The peak body for Australia’s fintech industry has urged Federal Parliament to prioritise a ‘vital new source of funds’ for SMEs by expediting the approval and implementation of private company equity crowdfunding legislation introduced in September 2017.
According to FinTech Australia chair Stuart Stoyan, the Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Bill 2017 has not progressed through Parliament “for reasons that are not clear’. He called on parliamentarians to give priority to the legislation when Parliament resumes next week.
He also called for the legislation to commence ‘effectively immediately’ upon its passage through Parliament, instead of there being a six-month delay, as proposed in the bill, citing “the significant amount of preparatory work that has already taken place”.
“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.
FinTech Australia has previously stated that it expects the legislation to provide “hundreds of thousands” of Australian businesses with a “major new fund-raising tool”. Specifically, private companies would be able to crowdsource up to $5 million a year from retail investors, capped at $10,000 per retail investor, in return for equity.
“Given that some 99 per cent of Australia’s companies are private companies, and just one per cent are public companies, the legislative amendments before the Australian Parliament are… vital to open up new funding opportunities,” Stoyan said.
“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.
“Australia’s 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.
“It’s 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 unlisted public companies has underlined the huge potential of crowdfunding for the much larger pool of private companies across the nation.”
On 10 January, the Federal Government announced that seven companies, including Fintech Australia members Equitise, Birchal and OnMarket, had been licensed by ASIC to assist eligible public companies raise up to $5 million in capital through equity crowdfunding.
Fintech Australia said its call for the equity crowdfunding regime to be extended to private companies comes was consistent with the Reserve Bank of Australia’s recent statement on the role crowdfunding could play in improving finance for small businesses.
In a speech delivered on 13 December, Christopher Kent, the RBA’s Assistant Governor (Financial Markets), stated that small businesses had been affected by a “reduction in the risk appetite of lenders”, particularly major banks, following the global financial crisis.
“Entrepreneurs starting or expanding a small business are typically more reliant on external finance, which remains difficult to obtain,” Kent 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.”
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.”