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Managed Investments Bill 1997
Schedule 1 New managed investments provisions and transitional provisions

   

Corporations Law set out in section 82 of the Corporations Act 1989

1  After Chapter 5B

Insert:

Chapter 5C Managed investment schemes

Part 5C.1 ¾ Registration of managed investment schemes

   

601EA   Applying for registration

             (1)  To register a managed investment scheme, a person must lodge an application with the ASC.

             (2)  The application must state:

                     (a)  the name, and the address of the registered office, of the proposed responsible entity; and

                     (b)  the name and address of a person who has consented to be the auditor of the compliance plan.

             (3)  The applicant must have the consent referred to in paragraph (2)(b) when the application is lodged. After the scheme is registered, the applicant must give the consent to the responsible entity. The responsible entity must keep the consent.

             (4)  The following must be lodged with the application:

                     (a)  a copy of the scheme’s constitution

                     (b)  a copy of the scheme’s compliance plan

                     (c)  a statement signed by the directors of the proposed responsible entity that:

                              (i)  the scheme’s constitution complies with sections 601GA and 601GB; and

                             (ii)  the scheme’s compliance plan complies with section 601HA.

Note:          Section 601HC requires that the copy of the compliance plan be signed by the directors of the responsible entity.

601EB   Registration of managed investment scheme

             (1)  The ASC must register the scheme within:

                     (a)  28 days if the application is lodged within 2 years after commencement of this Chapter; or

                     (b)  14 days if the application is lodged later than that;

unless it appears to the ASC that:

                     (c)  the application does not comply with section 601EA; or

                     (d)  the proposed responsible entity does not meet the requirements of section 601FA; or

                     (e)  the scheme’s constitution does not meet the requirements of sections 601GA and 601GB; or

                      (f)  the scheme’s compliance plan does not meet the requirements of section 601HA; or

                     (g)  the copy of the compliance plan lodged with the application is not signed as required by section 601HC; or

                     (h)  arrangements are not in place that will satisfy the requirements of section 601HG in relation to audit of compliance with the plan.

             (2)  If the ASC registers the scheme, the ASC must give it an ARSN.

             (3)  The ASC must keep a record of the registration of the scheme.

             (4)  For the purpose of determining whether subsection (1) is satisfied in relation to the scheme:

                     (a)  references in Parts 5C.3, 5C.4 and 5C.5 to a registered scheme are taken to include a reference to the scheme; and

                     (b)  references in those Parts to the responsible entity of a registered scheme are taken to include a reference to the proposed responsible entity of the scheme.

601EC   All documents etc. lodged with ASC to bear ARSN

                   After a managed investment scheme is registered, the scheme’s ARSN must appear on all documents relating to the scheme that are lodged with the ASC.

601ED   When a managed investment scheme must be registered

             (1)  Subject to subsection (2), a managed investment scheme must be registered under section 601EB if:

                     (a)  it has more than 20 members; or

                     (b)  it was promoted by a person, or an associate of a person, who was, when the scheme was promoted, in the business of promoting managed investment schemes; or

                     (c)  a determination under subsection (3) is in force in relation to the scheme and the total number of members of all of the schemes to which the determination relates exceeds 20.

             (2)  A managed investment scheme does not have to be registered if all the issues of interests in the scheme that have been made were excluded issues (disregarding paragraph 66(2)(da)) when they were made.

             (3)  The ASC may, in writing, determine that a number of managed investment schemes are closely related and that each of them has to be registered at any time when the total number of members of all of the schemes exceeds 20. The ASC must give written notice of the determination to the operator of each of the schemes.

             (4)  For the purpose of this section, when working out how many members a scheme has:

                     (a)  joint holders of an interest in the scheme count as a single member; and

                     (b)  an interest in the scheme held on trust for a beneficiary is taken to be held by the beneficiary (rather than the trustee) if:

                              (i)  the beneficiary is presently entitled to a share of the trust estate or of the income of the trust estate; or

                             (ii)  the beneficiary is, individually or together with other beneficiaries, in a position to control the trustee.

             (5)  A person must not operate a managed investment scheme that this section requires to be registered under section 601EB unless the scheme is so registered.

             (6)  For the purpose of subsection (5), a person is not operating a scheme merely because:

                     (a)  they are acting as an agent or employee of another person; or

                     (b)  they are taking steps to wind up the scheme or remedy a defect that led to the scheme being deregistered.

             (7)  A person who would otherwise contravene subsection (5) because an interest in a scheme is held in trust for 2 or more beneficiaries (see paragraph (4)(b)) does not contravene that subsection if they prove that they did not know, and had no reason to suspect, that the interest was held in that way.

601EE   Unregistered schemes may be wound up

             (1)  If a person operates a managed investment scheme in contravention of subsection 601ED(5), the following may apply to the Court to have the scheme wound up:

                     (a)  the ASC

                     (b)  the person operating the scheme

                     (c)  a member of the scheme.

             (2)  The Court may make any orders it considers appropriate for the winding up of the scheme.



 

Part 5C.2 The responsible entity

Division 1 ¾ Responsibilities and powers

601FA   Responsible entity to be public company and hold dealers licence

                   The responsible entity of a registered scheme must be a public company that holds a dealers licence authorising it to operate a managed investment scheme.

601FB   Responsible entity to operate scheme

             (1)  The responsible entity of a registered scheme is to operate the scheme and perform the functions conferred on it by the scheme’s constitution and this Law.

             (2)  The responsible entity has power to appoint an agent, or otherwise engage a person, to do anything that it is authorised to do in connection with the scheme. For the purpose of determining whether:

                     (a)  there is a liability to the members; or

                     (b)  the responsible entity has properly performed its duties for the purposes of subsection 601GA(2);

the responsible entity is taken to have done (or failed to do) anything that the agent or person has done (or failed to do) because of the appointment or engagement, even if they were acting fraudulently or outside the scope of their authority or engagement.

Note:         A scheme’s constitution may provide for the responsible entity to be indemnified for liabilities ¾ see subsection 601GA(2).

             (3)  An agent appointed, or a person otherwise engaged, by:

                     (a)  the agent or person referred to in subsection (2); or

                     (b)  a person who is taken under this subsection to be an agent of the responsible entity;

to do anything that the responsible entity is authorised to do in connection with the scheme is taken to be an agent appointed by the responsible entity to do that thing for the purposes of subsection (2).

             (4)  If:

                     (a)  an agent holds scheme property on behalf of the responsible entity; and

                     (b)  the agent is liable to indemnify the responsible entity against any loss or damage that:

                              (i)  the responsible entity suffers as a result of a wrongful or negligent act or omission of the agent; and

                             (ii)  relates to a failure by the responsible entity to perform its duties in relation to the scheme;

any amount recovered under the indemnity forms part of the scheme property.

601FC   Duties of responsible entity

             (1)  In exercising its powers and carrying out its duties, the responsible entity of a registered scheme must:

                     (a)  act honestly; and

                     (b)  exercise the degree of care and diligence that a reasonable person would exercise if they were in the responsible entity’s position; and

                     (c)  act in the best interests of the members and, if there is a conflict between the members’ interests and its own interests, give priority to the members’ interests; and

                     (d)  treat the members who hold interests of the same class equally and members who hold interests of different classes fairly; and

                     (e)  not make use of information acquired through being the responsible entity in order to:

                              (i)  gain an improper advantage for itself or another person; or

                             (ii)  cause detriment to the members of the scheme; and

                      (f)  ensure that the scheme’s constitution meets the requirements of sections 601GA and 601GB; and

                     (g)  ensure that the scheme’s compliance plan meets the requirements of section 601HA; and

                     (h)  comply with the scheme’s compliance plan; and

                      (i)  ensure that scheme property is :

                              (i)  clearly identified as scheme property; and

                             (ii)  held separately from property of the responsible entity and property of any other scheme; and

                      (j)  ensure that the scheme property is valued at regular intervals appropriate to the nature of the property; and

                     (k)  ensure that all payments out of the scheme property are made in accordance with the scheme’s constitution and this Law; and

                      (l)  report to the ASC any breach of this Law that:

                              (i)  relates to the scheme; and

                             (ii)  has had, or is likely to have, a materially adverse effect on the interests of members;

                            as soon as practicable after it becomes aware of the breach; and

                    (m)  carry out or comply with any other duty, not inconsistent with this Law, that is conferred on the responsible entity by the scheme’s constitution.

Note:         Subsection (1) is a civil penalty provision as defined by section 1317DA and Part 9.4B provides for civil and criminal consequences of contravening it.

             (2)  The responsible entity holds scheme property on trust for scheme members.

Note:          Under subsection 601FB(2), the responsible entity may appoint an agent to hold scheme property separately from other property.

             (3)  A duty of the responsible entity under subsection (1) or (2) overrides any conflicting duty an officer or employee of the responsible entity has under section 232.

Investment of scheme property in other managed investment schemes

             (4)  The responsible entity may only invest scheme property, or keep scheme property invested, in another managed investment scheme if that other scheme is registered under this Chapter.

601FD   Duties of officers of responsible entity

             (1)  An officer of the responsible entity of a registered scheme must:

                     (a)  act honestly; and

                     (b)  exercise the degree of care and diligence that a reasonable person would exercise if they were in the officer’s position; and

                     (c)  act in the best interests of the members and, if there is a conflict between the members’ interests and the interests of the responsible entity, give priority to the members’ interests; and

                     (d)  not make use of information acquired through being an officer of the responsible entity in order to:

                              (i)  gain an improper advantage for the officer or another person; or

                             (ii)  cause detriment to the members of the scheme; and

                     (e)  not make improper use of their position as an officer to gain, directly or indirectly, an advantage for themselves or for any other person or to cause detriment to the members of the scheme; and

                      (f)  take all steps that a reasonable person would take, if they were in the officer’s position, to ensure that the responsible entity complies with:

                              (i)  this Law; and

                             (ii)  any conditions imposed on the responsible entity’s dealers licence; and

                            (iii)  the scheme’s constitution; and

                            (iv)  the scheme’s compliance plan.

Note:         Subsection (1) is a civil penalty provision as defined in section 1317DA and Part 9.4B provides for civil and criminal consequences of contravening it.

             (2)  A duty of an officer of the responsible entity under subsection (1) overrides any conflicting duty the officer has under section 232.

601FE   Duties of employees of responsible entity

             (1)  An employee of the responsible entity of a registered scheme must not:

                     (a)  make use of information acquired through being an employee of the responsible entity in order to:

                              (i)  gain an improper advantage for the employee or another person; or

                             (ii)  cause detriment to members of the scheme; or

                     (b)  make improper use of their position as an employee to gain, directly or indirectly, an advantage for themselves or for any other person or to cause detriment to the members of the scheme.

Note:         Subsection (1) is a civil penalty provision as defined in section 1317DA and Part 9.4B provides for civil and criminal consequences of contravening it.

             (2)  A duty of an employee of the responsible entity under subsection (1) overrides any conflicting duty the employee has under section 232.

601FF   Surveillance checks by ASC

             (1)  The ASC may, from time to time, check whether the responsible entity of a registered scheme is complying with the scheme’s constitution and compliance plan and with this Law.

Note:         For this purpose the ASC may exercise the powers set out in Division 3 of Part 3 of the Australian Securities Commission Act 1989 .

             (2)  The responsible entity and its officers must take all reasonable steps to assist the ASC in carrying out a check under subsection (1).

601FG   Acquisition of interest in scheme by responsible entity

                   The responsible entity of a registered scheme may acquire and hold an interest in the scheme, but it must only do so:

                     (a)  for not less than the consideration that would be payable if the interest were acquired by another person; and

                     (b)  subject to terms and conditions that would not disadvantage other members.

Note 1:      If the responsible entity holds an interest in the scheme, it does so subject to section 253E (certain members cannot vote or be counted).

Note 2:      This section is a civil penalty provision as defined in section 1317DA and Part 9.4B provides for civil and criminal consequences of contravening it.

601FH   Liquidator etc. of responsible entity entitled to exercise indemnity rights

                   If the company that is a registered scheme’s responsible entity is being wound up, is under administration or has executed a deed of company arrangement that has not terminated:

                     (a)  a provision of the scheme’s constitution, or of another instrument, is void against the liquidator, or the administrator of the company or the deed, if it purports to deny the company a right to be indemnified out of the scheme property that the company would have had if it were not being wound up, were not under administration, or had not executed a deed of company arrangement; and

                     (b)  a right of the company to be indemnified out of the scheme property may only be exercised by the liquidator or the administrator of the company or the deed.



 

Division 2 Changing the responsible entity

601FJ   Changes only take effect when ASC alters record of registration

             (1)  Despite anything in this Division, the company named in the ASC’s record of registration as the responsible entity or temporary responsible entity of a registered scheme remains the scheme’s responsible entity until the record is altered to name another company as the scheme’s responsible entity or temporary responsible entity.

             (2)  A purported change of the scheme’s responsible entity is ineffective unless it is in accordance with this Division.

601FK   Requirements of section 601FA must be met

                   A company cannot be chosen or appointed as the responsible entity or temporary responsible entity of a registered scheme unless it meets the requirements of section 601FA.

601FL   Retirement of responsible entity

             (1)  If the responsible entity of a registered scheme wants to retire, it must call a members’ meeting to explain its reason for wanting to retire and to enable the members to vote on an extraordinary resolution to choose a company to be the new responsible entity.

             (2)  If the members choose a company to be the new responsible entity and that company has consented, in writing, to becoming the scheme’s responsible entity:

                     (a)  as soon as practicable and in any event within 2 business days after the resolution is passed, the current responsible entity must lodge a notice with the ASC asking it to alter the record of the scheme’s registration to name the chosen company as the scheme’s responsible entity; and

                     (b)  if the current responsible entity does not lodge the notice required by paragraph (a), the company chosen by the members to be the new responsible entity may lodge that notice; and

                     (c)  the ASC must comply with the notice when it is lodged.

             (3)  If the members do not choose a company to be the new responsible entity, or the company they choose does not consent to becoming the scheme’s responsible entity, the current responsible entity may apply to the Court for appointment of a temporary responsible entity under section 601FP.

             (4)  A person must not lodge a notice under subsection (2) unless the consent referred to in that subsection has been given before the notice is lodged.

601FM   Removal of responsible entity by members

             (1)  If members of a registered scheme want to remove the responsible entity, they may take action under Division 1 of Part 2G.4 for the calling of a members’ meeting to consider and vote on:

                     (a)  an extraordinary resolution that the current responsible entity should be removed; and

                     (b)  an extraordinary resolution choosing a company to be the new responsible entity.

             (2)  If the members vote to remove the responsible entity and, at the same meeting, choose a company to be the new responsible entity that consents, in writing, to becoming the scheme’s responsible entity:

                     (a)  as soon as practicable and in any event within 2 business days after the resolution is passed, the current responsible entity must lodge a notice with the ASC asking it to alter the record of the scheme’s registration to name the chosen company as the scheme’s responsible entity; and

                     (b)  if the current responsible entity does not lodge the notice required by paragraph (a), the company chosen by the members to be the new responsible entity may lodge that notice; and

                     (c)  the ASC must comply with the notice when it is lodged.

             (3)  A person must not lodge a notice under subsection (2) unless the consent referred to in that subsection has been given before the notice is lodged.

Note:         If the members vote to remove the responsible entity but do not, at the same meeting, choose a company to be the new responsible entity, or the company they choose does not consent to becoming the scheme’s responsible entity, the scheme must be wound up (see section 601NE).

601FN   ASC or scheme member may apply to Court for appointment of temporary responsible entity

                   The ASC or a member of the registered scheme may apply to the Court for the appointment of a temporary responsible entity of the scheme under section 601FP if the scheme does not have a responsible entity that meets the requirements of section 601FA.

601FP   Appointment of temporary responsible entity by Court

             (1)  On application under section 601FL or 601FN, the Court may, by order, appoint a company as the temporary responsible entity of a registered scheme if the Court is satisfied that the appointment is in the interest of the members.

             (2)  The Court may make any further orders that it considers necessary.

             (3)  If the application was made by the current responsible entity, it must, as soon as practicable after the Court’s order appointing the temporary responsible entity, lodge a notice with the ASC informing the ASC of the appointment made by the Court.

             (4)  As soon as practicable after the appointment, the ASC must alter the record of the scheme’s registration to name the appointed company as the scheme’s temporary responsible entity.

601FQ   Temporary responsible entity to take steps for appointment of new responsible entity

             (1)  The temporary responsible entity of a registered scheme must call a members’ meeting for the purpose of the members, by extraordinary resolution, choosing a company to be the new responsible entity. The temporary responsible entity must call the meeting as soon as practicable and, in any event, within 3 months of becoming the temporary responsible entity.

             (2)  Within that 3 months, the temporary responsible entity may call further members’ meetings for the purpose of choosing a company to be the new responsible entity. Before the end of the 3 months, it may apply to the Court for an extension of that period. If the Court grants the extension, the temporary responsible entity may, within the extended period, call further members’ meetings for the purpose of choosing a company to be the new responsible entity.

             (3)  Provided it still meets the requirements in section 601FA, nothing prevents the company that is the temporary responsible entity from being chosen as the new responsible entity.

             (4)  If the members choose a company to be the new responsible entity and that company has consented, in writing, to becoming the scheme’s responsible entity, the temporary responsible entity must, as soon as practicable, lodge a notice with the ASC asking it to alter the record of the scheme’s registration to name the chosen company as the scheme’s responsible entity. The ASC must comply with the notice when it is lodged.

             (5)  The temporary responsible entity must apply to the Court for an order directing it to wind up the scheme, and the Court may make the order, if:

                     (a)  no meeting is called within the 3 months or extended period for the purpose of choosing a new company to be the responsible entity; or

                     (b)  the meeting or meetings called within that period for that purpose have not resulted in the members choosing a company to be the new responsible entity that consents to becoming the scheme’s responsible entity.

The ASC or a member of the scheme may apply for the order if the temporary responsible entity does not do so.

             (6)  The temporary responsible entity must not lodge a notice under subsection (4) unless the consent referred to in that subsection has been given before the notice is lodged.



 

Division 3 ¾ Consequences of change of responsible entity

601FR   Former responsible entity to hand over books and provide reasonable assistance

                   If the responsible entity of a registered scheme changes, the former responsible entity must:

                     (a)  as soon as practicable give the new responsible entity any books in the former responsible entity’s possession or control that this Law requires to be kept in relation to the scheme; and

                     (b)  give other reasonable assistance to the new responsible entity to facilitate the change of responsible entity.

601FS   Rights, obligations and liabilities of former responsible entity

             (1)  If the responsible entity of a registered scheme changes, the rights, obligations and liabilities of the former responsible entity in relation to the scheme become rights, obligations and liabilities of the new responsible entity.

             (2)  Despite subsection (1), the following rights and liabilities remain rights and liabilities of the former responsible entity:

                     (a)  any right of the former responsible entity to be paid fees for the performance of its functions before it ceased to be the responsible entity; and

                     (b)  any right of the former responsible entity to be indemnified for expenses it incurred before it ceased to be the responsible entity; and

                     (c)  any right, obligation or liability that the former responsible entity had as a member of the scheme; and

                     (d)  any liability for which the former responsible entity could not have been indemnified out of the scheme property if it had remained the scheme’s responsible entity.

601FT   Effect of change of responsible entity on documents etc. to which former responsible entity is party

             (1)   If the responsible entity of a registered scheme changes, a document:

                     (a)  to which the former responsible entity is a party, in which a reference is made to the former responsible entity, or under which the former responsible entity has acquired or incurred a right, obligation or liability, or might have acquired or incurred a right, obligation or liability if it had remained the responsible entity; and

                     (b)  that is capable of having effect after the change;

has effect as if the new responsible entity (and not the former responsible entity) were a party to it, were referred to in it or had or might have acquired or incurred the right, obligation or liability under it.

             (2)  Subsection (1) does not apply to a right, obligation or liability that remains a right, obligation or liability of the former responsible entity because of subsection 601FS(2).



 

Part 5C.3 The constitution

   

601GA   Contents of the constitution

             (1)  The constitution of a registered scheme must make adequate provision for:

                     (a)  the consideration that is to be paid to acquire an interest in the scheme; and

                     (b)  the powers of the responsible entity in relation to making investments of, or otherwise dealing with, scheme property; and

                     (c)  the method by which complaints made by members in relation to the scheme are to be dealt with; and

                     (d)  winding up the scheme.

             (2)  If the responsible entity is to have any rights to be paid fees out of scheme property, or to be indemnified out of scheme property for liabilities or expenses incurred in relation to the performance of its duties, those rights:

                     (a)  must be specified in the scheme’s constitution; and

                     (b)  must be available only in relation to the proper performance of those duties;

and any other agreement or arrangement has no effect to the extent that it purports to confer such a right.

             (3)  If the responsible entity is to have any powers to borrow or raise money for the purposes of the scheme:

                     (a)  those powers must be specified in the scheme’s constitution; and

                     (b)  any other agreement or arrangement has no effect to the extent that it purports to confer such a power.

             (4)  If members are to have a right to withdraw from the scheme, the scheme’s constitution must:

                     (a)  specify the right; and

                     (b)  if the right may be exercised while the scheme is liquid (as defined in section 601KA) ¾ set out adequate procedures for making and dealing with withdrawal requests; and

                     (c)  if the right may be exercised while the scheme is not liquid (as defined in section 601KA) ¾ provide for the right to be exercised in accordance with Part 5C.6 and set out any other adequate procedures (consistent with that Part) that are to apply to making and dealing with withdrawal requests.

The right to withdraw, and any provisions in the constitution setting out procedures for making and dealing with withdrawal requests, must be fair to all members.

601GB   Constitution must be legally enforceable

                   The constitution of a registered scheme must be contained in a document that is legally enforceable as between the members and the responsible entity.

601GC   Changing the constitution

             (1)  The constitution of a registered scheme may be modified, or repealed and replaced with a new constitution:

                     (a)  by special resolution of the members of the scheme; or

                     (b)  by the responsible entity if the responsible entity reasonably considers the change will not adversely affect members’ rights.

             (2)  The responsible entity must lodge with the ASC a copy of the modification or the new constitution. The modification, or repeal and replacement, cannot take effect until the copy has been lodged.

             (3)  The responsible entity must lodge with the ASC a consolidated copy of the scheme’s constitution if the ASC directs it to do so.

             (4)  The responsible entity must send a copy of the scheme’s constitution to a member of the scheme within 7 days if the member:

                     (a)  asks the responsible entity, in writing, for the copy; and

                     (b)  pays any fee (up to the prescribed amount) required by the responsible entity.



 

Part 5C.4 The compliance plan

   

601HA   Contents of the compliance plan

             (1)  The compliance plan of a registered scheme must set out adequate measures that the responsible entity is to apply in operating the scheme to ensure compliance with this Law and the scheme’s constitution, including the arrangements for:

                     (a)  ensuring that all scheme property is clearly identified as scheme property and held separately from property of the responsible entity and property of any other scheme (see paragraph 601FC(1)(i)); and

                     (b)  if the scheme is required to have a compliance committee (see section 601JA) ¾ ensuring that the compliance committee functions properly, including adequate arrangements relating to:

                              (i)  the membership of the committee; and

                             (ii)  how often committee meetings are to be held; and

                            (iii)  the committee’s reports and recommendations to the responsible entity; and

                            (iv)  the committee’s access to the scheme’s accounting records and to the auditor of the scheme’s financial statements; and

                             (v)  the committee’s access to information that is relevant to the responsible entity’s compliance with this Law; and

                     (c)  ensuring that the scheme property is valued at regular intervals appropriate to the nature of the property; and

                     (d)  ensuring that compliance with the plan is audited as required by section 601HG; and

                     (e)  ensuring adequate records of the scheme’s operations are kept; and

                      (f)  any other matter prescribed by the regulations.

             (2)  If:

                     (a)  a registration application is made as a result of a resolution passed under subparagraph 1457(1)(a)(i); and

                     (b)  the resolution included a direction under subsection 1457(1A);

the compliance plan lodged with the application must provide for scheme property to be held by a person other than the responsible entity, or a person that is not related to the responsible entity, as the responsible entity’s agent.

601HB   Compliance plan may incorporate provisions from another scheme’s plan

             (1)  The responsible entity of a registered scheme may lodge with the ASC a compliance plan for the scheme that is expressed to incorporate specified provisions, as in force at a specified time, of a compliance plan of another registered scheme of which it is also the responsible entity.

             (2)  The specified provisions, as in force at the specified time, are taken to be included in the plan.

601HC   Directors must sign lodged copy of compliance plan

                   The copy of a scheme’s compliance plan that is lodged with the ASC must be signed by all the directors of the responsible entity.

601HD   ASC may require further information about compliance plan

                   The ASC may direct the responsible entity of a registered scheme to give it information about the arrangements contained in the compliance plan. The direction is to be given by notice in writing to the responsible entity.

601HE   Changing the compliance plan

Responsible entity’s powers

             (1)  The responsible entity of a registered scheme may modify the scheme’s compliance plan or repeal it and replace it with a new compliance plan.

ASC may require modifications

             (2)  The ASC may direct the responsible entity of a registered scheme to modify the scheme’s compliance plan, as set out in the direction, to ensure that the plan is consistent with section 601HA. The direction is to be given by notice in writing to the responsible entity.

Lodgment of modification or new plan

             (3)  The responsible entity must lodge with the ASC a copy of a modification of the scheme’s compliance plan or of a new compliance plan within 14 days after the modification is made or the old plan is repealed. The copy must be signed by all the directors of the responsible entity.

601HF   ASC may require consolidation of compliance plan to be lodged

             (1)  The ASC may direct the responsible entity of a registered scheme to lodge a consolidated copy of the scheme’s compliance plan.

             (2)  The consolidation must set out:

                     (a)  the plan as modified to the time of lodgment; and

                     (b)  if required by the ASC’s direction—the full text of provisions taken to be included in the plan by subsection 601HB(2).

601HG  Audit of compliance plan

             (1)  The responsible entity of a registered scheme must ensure that at all times a registered company auditor is engaged to audit compliance with the scheme’s compliance plan in accordance with this section. This auditor is referred to as the auditor of the compliance plan .

             (2)  A person is not eligible to act as the auditor of the compliance plan if the person is:

                     (a)  an associate of the responsible entity; or

                     (b)  an agent holding scheme property on behalf of the responsible entity or an associate of an agent of that kind; or

                     (c)  the auditor of the responsible entity’s financial statements.

The auditor of the compliance plan and the auditor of the responsible entity’s financial statements may, however, work for the same firm of auditors.

             (3)  Within 3 months after the end of a financial year of the scheme, the auditor of the compliance plan must:

                     (a)  examine the scheme’s compliance plan; and

                     (b)  carry out:

                              (i)  if the scheme has only had one responsible entity during the financial year ¾ an audit of the responsible entity’s compliance with the compliance plan during the financial year; or

                             (ii)  if the scheme has had more than one responsible entity during the financial year ¾ an audit of each responsible entity’s compliance with the compliance plan during that part of the financial year when it was the scheme’s responsible entity; and

                     (c)  give to the scheme’s current responsible entity a report that states whether, in the auditor’s opinion:

                              (i)  the responsible entity, or each responsible entity, complied with the scheme’s compliance plan during the financial year or that part of the financial year when it was the scheme’s responsible entity; and

                             (ii)  the plan continues to meet the requirements of this Part.

             (4)  The auditor of the compliance plan must, as soon as possible, notify the ASC in writing if the auditor:

                     (a)  has reasonable grounds to suspect that a contravention of this Law has occurred; and

                     (b)  believes that the contravention has not been or will not be adequately dealt with by commenting on it in the auditor’s report under subsection (3) or bringing it to the attention of the responsible entity.

             (5)  The auditor of the compliance plan:

                     (a)  has a right of access at all reasonable times to the books of the scheme; and

                     (b)  may require an officer of the responsible entity to give the auditor information and explanations for the purposes of the audit.

             (6)  An officer of the responsible entity must:

                     (a)  allow the auditor of the compliance plan to have access to the books of the scheme; and

                     (b)  give the auditor information or an explanation required under subsection (5); and

                     (c)  otherwise assist the conduct of the audit.

             (7)  The responsible entity must lodge the auditor’s report under subsection (3) with the ASC at the same time as the financial statements and reports in respect of the scheme are to be lodged with the ASC (see sections 292 and 321).

             (8)  The auditor of the compliance plan has qualified privilege in respect of:

                     (a)  a statement made in a report under subsection (3); or

                     (b)  a notification to the ASC under subsection (4).

             (9)  This section does not prevent the responsible entity from arranging for the auditor of the compliance plan to carry out audits in addition to those required by this section.

601HH   Removal and resignation of auditors

Removal of auditor by responsible entity

             (1)  The responsible entity:

                     (a)  must remove the auditor of the compliance plan if the auditor becomes ineligible under subsection 601HG(2) to act as auditor of the compliance plan; and

                     (b)  may, with the ASC’s consent, remove the auditor of the compliance plan.

Resignation of auditor

             (2)  The auditor of the compliance plan may resign by written notice to the responsible entity if:

                     (a)  the auditor:

                              (i)  applies to the ASC in writing for its consent to the resignation; and

                             (ii)  gives the responsible entity written notice of the application at or about the same time as applying to the ASC; and

                     (b)  the ASC consents to the resignation.

             (3)  As soon as practicable after receiving the application, the ASC must notify the auditor and the responsible entity whether it consents to the resignation.

             (4)  A statement by the auditor in the application or in answer to an inquiry by the ASC relating to the reasons for the application:

                     (a)  is not admissible in evidence in any civil or criminal proceedings in a court of this jurisdiction against the auditor (other than proceedings for a contravention of section 1308); and

                     (b)  may not be made the ground of a prosecution (other than a prosecution for a contravention of section 1308), action or suit against the auditor.

A certificate by the ASC that the statement was made in the application, or in answer to an inquiry by the ASC, is conclusive evidence that the statement was so made.

             (5)  The auditor’s resignation takes effect on the later of:

                     (a)  the day (if any) specified in the notice of resignation; or

                     (b)  the day the ASC consents to the resignation; or

                     (c)  the day (if any) fixed by the ASC for the purpose.

601HI   Action on change of auditor of compliance plan

                   If the auditor of the compliance plan of a registered scheme changes, the responsible entity must, as soon as practicable after the change and in writing, ask the ASC to alter the record of the scheme’s registration to show the name of the new auditor as the auditor of the scheme’s compliance plan. The ASC must comply with the request if the change complies with the Law.



 

Part 5C.5 The compliance committee

   

601JA   When is a compliance committee required?

             (1)  The responsible entity of a registered scheme must establish a compliance committee if less than half of the directors of the responsible entity are external directors.

             (2)  A director of the responsible entity is an external director if they:

                     (a)  are not, and have not been in the previous 2 years, an employee of the responsible entity or a related body corporate; and

                     (b)  are not, and have not been in the previous 2 years, an executive officer of a related body corporate; and

                     (c)  are not, and have not been in the previous 2 years, substantially involved in business dealings, or in a professional capacity, with the responsible entity or a related body corporate; and

                     (d)  are not a member of a partnership that is, or has been in the previous 2 years, substantially involved in business dealings, or in a professional capacity, with the responsible entity or a related body corporate; and

                     (e)  do not have a material interest in the responsible entity or a related body corporate; and

                      (f)  are not a relative or de facto spouse of a person who has a material interest in the responsible entity or a related body corporate.

             (3)  The responsible entity must establish the compliance committee within 14 days after it is required to do so by subsection (1) or within any longer period that the ASC has agreed to in writing.

             (4)  In agreeing to a longer period under subsection (3), the ASC may impose conditions to be complied with and the responsible entity must comply with them.

601JB   Membership of compliance committee

             (1)  A scheme’s compliance committee must have at least 3 members, and a majority of them must be external members.

             (2)  A member of the compliance committee is an external member if they:

                     (a)  are not, and have not been in the previous 2 years, a non-external director, an executive officer or an employee of the responsible entity or a related body corporate; and

                     (b)  are not, and have not been in the previous 2 years, substantially involved in business dealings, or in a professional capacity, with the responsible entity or a related body corporate; and

                     (c)  are not a member of a partnership that is, or has been in the previous 2 years, substantially involved in business dealings, or in a professional capacity, with the responsible entity or a related body corporate; and

                     (d)  do not have a material interest in the responsible entity or a related body corporate; and

                     (e)  are not a relative or de facto spouse of a person who has a material interest in the responsible entity or a related body corporate.

             (3)  For the purposes of paragraph (2)(a), a person who is a director of a related body corporate, but not of the responsible entity itself, is an external director of the related body corporate if they would have been an external director of the responsible entity under section 601JA(2) had they been a director of the responsible entity.

             (4)  A person who is, or has been, either:

                     (a)  an external director of the responsible entity; or

                     (b)  a member of a compliance committee for the scheme or another registered managed investment scheme operated by the responsible entity;

is not, merely because of that directorship or membership, taken to be, or to have been, substantially involved in business dealings, or in a professional capacity, with the responsible entity.

             (5)  If the membership of the scheme’s compliance committee ceases to satisfy subsection (1), the responsible entity must make appointments to the committee to satisfy that subsection within 14 days or within any longer period that the ASC has agreed to in writing.

             (6)  In agreeing to a longer period under subsection (5), the ASC may impose conditions to be complied with and the responsible entity must comply with them.

601JC   Functions of compliance committee

             (1)  The functions of a scheme’s compliance committee are:

                     (a)  to monitor to what extent the responsible entity complies with the scheme’s compliance plan and to report on its findings to the responsible entity; and

                     (b)  to report to the responsible entity:

                              (i)  any breach of this Law involving the scheme; or

                             (ii)  any breach of the provisions included in the scheme’s constitution in accordance with section 601GA;

                            of which the committee becomes aware or that it suspects; and

                     (c)  to report to the ASC if the committee is of the view that the responsible entity has not taken, or does not propose to take, appropriate action to deal with a matter reported under paragraph (b); and

                     (d)  to assess at regular intervals whether the compliance plan is adequate, to report to the responsible entity on the assessment and to make recommendations to the responsible entity about any changes that it considers should be made to the plan.

             (2)  In carrying out its functions, the compliance committee may commission independent legal, accounting or other professional advice or assistance, at the reasonable expense of the responsible entity.

601JD   Duties of members

             (1)  A member of a scheme’s compliance committee must:

                     (a)  act honestly; and

                     (b)  exercise the degree of care and diligence that a reasonable person would exercise if they were in the member’s position; and

                     (c)  not make use of information acquired through being a member of the committee in order to:

                              (i)  gain an improper advantage for the member or another person; or

                             (ii)  cause detriment to the members of the scheme; and

                     (d)  not make improper use of their position as a member of the committee to gain, directly or indirectly, an advantage for themselves or for any other person or to cause detriment to the members of the scheme.

Note:         Subsection (1) is a civil penalty provision as defined in section 1317DA and Part 9.4B provides for civil and criminal consequences of contravening it.

             (2)  A member of the compliance committee is to take all reasonable steps to assist the ASC in carrying out a check under subsection 601FF(1).

601JE   Compliance committee members have qualified privilege in certain cases

                   A member of a scheme’s compliance committee has qualified privilege in respect of a statement concerning the operation of the scheme made by or on behalf of the committee, or a member of the committee, to the responsible entity or to the ASC.

601JF   When can responsible entity indemnify compliance committee members?

             (1)  A scheme’s responsible entity or a related body corporate must not:

                     (a)  indemnify a person who is or has been a member of the scheme’s compliance committee against a liability incurred by the person as a member; or

                     (b)  exempt the person from such a liability.

             (2)  A provision of the scheme’s constitution or a body corporate’s constitution is void in so far as it provides for the responsible entity or a related body corporate to do something that subsection (1) prohibits.

             (3)  Subsection (1) does not prevent a person from being indemnified against a liability to another person (other than the responsible entity or a related body corporate) unless the liability arises out of conduct involving a lack of good faith.

             (4)  Subsection (1) does not prevent a person from being indemnified against a liability for costs and expenses incurred by them:

                     (a)  in defending proceedings, whether civil or criminal, in which judgment is given in favour of them or in which they are acquitted; or

                     (b)  in connection with an application, in relation to such proceedings, in which the Court grants relief to them under this Law.

             (5)  In this section:

indemnify includes indemnify indirectly through one or more interposed entities.

601JG   When can responsible entity pay insurance premiums for compliance committee members?

             (1)  A scheme’s responsible entity or a related body corporate must not pay, or agree to pay, a premium in respect of a contract insuring a person who is or has been a member of the scheme’s compliance committee against a liability:

                     (a)  incurred by the person as a member; and

                     (b)  arising out of conduct involving a wilful breach of a duty referred to in section 601JD.

             (2)  If subsection (1) is contravened, the contract is void in so far as it insures the person against the liability.

             (3)  Subsections (1) and (2) do not apply to a liability for costs and expenses incurred by a person in defending proceedings, whether civil or criminal and whatever their outcome.

             (4)  In this section:

pay includes pay indirectly through one or more interposed entities.

601JH   Proceedings of compliance committee

             (1)  Subject to the requirements of the compliance plan, a scheme’s compliance committee may regulate its proceedings as it thinks appropriate.

             (2)  The committee must keep:

                     (a)  minutes of its meetings; and

                     (b)  records of its reports and recommendations.

             (3)  A committee meeting may be held using any technology agreed to by all the members.

601JJ   Disclosure of interests

             (1)  A member of a scheme’s compliance committee must disclose to the committee a direct or indirect pecuniary interest that they have in a matter being considered, or about to be considered, by the committee if their interest could conflict with the proper performance of their duties in relation to the consideration of the matter.

             (2)  A disclosure under subsection (1) must occur at the first meeting of the committee after the relevant facts have come to the member’s knowledge and must be recorded in the minutes of the meeting.



 

Part 5C.6 Members’ rights to withdraw from a scheme

   

601KA   Members’ rights to withdraw

Withdrawal from schemes that are liquid

             (1)  The constitution of a registered scheme may make provision for members to withdraw from the scheme, wholly or partly, at any time while the scheme is liquid (see subsection 601GA(4)).

Withdrawal from schemes that are not liquid

             (2)  The constitution of a registered scheme may make provision for members to withdraw from the scheme, wholly or partly, in accordance with this Part while the scheme is not liquid (see subsection 601GA(4)).

Restrictions on withdrawal from schemes

             (3)  The responsible entity must not allow a member to withdraw from the scheme:

                     (a)  if the scheme is liquid ¾ otherwise than in accordance with the scheme’s constitution; or

                     (b)  if the scheme is not liquid ¾ otherwise than in accordance with the scheme’s constitution and sections 601KB to 601KE.

Liquid schemes

             (4)  A registered scheme is liquid if liquid assets account for at least 80% of the value of scheme property.

Liquid assets

             (5)  The following are liquid assets unless it is proved that the responsible entity cannot reasonably expect to realise them within the period specified in the constitution for satisfying withdrawal requests while the scheme is liquid:

                     (a)  money in an account or on deposit with a bank, building society or other financial institution

                     (b)  bank accepted bills

                     (c)  marketable securities (as defined in section 9)

                     (d)  property of a prescribed kind.

             (6)  Any other property is a liquid asset if the responsible entity reasonably expects that the property can be realised for its market value within the period specified in the constitution for satisfying withdrawal requests while the scheme is liquid.

601KB   Non-liquid schemes—offers

             (1)  The responsible entity of a registered scheme that is not liquid may offer members an opportunity to withdraw, wholly or partly, from the scheme to the extent that particular assets are available and able to be converted to money in time to satisfy withdrawal requests that members may make in response to the offer.

             (2)  The withdrawal offer must be in writing and be made:

                     (a)  if the constitution specifies procedures for making the offer—in accordance with those procedures; or

                     (b)  otherwise—by giving a copy of the offer to all members of the scheme or to all members of a particular class.

             (3)  The withdrawal offer must specify:

                     (a)  the period during which the offer will remain open (this period must last for at least 21 days after the offer is made); and

                     (b)  the assets that will be used to satisfy withdrawal requests; and

                     (c)  the amount of money that is expected to be available when those assets are converted to money; and

                     (d)  the method for dealing with withdrawal requests if the money available is insufficient to satisfy all requests.

The method specified under paragraph (d) must comply with section 601KD.

             (4)  For joint members, a copy of the withdrawal offer need only be given to the joint member named first in the register of members.

             (5)  As soon as practicable after making the withdrawal offer, the responsible entity must lodge a copy of the offer with the ASC.

601KC   Non-liquid schemes—only one withdrawal offer to be open at any time

                   Only one withdrawal offer may be open at any time in relation to a particular interest in a registered scheme that is not liquid.

601KD   Non-liquid schemes ¾ how payments are to be made

                   The responsible entity of a registered scheme that is not liquid must ensure that withdrawal requests made in response to a withdrawal offer are satisfied within 21 days after the offer closes. No request made under the withdrawal offer may be satisfied while the offer is still open. If an insufficient amount of money is available from the assets specified in the offer to satisfy all requests, the requests are to be satisfied proportionately in accordance with the formula:

601KE   Non-liquid schemes ¾ responsible entity may cancel withdrawal offer

             (1)  The responsible entity of a registered scheme that is not liquid:

                     (a)  may cancel a withdrawal offer before it closes if the offer contains a material error; or

                     (b)  must cancel a withdrawal offer before it closes if it is in the best interests of members to do so.

             (2)  The cancellation must be made:

                     (a)  if the constitution specifies procedures for cancelling the withdrawal offer ¾ in accordance with those procedures; or

                     (b)  otherwise ¾ by notice in writing to the members to whom the withdrawal offer was made.

             (3)  The responsible entity must lodge written notice of the cancellation with the ASC.



 

Part 5C.7 Related party transactions

   

601LA   Part 3.2A applies with modifications

                   Part 3.2A applies to a registered scheme with the modifications set out in sections 601LB to 601LE and as if:

                     (a)  references to a public company were instead references to the responsible entity of the scheme; and

                     (b)  references to a benefit being given to or received by a related party of a public company were instead references to a benefit being given to or received by the responsible entity or a related party; and

                     (c)  references to a resolution of a public company were instead references to a resolution of the members of the scheme; and

                     (d)  references to a general meeting were instead references to a members’ meeting of the scheme; and

                     (e)  references to members of a public company were instead references to members of the scheme; and

                      (f)  references to the company’s best interests were instead references to the best interests of the scheme’s members.

601LB   Replacement section 243A

                   Part 3.2A applies as if section 243A were replaced by the following section:

243A   Object

                   The object of this Part as it applies to a registered scheme is to protect the scheme property and the interests of members in the scheme property by requiring that, in general, financial benefits to the responsible entity or its related parties that could diminish or endanger the scheme property, or that could adversely affect the interests of members, must be disclosed, and approved by a members’ meeting, before they are given.

601LC   Replacement section 243H

                   Part 3.2A applies as if section 243H were replaced by the following section:

243H   Prohibited financial benefits to responsible entity and related party

             (1)  The responsible entity of a registered scheme must not give a financial benefit to itself, or to a related party :

                     (a)  out of the scheme property; or

                     (b)  that could diminish or endanger the scheme property;

unless Division 4 or 5 permits the benefit to be given.

             (2)  A child entity of the responsible entity must not give a financial benefit:

                     (a)  to itself, to the responsible entity, or to a related party of the responsible entity, out of the scheme property; or

                     (b)  that could diminish or endanger the scheme property;

unless Division 4 or 5 permits the benefit to be given.

             (3)  Subsections (1) and (2) do not prevent the responsible entity from paying itself fees, and exercising rights to an indemnity, as provided for in the scheme’s constitution under subsection 601GA(2).

601LD   Omission of sections 243L, 243M and 243ZF

                   Part 3.2A applies as if sections 243L, 243M and 243ZF were omitted.

Note:         Instead of section 243ZF, the rule in section 253E will apply.

601LE   Modification of section 243ZB

                   Part 3.2A applies as if subsection 243ZB(1) were amended by omitting “subsection 243ZF(1)” and substituting “section 253E” and by omitting the note at the end.



 

Part 5C.8 Effect of contraventions (civil liability and voidable contracts )

   

601MA   Civil liability of responsible entity to members

             (1)  A member of a registered scheme who suffers loss or damage because of conduct of the scheme’s responsible entity that contravenes a provision of this Chapter may recover the amount of the loss or damage by action against the responsible entity whether or not the responsible entity has been convicted of an offence, or has had a civil penalty order made against it, in respect of the contravention.

             (2)  An action under subsection (1) must be begun within 6 years after the cause of action arises.

             (3)  This section does not affect any liability that a person has under other provisions of this Law or under other laws.

601MB   Voidable contracts where subscription offers and invitations contravene this Law

             (1)  If:

                     (a)  a managed investment scheme is being operated in contravention of subsection 601ED(5) and a person (the offeror ) offers an interest in the scheme for subscription, or issues an invitation to subscribe for an interest in the scheme; or

                     (b)  a person (the offeror ), in contravention of Part 7.12, offers an interest in a registered scheme for subscription, or issues an invitation to subscribe for an interest in a registered scheme;

a contract entered into by a person (other than the offeror) to subscribe for the interest as a result of the person accepting the offer, or of the acceptance of an offer made by the person in response to the invitation, is voidable at the option of that person by notice in writing to the offeror.

             (2)  If the person gives a notice under subsection (1), the obligations of the parties to the contract are suspended:

                     (a)  during the period of 21 days after the notice is given; and

                     (b)  during the period beginning when an application is made under subsection (4) in relation to the notice and ending when the application, and any appeals arising out of it, have been finally determined or otherwise disposed of.

             (3)  Subject to subsection (6), the notice takes effect to void the contract:

                     (a)  at the end of 21 days after the notice is given; or

                     (b)  if, within that 21 days, the offeror applies under subsection (4) ¾ at the end of the period when the obligations of the parties are suspended under paragraph (2)(b).

             (4)  Within 21 days after the notice is given, the offeror may apply to the Court for an order declaring the notice to have had no effect.

             (5)  The Court may extend the period within which the offeror may apply under subsection (4), even if the notice has taken effect.

             (6)  On application under subsection (4), the Court may declare the notice to have had no effect if it is satisfied that, in all the circumstances, it is just and equitable to make the declaration.



 

Part 5C.9 Winding up

   

601NA   Winding up required by scheme’s constitution

                   The constitution of a registered scheme may provide that the scheme is to be wound up:

                     (a)  at a specified time; or

                     (b)  in specified circumstances or on the happening of a specified event;

but a provision of the constitution that purports to provide that the scheme is to be wound up if a particular company ceases to be its responsible entity is of no effect (including for the purposes of paragraph 601NE(1)(a)).

601NB   Winding up at direction of members

                   If members of a registered scheme want the scheme to be wound up, they may take action under Division 1 of Part 2G.4 for the calling of a members’ meeting to consider and vote on an extraordinary resolution directing the responsible entity to wind up the scheme.

601NC   Winding up if scheme’s purpose accomplished or cannot be accomplished

             (1)  If the responsible entity of a registered scheme considers that the purpose of the scheme:

                     (a)  has been accomplished; or

                     (b)  cannot be accomplished;

it may, in accordance with this section, take steps to wind up the scheme.

             (2)  The responsible entity must give to the members of the scheme and to the ASC a notice in writing:

                     (a)  explaining the proposal to wind up the scheme, including explaining how the scheme’s purpose has been accomplished or why that purpose cannot be accomplished; and

                     (b)  informing the members of their rights to take action under Division 1 of Part 2G.4 for the calling of a members’ meeting to consider the proposed winding up of the scheme and to vote on any extraordinary resolution members propose about the winding up of the scheme; and

                     (c)  informing the members that the responsible entity is permitted to wind up the scheme unless a meeting is called to consider the proposed winding up of the scheme within 28 days of the responsible entity giving the notice to the members.

             (3)  If no meeting is called within that 28 days to consider the proposed winding up, the responsible entity may wind up the scheme.

601ND   Winding up ordered by Court

             (1)  The Court may, by order, direct the responsible entity of a registered scheme to wind up the scheme if:

                     (a)  the Court thinks it is just and equitable to make the order; or

                     (b)  within 3 months before the application for the order was made, execution or other process was issued on a judgment, decree or order obtained in a court (whether an Australian court or not) in favour of a creditor of, and against, the responsible entity in its capacity as the scheme’s responsible entity and the execution or process has been returned unsatisfied.

             (2)  An order based on paragraph (1)(a) may be made on the application of:

                     (a)  the responsible entity; or

                     (b)  a director of the responsible entity; or

                     (c)  a member of the scheme; or

                     (d)  the ASC.

             (3)  An order based on paragraph (1)(b) may be made on the application of a creditor.

601NE   The winding up of the scheme

             (1)  The responsible entity of a registered scheme must ensure that the scheme is wound up in accordance with its constitution and any orders under subsection 601NF(2) if:

                     (a)  the scheme’s constitution provides that the scheme is to be wound up at a specified time, in specified circumstances or on the happening of a specified event and that time is reached, those circumstances occur or that event occurs; or

                     (b)  the members pass an extraordinary resolution directing the responsible entity to wind up the scheme; or

                     (c)  the Court makes an order directing the responsible entity to wind up the scheme; or

                     (d)  the members pass an extraordinary resolution to remove the responsible entity but do not, at the same meeting, pass an extraordinary resolution choosing a company to be the new responsible entity that consents to becoming the scheme’s responsible entity.

Note:         For the Court’s power to order winding up, see subsection 601FQ(5) and section 601ND.

             (2)  The responsible entity of a registered scheme may wind up the scheme in accordance with its constitution and any orders under subsection 601NF(2) if the responsible entity is permitted by subsection 601NC(3) to wind up the scheme.

             (3)  Interests must not be issued in a registered scheme at a time after the responsible entity has become obliged to ensure the scheme is wound up, or after the scheme has started to be wound up.

601NF   Other orders about winding up

             (1)  The Court may, by order, appoint a person to take responsibility for ensuring a registered scheme is wound up in accordance with its constitution and any orders under subsection (2) if the Court thinks it necessary to do so (including for the reason that the responsible entity has ceased to exist or is not properly discharging its obligations in relation to the winding up).

             (2)  The Court may, by order, give directions about how a registered scheme is to be wound up if the Court thinks it necessary to do so (including for the reason that the provisions in the scheme’s constitution are inadequate or impracticable).

             (3)  An order under subsection (1) or (2) may be made on the application of:

                     (a)  the responsible entity; or

                     (b)  a director of the responsible entity; or

                     (c)  a member of the scheme; or

                     (d)  the ASC.

601NG   Unclaimed money to be paid to ASC

                   If, on completion of the winding up of a registered scheme, the person who has been winding up the scheme has in their possession or under their control any unclaimed or undistributed money or other property that was part of the scheme property, the person must, as soon as practicable, pay the money or transfer the property to the ASC to be dealt with under Part 9.7.



 

Part 5C.10 Deregistration

   

601PA   Deregistration ¾ voluntary

Responsible entity may apply for deregistration

             (1)  The responsible entity of a registered scheme may lodge an application for deregistration of the scheme with the ASC.

             (2)  The responsible entity may only apply if:

                     (a)  the scheme:

                              (i)  has 20 or less members (calculated in accordance with subsection 601ED(4)) and all the members agree that the scheme should be deregistered; and

                             (ii)  is not required to be registered by paragraph 601ED(1)(b) or (c); or

                     (b)  because of subsection 601ED(2) (exemption based on excluded issues), the scheme is not required to be registered and all the members agree that the scheme should be deregistered; or

                     (c)  the scheme is not a managed investment scheme.

             (3)  If the ASC is satisfied that the application complies with subsections (1) and (2), it must give notice of the proposed deregistration:

                     (a)  on the national database; and

                     (b)  in the Gazette .

When 2 months have passed since the Gazette notice, the ASC may deregister the scheme.

             (4)  The ASC must give notice of the deregistration to the applicant.

601PB   Deregistration by ASC

             (1)  The ASC may decide to deregister a registered scheme if:

                     (a)  the scheme does not have a responsible entity that meets the requirements of section 601FA; or

                     (b)  the scheme does not have a constitution that meets the requirements of sections 601GA and 601GB; or

                     (c)  the scheme does not have a compliance plan that meets the requirements of section 601HA; or

                     (d)  the scheme’s property is not being :

                              (i)  clearly identified as the scheme’s property; and

                             (ii)  held separately from property of the responsible entity and property of any other scheme;

                            in accordance with the scheme’s compliance plan; or

                     (e)  the following conditions are satisfied:

                              (i)  the annual return for the scheme is at least 6 months late; and

                             (ii)  no other documents have been lodged by or on behalf of the scheme in the last 18 months; and

                            (iii)  the ASC has no reason to believe that the scheme is being operated; or

                      (f)  the scheme has been wound up.

Deregistration procedure

             (2)  If the ASC decides to deregister a scheme under this section, it must give notice of the proposed deregistration:

                     (a)  to the scheme’s responsible entity; and

                     (b)  to any other person who is winding up the scheme; and

                     (c)  on the national database; and

                     (d)  in the Gazette .

If the notice is given under paragraph (1)(a), (b), (c) or (d), the notice must specify the period at the end of which the ASC proposes to deregister the scheme.

             (3)  The ASC may deregister the scheme:

                     (a)  if paragraph (1)(a), (b), (c) or (d) applies—at the end of the period set out in the Gazette notice; or

                     (b)  if paragraph (1)(e) or (f) applies—when 2 months have passed since the Gazette notice.

             (4)  The ASC does not have to give a person notice under subsection (2) if the ASC does not have the necessary information about the person’s address.

             (5)  The ASC must give notice of the deregistration to everyone who was notified of the proposed deregistration under paragraph (2)(a) or (b).

601PC   Reinstatement

             (1)  The ASC may reinstate the registration of a managed investment scheme if the ASC is satisfied that the scheme should not have been deregistered or if the defect that led to the scheme being deregistered has been remedied.

             (2)  The Court may make an order that the ASC reinstate the registration of a managed investment scheme if:

                     (a)  an application for reinstatement is made to the Court by:

                              (i)  a person aggrieved by the deregistration; or

                             (ii)  a person who was winding up the scheme; and

                     (b)  the Court is satisfied that it is just that the scheme’s registration be reinstated.

             (3)  The Court may give any directions it thinks just for putting the scheme and other people in the same position, as far as possible, as if the scheme had not been deregistered.

ASC to give notice of reinstatement

             (4)  The ASC must give notice of a reinstatement in the Gazette . If the ASC exercises its power under subsection (1) in response to an application by a person, the ASC must also give notice of the reinstatement to the applicant.



 

Part 5C.11 Exemptions and modifications

   

601QA   ASC’s power to make exemption and modification orders

             (1)  The ASC may:

                     (a)  exempt a person from a provision of this Chapter; or

                     (b)  declare that this Chapter applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration.

Without limiting this, the ASC may declare that this Chapter applies to a person as if section 601HA included a requirement for scheme property to be held by a person other than the responsible entity as the responsible entity’s agent.

             (2)  The exemption or declaration may:

                     (a)  apply to all or specified provisions of this Chapter; or

                     (b)  apply to all persons, specified persons, or a specified class of persons; and

                     (c)  relate to all interests, specified interests or a specified class of interests in managed investment schemes; and

                     (d)  relate to any other matter generally or as specified.

             (3)  An exemption may apply unconditionally or subject to specified conditions. A person to whom a condition specified in an exemption applies must comply with the condition. The Court may order the person to comply with the condition in a specified way. Only the ASC may apply to the Court for the order.

             (4)  The exemption or declaration must be in writing and the ASC must publish notice of it in the Gazette .

             (5)  For the purposes of this section, the provisions of this Chapter include:

                     (a)  regulations made for the purposes of this Chapter; and

                     (b)  definitions in this Law or the regulations as they apply to references in:

                              (i)  this Chapter; or

                             (ii)  regulations made for the purposes of this Chapter; and

                     (c)  Division 11 of Part 11.2.

601QB   Modification by regulations

                   The regulations may modify the operation of this Chapter or any other provisions of this Law relating to securities in relation to:

                     (a)  a managed investment scheme; or

                     (b)  all managed investment schemes of a specified class.

2  After Division 10 of Part 11 .2

Insert:

Division 11 Changes resulting from the Managed Investments Act 1998

1451   Definitions

                   In this Division:

commencement means the commencement of Chapter 5C of this Law.

new Law means this Law as in force after the commencement.

old Law means this law as in force immediately before the commencement.

registered scheme means a managed investment scheme that is registered under section 601EB of the new Law.

registration application means an application for registration of a managed investment scheme under section 601EB of the new Law.

undertaking includes scheme, enterprise, contract or arrangement.

1452   Division applies to prescribed interests in existence immediately before commencement

                   This Division applies to interests that, immediately before the commencement, were prescribed interests to which:

                     (a)  Division 5 of Part 7.12 of the old Law applied; or

                     (b)  that Division would have applied but for the operation of subparagraph 7.12.04(c)(ii) of the Corporations Regulations;

and that are interests in a managed investment scheme as defined in section 9 of the new Law. It also applies to the undertaking to which the interests relate and to the trustee or representative and the management company in relation to the interests.

1453   Application of new Law to interests covered by approved deed immediately before commencement

                   The new Law applies to prescribed interests covered by an approved deed immediately before commencement as if paragraph 601ED(1)(a) (requirement for 20 members) were omitted. This section ceases to apply to the prescribed interests covered by the deed if all the people who hold the interests agree that this section should cease to apply to the interests.

1454   Old Law continues to apply for 2 years or until scheme registered

             (1)  The old Law continues to apply to the interests, the undertaking, the trustee or representative and the management company, for the period of 2 years starting on the commencement, unless, before then, the undertaking becomes a registered scheme.

             (2)  The ASC may extend that period of 2 years if the undertaking is to be wound up at a fixed time after the 2 years and the ASC thinks it would be unreasonable to require the undertaking to become a registered scheme before being wound up.

             (3)  Except for the purposes of applying to register the undertaking as a managed investment scheme under the new Law and dealing with the application, the new Law does not apply to the interests, the undertaking, the trustee or representative and the management company while the old Law continues to apply to them.

             (4)  If the undertaking becomes a registered scheme within the period of 2 years referred to in subsection (1), section 601FC(4) of the new Law applies to the registered scheme for the remainder of that period as if prescribed interests that are still covered by an approved deed because of subsection (1) of this section were interests in a registered scheme.

1455   Retirement from office of trustee or representative or management company

             (1)  This section provides for the bodies that hold the offices of trustee or representative and management company to retire from those offices. A retirement under this section takes effect if, and only if, the undertaking becomes a registered scheme.

             (2)  One of the bodies may retire from the office it holds by giving written notice of its retirement to the other body. The body giving the notice must lodge a copy of it with the ASC.

             (3)  Once one of the bodies has given a retirement notice to the other body, that other body cannot give a retirement notice. If both bodies give notices at the same time, the notice by the body that holds the office of management company is ineffective.

             (4)  A retirement notice may only be given:

                     (a)  while Division 5 of Part 7.12 of the old Law continues to apply to the prescribed interests; and

                     (b)  during the first year after the commencement.

             (5)  A retirement notice cannot be revoked.

             (6)  Section 1456 sets out what happens when one of the bodies gives the other a retirement notice.

             (7)  Section 1457 sets out what happens if neither of the bodies gives the other a retirement notice.

             (8)  Sections 1458 to 1461 only confer rights and impose obligations on a body for so long as:

                     (a)  if the body is the trustee or representative or the management company ¾ the body continues to hold that office; and

                     (b)  in any case ¾ the undertaking is not a registered scheme.

1456   What happens when one of the bodies receives a retirement notice

             (1)  If one of the bodies receives a retirement notice it must, within 2 months, decide either to:

                     (a)  retire from the office it holds; or

                     (b)  lodge a registration application in relation to the undertaking naming itself as the proposed responsible entity.

The body must lodge a notice of its decision with the ASC.

Note:         For the powers of the body if it decides to become the responsible entity, see section 1460.

             (2)  If the body decides to retire:

                     (a)  its retirement takes effect if, and only if, the undertaking becomes a registered scheme; and

                     (b)  the body must, as soon as practicable after making its decision, convene a meeting of the holders of the prescribed interests to:

                              (i)  choose a proposed responsible entity for the purpose of making a registration application; or

                             (ii)  decide that the undertaking is to be wound up; and

                     (c)  the body must lodge a notice with the ASC setting out the outcome of the meeting.

Note 1:      For the powers of the proposed responsible entity, see section 1460.

Note 2:      For the procedure at the meeting, see section 1460.

             (3)  If, at the meeting held under paragraph (2)(b), the holders of the prescribed interests do not either choose a proposed responsible entity or decide that the undertaking is to be wound up, the management company may apply to the Court for an order directing it to wind up the scheme.

1457   What happens if neither of the bodies gives a retirement notice

             (1)  If neither of the bodies gives a retirement notice during the first year after the commencement, the management company must:

                     (a)  as soon as practicable after the end of that year, convene a meeting of the holders of the prescribed interests to:

                              (i)  choose a proposed responsible entity for the purpose of making a registration application; or

                             (ii)  decide that the undertaking is to be wound up; and

                     (b)  lodge a notice with the ASC setting out the outcome of the meeting.

Note 1:      For the powers of the proposed responsible entity, see section 1460.

Note 2:      For the procedure at the meeting, see section 1460.

          (1A)  A resolution passed under subparagraph (1)(a)(i) may direct the proposed responsible entity to lodge with the registration application a compliance plan that provides for scheme property to be held by a person other than the responsible entity, or a person that is not related to the responsible entity, as the responsible entity’s agent.

             (2)  If, at the meeting, the holders of the prescribed interests do not either choose a proposed responsible entity or decide that the undertaking is to be wound up, the management company may apply to the Court for an order directing it to wind up the scheme.

1458   Winding up of the undertaking

                   The trustee or representative for the purposes of the deed must ensure that the undertaking is wound up in accordance with the deed in relation to the prescribed interests and with any orders under subsection 1459(2) if:

                     (a)  the holders of the prescribed interests decide, at a meeting convened for the purpose of paragraph 1456(2)(b) or 1457(1)(a), that the undertaking is to be wound up; or

                     (b)  the Court makes an order directing the management company to wind up the undertaking pursuant to an application under subsection 1457(2).

1459   Other orders about winding up

             (1)  The Court may, by order, appoint a person to take responsibility for ensuring the undertaking is wound up in accordance with the deed and any orders under subsection (2) if the Court thinks it necessary to do so (including for the reason that the management company has ceased to exist or is not properly discharging its obligations in relation to the winding up).

             (2)  The Court may, by order, give directions about how the undertaking is to be wound up if the court thinks it necessary to do so (including for the reason that the provisions in the deed are inadequate or impracticable).

             (3)  An order under subsection (1) or (2) may be made on the application of:

                     (a)  the management company or the trustee or representative; or

                     (b)  a director of the management company or of the trustee or representative; or

                     (c)  a holder of any of the prescribed interests; or

                     (d)  the ASC.

1460   Powers of proposed responsible entity

             (1)  This section sets out the powers of:

                     (a)  a body that decides under subsection 1456(1) to lodge a registration application in relation to the undertaking naming itself as the proposed responsible entity; or

                     (b)  a body chosen by the holders of the prescribed interests as the proposed responsible entity at a meeting convened under paragraph 1456(2)(b) or 1457(1)(a).

             (2)  The body has power to lodge a registration application in relation to the undertaking on behalf of the holders of the prescribed interests, and has power to do all things necessary for the purpose of the application.

             (3)  The body has power to modify the deed in relation to the prescribed interests:

                     (a)  if the purpose of the modification is to make the deed meet the requirements of section 601GA of the new Law for the constitution of a registered scheme; or

                     (b)  the modification removes from the deed covenants that were included to satisfy the requirements of Division 5 of Part 7.12 of the old Law.

This is so despite any provision in the deed to the contrary.

             (4)  Section 1069A of the old Law does not apply to the body’s power to modify the deed (except as provided in section 1461).

             (5)  The body must lodge a notice with the ASC setting out the modifications.

             (6)  The body’s power to modify the deed is subject to the following qualifications:

                     (a)  the modifications have effect if, and only if, the undertaking becomes a registered scheme; and

                     (b)  within 28 days of lodgment of the notice setting out the modifications, the ASC may require the management company to convene a meeting of the holders of the prescribed interests to ratify all or any of the modifications; and

                     (c)  if the ASC requires a modification to be ratified, it does not have effect under paragraph (a) unless it has been ratified and written notice of the ratification has been lodged with the ASC.

1461   Meeting procedures

                   Sections 1069A to 1069C of the old Law apply, with necessary modifications, for the purposes of convening, holding, and voting at meetings for the purpose of paragraph 1456(2)(b), 1457(1)(a) or 1460(6)(b).

1462   Transfer of rights, obligations and liabilities

                   If the undertaking becomes a registered scheme, Division 3 of Part 5C.2 of the new Law applies as if:

                     (a)  references to the new responsible entity were references to the responsible entity of the scheme on registration; and

                     (b)  references to the former responsible entity were references to either or both of the bodies that, immediately before the scheme’s registration, held the offices of trustee or representative and management company (in their capacities as the holders of those offices).

1463   Indemnification of trustee or representative for transfer of scheme property

                   If the undertaking becomes a registered scheme but the trustee or representative does not become the responsible entity of the scheme, the trustee or representative is entitled to be indemnified out of the scheme property for reasonable expenses incurred in transferring the scheme property to the responsible entity.

1464   Application of paragraphs 601JA(2)(c) and 601JB(2)(b) of new Law to officers or employees of body that does not become scheme’s responsible entity

                   If:

                     (a)  the undertaking becomes a registered scheme; and

                     (b)  on registration of the scheme, the scheme’s responsible entity is one of the bodies referred to in subsection 1455(1);

then, in applying paragraph 601JA(2)(c) or 601JB(2)(b) of the new Law to the scheme, a person who was an officer or employee of the other of those bodies is not, merely because of things they did before the scheme’s registration in the performance of their functions or duties as an officer or employee of that body, taken to have been substantially involved in business dealings, or in a professional capacity, with the responsible entity.

1465   References to prescribed interests etc. in existing laws and documents

                   A reference in any law of the Commonwealth or of a State or Territory, or in any document, to a term set out in the old term column of the table (within the meaning of this Law) is to be read after commencement as including a reference to the corresponding term set out in the new term column of the table (within the meaning of this Law) except so far as the contrary intention appears in the law or document.

 

Conversion of references

Item

Old term

New term

1.

prescribed interest

managed investment

2.

management company

responsible entity

3.

trustee

responsible entity

4.

approved deed

constitution of registered scheme