Crowdfunding Bill Fails

The federal government’s controversial crowd-sourced equity funding bill, which the social sector said missed the mark, has lapsed before it could be passed by the Senate.

The Corporations Amendment (Crowd-sourced Funding) Bill was introduced in December 2015 and passed the lower house this year. A Senate committee recently released its findings on the bill, recommending it should be passed.

However, the bill faced heavy criticism, and Labor senators released a dissenting report, accusing the committee of failing “to address the very real concerns raised” by stakeholders.

It was said that the proposed legislation, intended to “democratise finance”, would block access to social businesses, with one of the provisions being that only unlisted public companies were eligible for crowd-sourced equity funding (CSEF).

Director of energy social enterprise Community Power Agency, Tom Nockolds, was heavily involved in campaigning to improve the bill.

“It’s probably not a bad thing that ultimately the bill didn’t get up,” Nockolds told Pro Bono Australia News.

“I’ve always [said] it’s good for the bill to be up because anything would be an improvement from what we currently have – I still believe that to be the case, but it’s not necessarily a bad thing that what was essentially a bit of a dud bit of legislation is not getting up.

“It now gives us the opportunity to re-group, and for lessons to be learnt around what does a bad bit of crowd-sourced equity-funding legislation look like.

“And hopefully next time something’s put before Parliament, it’s been designed to not just pander to the big end of town.”

However, he said he was concerned that crowdfunding legislation would now be off the political agenda.

“I’m worried it will slip off the radar, but at least now there’s the opportunity for it to come back on the radar, and we don’t have the alternate risk of an argument being made that we’ve already solved this crowd-sourced equity funding problem why are we discussing this still.” he said.

“If the legislation had passed in its proposed form, there would have been a lot of backslapping within government saying, isn’t it wonderful we’ve solved the crowd-sourced equity funding problem and we don’t have to address that anymore, when actually it would have only been half the job done at most.”

Nockolds said he would like to see a new discussion on how CSEF can support all types of enterprises, not just corporations.

“I know that’s not politically expedient, and I know that’s a more complex and expensive route to take,” he said.

“But if we want the right outcome, then unfortunately we’re going to have to have a more complex discussion than simply public companies and a bit of legislation that really caters to people who are probably doing crowd-sourced equity-funding anyway.”  

In its submission to the Senate inquiry, the Business Council for Co-operatives and Mutuals (BCCM) said the bill did “not serve the capital needs of small or start up enterprises, particularly co-operative or social enterprise models” because it imposed “unwarranted regulatory imposts on the disclosure regime for the offer of securities by co-operatives governed by state and territory laws”.

Following the lapse of the bill, the BCCM told Pro Bono Australia News that the proposed legislation “missed the mark”.

“The BCCM is of the view that a CSF regime should be simple, cost effective and minimises the hurdles for co-operatives to raise capital in this way,” BCCM CEO Melina Morrison said.

However, she said that the recent Senate inquiry into cooperatives, mutuals and member owned firms provided opportunities for communities to raise funds from community investors for community-based initiatives.

“This is a cooperative approach to crowd funding that can have deep and long lasting social and economic impact for communities. We look forward to working with government to see these creative approaches flourish,” she said.

The BCCM will be publishing a manual on community shares, which Morrison said was one of the innovative approaches that was proving successful for communities to raise capital.