Capital raising is easy for small companies?

This is a MYTH!

Directors of small companies need to ensure that proper processes are put in place whenever a company wants to raise capital.

Section 708 of the Corporations Act enables small companies to raise capital without having to issue a ‘Disclosure Document’.

This section gives a special exemption for companies undertaking ‘Small Scale Offerings’, also known as the ‘20/12 rule’.

It is called this because companies are able to make up to 20 issues in 12 months, with the maximum amount to be raised by issuing securities not to exceed $2M from a maximum of 20 people.

A key point is that the offer must be a ‘personal offer’ and it has to be made to a person who is likely to be interested in the offer having regard to:

• Previous contact between the person making the offer and that person.

• Some professional or other connection between the person making the offer and that person.

• Statements or actions by that person that indicate that they are interested in offers of that kind.

The person receiving the ‘personal offer’ could be a customer, supplier, contractor, employee or someone who has viewed the company’s website and has made contact and asked for additional information on the company’s vision.

Raising capital under Section 708 is a popular way for small companies to start the capital raising process. Furthermore, this is the type of initial capital raising that most companies have undertaken prior to attempting to raise capital as an Early-Stage Innovation Company and/or as a Crowd Sourced Funding Equity Raising Company.

If your company is contemplating undertaking the ‘Innovation Journey’, capital raising in this manner can be very helpful in obtaining funds for R&D activities, start the commercialisation process and to raise the matching funds that your company may require to be able to access a government grant such as the new ‘Industry Growth Program’.

Towers Business Development provides consulting services to assist companies in this process. To find out more, contact us on 1800 232 088 or email .