Early stage investment via crowdfunding seems like a great idea - access to much needed early stage funding for startups and opportunity to get in on the ground floor for investors. But forcing public company reporting on a start up...?? Investor protection is a laudable aim but the consensus seems to be the legislation has not got the balance right.
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. The VentureCrowd submission pointed 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.""The other problem with forcing a company to become public is it limits its future potential and means many investors will not participate in further funding due to the restrictions," said Equitise . Commercial law firm King & Wood Mallesons said the public company regime is "not suitable" for equity crowdfunding, arguing that a "more flexible, graduated regulatory framework would make more sense".