Early Stage Innovation Company Status – Benefits for the Company and the Investor
Issue 007
Finding funds to enable the commercialisation of an invention or a new product that has been developed can be one of the most difficult tasks undertaken by a business, because many of these entities have great difficulty in borrowing money because of insufficient security to be offered to a bank.
The Federal Government was aware of this when the government introduced legislation about four years ago to establish a new type of company – Early Stage Innovation Company.
Companies which qualify for the “Early Stage Innovation Company” status have been given some assistance in being able to raise share capital from the public because the Federal Government introduced two significant taxation inducements for investors to invest some of their investment funds into this special category of innovative companies.
The inducements for investors are that if they invest in a company that has qualified as an Early Stage Innovation Company the investor receives:
- 20% of their share investment in the Early Stage Innovation Company as a tax rebate of up to $200,000 for a sophisticated investor and $10,000 for a retail investor; and
- if the shares are held for longer than 12 months and less than 10 years there is no Capital Gains Tax paid when those shares are sold.
What are the key characteristics of a company to be deemed to be an Early Stage Innovation Company?
- Company incorporated within the last three years, although in some instances, it could be the last six years.
- Turnover in the last 12 months less than $200,000.
- Expenditure in the last 12 months less than $1m.
- The company then has to pass 1 of 2 tests which relate to the research and development and or commercialisation activities that the company has been undertaking.
Most companies will require assistance from an experienced business accountant/consultant who can guide the company through the due diligence process and gaining approval from the Australian Taxation Office that the company meets the requirements to be deemed an Early Stage Innovation Company.
Towers Business Development Pty Ltd is an experienced Business Advisory Services organisation which can assist companies through this entire process:
- from the initial briefing on how Early Stage Innovation Company status operates;
- through to the actual due diligence process;
- the preparation of the documentation to support the results of the due diligence review; and
- assistance with the preparation of the documentation that the company will require to present to potential investors for them to consider whether to make an investment into the company.
Peter Towers, experienced accountant, company secretary, director and business consultant has prepared a complete due diligence process to assist companies to be able to avail themselves of the special status that is available for some “young companies” who have a desire to raise funding to assist in the commercialisation of their research and development processes. If you would like to have a discussion relative to the facilitation services that Towers Business Development Pty Ltd can provide, please do not hesitate to contact us:
You are most welcome to visit the Towers Business Development website (www.towersbusiness.com.au to get an overview of the services that can be supplied.
In our recent webinar, posts and videos we discussed:
- “Grants Can Assist Funding For Research Activities” webinar – to view click here.
- If your private company needs additional funding and the group turnover is under $25m your company may be able to utilise Crowd Sourced Funding Equity Raising to raise up to $5m in a 12 month period from the public:
- Crowd Sourced Funding Might Be The Answer – click here
- Video recording – click here
- The Research and Development Incentive Rebate is a tremendous assistance to companies who have undertaken research activities:
- Research and Development assisted by government grants – click here
- Video recording – click here
Towers Business Development Services
Towers Business Development does not give taxation advice but offers consulting services for small/medium sized enterprises and accountancy businesses, including:
- Advice on a “young company” that has undertaken research and development and wishes to raise funds from the public to be able to undertake the due diligence process to be declared an “Early Stage Innovation Company”
- Assistance in the capital raising process for companies that fit the requirement to be deemed a Crowd Sourced Funding Equity Raising Company
- Assistance with capital raising utilising s708 Corporations Act Capital Raising
- Preparation of Business Plans
- Predictive Accounting – Budgets, Cashflow Forecast, Predicted Balance Sheet
- Virtual Chief Financial Officer Services
- Succession Planning
- Establishment of Research and Development Systems
- Government Grant Advice for SMEs
- Corporate Governance Mentoring
- Business Review Meetings – monthly or quarterly
Upcoming Free Webinars Presented By Towers Business Development
- “Early Stage Innovation Company Status - Great For The Company - Investors Love The Incentives” - Thursday 15th July 2021 at 12-noon AEST. To register - click here.
- “Crowd Sourced Funding Equity Raising - What’s Available for Companies” - Thursday 22nd July 2021 at 12-noon AEST. To register - click here.
- “Using Section 708 of the Corporations Act to Raise Capital” - Thursday 29th July 2021 at 12-noon AEST. To register - click here.
- “Corporate Governance Issues for SMEs” - Thursday 5th August 2021 at 12-noon AEST. To register - click here.
- “Identifying Grants for Businesses” - Wednesday 11th August 2021 at 12-noon AEST. To register - click here.
- “Business Review Meetings” - Wednesday 18th August 2021 at 12-noon AEST. To register - click here.
- “Planning Funding for Your Business” - Thursday 26th August 2021 at 12-noon AEST. To register - click here.
Want to know more about the services that Towers Business Development can supply to assist your business in its business growth? You are invited to visit the Towers Business Development website; or contact Peter Towers:
Stay safe!
Have a great day!
