CSF legislation: Proprietary companies join the crowd

13 September 2018

On 12 September 2018, new legislation was passed expanding Australia’s equity crowd-sourced funding (CSF) regime. CSF involves companies sourcing small amounts of capital from a large number of investors, generally using online platforms and appealing to non-professional investors. The new rules, which will come into effect 28 days after the legislation receives Royal Assent, extend the availability of this capital source to proprietary companies.

Recapping the CSF regime

The new laws primarily expand upon the existing regime, which was limited to public companies. Access to crowd funding remains limited to companies with a principal place of business in Australia which have:

  1. A majority of their directors ordinarily residing in Australia;
  2. Less than $25 million in both consolidated gross assets and revenue; and
  3. No substantial purpose of investing securities or interests in other entities or schemes.

Provided those requirements are satisfied, a company can raise money from private investors, up to $10,000 from each investor and $5 million in total over any 12 month period.

All crowd sourced fundraising must be conducted through licensed CSF intermediaries

New rules for proprietary companies

The new amendments do provide additional rules applicable only to proprietary companies, focused on protecting small investors. The obligations on all proprietary companies with CSF shareholders include:

  1. Maintaining a minimum of two directors;
  2. Having their annual financial and directors’ reports prepared in accordance with accounting standards;
  3. Disclosing the details of each CSF offer to ASIC, including maintaining a register of CSF shareholders;
  4. Being subject to the restrictions on related party transactions in the Corporations Act, which require shareholder approval before companies can give benefits or engage in transactions with persons related to the company or its officers or directors;
  5. Giving rights to CSF shareholders to participate in exit events; and
  6. Being either subject to the Corporations Act’s takeover regime, or required to lodge a copy of their constitution with ASIC if they want to avoid that regime.

In addition, proprietary companies which raise more than $1 million from CSF offers must have their annual financial reports audited.

CSF shareholders will be exempted from the 50 shareholder cap for proprietary companies.


With 99% of the companies in Australia being privately held, the new extension of the CSF regime promises to greatly expand the way start-ups and small companies can raise capital. This will allow entrepreneurs to access the funds necessary to grow their businesses and give ordinary investors the means to access and benefit from the most exciting new Australian companies.

We look forward to assisting you with exploring the fundraising options for your business, so you can choose the ideal solution for your circumstances. If you have any questions or wish to seek specific advice, please do not hesitate to contact our Equity Capital Markets team.

This article was written by Paul Brown, Partner and David Ellis, Solicitor.

Paul Brown

P: +61 2 9334 8943

E: pabrown@hwle.com.au 

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