Fintech sector rejects crowdfunding bill
The fintech sector has taken aim at the 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’s 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,” said the VentureCrowd submission.
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.
“These tasks and expenses are well beyond the capacity and limited resources of a start-up,” said the submission.
“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”.
Crowdfunding provider CrowdfundUP described the requirement to become a public company as “onerous”.