The Federal Government has announced two reviews that will support Australia's growing capabilities in cutting edge digital innovation.
The Government will undertake consultation on Australian crowd-sourced equity funding (CSEF), which will consider whether Australia’s corporations law properly regulates and facilitates CSEF.
A review will also be conducted into employee share schemes (ESS) to help address the barriers faced by start-up companies in attracting and retaining staff.
“As the rollout of the NBN continues, the capacity for start-up companies, particularly in the tech and digital sectors, to create game-changing businesses and applications is unprecedented,” Minister for Broadband, Communications and the Digital Economy, Senator Stephen Conroy, said.
“The Government can’t create the next Twitter, Instagram or 99 Designs, but we can provide the infrastructure and regulatory environment to help Australians who will.”
Minister for Climate Change, Industry and Innovation, Greg Combet, said Australia’s start-up sector has the potential to make a significant contribution to the Australian economy.
“These reviews will complement measures designed to encourage high-growth start-up firms outlined in the government’s A Plan for Australian Jobs, including the announcement of a new $350 million round of capital under the existing Innovation Investment Fund.”
Assistant Treasurer, David Bradbury, said, the feedback from the Prime Minister’s Digital Economy Forum in October 2012 was that Government should look at the framework around employee share schemes with an eye to supporting the development of start-ups in Australia, particularly digital start-ups.
“It is, therefore, timely to re-examine the current rules to see if they are performing as expected or whether there are areas that could be adjusted,” he said.
The review of Australian crowd sourced equity funding will report to Government by April 2014. The review of the regulatory arrangements of employee share schemes will report to Government by December 2013. A consultation paper will be released shortly.
Crowd sourced equity funding (CSEF) is a relatively new and evolving way for companies to raise capital, particularly early stage or ‘seed’ capital. It works by ‘crowdsourcing’ investors through allowing businesses to offer debt or equity interests in their businesses using online crowd-funding platforms, similar to Kickstarter and Pozible.
Although CSEF is not regulated as a specific form of investment in Australia, the Australian Securities and Investments Commission issued guidance in August 2012 suggesting that in some circumstances CSEF may be regulated by the Australian Securities and Investments Commission and be subject to regulatory requirements such as disclosure obligations or managed investment scheme regulatory requirements.
The review will consider, in consultation with stakeholders, whether Australian corporations law appropriately facilitates and properly regulates CSEF. In doing so, the review will consider whether international models can provide guidance, and what would constitute a best practice framework for regulating CSEF in the event that legislative change is appropriate.
Review into the regulatory arrangements for employee share schemes
Employee share schemes (ESS) are incentive schemes which allow employees to receive shares and options as part of their salary package. They are particularly popular with high-growth startup companies. However, some businesses and industry groups have reported difficulties with the existing scheme due to concerns about complexity and cost.
The review into the regulatory arrangements for ESS will consider what measures could help address the barriers faced by start-up companies, such as:
- Developing guidance to reduce the administrative burden (meaning the cost of valuing shares and options) of establishing an ESS.
- Adjusting the valuation methodology of options.
- Examining the point at which share options are taxed for start-up companies.