After extensive efforts, the Australian Government has established a regime for Corporate Collective Investment Vehicles (CCIVs).
In this insights series, our financial services team will dive into the new CCIV regime to see what the proposed framework looks like and what the ongoing obligation are for those who wish to operate a CCIV.
Parliament has created CCIVs in order to attract more overseas investment – the concept being that a corporate vehicle that is more aligned with investment structures overseas will be more attractive than Australia’s unique managed investment scheme structures. In particular, the humble unit trust is seen as anathema to foreign investors.
While the CCIV has been created with international investment in mind, it will also be an investment option for Australian investors.
The new regime will commence on 1 July 2022.
What is a CCIV?
A CCIV is a type of company limited by shares and has a public company as its “corporate director”. The corporate director must hold an Australian Financial Services Licence authorising it to conduct the affairs and business of the CCIV.
The CCIV will operate through sub-funds holding underlying investments. A CCIV must have at least one sub-fund in operation at any given time – if a CCIV winds up all of its sub-funds, the CCIV itself will be wound up. Sub-funds can also cross-invest – i.e. one sub-fund can invest in another sub-fund under the same CCIV.
Investors invest via the CCIV by acquiring shares in the CCIV, which are referrable to each sub-fund.
Retail CCIVs with only one sub-fund are eligible to list on Australian financial markets.
What is the new regime?
CCIVs are established under the new Chapter 8B of the Corporations Act 2001 (Cth) (Act). Chapter 7 of the Act has also been modified to introduce amendments relating to assignment of responsibility for conduct, financial services licensing, and disclosure for financial products.
As always, and in common with overseas jurisdictions, the CCIV regime will distinguish between wholesale and retail clients. The retail client compliance regime will be recognisable to anyone familiar with the operation of registered managed investment schemes. CCIVs open to wholesale clients only will be subject to a lighter-touch regime, however all CCIVs, whether wholesale or retail, must be registered with ASIC.
In the next insights (Part 2), we will look more deeply into the CCIV structure and discuss how the operation of a CCIV works in practice. But in the meantime, if you have any questions about CCIVs, or how you may adopt this kind of business please contact us and a member of our team will help answer your question.
What do the legal requirements and obligations look like for CCIVs?
In our previous insights (Part 1), we set out some of the key elements of Corporate Collective Investment Vehicles (CCIVs). In this update (Part 2), we will look at some of the fine detail on how the CCIV regime will operate.
General obligations which apply to CCIVs
The CCIV framework incorporates legal obligations applying to Australian companies, features from Australia’s managed investment scheme regime and financial services law.
The CCIV must:
have at least one sub-fund with at least one member of the sub-fund;
register with ASIC;
have a corporate director, which is a public company (like a responsible entity of a registered managed investment scheme);
have a constitution;
if open to retail investors, have a compliance plan;
maintain a register of members;
keep its sub-funds’ assets and liabilities segregated.
Obligations as a financial service provider
Interests in CCIVs are financial products and subject to the Australian financial services regime. The corporate director of the CCIV will be required to hold an Australian Financial Services Licence (AFSL) with sufficient authorisations to operate the CCIV and invest its funds.
A single AFSL can cover multiple CCIVs, however the exemptions under s 911A(2) of the Corporations Act 2001 (Cth) (Act) are disapplied for CCIVs. This means that the corporate director must hold an AFSL itself – it cannot operate a CCIV as an authorised representative of an AFS Licensee or via an intermediary authorisation arrangement.
Chapter 7 of the Act applies to CCIVs – including:
the obligation to provide a Product Disclosure Statement to retail clients;
breach reporting obligations;
prohibition of hawking CCIV securities to retail clients;
design and distribution obligations where a CCIV’s securities are issued to retail clients;
ASIC’s product intervention power where a CCIV’s securities are issued to retail clients.
If you want to know more about how to set up a CCIV, please contact us and a member of our Financial Services team will be able to assist.
This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.