ASIC Class Order [CO 01/1541]

Overview

The Corporations Act 2001, enacted by the Australian Parliament, addresses the need for greater accountability and transparency in the management of registered schemes, particularly those that are listed. The Act aims to ensure that members of these schemes have a meaningful opportunity to influence the composition of their management. The legislative instrument F2007B00072, issued under the authority of the Australian Securities and Investments Commission (ASIC), modifies the Act by introducing provisions that allow members to request meetings to consider resolutions for removing the responsible entity and appointing a new one. This amendment was introduced to provide more robust mechanisms for members to effect change in the management of their schemes, thereby enhancing democratic participation and oversight within these entities. The policy objective is to ensure that the governance structures of registered schemes are responsive to the needs and interests of their members.

Scope and Application

Under subsection 601QA(1) of the Corporations Act 2001, the Australian Securities and Investments Commission has declared that Chapter 5C of the Act applies to all persons, extending its purview to registered schemes that are listed. This particular legislative instrument modifies section 601FM by adding subsection (1A), which delineates specific conditions under which a meeting of the members must be called and arranged. This meeting is to consider and vote on proposed resolutions to remove the responsible entity and choose a new one. The responsible entity must convene such a meeting upon the request of members holding at least 5% of the votes that may be cast on the resolution or at least 100 members who are entitled to vote. Additionally, members holding interests carrying at least 5% of the votes may themselves call and arrange a meeting for the same purpose. Furthermore, the Court retains the authority to order a meeting if it is impracticable to call one through other means. This declaration is effective nationwide and applies to all entities within the Commonwealth of Australia.

Key Provisions

Under subsection 601QA(1) of the Corporations Act 2001, the Australian Securities and Investments Commission (ASIC) has declared that Chapter 5C of the Act applies to all persons as if section 601FM were amended by adding a new subsection (1A). This amendment introduces specific provisions for the removal and replacement of responsible entities in registered schemes that are listed. According to this amendment, the responsible entity must call and arrange a meeting of the members to consider and vote on resolutions to remove the responsible entity and choose a new one. This can be triggered by either members holding at least 5% of the votes that may be cast on the resolution, or at least 100 members who are entitled to vote on the resolution (subsection 601FM(1A)(a)). Additionally, members holding interests carrying at least 5% of the votes that may be cast at a meeting can themselves call and arrange for such a meeting (subsection 601FM(1A)(b)). Furthermore, the Court has the authority to order a meeting to consider and vote on these resolutions if it is impracticable to call the meeting in any other way (subsection 601FM(1A)(c)). The Act imposes specific obligations on the parties involved. The responsible entity of a listed registered scheme must ensure that a meeting of the members is convened and arranged whenever the specified voting thresholds are met by members requesting such a meeting. This includes facilitating the consideration and voting on resolutions to remove the responsible entity and choose a new one. Members holding significant voting interests also have the right to call for such meetings themselves, reinforcing the importance of member participation in the governance of the scheme. Additionally, the Court’s role is to provide an alternative means of convening a meeting when direct action by the responsible entity or members is not feasible. Breach of the provisions set out in this declaration could lead to various consequences. While the Act does not specify particular offences or penalties for failure to comply with the meeting requirements, non-compliance could potentially result in legal action by affected members, reputational damage for the responsible entity, and possible intervention by ASIC. The Court’s power to order a meeting underscores the seriousness with which the Act regards these provisions, indicating that failure to comply could lead to judicial intervention and further legal repercussions. The precise civil or criminal penalties are not detailed in the declaration but would typically depend on the specific nature and impact of the non-compliance.