Fully paid ordinary shares
• Issuer cap: $5 million in any 12 month period
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14. ISSUERS
The process of making a CSF offer
For each CSF offer, an issuer must:
• Prepare a CSF offer document containing clear and concise
information, presented in an effective manner
• Comply with the Regulation
• Obtain the consents of persons associated with the offer document
• Publish the offer document on the platform of a single CSF
intermediary
• Only one CSF offer open and no related party CSF offer
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15. INTERMEDIARIES
Financial services licensing requirement
An intermediary must hold an AFSL to provide a CSF service. A
person provides a CSF service if:
• A CSF offer document relating to securities of a company is
published on a platform operated by the person
• Applications may be made to the person for the issue, by an
issuer company, of securities pursuant to the offer
CSF service is provided to:
• Potential investors who apply for securities through the
intermediary’s platform
• The issuer
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16. INTERMEDIARIES
The responsibilities of an intermediary
Responsibilities of an intermediary include (but are not limited to):
• Fulfil gatekeeper obligations;
• Provide an application facility;
• Provide a communication facility;
• Closure or suspension the offer as required;
• Handle application money appropriately; and
• Do not provide financial assistance to a retail client to purchase
securities pursuant to the CSF offer
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17. INVESTORS
Investors must:
• Apply in response to a CSF offer via the intermediary’s platform
• Provide the application money via the intermediary
• Abide by the general investor protections
• Acknowledge that they may lose their investment and that such a
loss would not affect their lifestyle
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EQUITY CROWDFUNDING © MACPHERSON GREENLEAF 2016

18. INVESTORS
Protections for retail clients only
Additional protections applicable to retail clients only are:
• An investor cap of $10,000 per issuer via an intermediary’s platform within
a 12 month period
• The right to withdraw from a CSF offer within 5 business days of making an
application
• A prohibition on the company and its related parties, and the intermediary
and its associates, providing retail clients with financial assistance to
acquire securities under CSF offers
• The requirement for an intermediary to obtain a risk acknowledgement
from a consumer investor before accepting the CSF application
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19. INVESTORS
General investor protections
• Persons cannot advertise a CSF offer or publish a statement in relation
to a CSF offer
– Exception for publishers and the publication of certain reports and notices
– Exception for statements made in good faith on the intermediary’s platform
• Persons cannot offer securities for issue or sale through an unsolicited
meeting or telephone call
• ASIC has stop order powers for advertising and publications that are
misleading, deceptive, or do not draw attention to the CSF offer
document or the general CSF risk warning
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20. Defective CSF offer documents
Obligations in relation to defective documents
The following obligations arise when the relevant person becomes aware,
while a CSF offer is open, that the offer document was defective:
• Issuer must notify the intermediary
• Intermediary must:
- Notify the issuer
- Remove offer document from platform and close or suspend offer
• Person liable on the offer document must notify issuer and intermediary
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21. Defective CSF offer documents
Investor rights
Prospective investors who have already applied for securities under the
document will either:
• Receive a supplementary or replacement offer document that
corrects the defect and then have the right, for 1 month, to withdraw
their acceptance
OR
• Be refunded any application money paid as soon as practicable
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22. Equity Crowdfunding - Pluses
1. CSF offer assessment and approval privatised
2. Faster and simpler procedure
3. Lower cost to the issuer companies?
4. A quality assessment introduced?
5. Investor limit per company but not limit on number
of companies
6. Does not interfere with existing regime
7. CSF offer has minimum template requirements
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23. Equity Crowdfunding - Minuses
1. Confusion – retail client, retail investor, consumer investor
2. Use of funds – not sufficiently clear on debts
3. False and misleading – reliance – problem with pivots
4. False and misleading – currently avoided with caveats
5. False and misleading – contradicts “I recognise I could lose all my
investment and it would not affect my lifestyle if I lost my investment”
6. Eligible issuer criteria – too limiting and do not advantage issuer,
intermediary, investor or Government
7. Advertising – where is the harm?
8. Persons who use a communication facility hosted by a CSF
intermediary should not have to prove that they acted in good faith:
the onus should be on those alleging lack of good faith
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EQUITY CROWDFUNDING © MACPHERSON GREENLEAF 2016