What you need to know about raising private capital.

In almost every case, if you raise money – from people you know or from strangers – you need an Australian Financial Services License (AFSL). The method by which you raise funds does not alter this requirement. Raising money in Australia is a heavily regulated activity. There are severe penalties – including imprisonment for up to five years – for people who do not comply with the rules, and that includes both the party raising the money and those who assist them.

Do I need an AFSL if I raise money?

Usually, yes. The financial services rules were introduced to regulate the raising of money and promote transparency and accountability in financial transactions. Thus, they generally apply to anyone who is raising money by whatever means.

Am I carrying on a “financial services business”?

If you engage in communication with multiple individuals on multiple occasions regarding fundraising or investment activities, the law generally classifies you as 'carrying on a financial services business’. If you operate without one, you may be prosecuted, fined, jailed, have a liquidator appointed and your investment project wound up.

What is a “fund”?

The terms "fund," "syndicate," "club investment" and various other terms all refer to the same concept defined under the Corporations Act 2001 as a "managed investment scheme." These schemes are typically structured as unit trusts. “Fund” is the term commonly used in the financial services industry.

Why use a unit trust and not a company?

A company is a costly and restrictive vehicle through which to raise private capital and all its shareholders must be listed on a public register. A unit trust operates under simpler compliance requirements. It is much easier to manage, implement changes, and distribute funds and the registry of investors is private.

What’s the difference between a registered and unregistered fund?

Wholesale funds are not required to be registered. Retail funds are required to be registered. Where a fund is comprised of wholesale investors, the fund will be a wholesale fund and will not require registration with ASIC.

Do I need a Product Disclosure Statement or an Information Memorandum?

A retail fund is required to be registered with ASIC and a PDS must be issued. A wholesale fund can be registered or unregistered and it is advisable to issue an IM to prospective investors setting out sufficient information so that an investor may make an informed decision about whether to invest.

Jurisdictional Issues

Applications to invest in a fund will only be accepted in Australia.

Taxation implications

There isn’t one. Taxation implications of funds are varied and complex. We strongly recommend that you obtain professional taxation advice as to the likely treatment of each fund you are considering initiating.

Transaction steps and documents

The transaction steps and documents required for your fund will depend on many factors. Typically, we can have the fund establishment documents and draft Information Memorandum with you in a matter of weeks.

The obligations of an AFS Licensee and Trustee

As AFS licensees, we are required to meet strict financial guidelines as set out in the Corporations Act 2001. In exercising trustee powers and duties to the fund and the fund’s investors, a trustee must always act honestly and in the best interests of investors.

Authorised Representatives, Corporate Authorised Representatives and CAR Agreements

An authorised representative is an individual or entity that acts on behalf of an Australian financial services licensee (AFSL) to provide financial services to clients

Common questions answered

Welcome to our "Common Questions Answered" section, designed to provide clarity and insights into the intricate world of Australian Financial Services licenses in Australia. As a trusted professional trustee in the industry, we understand that navigating these matters can be complex and overwhelming. In this section, we aim to address the most frequently asked questions and demystify various aspects of AFS licensing, Trustees for “hire” or for “rent”, and “renting” an AFSL.

Glossary and Terminology

AFSL Australian Financial Services Licence ASIC Australian Securities & Investments Commission Authorised Representative A person or entity that has been authorised by the holder of an ...