How to use section 708 disclosure exemptions wisely
Under section 706 of the Corporations Act 2001 (Cth), an offer of securities for issue (including ordinary shares, preference shares, SAFEs, and convertible notes) requires a disclosure document unless an exemption applies. A proprietary (Pty Ltd) company generally cannot make offers that need a disclosure document (s 113(3), except offers of shares and options over shares to existing shareholders or employees, or a crowd-sourced funding offer under Part 6D.3A), so every raise must fit within an exemption, most commonly section 708.
Olena Brodovska, Principal Last reviewed: 3 November 2026
| Exemption / Regime | Who qualifies | Evidence to keep | Counts toward 20/12? | Counts toward 50 (s 113)? |
|---|---|---|---|---|
| Small-scale personal offers (s 708(1)–(7)) | Specific person approached via prior contact, connection, or expressed interest (no public advertising). | Personal offer log (who approached whom, prior relationship, date) and signed subscription agreement or SAFE. | Yes (up to 20 investors and $2m raised in any rolling 12 months). | Yes, unless the holder is an employee shareholder (s 113(2)). SAFE holders count only once their SAFEs convert into shares. |
| Sophisticated investor: accountant's certificate (s 708(8)(c), (d) & reg 6D.2.03) | Investor with $2.5m net assets or $250k gross income for the last 2 years, or a company/trust controlled by them (s 708(8)(d)). | Qualified accountant's certificate given no more than 2 years before the offer, plus confirmation of control if investing via a trust or company. | No (excluded under s 708(5)). | Yes, unless the holder is an employee shareholder (s 113(2)). A trust or company investing for a certified individual counts separately. |
| Sophisticated investor: $500,000 minimum or top-up (s 708(8)(a) & (b)) | Investor paying at least $500,000 on acceptance (s 708(8)(a)), or whose new investment plus amounts previously paid for securities of the same class still held totals at least $500,000 (s 708(8)(b)). | Subscription agreement and register records showing $500,000 single or cumulative payment for that class. | No (excluded under s 708(5)). | Yes, unless the holder is an employee shareholder (s 113(2)). |
| Experienced investor via AFSL holder (s 708(10)) | Investor offered securities through a financial services licensee (AFSL holder) satisfied on reasonable grounds of the investor's prior investment experience. | AFSL holder's written statement of reasons given to the investor, and the investor's signed acknowledgement that no disclosure document was provided. | No (excluded under s 708(5)). | Yes, unless the holder is an employee shareholder (s 113(2)). |
| Professional investor (s 708(11) & s 9) | AFSL holders, super funds with at least $10m net assets, or persons who have or control at least $10m in gross assets. | Written confirmation or warranty of professional investor status, and any reasonable verification (such as checking the AFSL register). | No (excluded under s 708(5)). | Yes, unless the holder is an employee shareholder (s 113(2)). |
| Senior manager or close relative (s 708(12)) | Senior manager of the company (or a related body), including a director or secretary involved in its management, their spouse, parent, child, brother, or sister, or a body corporate controlled by any of them. | Board record confirming senior manager role, family relationship, or control of the investing entity. | No (excluded under s 708(5)). | Yes, unless the holder is an employee shareholder (s 113(2)). A senior manager who is an employee does not count, but their relatives and controlled companies do. |
| Employee share scheme (Part 7.12 Div 1A) | Employees, directors, and qualifying contractors receiving shares or options under an ESOP. | ESOP Plan Rules, offer letter, and Part 7.12 Div 1A compliance records (where monetary consideration is payable). | No (disregarded under s 1100ZC(4) where eligible under Div 1A; small-scale s 708(1) offers are eligible only via s 1100R(2), subject to its conditions). | No for employee shareholders (s 113(2)). Options do not count until exercised. Contractors and non-executive directors who become shareholders count toward the 50 limit. |
Whether a shareholder counts toward the 50 limit depends on who holds the shares, not on which exemption was used. Every non-employee shareholder counts, with joint holders counted as one. Employee shareholders, including former employees who became shareholders while employed by the company or a subsidiary, do not count (s 113(2)). Shares held through an employee's family trust or company do count, because the trustee or company, not the employee, is the shareholder.
01Small-scale personal offers (20/12 rule) and the advertising ban
Section 708(1) to (7) exempts personal offers where securities are issued to no more than 20 investors and raise no more than $2 million in any rolling 12-month period (s 708(3)). In working out the $2 million, include amounts payable later on the exercise of options or the conversion of convertible securities, not just the amount paid up front (s 708(7)). Under section 708(2), a personal offer may only be accepted by the specific person to whom it was made, and must be made to a person who is likely to be interested in the offer having regard to previous contact, some professional or other connection, or statements or actions by them that indicate interest in offers of that kind. Because a SAFE is treated as a security when signed, uncertified SAFE investors count toward the 20-investor and $2 million limits at signing rather than on conversion (see Raising on SAFEs: conversion, dilution and key terms to check, which also explains the section 707 on-sale restriction).
Section 734(1) of the Corporations Act prohibits advertising or publishing a statement that directly or indirectly refers to an offer, or intended offer, of securities that relies on the section 708(1) small-scale personal offer exemption (while section 734(2) restricts advertising offers that require a disclosure document before it is lodged). Founders risk breaching section 734(1) when they post on LinkedIn, X, or public newsletters that they are raising a round and invite the public to get in touch to invest. Beyond the statutory offence, public advertising can mean the approaches no longer qualify as personal offers under section 708(2), so the section 708(1) exemption may be lost altogether. Separately, section 992A prohibits offering securities to retail investors in the course of, or because of, unsolicited contact (such as cold emails or messages to people with no prior connection), subject to limited exceptions. For grey areas such as pitching at a demo day or being listed on an online syndicate platform, in practice founders keep events invitation-only for sophisticated or professional investors, do not publish offer terms, and route investment through the platform's own compliant process. These are market practices, not statutory safe harbours. The risk is greatest where any part of the same round relies on the section 708(1) personal offer exemption. Even in a wholesale-only round, public advertising that amounts to an offer of securities to people who do not qualify for an exemption will itself require disclosure, engaging section 727 and the section 113(3) prohibition.
When counting the 20 investors and the $2 million ceiling over the rolling 12-month period under section 708(5), the company disregards any offer or issue that qualifies under another section 708 exemption, such as sophisticated investors (s 708(8)), experienced investors through an AFSL holder (s 708(10)), professional investors (s 708(11)), or senior managers (s 708(12)), and also disregards offers not received in Australia, offers made under a disclosure document, and issues eligible under the employee share scheme regime (s 1100ZC(4)).
Worked example of the rolling 12-month trap: A startup closes a pre-seed round on SAFEs in March to 15 uncertified angels ($600,000 total), relying on section 708(1). Eight months later, in November, it raises a Seed round that includes a lead VC (exempt under s 708(11)), 4 certified sophisticated angels (exempt under s 708(8)(c)), and another 8 retail angels ($400,000 total). Because March and November fall within the same rolling 12-month window, those 8 additional retail angels take the company to 23 personal-offer investors within 12 months, breaching the 20/12 limit under section 727(4) (so any issue that results in the 20-investor ceiling being exceeded contravenes s 727(4)) unless at least 3 of the 23 personal-offer investors across both rounds qualify under another section 708 exemption.
02Sophisticated investors, family trusts, and follow-on top-ups
Offers to sophisticated investors under section 708(8) do not require disclosure and do not count toward the 20-investor or $2 million small-scale limit. For startup raises, four limbs of section 708(8) are relevant:
Qualified Accountant's Certificate (s 708(8)(c) & reg 6D.2.03): The investor provides a certificate given by a qualified accountant (as defined in section 88B and ASIC Corporations (Qualified Accountant) Instrument 2026/734, which covers members of CPA Australia, CA ANZ and the IPA who meet their body's designation and continuing professional education requirements, and members of specified foreign professional bodies) no more than 2 years before the offer is made, confirming that under Corporations Regulations 2001 regulation 6D.2.03 the investor had gross income of at least $250,000 per annum in each of the previous two financial years, or has net assets of at least $2.5 million. These thresholds have been under policy and parliamentary review (with proposals to index the $2.5 million net assets and $250,000 income figures for inflation); check the current figures in regulation 6D.2.03 before relying on a certificate.
Company or Trust Controlled by a Certified Investor (s 708(8)(d)): Because Australian angel investors frequently invest through a family discretionary trust, SMSF, or personal investment company rather than in their own name, section 708(8)(d) extends the exemption to a company or trust controlled by a person who meets the section 708(8)(c) accountant's certificate test. Under sections 708(9B) and (9C), an individual's certificate can also count the net assets or gross income of companies and trusts they control. For an SMSF, check with the accountant whether the certificate is issued for the SMSF trustee directly under section 708(8)(c) or relies on section 708(8)(d).
Minimum $500,000 Subscription (s 708(8)(a)): The minimum amount payable for the securities on acceptance of the offer by that investor is at least $500,000. Under section 708(9), amounts funded by a loan from the company or an associate of the company are disregarded for both $500,000 tests.
Cumulative $500,000 Top-Up (s 708(8)(b)): The amount payable by the investor on acceptance of the offer, plus the amounts previously paid by the investor for securities of the company of the same class that are held by the investor at the time of the offer, totals at least $500,000. This limb is particularly useful for follow-on investments by existing shareholders. Amounts paid for a different class (for example, a SAFE or ordinary shares where the round issues preference shares) generally do not count.
03Senior managers, relatives, and employee share schemes
Under section 708(12), an offer of securities does not need disclosure if it is made to a senior manager of the company (or of a related body), to their spouse, parent, child, brother, or sister, or to a body corporate controlled by any of those persons. For Chapter 6D purposes, ASIC Corporations (Disclosure Relief–Offers to Associates) Instrument 2017/737 modifies the section 9 definition so that a senior manager is a person who is concerned in, or takes part in, the management of the company (or related body), whatever their title and including a director or secretary.
Offers of shares or options to employees, directors, and contractors under an Employee Share Option Plan (ESOP) can rely on the employee share scheme provisions in Division 1A of Part 7.12 of the Corporations Act instead of, or alongside, section 708 (see ESOP establishment & plan rules).
04Professional investors, VC funds, and AFSL experienced-investor offers
Offers made to 'professional investors' (as defined in section 9 of the Corporations Act) are exempt under section 708(11). This includes holders of an Australian Financial Services Licence (AFSL), trustees of superannuation funds with net assets of at least $10 million, and persons who have or control gross assets of at least $10 million (including assets held by an associate or under a trust that the person manages).
When recording which exemption applies to each fund on your cap table, note that a fund (such as a VCLP, ESVCLP, or unit trust) is usually not 'controlled' by a certified individual under section 708(8)(d), although the fund can obtain its own accountant's certificate under section 708(8)(c) if it meets the net assets test (for a unit trust, the certificate is given for the trustee, as the trust is not a separate legal person; a limited partnership obtains it through its general partner). In practice, most institutional funds qualify as professional investors under section 708(11) because the investing entity (or the trustee or manager making the investment on its behalf) holds an AFSL or has or controls at least $10 million in gross assets. Smaller funds and micro-VCs typically rely on the fund's own section 708(8)(c) certificate, the $500,000 minimum subscription in section 708(8)(a) (or the section 708(8)(b) top-up), or section 708(10) through a licensee (whereas individual angel syndicate members or their personal trusts rely on section 708(8)(c) and (d)). Under section 708(10), the offer must be made through a licensee and three further requirements must be met: the licensee must be satisfied on reasonable grounds that the investor has previous experience in investing in securities that allows them to assess the merits, value, and risks of the offer, their own information needs, and the adequacy of the information given by the person making the offer; the licensee must give the investor a written statement of its reasons for being satisfied before or at the time the offer is made; and the investor must sign a written acknowledgement before or at the time the offer is made that the licensee has not given them a disclosure document.
05The 50-shareholder cap, nominee structures, due diligence, and remedies
Even if 25 small angel investors each hold a valid section 708(8)(c) accountant's certificate (so they do not count toward the 20-investor limit under s 708(1)), issuing shares directly to 25 individual angels consumes half of a proprietary (Pty Ltd) company's 50 non-employee shareholder limit under section 113(1) in a single round. Under section 113(2), joint holders of a parcel of shares count as one shareholder, and employee shareholders (including former employees who became shareholders while employed by the company or a subsidiary) are excluded from the 50 limit. Companies that outgrow the cap (often around Series B, or with large ESOPs and many angels) must convert to an unlisted public company, which removes the 50 limit but brings audit, AGM, and other obligations.
Before that stage, incoming VCs strongly prefer startups to set a minimum direct cheque size for the cap table. From the VC side, what matters is that there is a single holder on the register who can sign: someone who can give consents, accede to the Shareholders Deed, and be dragged on a sale without chasing 25 angels. Custodial or bare-trust nominee structures through established platforms usually achieve this. A nominee does not remove the need for each underlying investor to qualify under a section 708 exemption, and the nominee arrangement should be run by a properly licensed platform.
Chapter 6D of the Corporations Act applies to offers of securities received in Australia (s 700(4)). Where an Australian startup offers shares or other securities to investors outside Australia, the company must also ensure the offer complies with the securities laws of each investor's jurisdiction.
In due diligence, incoming VCs ask for a complete compliance trail for every prior issue of shares, SAFEs, and convertible notes: the specific section 708 exemption relied on, the supporting evidence (accountant's certificates and the personal offer log), the board approvals, the ASIC Form 484 lodgements, and the entries in the company's registers. The subscription agreement will typically also include a warranty that all prior issues complied with Chapter 6D. Founders who know this list in advance save weeks during a raise. If gaps are found, they can often be remediated before close, but the options depend on the facts. See our Raise-ready legal review.
Offering securities that require disclosure without a lodged disclosure document contravenes section 727 (both a criminal offence under s 727(1)–(4), s 1311 and Schedule 3, and a civil penalty provision under s 727(6) and s 1317E, with potential accessorial liability for directors involved in the contravention). In this no-disclosure-document scenario, the investor's main statutory routes are court orders under section 1325 (including declaring the contract or issue void, ordering a refund of subscription money, and compensating for loss or damage) and recovery under section 1041I for misleading or deceptive conduct contrary to section 1041H, rather than the withdrawal and return rights in sections 724 and 737, which apply only to offers made under a disclosure document. From the VC side, the deck and any data room materials are what founders get held to under section 1041H. Under section 769C of the Corporations Act (and section 12BB of the ASIC Act), a representation about a future matter, such as a revenue forecast, is taken to be misleading if it is made without reasonable grounds, so projections should be based on documented assumptions, not just labelled as forecasts, and lead investors will also rely on these through the subscription agreement warranties.
Checklist before your next round
- Confirm that as a proprietary (Pty Ltd) company you generally cannot make offers that need a disclosure document (s 113(3), except offers of shares and options over shares to existing shareholders or employees, or a crowd-sourced funding offer under Part 6D.3A), so every raise must fit within an exemption, most commonly s 708.
- Do not advertise or publicise a private raise on LinkedIn, X, or public newsletters in breach of s 734(1), as public solicitation can also strip offers of their personal-offer status under s 708(2).
- Keep a log of how each personal offer was made (who approached whom, prior connection, and date) and track rolling 12-month totals under the 20-investor / $2 million limit (counting uncertified SAFEs at signing).
- Collect dated s 708(8)(c) accountant certificates (given no more than 2 years before the offer) before making the offer, and check current reg 6D.2.03 thresholds in case the $2.5m / $250k figures are updated.
- Verify control under s 708(8)(d) whenever an angel invests through a family discretionary trust, SMSF, or personal investment company.
- Check whether follow-on investments by existing shareholders qualify under the s 708(8)(b) $500,000 cumulative top-up exemption.
- Track your s 113 cap of 50 non-employee shareholders (counting joint holders as one and excluding employee shareholders, while counting contractor and non-executive director shareholders), and set a minimum direct cheque size.
- Check foreign securities law compliance before accepting cheques from overseas investors.
General legal information only: These guides provide general information on Australian law only and do not constitute legal, financial, tax, or employment advice. Reading these guides does not create a solicitor-client relationship with Cloudberry Law.