Startup founders say crowdfunding delays are an ‘extreme embarrassment’

Startup founders say crowdfunding delays are an ‘extreme embarrassment’

Startup founders have hit out at the Labor Party for its refusal to support the passage of a long-awaited crowd sourced equity funding (CSEF) bill, resulting in the legislation being pushed back until February at the earliest.

The move from Labor, which was led by digital economy spokesman Ed Husic, comes a week after the bill was introduced to Parliament for a second time, having already been knocked back in December 2015.

The new bill, if eventually passed, means unlisted public companies with less than $25 million in assets and turnover would be able to raise capital via crowd-sourced equity funding.

A spokesperson for Treasurer Scott Morrison told Fairfax Media that Mr Husic’s main concern with the legislation was that it was not open to private companies yet, despite the Coalition’s commitment to open it up to these firms in the new year when the complexities of the Corporations Act had been overcome.

“It is very disappointing that we couldn’t get this done this year as we had been discussing the CSEF bill in good faith with Labor,” the spokesperson said.

“In playing politics to damage the government, Labor is damaging the fintech sector and crowdfunding businesses as well as our international reputation.”

Mr Husic is also believed to have wanted a hard retail investor cap of $50,000 a year in crowdfunding deals, in contrast to the Coalition’s $10,000 investment cap for retail investors for each deal, which does not impose an overall cap.

But the Treasurer’s spokesperson challenged the validity of these issues.

“The so-called issues raised by Labor sounded like excuses for not proceeding, especially as the government has committed to extending the legislation to include private companies in the new year.”

Mr Husic was approached for comment, but failed to respond before publication.

Chris Gilbert, the co-founder of online equity crowdfunding platform Equitise, which has been involved in the government’s consultation process on the new legislation, said this delay put Australia behind Britain and New Zealand, which have had crowdfunding legislation in place for five years and three years respectively.

“It is very disappointing to see the Labor party be disagreeable at this stage in the process when they had such vast amounts of time to work with the Coalition to get this legislation right prior to the Christmas break,” he said.

“With the current state and the six months after royal ascent for the legislation to take effect, it is likely we might not have an operating equity crowdfunding market until 2018. This is an absolute disgrace.”

Mr Gilbert labelled the further delay as an “extreme embarrassment” for the country.

“I would not be surprised if more Australian companies chose to relocate to NZ or Singapore to raise capital in more favourable markets that provide higher levels of support and make it easier to access capital.”

The Coalition’s new bill has a few amendments from the original legislation, including expanding the size of the unlisted public companies that can access this type of funding from only those with less than $5 million in assets, to $25 million.

If the legislation is passed, these small businesses will be able to raise up to $5 million in any 12-month period through crowdfunding platforms.


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