Equity crowd funding is finally approved by Parliament

After years of languishing behind the rest of the developed world in facilitating the development of an innovation based economy, the Australian parliament has finally passed legislation enabling equity crowd funding. The process of consultation, debate and deliberation has taken over two years but the long awaited Corporations Amendment (Crowd-sourced Funding) Bill 2016 finally passed through the Senate on Monday. The passing of the bill was bipartisan although the opposition and minor parties did insist on some amendments to the cooling off period which is now 5 business days rather than 48 hours.

The legislation will give small business much better access to capital because previously equity raising was really only something that could be undertaken by ASX listed companies. The process of developing a regulatory framework will now begin as well. It will mean the availability of capital raising will extend to small business and startups. It is a welcome development because it will significantly democratise the process of raising capital which traditionally has been the domain of ASX listed companies.

In the past, because only ASX listed companies had access to significant amounts of capital, if someone was an individual with a good idea but not enough resources to get it off the ground, the idea would basically be wasted because it would never have enough funding to get the project started. The inventor of a process or idea would eventually be forced to find work in another industry. However, this new legislation has the potential to significantly change the situation because it removes the barrier that was previously there to investing in a new idea.