Crowd-sourced funding is a financial service where start-ups and small businesses raise funds, generally from a large number of investors that invest small amounts of money.
The information on this page will assist:
- intermediaries seeking to provide crowd-sourced funding (CSF) services,
- companies seeking to raise funds through crowd-sourced funding.
ASIC's MoneySmart website also has information for investors about crowd-sourced funding.
- CSF legislation
- ASIC guidance
- AFS licence for CSF intermediaries
- Companies making CSF offers
- Innovation Hub
- Related links
The Corporations Amendment (Crowd-sourced Funding) Act 2017 amends the Corporations Act 2001 (Corporations Act), and makes minor amendments to the Australian Securities and Investments Commission Act 2001, to provide a legislative framework for crowd-sourced funding. Generally, the CSF regime reduces the regulatory requirements for public fundraising while maintaining appropriate investor protection measures. A provider of CSF services must hold an Australian financial services (AFS) licence.
The Corporations Amendment (Crowd-sourced Funding) Act 2017 received Royal Assent on 28 March 2017 and took effect from 29 September 2017. See:
- Corporations Amendment (Crowd-sourced Funding) Act 2017
The Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Act 2018 makes further changes to the law to extend the CSF regime to eligible proprietary companies. The Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Act 2018 received Royal Assent on 21 September 2018 and takes effect from 19 October 2018. See:
- Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Act 2018
- Corporations Amendment (Crowd-sourced Funding) Regulations 2018
This means that:
- applications from intermediaries can continue to apply for an AFS licence with authorisation to provide CSF services
- intermediaries who already have an AFS licence with authorisation to provide CSF services are able to extend the CSF services to eligible proprietary companies
- eligible proprietary companies will be able to use the CSF regime to raise funds from the public
- new public companies that make CSF offers will no longer have the benefit of the temporary corporate governance concessions.
As the regulator responsible for fundraising activities and financial services, we have engaged with Treasury and Government in the development of the CSF regime.
To further assist with the development of a CSF industry, we have published updated regulatory guidance for intermediaries seeking to provide CSF services and for companies seeking to raise funds on a platform of a CSF intermediary.
- Regulatory Guide 261 Crowd-sourced funding: Guide for companies (RG 261) will assist companies seeking to raise funds through crowd-sourced funding to understand and comply with their obligations in the new regime, particularly as many of these companies will not have experience in making public offers of their shares. ASIC has also published a template CSF offer document to help companies prepare their CSF offers.
- Regulatory Guide 262 Crowd-sourced funding: Guide for intermediaries (RG 262) will assist intermediaries seeking to provide CSF services, particularly as this is a new type of financial service and there are unique gatekeeper obligations for operating platforms for CSF offers.
We have also provided relief for intermediaries and eligible public companies from certain requirements under the Corporations Act to help facilitate crowd-sourced funding.
We consulted on the initial regulatory guidance and relief in June 2017 and have published Report 544 Response to submissions on CP 288 and CP 289 on crowd-sourced funding (REP 544) detailing our response to that consultation. We conducted targeted consultation on the update to the regulatory guidance with the participants of the initial consultation, with only minor changes made.
- Read the media release for the regulatory guides and relief (with links to the legislative instruments)
- Download RG 261
- Download RG 262
- Download REP 544
- Download Consultation Paper 288 Crowd-sourced funding: Guide for public companies (CP 288) and read the media release
- Download Consultation Paper 289 Crowd-sourced funding: Guide for intermediaries (CP 289) and read the media release
We consulted on the operation of a secondary financial market in shares issued by eligible CSF companies under CSF offers, as this will require an Australian market licence. The CSF legislation introduces new exemption powers that will enable a more tailored regulatory regime to facilitate the operation of specialised and emerging financial markets and clearing and settlement facilities, including in relation to shares of eligible CSF companies.
- Download Consultation Paper 293 Revising the market licence regime for domestic and overseas operators (CP 293) and read the media release
Under the CSF regime, intermediaries will be required to hold an AFS licence with an authorisation to provide a crowd-funding service. The AFS licence obligations under the Corporations Act will apply, including, for example:
- the obligation to act efficiently, honestly and fairly, and comply with the conditions on the licence and the financial services laws (s912A(1)(a), (b) and (c)) which will include:
- an obligation to notify significant breaches (s912D)
- an obligation to lodge annual financial statements and an auditor's report (s989B)
- conflicts of interest – having in place adequate arrangements to manage conflicts of interest (s912A(1)(aa))
- resource requirements – unless a body regulated by APRA (other than certain RSE licensees), having adequate financial, human and technological resources (s912A(1)(d))
- organisational competence – maintaining the competence to provide the financial services (s912A(1)(e))
- risk management – unless a body regulated by APRA (other than certain RSE licensees), having adequate risk management systems (s912A(1)(h))
- having adequate compensation arrangements (s912B)
- dispute resolution – if the financial services are provided to persons as retail clients, having an internal and external dispute resolution system that complies with s912A(2) (s912A(1)(g)).
If you wish to operate as a CSF intermediary, you will need to apply to ASIC for an AFS licence that authorises you to provide a crowd-funding service.
As of 1 October 2018, ASIC has approved 13 CSF intermediaries with AFS licence authorisations to provide a crowd-funding service.
Under the CSF regime, eligible public companies and proprietary companies will be able to make offers of their shares, via an intermediary CSF service, using an offer document.
Unlisted public companies with less than $25 million in assets and annual turnover will be eligible to raise funds under the CSF regime. Eligible companies will be able to make offers of ordinary shares to raise up to $5 million in any 12-month period.
Companies that registered as or converted to public after the commencement of the CSF regime (i.e. 29 September 2017) and before the CSF regime was extended to proprietary companies (i.e. 19 October 2018) will not have to comply with certain reporting, audit and AGM obligations that would usually apply to public companies for up to five years as long as they continue to meet the eligibility requirements.
Public companies that register or convert after 19 October 2018 and make a CSF offer will not have the benefit of the temporary corporate governance concessions as they are able to become or remain a proprietary company and make CSF offers.
Proprietary companies wishing to use the CSF regime will be required under the law to:
- maintain a minimum of two directors
- prepare annual financial and directors’ reports in accordance with accounting standards
- have their financial reports audited once they raise $3 million or more from CSF offers
- comply with the existing related party transaction rules that apply to public companies.
There are obligations and investor protections that apply to CSF offers, including:
- an investor cap of $10,000 per annum per company for retail investors
- the provision of a CSF offer document containing minimum information and a prescribed risk warning
- a five-day cooling-off period.
If you wish to register as a public or proprietary company, you will need to lodge Form 201 Application for registration as an Australian company with ASIC.
ASIC’s Innovation Hub exists to foster innovation that could benefit consumers by helping Australian fintech start-ups navigate our regulatory system. CSF intermediaries may be eligible for assistance from ASIC's Innovation Hub in relation to the AFS licensing process and requirements. Please refer to Innovation Hub for more details.