Recently, we released an article introducing the Federal Government’s proposal of a new corporate collective investment vehicle (CCIV) scheme which aims to create a new form of investment vehicle similar to corporate investment vehicles used overseas.
Since our article was released, the Federal Government has released the third tranche of legislation (Third Tranche) which sets out:
- independence requirements for depositaries of a retail CCIV;
- external administration procedures for a sub-fund of a CCIV;
- interaction with takeovers, compulsory acquisitions and buy-outs, disclosure and fundraising laws under the Corporations Act 2001(Cth) (Corporations Act);
- miscellaneous amendments to the Corporations Act, ASIC Act and Personal Property Securities Act to ensure that the new laws work appropriately.
Independence requirements for depositaries
Retail CCIVs must have an Australian public company that acts as a depositary for the CCIV. The depositary must have an AFS licence and holds the assets of the CCIV on trust. The Third Tranche provides three independence requirements for depositaries being:
- a structural independence requirement that separates the depositary from the corporate director or a person that makes investment decisions for the CCIV;
- voting/control thresholds where the depositary must not hold more than 20% of voting power in the corporate director of the CCIV; and
- independent director requirements where directors on the board of the depositary cannot be on the board of the corporate director of the CCIV. Where there are less than 6 directors on the board of the depositary, common directors are prohibited. Where there are 6 or more directors on the board of the depositary, only one common director may sit on both boards.
A depositary must satisfy all of these requirements to be considered independent.
The Third Tranche introduces concepts of interpretation to “translate” the existing parts of the Corporations Act relating to external administration (eg. schemes of arrangement and reconstructions, receivership and liquidation provisions) to allow the CCIV provisions to operate effectively.
In a scheme of arrangement or reconstruction, the translation rules allow the sub-funds (and the underlying property) within a CCIV to be re-arranged or combined. In a receivership scenario, receivers are taken to be appointed for each sub-fund separately (keeping in line with the broad principle that each sub-fund within a CCIV is to be kept separate). In a winding up scenario, creditors (such as those serving statutory demands) must specify the sub-fund or sub-funds to which the debt relates (and if relating to multiple sub-funds, the proportion of the debt). Liquidators are also given powers to deal with the property of the sub-fund in which they are appointed (not the whole CCIV).
Takeovers, compulsory acquisitions and buy-outs, disclosure and fundraising
The takeovers, compulsory acquisitions and buy-out rules in the Corporations Act do not apply to CCIVs. The Takeovers Panel does not have jurisdiction in relation to a takeover of a CCIV or the acquisition of a relevant interest in a CCIV. However, where the CCIV is the bidder in a takeover then standard Corporations Act provisions apply.
In terms of disclosure, CCIVs are subject to the PDS disclosure regime as modified by the second tranche of draft legislation relating to CCIVs by the Federal Government.
The Third Tranche of legislation was released for consultation on 12 October 2018 and the consultation period closed on 26 October 2018. We will continue to keep our clients updated of these developments however it may be a while before recommendations from submissions and amended draft legislation are released.