Question

What is equity crowdfunding and how does equity crowdfunding work? Show examples from Australia.

Answer 1

A equity crowdfunding is a process where people invest their capital in a firm that is not lsited in the stock exchange in exchange for shares in the company. The shareholders gain when the company does well eventually.Equity crowfunding allows any interested person with funds to invest as a part of the crowd. Equity crowdfunding, in a way, has democrazed the process of investment in startups and other unlisted firms which was earlier reserved for wealthy individuals, venture capitalists and angel investors.

Equity crowdfunding in Australia -

1.Legislations for Crowd Sourced Equity Funding(CSF) was passed in 2017 and ammended in 2018.

2.The prescribed cap for CSF for companies is $5 million a year

3.The company has to prepare a CSF offer document and CSF can be undertaken via an authorized intermediary like Equitise, Birchal and others.

4.Unlisted companies and propreitory firms with less than $25 million in consolidated assets are eliglible for raisng funds through CSF.

5.Funds are raised by issuance of ordinary shares to retail investors who can buy upto $10,000 of shares for a 12 month period.