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Corporations Amendment (Crowd-sourced Funding) Bill 2015

Speeches in Parliament
Adam Bandt 11 Feb 2016

Mr BANDT

I rise to speak on the Corporations Amendment (Crowd-Sourced Funding) Bill 2015. The social media has really turbocharged crowdsourced funding. It is now possible to go to a variety of platforms, some of which many people know and use regularly—Kickstarter, Pozible and many others—and put up a project or an idea online and put the call out for people who want to be part of it and who want to put a bit of money into that project. That is a remarkable thing and it has given rise to whole new ways of people relating to each other and supporting each other in their communities. On the whole it is to be encouraged, and it is something that is to be applauded because it is allowing people to connect with each other and form common bonds in a way that even 10 years ago, let alone 20 or 30 years ago, would not have been possible. I have helped a book come to fruition by being a small player in crowdsourcing it, and I have participated in other crowdsourced projects as well. Knowing that it is something that I could not have done 10 or 15 years ago is a good thing, and it is one of the more welcome aspects of the development of technology—the ability for people to connect to each other.

Many of the projects that use existing crowdsourced funding platforms reach an almost natural limit. These platforms are great for things like putting out a book, and some people have even used them for getting a new piece of machinery for their farm, for example. But there are certain projects where you want a bit more than someone offering to put in a bit of money on a website. You want something where the person who is putting in money might have a legal claim, and it is questionable at the moment as to what your legal status is if all you have done is to put in $20 via Kickstarter. So you might want to have a legal claim or you might want to have some say in what happens inside the enterprise. All these are questions we have to answer, as this new sharing economy develops, as to how best to deal with them.

In Australia at the moment, if you are someone with a good idea and you needed funding to make it happen, and you want to get that funding from multiple sources—as opposed to, say, going to a bank or getting into debt some other way—you have really only got the option, once you reach a certain size, of forming what is called a public company: a company that the law allows to go out and publicly advertise for people to put money into. The other form of company that most small businesses use, a proprietary company, does not allow you to do that. So start-ups find themselves at that point where they might have to make a choice: do they become a private company, as many small businesses would, but know that you cannot then go out to the public and ask for money—or do you become a public company? The problem with becoming a public company, for many of these innovative ideas, is that there are a lot of requirements that you have to comply with to become a public company. There is a lot of disclosure that you have to go through and it is an expensive exercise, and for those reasons not many small companies choose to take it up—public offerings and the like—and it gets even more complicated if you decide that you want to list on the stock exchange. You do not have to, of course, but many public companies do. So these new ideas are finding themselves at a point where they are facing an impasse. So, to that extent, it is good that the government has recognised that. It is good the Financial System Inquiry recognised that. And it is good that the government is bringing a proposal before this chamber to deal with it, because it is something that we should deal with, as members of parliament.

I am encouraged to hear from previous speakers and also from the minister that the government is going to have a look a bit later on at how to deal with debt funding for crowdsourced entities, because at the moment it would be fair to say that that characterises the majority of crowdsourced funding—people putting a bit of money into something that could be much more closely akin to debt rather than equity funding. But what we are dealing with here is: how do small enterprises encourage other people to take something akin to an ownership stake—an equity, or a share, as it would commonly be referred to?

It is good that there is potentially going to be a third way for these companies, so that they do not have to go through the rigmarole of becoming public companies and certainly not publicly-listed companies. And it is good that the government is considering allowing people in that position to opt out of a large number of the regulatory requirements. With that comes a potential downside, because the investors into those crowdsourced enterprises then might not have the same information that you would have if you were a normal, publicly-listed company in Australia. So if you jump on the internet and you see an idea or you hear an idea on the radio and you think, 'That looks like a good idea; I want to invest in that,' if they are going through a crowdsourced funding model as proposed by this bill, then you, as an investor, will probably have less information available to you than you would if you were to go off and buy a share in a public company. So, on the one hand, it makes it easier to get the idea off the ground; on the other, it potentially reduces the protections that are available for people who are prepared to invest in it.

Say I put $20 in to help someone publish a book. Many of us who do that are prepared to accept that we might not see that $20 again. Many platforms in fact only ask you for the $20 if you reach the full amount. We are talking about something different here. We are talking about potential investments of tens of thousands of dollars into a new idea—into a start-up. What kinds of protections should you offer those people?

I am pleased to see that this bill does place some weight on those protections for those people—that there is a version of the protections that are available to people who invest in public companies flowing through to this new crowdsourced equity funding model. That is a good thing. That has led some, though, in the sector to say: 'This bill won't do enough for start-ups. If we have to comply with those requirements, and if the protections that are available for the investors come in the form of limiting how much money we can raise or limiting how much money we can raise from an individual investor, then it is not going to do enough for start-ups.' We have had people approach our office from this sector saying exactly that—saying, 'If you really want to unleash innovation then you need a more laissez faire model than is currently being proposed,' and saying that this model is too restrictive.

I want to thank everyone in the sector who has come and approached us and raised those issues and said that there are ways that the bill could be improved. I also want to thank the minister responsible, for giving us an extensive briefing on it. I anticipate that this bill will be subject, probably, to an inquiry in the Senate, but it is certainly something that is being discussed and debated more broadly. We will continue to formulate our position based on those inputs that we get. We appreciate that this is about striking a balance, and the question is whether or not the government has got the balance right in this particular bill. That is in part going to be a question of judgement. But we need to have a bit more work done, from our perspective, before we can form a final position about the pros and cons of each.

There is one area that is of particular interest to us in the Greens, and that comes to the question of crowdsourced and community-owned renewable energy, because this is a booming sector. Increasingly, people want to own their own solar panels—their own way of producing electricity. They are going to start putting batteries in their houses soon so as to be able to store that electricity and generate it as they need. And it is expanding now beyond individual households to whole communities and whole towns.

In Victoria we have Hepburn Wind, for example, where the wind turbines that have been erected outside Hepburn are now helping power the whole community, but they are owned by the community as well. When the community decided to put this together, they had to jump over a number of hurdles to work out what the right legal form was to allow everyone in the community to own a bit of the wind turbine that exists in their area and how they—the people who wanted to make it happen—could put out an open offer to the community to get everyone to buy in and how to navigate their way through all these parts of corporations law that I have been talking about—private versus public company versus other kinds of organisations, associations and the like.

We have heard from a number of the community-owned renewable energy associations, of which there are many, many more around the country and whose number is growing, especially as they watch governments attack the renewable energy target and attack action being taken on climate change. People in this country are far, far ahead of this government. People know climate change is real, and people like renewable energy. They are now starting to build wind farms and large solar farms in their own backyards, especially if they are living in regional and rural areas, and they are starting to come together as communities to own them. One issue that we found is this. They get together, they navigate the system, and, after doing their crowdsourced funding, they have community ownership of renewable energy generation—and then they find it hard to plug into the market. They are told that there are a number of barriers to being able to do that and told, 'You are not the right kind of entity to do that.' We hope that perhaps this bill might give them a new way forward. Perhaps it might provide an opportunity for addressing some of those issues. But those issues are real, and they are ones that we will be considering in the context of this bill.

I can also say that, more generally, in Melbourne, which I think is the social enterprise capital of Australia and the social innovation capital of Australia, there will be many, many others who are looking at the prospects of doing their own crowdsourced funding who we will continue to talk to over the next little while.

As a result, I commend the government for taking the initiative of adopting this part of the financial systems inquiry and bringing a proposal before the House. The Greens will look at it in good faith and will continue to take soundings from the sector and will make the decision about whether it strikes the balance in the right way. I again thank the minister for approaching us in good faith as well and offering us information about this bill. As it progresses through this House and through the Senate, we hope that this is a bill that, either in its current form or in an amended form, will strike the right balance, because crowdsourced funding is an idea whose time has come and, if we can support it and protect people who want to invest in it as well, that is something that we as parliamentarians should do.

Mrs PRENTICE

Innovation is constantly transforming the international financial system and this is likely to continue. Technology-driven innovation has the potential to deliver significant efficiency benefits and improved productivity, efficiency and investment outcomes right across Australia's financial system. New payment methods, innovative funding sources, better use of customer information and deeper cross-border linkages promise enormous opportunities if properly harnessed. Technology is reducing the number and need for a financial institution to secure and underwrite a financially viable contract between producers and consumer, and crowdfunding is emerging as an alternative funding source for small and medium sized enterprises around the world. There has never been a better time to start and grow a business anywhere in Australia, and from here to compete for customers located anywhere in the world.

On this side of the House, we know that funding for small and medium sized enterprises is essential to facilitate productivity growth and job creation, and crowdfunding and peer-to-peer lending can facilitate new technology enabled mechanisms for accessing finance and obtaining credit. Our future depends on us being a nation that is agile, innovative and creative. As the old saying goes: fortune favours the bold. We cannot be defensive; we cannot future-proof ourselves.

Prime Minister Malcolm Turnbull, arguably the best qualified person in any Australian parliament in the combined areas of law, commerce, banking, finance, investment, environment and water resources, constitutional change, information technology, communications, media and the arts, speaks from experience when he says:

... the disruption that we see driven by technology, the volatility in change is our friend if we are agile and smart enough to take advantage of it.

Our policy settings must facilitate entry of these disruptors rather than acting as a blockage. As part of our Growing Jobs and Small Business package, the coalition committed to introducing a new regulatory framework to facilitate crowdsourced equity funding for public companies. Crowdsourced equity funding is a relatively new and innovative concept that allows businesses to obtain capital from a large number of investors to an online platform where each investor typically contributes a small amount of money in return for an equity stake in the business.

The big challenge we must overcome right now is that start-ups and small businesses in Australia are struggling to access retail investors due to significant and ongoing compliance costs and red tape. Changing this will unlock growth and unlock innovation. I welcome the introduction of the Corporations Amendment (Crow-sourced Funding) Bill 2015 as another step closer to where we need to be to meet the challenges and opportunities that technology and innovation promise. I congratulate and thank the minister for bringing this bill forward. I have many innovative small to medium sized businesses in the electorate of Ryan which have developed some very creative and exciting world-first products and services, and they are currently looking for finance and new markets. I look forward to telling them about what we are doing today to give them another opportunity to help secure the finance they need to turn smart and clever thought into action. As I said earlier, there has never been a better time to start and grow a business anywhere in Australia.

The Foreign Minister this week provided a terrific example of where new thinking is transforming old industries, with the Australian start-up company called Flow Hive, which has made harvesting of honey from a beehive as simple as turning on a tap. The father and son team put this idea on a global crowdfunding website and they hit their funding target within three minutes—that is right, just three minutes—and they are now receiving $30,000 worth of orders every day. Like the Foreign Minister and indeed all Australians, I celebrate the success of Australian businesses that are taking Australian innovation onto the world stage. I am even more proud to be an Australian when I hear that a family owned Australian start-up businesslike Flow Hive has achieved what has been called the greatest step forward for beekeeping in 150 years. Wouldn't it be even better if the crowdsourced funding website that our creative thinkers and our innovative small to medium sized businesses used was also Australian owned and operated?

I applaud the coalition government's decision that development of a crowdsourced equity funding market in Australia is an urgent priority to support the funding needs of early-stage innovators. These reforms were considered by the Corporations and Markets Advisory Committee which identified regulatory impediments that make it costly and impractical for businesses to undertake crowdsourced equity fundraising. In this context, regulatory barriers can hinder competition and impact the market forces that push firms to innovate and perform at their best. Crowdsourced equity funding will complement other forms of crowdfunding already available, including rewards based crowdfunding and peer-to-peer lending to offer start-ups choices in how they fund their operations. It will serve as both a complement to and a source of competition to more traditional funding options for small businesses, including bank debt products.

To get to this point today the government also had a root-and-branch examination of Australia's financial system, just as we committed to during the last federal election. As most members know, the inquiry, chaired by Mr David Murray AO, was tasked with making recommendations that would position our financial system to best meet Australia's evolving needs and support economic growth. The inquiry also recommended facilitating crowdfunding by adjusting fundraising and lending regulations, streamlining issuers' disclosure requirements and allowing retail investors to participate in this new market with protections such as caps on investment.

The government has worked hard to get the regulatory framework right so that it can fit within Australia's financial system while creating more opportunities for small to medium sized businesses to grow but also provide some safeguards for Australian consumers and investors. The government consulted widely on potential models, including the model recommended by the committee and the model implemented by New Zealand in 2014. This bill inserts a new part into chapter D of the Corporations Act to create a new regulatory framework to facilitate crowdsourced funding in Australia. Graduating the regulation of market based financing will increase opportunities for small businesses to seek finance from the general public.

The framework set out in this bill adopts key elements of the New Zealand approach, such as licensing and gatekeeper obligations for intermediaries, reduced disclosure, risk warnings and a relatively liberal approach to retail investor caps. The bill balances stakeholder views on supporting investment by reducing compliance costs for equity fundraising while also ensuring appropriate levels of investor protection.

It is no doubt fair to say that because the previous the Rudd-Gillard-Rudd governments were better at talking than doing and, because Labor was better at spending than developing new markets and growing our economy, we are now playing catch-up with New Zealand and other developed countries in this innovative area of finance. Many stakeholders recommended adoption of a framework quickly because further delays would risk impeding the development of the crowdfunding market in Australia.

The government listened and engaged extensively with industry and other stakeholders on the design of the proposed crowdsourced equity funding framework. That is why the model in this bill strikes the right balance between supporting investment, reducing compliance costs and maintaining an appropriate level of investor protection. The new crowdsourced equity funding regime will allow eligible companies to fundraise up to $5 million per year from retail investors, which is higher than that allowed under both the New Zealand framework and the model recommended by CAMAC, the advisory committee. The ability to raise higher amounts will enable entrepreneurs of innovative early-stage businesses in Australia to obtain the capital they need to turn good ideas into commercial successes.

I am also pleased the government has shown foresight in the framing of this bill so that, as the market develops, the ongoing appropriateness of these thresholds can be reviewed. This bill permits retail investors to invest up to $10,000 per issuer per 12-month period, allowing investors the opportunity to make substantial investments in a product while also seeking to mitigate the size of their exposure. The bill also provides a regulation-making power to amend this amount as the market develops. Retail investors will not be limited in the total amount of investment in crowdsourced equity funding they can undertake, which will allow them to diversify their investments. Investors will also be protected in the form of cooling-off rights for a period of five days after making an initial investment.

The framework will enable public companies that are issuing equity through crowdsourcing to do so with reduced disclosure compared with what is required under full public equity fundraising. It also provides for newly registered public companies that meet the assets and turnover tests concessions from some corporate governance and reporting obligations.

The important role of intermediaries in the operation of an equity crowdfunding market cannot be overstated. As gatekeepers, intermediaries provide an important quality assurance role. For this reason, intermediaries will be required to hold an Australian Financial Services licence. The framework sets out certain obligations that intermediaries will need to meet, including the requirement to conduct checks on issuers before listing their offer. Ongoing responsibility for issuing licenses and monitoring the operation of the framework set out in this bill will sit with the Australian Securities and Investments Commission, which was provided with $7.8 million in funding through the 2015-16 budget for this task.

I note a number of other jurisdictions have a regulatory framework in place for crowdsourced equity funding, and consultation indicated wide ranging support for an Australian framework. Because the legislative framework and policy settings we are constructing today will need to continually evolve and keep pace with technologically driven change, we must as far as possible future-proof this regulation such that public administration will always encourage innovation.

Clearly in an age of rapid, technology driven change we simply cannot afford to 'set and forget' when it comes to rules and regulations. I note advice from the Minister for Industry, Innovation and Science that one of the most well-known stockbrokers in London said, 'Australia now has an innovation competitive advantage as a result of the coalition's changes to taxation for angel investors around capital gains tax and income tax.' Britain has been ahead of us in this area on innovation. That Australia has now leapfrogged Great Britain means our creative class and our small to medium sized businesses will be able to attract even more international investment, which will create more jobs and more growth in the economy.

The coalition are the real friend of small business, and we will always consider any emerging issues, concerns and aspirations for consumers, investors and business operators surrounding the scope and application of these laws. I welcome amendments in this bill to ensure the Australian market licensing and clearing and settlement licensing regimes can be tailored to operators of emerging and specialised markets, such as crowdfunding intermediaries. This will reduce the compliance burden for operators of these markets.

The framework set out in this bill will enable Australia's innovative early-stage businesses to obtain the capital they need to turn good ideas into commercial successes. I congratulate and thank the minister for bringing this bill forward, because it delivers on our commitment to foster innovative economic activity. This bill unlocks a new source of funding for small to medium sized enterprises that will push and pull more opportunities for Australian innovators and those other creative thinkers and doers into developing new products and services for the domestic and international market. As I have said before, there has never been a better time to start and grow a business anywhere in Australia and, from here, to compete for customers located anywhere in the world. I commend the bill to the House.

Mr VAN MANEN

It is with great pleasure that I rise today to speak on the Corporations Amendment (Crowd-sourced Funding) Bill 2015. This bill is designed to help facilitate crowdsourced equity funding in Australia, which is an innovative and increasingly popular concept. Crowdsourcing allows businesses to obtain capital from a large number of investors through online platforms, where each investor typically contributes a small amount of money in return for an equity stake in the business.

It is worthwhile reflecting on one of the reasons that I think this legislation is so important, and this was touched on in the Treasury discussion paper on this particular topic back in 2014. The discussion paper makes the observation that:

Small businesses are a significant driver of productivity and economic growth. However, obtaining affordable finance to fund development of innovative new products is difficult in some cases.

… … …

Difficulties in accessing debt finance can arise as a result of gaps in information between lenders and borrowers. As the provision of debt finance requires an assessment of a business' ability to service the debt, small businesses and start-ups that do not have adequate evidence of past performance or prospects for success can face particular challenges accessing credit.

… … …

Some banks have noted that they decline approximately twice as many loan applications for start-ups as for established small businesses …

That is why this bill is so important to our small business and start-up sector.

We are in a time where our government is encouraging innovation—innovation that creates jobs, creates opportunities and creates economic growth for Australia. Crowdsourcing is an opportunity to provide an alternative funding avenue that unlocks a new way of funding business start-ups. The member for Ryan used a fabulous example, which the Prime Minister had used, in Flow Hive. Equally, in my electorate of Forde, we have fabulous innovative businesses such as Beovista, A1 Rubber, Poppy's Chocolate and Beenleigh Artisan Distillers. While they are a large business not a small business, they are constantly looking to innovate and develop their product, and they are the oldest operating rum distillery in Australia. Recently, Zarraffa's have announced that they are going to move their headquarters to Beenleigh. They are looking at doing some additional, really innovative things in the building that they have purchased. So it is not just an administrative. I am sure that everyone in this House has in their electorates some businesses that are at that cutting edge of innovation and technological development.

It is an innovative economic concept that has helped launch many successful businesses. That is the importance of this crowdsourced equity funding. For retail investors, it creates an opportunity, which they do not currently have, to invest in small companies and start-up companies. Therefore, it is time for the government to catch up and provide a framework that will deliver sound outcomes and opportunities for these businesses and investors to take part in crowdsourced equity funding, and that is what this bill is about.

Crowdsourced equity funding was found by the Corporations and Markets Advisory Committee to be costly and impractical for businesses, due to regulatory impediments in the Corporations Act. This bill responds to those findings by establishing a legislative framework for crowdsourced equity funding that will address these regulatory impacts.

The coalition government made a commitment in the 2015-16 budget, as part of the Growing Jobs and Small Business package, to introduce legislation that facilitates crowdsourced funding in Australia. This government is committed to supporting the growth and success of Australian business. As we continue passing legislation from the jobs and small business package, complemented by the recent launch of the National Innovation and Science Agenda, there really has never been a more exciting time to establish and grow a business in Australia.

The framework our government is introducing in this bill will enable public companies that are issuing equity through crowdsourcing, to do so with reduced disclosure compared with what is required under a full public equity fundraising. For newly registered public companies that meet the assets and turnover tests, this framework provides concessions from some corporate governance and reporting obligations, to ensure that investors are able to make informed investment decisions and are not exposed to excessive losses. The framework also sets out the minimum disclosure requirements and a $10,000 per issuer per 12-month period investor cap for retail investors.

It is not the government's role to help pick a winning concept or business idea. What we can do is create the right economic conditions for small businesses and start-ups to grow and thrive, and take steps to remove unnecessary regulatory barriers. The framework set out in this bill will enable Australia's innovative early-stage businesses to obtain the capital they need to turn good ideas into commercial successes. It is only through turning those good ideas into commercial successes that we grow and develop our economy. The great thing about Australia is that we have a history of innovation, and we should be very proud of that. Yet, we should also be disappointed at the fact that many of those innovations ended up offshore as a result of a lack of capital to help develop and grow them here onshore.

Crowd-sourced equity funding will also offer a new funding option for Australian small business. It will complement other forms of crowdfunding already available, including the rewards based crowdfunding and peer-to-peer lending to offer start-ups a choice in how they fund their operations. It does not take much of a search on the internet these days to find peer-to-peer or crowdfunding options. Many of those are now local but a lot are still overseas. Hopefully, this legislation will also encourage those organisations to set up their operations here in Australia so that the operations are contained here locally. This will serve as both a complement and a source of competition to more traditional funding options for small business, particularly in relation to bank debt products. One of the major issues for our small- to medium-businesses is the gap in the cost of capital compared to large listed entities. That gap in capital cost can in a lot of cases be roughly double. So this option creates an opportunity for our small- to medium-business sector to be able to compete on a more level playing field with the big end of town.

The government has consulted extensively on the design of the proposed crowd-sourced equity funding framework, and the model detailed in this bill strikes the right balance between supporting investment, reducing compliance costs and maintaining an appropriate level of investor protection. Schedule 1 of this bill inserts a new part into chapter 6D of the Corporations Act. This sets out the various elements that comprise a crowd-sourced equity funding framework. Australia's crowd-sourced equity funding regime will allow eligible companies to fundraise up to $5 million per year from retail investors. This amount is higher than that allowed under both the New Zealand framework and the model recommended by CAMAC. The ability to raise higher amounts will enable entrepreneurs of innovative early-stage businesses in Australia to obtain the capital they need to turn good ideas into commercial successes.

Schedule 2 of this bill sets out a number of concessions for newly-registered public companies that have restructured in order to access crowd-sourced equity funding. Provided a company undertakes crowd-sourced equity fundraising within 12 months of registering as a public company, it is eligible for exemptions of up to five years from the requirement to hold an annual general meeting; have annual reports audited if it has raised less than $1 million from crowd-sourced equity funding; and provide its annual reports to investors, other than publishing them on its website. Further, companies fundraising under this framework will be able to offer equity securities to retail investors, with lower disclosure than currently required. This measure will improve access to crowd-sourced equity funding for small businesses and start-ups, as a full disclosure document can be costly and time consuming to prepare.

The government has listened to stakeholders on how to best balance the fundraising needs of business with investor protection. The framework in this bill permits retail investors to invest up to $10,000 per issuer per 12-month period, allowing investors the opportunity to make substantial investments in a product, while also seeking to mitigate the size of their exposure. The bill also provides a regulation-making power to amend this amount as the market develops. Retail investors will not be limited in the total amount of investment in crowd-sourced equity funding they can undertake, allowing them to diversify their investment portfolio. Investors will also be protected in the form of cooling-off rights for a period of five days, after making an investment.

Another element of this bill reflects the importance of intermediaries in the operation of equity crowdfunding. As a gatekeeper, intermediaries provide an important quality assurance role and, in recognition of this, intermediaries will be required to hold an Australian financial services licence. Requiring intermediaries to be licensed will provide issuers and investors alike with confidence in the integrity of the intermediary and their capacity to carry out the obligations of operating a crowd-sourced equity funding platform.

This bill delivers on our government's commitment to foster innovative economic activity by unlocking new sources of funding and equity. I commend this bill to the House.

Ms O'DWYER

Firstly, I would like to thank those members who have contributed to this debate. The Corporations Amendment (Crowd-sourced Funding) Bill 2015 gives effect to the government's commitment to facilitate crowd-sourced equity funding in Australia by introducing a framework which will reduce the regulatory impediments for small businesses, particularly early-stage businesses, seeking to obtain equity finance.

The government consulted widely on the provisions contained in this bill. This process began in late 2014, following release of a discussion paper that sought to canvass stakeholder views on possible models for a crowd-sourced equity funding framework. These models included the framework adopted in New Zealand and the model recommended by the Corporations and Markets Advisory Committee, otherwise known as CAMAC, in its review of Australia's equity crowdfunding landscape. Over 40 submissions were received, and two stakeholder roundtables were hosted by Minister Billson to discuss the design of the framework. The government acknowledges the efforts of stakeholders to provide feedback and to help guide development of the framework in this bill.

A proposed framework for Australia, a hybrid of the New Zealand and CAMAC models, was outlined in a separate consultation paper in August 2015. Targeted consultation was undertaken on the draft legislation, and further public consultation was undertaken following the introduction of the legislation into Parliament. In line with the Corporations Agreement of 2002, the Commonwealth also sought and received the agreement of the states and territories to the amendments contained in this bill.

Overall, there was broad support for developing a framework that incorporates elements of the model recommended by CAMAC and a model adopted by New Zealand. The framework that the government has introduced into parliament reflects improvements suggested by stakeholders during consultations and seeks to ensure the balance between supporting investment and reducing compliance costs for the issuers of crowdsourced equity funding offers, while maintaining an appropriate level of investor protection.

For equity crowdfunding to be a viable funding source, it is important that the framework can operate effectively to benefit businesses and investors. Like in New Zealand, intermediaries will play an important role in the operation of Australia's equity crowdfunding market with the framework setting out certain obligations that are necessary for facilitating crowdsourced equity funding offers. Intermediaries will act as gatekeepers, ensuring that certain disclosure and other requirements are met by issuers before their offer is listed on the platform.

The crowdsourced equity funding framework proposed in this bill allows eligible companies to fundraise up to $5 million per year from retail investors with reduced disclosure obligations compared to traditional public equity fundraising. We are also streamlining public company corporate governance and reporting obligations for companies that become established as a public company in order to access crowdfunding.

In Australia, unlike other countries, the distinction between the rights and obligations of proprietary and public companies is an underlying rationale of our Corporations Act and applies to all companies. Australian proprietary companies are limited to 50 non-employee shareholders and as such have reduced reporting and governance arrangements than public companies. By providing a holiday for up to five years from the most onerous reporting and governance requirements for unlisted public companies, this framework facilitates equity funding from the 'crowd' while ensuring that the normal obligations that apply to all Australian companies with a larger number of shareholders apply once this time has passed. The government's approach in this matter was supported by the Productivity Commission's inquiry report into Business Set-Up, Transfer and Closure on 30 September 2015. The framework will provide a number of protections, including offer documents providing basic information about the offer and a per issuance investor cap, to ensure investors can make informed decisions without being subject to excessive levels of risk.

I acknowledge that some people found the limits on the fundraising threshold too low, while others argued that the investment limit should be higher than what is currently in the bill, or be removed altogether. The government has listened to stakeholder views on how to balance the fundraising needs of businesses while ensuring investors remain adequately protected. The bill also provides a regulation-making power that will allow these thresholds to be reviewed over time, as the market develops. To accommodate market developments, the bill also provides the minister with an exemption power to exempt certain market operators, including intermediaries, from specific obligations under the Australian Financial Market Licensing regime. This will enable the government to more readily tailor the regime to intermediaries operating in the crowdfunding market, as it matures. This exemption power will apply from the date this bill receives royal assent.

During the debate the issue of whether collective investment models, such as unit trusts or managed investment schemes, should be permitted to use the crowdsourced funding framework was raised. Under this structure, investors place their funds in trust with the managed investment scheme, which becomes the shareholder in small companies on the investors' behalf. Under the Corporations Act, managed investment schemes that accept investments from retail investors are subject to disclosure, licensing and other obligations that are specific to the risks of this investment structure. The crowdsourced funding framework would prevent a managed investment scheme from utilising the crowdsourced funding framework to raise funds from the public. This is because the reduced disclosure environment provided by the crowdfunding regime is not appropriate for more complex arrangements like a managed investment scheme.

The crowdsourced funding framework in this bill will take effect six months after it receives royal assent. Over this period, the Australian Securities and Investments Commission will put in place systems, processes and guidance to effectively administer the framework and provide additional certainty to industry. The government provided $7.8 million to the Australian Securities and Investments Commission in last year's budget to facilitate this.

This bill fulfils the government's 2015-16 budget commitment and our response to the Financial System Inquiry to introduce an equity crowdfunding framework. Its introduction will enable entrepreneurs of innovative early-stage businesses in Australia to obtain the capital they need to turn good ideas into commercial successes. It will also open a new form of investment class to provide an additional investment option for investors.

I commend the bill to the House.

Question agreed to.

Bill read a second time.

Ms O'DWYER

I move:

That the bill be read a third time.

Question agreed to.

Bill read a third time.

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