What is a CCIV?
The Corporate Collective Investment Vehicle (CCIV) will be a passive collective investment vehicle that is a public company and is structured as an umbrella fund incorporating one or more sub-funds. These sub-funds are not required to be separate legal entities, thereby allowing the offer of multiple products and investment strategies within the same vehicle.
A CCIV will be operated by a corporate director that is an Australian public company and holds an Australian financial services (AFS) licence authorising it to operate a CCIV.
A retail CCIV will have a depositary that is either an Australian public company or a foreign company registered under the Corporations Act 2001 (Cth) (Corporations Act) and must hold an AFS licence authorising it to act as a depositary of a CCIV. The depositary will be responsible for holding the assets of the CCIV on trust and for oversight of the operation of the CCIV.
Why are they being introduced?
It is argued that Australia has encountered difficulty in attracting offshore funds via the current managed investment scheme regime, as it utilises trust structures which may be unfamiliar to many foreign investors. The CCIV regime is intended to address the lack of a globally recognised fund management vehicle in Australia by introducing a corporate structure limited by shares which can be sold to investors across jurisdictions, in a similar manner to the European Union’s UCITS fund regime.
CCIVs will facilitate participation in the Asia Region Funds Passport (ARFP), which aims to enable the cross-border marketing of funds across participating economies, including Japan, South Korea, New Zealand and Thailand.
What has happened to date?
The Government has been working on the applicable legislation to introduce the CCIV regime, the Treasury Laws Amendment (Corporate Collective Investment Vehicle) Bill 2018 (CCIV Bill). On 13 June 2018 the first tranche of the CCIV Bill was released for public consultation, followed by the second tranche on 19 July 2018.
The first tranche of the CCIV Bill related to the core provisions of the CCIV regime, to be contained in a new chapter of the Corporations Act. This included establishing how the CCIV and sub-funds will operate. The second tranche dealt with outstanding substantive aspects of the CCIV framework, including the application of the financial services regime in Chapter 7 of the Corporations Act to CCIVs.
On 12 October 2018, the third tranche of the CCIV Bill and accompanying explanatory materials were released for public consultation.
What does the third tranche of the CCIV Bill do?
The third tranche is intended to address a number of unresolved elements of the CCIV regime. The main provisions are as follows:
1. Independence requirement for depositories for CCIVs
A three-part test must be met for a depository to satisfy the independence requirement. These tests are a structural independence test, a voting/control test and an independent director test. If any of the three tests are not met by the depository for a CCIV (or any other entity performing depositary functions and any related bodies corporate of these entities), then the depositary itself will fail the independence requirement.
2. External administration of a CCIV
External administration will apply on a sub-fund-by-sub-fund basis by applying translation rules to the existing external administration provisions in Chapter 5 of the Corporations Act. Additionally, the draft provisions include the following:
(a) Arrangement and reconstructions of sub-funds – sub-funds can be rearranged within a CCIV or transferred within a CCIV.
(b) Receivership – receivers are taken to be appointed for each sub-fund separately where an asset has been allocated to multiple sub-funds.
(c) Winding up – a CCIV cannot be wound up but a sub-fund may, and a liquidator is appointed to that sub-fund.
(d) Insolvent trading—natural persons (as opposed to the corporate director) will owe the duty to prevent insolvent trading.
3. Deregistering a sub-fund and a CCIV
A sub-fund may be deregistered in three ways:
(a) the CCIV, corporate director or a liquidator of a sub-fund may voluntarily apply for a sub-fund to be deregistered where the sub-fund has no assets or liabilities, and the CCIV is not a party to any legal proceedings that relate to that sub-fund;
(b) ASIC may deregister a sub-fund in certain circumstances; or
(c) A court may order deregistration.
A CCIV must be deregistered by ASIC after the CCIV’s last sub-fund has been deregistered (this is the only way a CCIV may be deregistered). A sub-fund and a CCIV may be reinstated following deregistration in certain circumstances.
4. Takeovers, compulsory acquisitions and buy-outs
The acquisition of a relevant interest in a CCIV is not regulated by procedural rules and obligations regarding takeovers, compulsory acquisitions and buy-outs (set out in Chapters 6 to 6B of the Corporations Act). Chapter 6C also does not apply to CCIVs, as CCIVs are prohibited from being listed.
However, the takeover, compulsory acquisitions and buy-outs rules will apply to CCIVs when the CCIV is proposing to acquire or hold an interest in any entity that is the subject of these rules (such as where the CCIV is a bidder in a takeover process).
5. Disclosure and fundraising
The continuous disclosure requirements in Chapter 6CA will apply to CCIVs that are disclosing entities. However, because CCIVs are subject to the PDS regime in Chapter 7 pf the Corporations Act, the disclosure and fundraising rules in Chapter 6D will not apply.
Additionally, a person must not offer securities in a CCIV that does not exist, or securities that are referable to a sub-fund that is not established, if the offer would give rise to an obligation to give a PDS.
6. Other provisions
A number of consequential amendments to accommodate the CCIV regime are contained in the CCIV Bill, including the following:
(a) Amendments to Chapter 9 of the Corporations Act (which contains includes a number of miscellaneous provisions, including relating to registers, auditors and offences)
(b) The application of the ARFP regime to CCIVs.
(c) Consequential amendments to the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), to ensure that the definition of financial services in the ASIC Act applies correctly, and that ASIC’s powers and functions work effectively in relation to CCIVs.
The public consultation process will allow stakeholders to lodge submissions to Treasury in relation to the third tranche of the CCIV Bill until 26 October 2018.
We have been following the evolution of the CCIV regime in our news posts and will continue to do so as we report on legislative updates and releases as they occur so as to keep you informed of developments.
One Investment Group is Australia’s largest provider of outsourced trustee and administration services to investment managers and the only provider able to provide a holistic solution to offshore fund managers or a single service. Should you be considering establishing an investment vehicle for Australian assets or outsourcing or comparing service providers for some of your current roles, please do not hesitate to contact us.