Today as this this a legal and lifestyle blog, I have managed to combine the two into the one blog.
I recently came across and then supported via Kickstarter a nifty little gadget called the Firebiner, find it here – https://www.kickstarter.com/projects/529624630/the-firebiner .
It has quite a few useful everyday items on what can basically be a handy everyday keyring.
What is crowdfunding?
I’m preaching to the converted a little here, however this is a handy excuse to talk a little about crowdfunding. As many of you will know already, crowdfunding has seen explosive growth over the last few years to fund many and varied products and projects. Some succeed in raising the required money, some do not. Some get the money but then fail in the market. Others are runaway successes.
Australian examples – Satellite Reign and Pop-Up Movie
A couple of Australian linked campaigns I personally know which illustrate some other types of funding campaigns and how far they can go include :
Satellite Reign – a campaign by Australian game developers, 5 Lives Studios, to create a sequel to a very popular computer game from the 90s raised a huge £461,333 from 15,029 backers to help bring this project to life – https://www.kickstarter.com/projects/5livesstudios/satellite-reign
With appropriate disclaimers that this one was by my brother, Stuart McBratney, just over $10,000 raised via Pozible to fun a low budget feature film – https://pozible.com/project/32215
There are many issues to consider when setting up a crowdfunding campaign and also some issues to consider when donating to one.
Legal issues around crowdfunding
The legal rules around crowdfunding differ from jurisdiction to jurisdiction. In Australia, it is permissible to set up a true crowdfunding campaign in the sense of donations in return for product or service, but you have to be very careful to make sure you do not stray into capital raising territory, regulated by the Corporations Act.
I won’t give a capital raising lecture here today, but in a nutshell, under Australian law currently you cannot give equity in the business unless you abide by the rules/exceptions under the Corporations Act. If you are doing anything other than having people donate in return for being provided with the product or service, you should consider your obligations under the Corporations Act and preferably seek legal advice from someone knowledgeable in the area.
If blog readers are interested in a Capital Raising/Corporations Act 101 from me, please comment below and I will post one for you!
Australian Federal Government’s proposed crowdfunding laws now lapsed
The Federal Government did have legislation to facilitate crowdfunding on its books prior to the most recent election :
The bill however lapsed with the double dissolution. We will need to watch this space to see if it is introduced once the various other high profile issues taking up the parliament’s attention are dealt with.
|House of Representatives|
|Introduced and read a first time||03 Dec 2015|
|Second reading moved||03 Dec 2015|
|Second reading debate||10 Feb 2016|
|Second reading agreed to||10 Feb 2016|
|Third reading agreed to||10 Feb 2016|
|Introduced and read a first time||22 Feb 2016|
|Second reading moved||22 Feb 2016|
|Lapsed at prorogation||17 Apr 2016|
|Consideration of House of Reps message
||02 May 2016|
|Lapsed at dissolution||09 May 2016|
What about contract law?
Putting aside corporations law compliance, those setting up a crowdfunding campaign should remember that they are still putting in place a contract between themselves and the funders for the sale of a good or service. As a result, all of the usual contract law and liability issues arise. These include :
- certainty as to what is being delivered;
- certainty around timing;
- terms and conditions of sale;
- product liability and insurance;
- returns policies;
- implied terms under consumer and sale of goods laws (e.g. fitness for purpose, merchantable quality etc)
Crowdfunders should make sure these issues are clearly spelt out in their online material. Similarly, those looking to support a campaign should read this material carefully to ensure they understand what they are signing up to.
The legal issues of running a business of course also should be covered off up front- a suitable corporate structure, written contracts with employees and contractors, confidentiality, IP protection, manufacturing and services agreements with suppliers and the list goes on.
Crowdfunding is here to stay. The donation model both here in Australia and overseas is working well; however I personally am hopeful that we will see the Australian legislation find its way back to parliament again soon, accepting that while it doesn’t go as far as may wish, every little bit helps.
Lastly, go get yourself a Firebinder and share with your contacts. Sharing links here :
Facebook Share: http://bit.ly/FB4OEshare
Tumbler Share: http://bit.ly/Tmblr4OEfirebiner