Crowd Sourced Funding Assignment 2022

RUNNING HEAD: BUSINESS AND COMPANY LAW
Crowd-Sourced Funding
Name of the student
Name of the university
Author Note

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BUSINESS AND COMPANY LAW
Introduction:
The process in which any medium and small scale business starts and increase the
amount of their capital for the business finance from the crowd or public is well known as the
funding of equity crowd or crowd-sourced funding. The funding of crowd-sourced can be
defined as increasing the lesser money amount from a huge number of the individual; it is done
generally by the method of internet use for any project or any venture funding. It has been
observed that the medium and small scale trade or any of the business start-up are offered for
highlighting the particular business or start-up golbally. In Australia, the administration has
introduced the process of crowdsourced funding in 2017. The CSF framework has given the way
of Amendment Act of the Corporation 20171 popularly known as crowd-sourced funding which
can be considered under the ASIC2. In the following essay a thorough analysis is done about the
effect of latest regimes for the funding of crowdsource and their application for the
intermediaries and companies along with the investors.
Funding of Crowd-Sourced:
The crowd-sourced funding is a process in which any medium and small scale business
starts and increase the amount their funds in terms of trade from a wide range of investors those
who willing invest in a small amount3. Therefore it has been found that certain similarities are
present, but it can easily be distinguished from the way of crowdfunding that is donation based
rather than by the method of increasing the amount of money for the sake of artists by the
entrepreneurs for the projects. Crowdfunding can be distinguished from the crowd-sourced
funding based on the nature of investment by the method of crowd-funding investment
1 Corporations Amendment (Crowd-sourced Funding) Act 2017
2 Australian Securities and Investment Commission (ASIC)
3 Storey, Jill. "Crowdfunding assists Agtech with crucial challenge." Australasian Biotechnology 28.2 (2018): 36.

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BUSINESS AND COMPANY LAW
concerning any scheme relating to the offered and managed investment by a person who does
require any license for the financial services of Australia. A person can made the investment in
an organisation through CSF up to the amount of $10000 yearly. There are different liabilities
and risks concerning the crowd-sourced funding. This type of risks includes the fraud risk,
insolvency and lack of records in the track of the organisation.
Deficiency in track proceedings of organisation:
Raising the business capital by the method funding of the crowd-sourced is the new method, or
in earlier stage of the process of development. Therefore the increment in the risk of the business
becomes unsuccessful and the risk of losing the money that is invested increases.
Fraud risk of insolvency:
The invested money has the threat of getting mislaid if it is not handled properly or the operating
website in the way of intermediary between the investor and the business that do not meet the
obligation for setting aside the amount of money in a separate, invested and therefore the
insolvency of the website can be seen.
Fall in the share or difficulty in selling the share:
After the achievement of the organisation the invested value of share by a person has been
observed to be diminished, and the return can be easily reduced if huge number of share is being
allotted by the organisation. The shares can be considered as the high and unlikely liquid that
explains that the chance for investor is less for selling the share in an easy manner4.
4 Moritz, Alexandra, and Joern H. Block. "Crowdfunding: A literature review and research directions." Crowdfunding in Europe. Springer,
Cham, 2016. 25-53.

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BUSINESS AND COMPANY LAW
Current Regime:
Like the discussion of the concept of proper rules and regulation of the liability that is
limited had emerged at the moment once it was first introduced to the U.K, the debate or the
discussion about the best way and proper regulating and legislating the funding of the crowd-
sourced had been observed as existing. The actual question that is arisen in this contention is
found to be the best method for balancing legislation according to the interest of the trade for
increasing the fund while protecting the main investors. The Australian legitimate scheme faces a
challenge that is the fact recognition that CSF is not a matter of accommodation for the actions
of raising the fund in a lawful framework that exists for a huge business. There is a requirement
of the reconceptualisation of the law related to the increasing the fund for keeping the huge
consistency ambition for giving support to the business policies that need access for the
innovative model refunding that can be considered as traditional like equity funding
crowdsourced. This type of business includes the entrepreneurial business, startups, micro,
medium or small scale industry and the forms that are innovative. The legislation was
reconceptualised by the government of Australia in 2017. It is done by amending the CA 2001 to
amendment of the corporation act 2017. This particular act has been observed making
amendment that is minor three sections of the ASIC and ICA 2001 for giving a lawful
framework to CSF. This regime has been observed typically lowering the requirement for the
regulations of raising the fund in public and also maintaining the measure of protection for the
investors. It was seen that the legislation was published after many years of discussion and
debate in 2017. The legislation is applied that is found to be restrictive highly in nature, and it
had made the companies that are publicly listed, and those are eligible to be unlisted for
increasing the capital funds. The act amended India 2018 was observed as the regime is extended