ASIC Class Order [CO 02/304]

ASIC Class Order [CO 02/304]

Management rights schemes

This instrument is made under paragraphs  601QA(1)(a),  911A(2)(l) and  992B(1)(a) of the Corporations Act 2001.

This compilation was prepared on 14 August 2014 taking into account amendments up to [CO 14/757].

Prepared by the Australian Securities and Investments Commission.

Australian Securities and Investments Commission
Corporations Act 2001 — Paragraphs  601QA(1)(a),  911A(2)(l) and  992B(1)(a) — Revocation and Exemption

1. Under paragraph 601QA(1)(a) of the Corporations Act 2001 (the “Act”) the Australian Securities and Investments Commission (“ASIC”) hereby revokes Class Order [99/460].

2. Under paragraph 601QA(1)(a) of the Act ASIC hereby exempts the persons referred to in Schedule A in the case referred to in Schedule B on the conditions set out in Schedule C from section  601ED of the Act.

3. Under paragraphs 911A(2)(l) and 992B(1)(a) of the Act ASIC hereby exempts the persons referred to in Schedule A in the case referred to in Schedule B on the conditions set out in Schedule C from:

(a) sections  992A and  992AA of the Act; and

(b) the requirement to hold an Australian financial services licence in relation to dealing in interests in a managed investment scheme of the kind referred to in Schedule B.

4. Under paragraph 992B(1)(a) of the Act ASIC hereby exempts the persons referred to in Schedule D in the case of an offer to sell an interest in a managed investment scheme referred to in Schedule B on the conditions set out in Schedule E from sections 992A and 992AA of the Act.

SCHEDULE A — WHO IS EXEMPT — PRIMARY OFFERS

Any person (“Operator”) who operates a scheme of the kind specified in Schedule B (“Scheme”) and any person offering an interest in such a scheme for issue (“Promoter”) other than a person who is aware that either:

(a) any Product Disclosure Statement required to be given to a person under the Act in relation to the Scheme was not given or was given but did not comply with the Act; or

(b) in the case of a Scheme that was operated before 11 March 2004 — any disclosure statement required to be given to a person under this instrument (as in force from time to time before that date) in relation to the Scheme was not given or was given did not comply with this instrument (as so in force).

SCHEDULE B — SCHEMES EXEMPTED

Making offers to issue interests in and operating a managed investment scheme:

(a) that involves registered proprietors (“Investors”) of strata title units, community title interests or similar real property interests (“Strata Units”), in the Investor's discretion, making their Strata Unit available for use as part of a serviced apartment, hotel, motel or resort complex; and

(b) where interests in the Scheme (“Interests”) have only been offered on the following basis:

(i) each Strata Unit can be lawfully used as a residence;

(ii) each Investor and the Operator may withdraw from participation in the Scheme on no more than 90 days' notice and an Investor that withdraws will not be bound after that notice expires to allow use of their Strata Unit except for occupation of the Strata Unit:

(A) by a person other than the Operator or an associate of the Operator; and

(B) under an agreement that the Operator made with that person before the notice of withdrawal was given;

(iii) each Investor may, if the Investor withdraws from participation in the Scheme, appoint another person to manage their Strata Unit;

(iv) the Operator is licensed in relation to the conduct of the letting services under the law of a State or Territory or is an Australian financial services licensee;

(v) no payment is liable to be made by an Investor to participate in the Scheme other than:

(A) payment of money to buy the Strata Unit; and

(B) one or more payments of the Investor's reasonable proportion of the Operator's fees and expenses with respect to the management of the Scheme where in any 3 month period the total of such payments relates to a period of no more than 3 months and where:

(I) that total is reasonably commensurate with the work done or to be done, or the expenses incurred or likely to be incurred (as the case may be), by the Operator during the period to which the payments relate; and

(II) where a FFE Fund has been established for the Investor — no payment or part thereof is used for the replacement, repair or refurbishment of furniture, fittings and equipment of the Strata Unit in relation to the period to which the payment relates unless all money in the Fund has first been expended; and

(C) where a FFE Fund has been established for the Investor — one or more payments into the Fund where:

(I) each payment is by way of a deduction from rental income of the Scheme that would otherwise be paid to the Investor in relation to a period and does not exceed 3% of the gross rent attributable to the Investor for the period; and

(II) the balance of the Fund at all times does not exceed $5,000 for each Strata Unit made available by the Investor for use as part of the Scheme;

(vi) the sale of the Strata Unit is not and was not conditional on participation in the Scheme and there is no obligation on any person to ensure that other owners of Strata Units agree to participate in the Scheme; and

(vii) under the agreement entered into or to be entered into between the Operator and each Investor participating in the Scheme, if the Operator or any of its associates have any rights with respect to any property that facilitate the use of the Strata Units (including under a lease or contract with the body corporate or as a registered proprietor) and a majority of Investors (excluding the Operator and any of its associates if they own a unit) based on their voting rights in relation to matters concerning the body corporate to which the Strata Units relate or if there is no such body corporate based on the value of their Strata Units agree in writing that those rights should be assigned to another person specified by those Investors, it is a term of the agreement that the Operator will and will cause any relevant associate of the Operator to:

(A) assign those rights to that person at their market value determined by a qualified independent valuer instructed by the Operator disregarding any special value of the property because it can be used to operate a resort, hotel, motel or serviced apartment complex; and

(B) give reasonable assistance to enable that person to operate the resort, hotel, motel or serviced apartment complex including making available information concerning any prospective bookings; and

(c) which has not at any time been a registered scheme; and

(d) in relation to which an approved deed under Division 5 of Part 7.12 of the Corporations Law as it stood prior to 1 July 1998 has not at any time been in force.               

SCHEDULE C — CONDITIONS ON OPERATORS AND PROMOTERS

1. The Operator must ensure that any part of the Scheme property held in cash or on deposit with an Australian ADI or a financial institution must be held on trust for the members in a trust account and subject to audit as to whether the moneys have been dealt with in accordance with the terms of the trust by a registered company auditor or an affected auditor (as defined in ASIC Class Order [CO 14/757]) at least annually.

2. Each promoter that is involved in making an offer of  interests in the Scheme for issue must not engage in any misleading or deceptive conduct or conduct that is likely to mislead or deceive in connection with those offers.

3. The Operator must provide on request by a Seller of an Interest in the Scheme a notice that is signed by the Operator and dated on the day of issue setting out the following:

(a) the name and address of the registered or principal office of the Operator:

(i) in the place in which the Operator was incorporated or registered if the Operator is a body corporate;

(ii) if the office is outside this jurisdiction — within this jurisdiction;

(b) the date on which the Scheme was established and if the Scheme has a fixed duration, the duration of the Scheme;

(c) a place where any agreements that will bind the Operator and a person buying from a Seller may be inspected;

(d) the extent of the liability of the Investors to make any contribution to the Scheme;

(e) the rights that a person buying from a Seller will have in relation to the use of their Strata Unit, income and voting;

(f) the amount (if any) paid to each class of Investors in each of the previous 5 financial years preceding the offer;

(g) if no amount has been paid out in respect of the rights or interests of a particular class of Investor in the previous 5 financial years — a statement to that effect which identifies each such class;

(h) if the Operator is a body corporate — the names and addresses of the directors of the body corporate;

(i) a copy of the most recent audit report in relation to the audit of the trust account for the Scheme; and

4. Where a FFE Fund has been established for an Investor, the Operator must ensure that:

(a) the money comprising the Fund is held on trust for the Investor in a trust account and subject to audit as to whether the money has been dealt with in accordance with the terms of the trust by a registered company auditor or an affected auditor (as defined in ASIC Class Order [CO 14/757]) at least annually; and

(b) the balance of the Fund is promptly returned to the Investor at the termination of the Scheme or upon the Investor's withdrawal from the Scheme, whichever occurs first.

SCHEDULE D — WHO IS EXEMPT FOR SECONDARY OFFERS

Any member of a scheme of the kind referred to in Schedule B other than the Operator or a Promoter of the Scheme (“Seller”).

SCHEDULE E — CONDITIONS ON SELLERS

A Seller must not offer to sell their Interest in the Scheme unless:

(a) the Seller has a notice issued by the Operator that the Seller reasonably believes to be current and that the Seller has no reason to believe does not comply with condition 3 in Schedule C; and

(b) the offer is accompanied by a copy of the notice or by a statement that the notice will be given free of charge to a person who asks for it.

Interpretation

In this instrument:

1. “FFE Fund” means a fund established for an Investor consisting of money paid by the Investor and any interest accrued on that money, to be used from time to time in accordance with the written agreement referred to in subparagraph (b)(vii) of Schedule B for the replacement, repair or refurbishment of furniture, fittings and equipment of the Strata Unit made available by the Investor for use as part of the Scheme; and:

2. “offer” is to be interpreted in accordance with subsection  1010C(2) of the Act.

Note: In this instrument, “this jurisdiction” means Australia, ss 5 and 9 (definition of “this jurisdiction”).

Commencement

This instrument takes effect on the commencement of Schedule 1 to the Financial Services Reform Act 2001.

Notes to ASIC Class Order [CO 02/304]

Note 1

ASIC Class Order [CO 02/304] (in force under paragraphs  601QA(1)(a),  911A(2)(l) and  992B(1)(a) of the Corporations Act 2001) as shown in this compilation comprises that Class Order amended as indicated in the Tables below.

Table of Instruments

Table of Amendments

ad. = added or inserted     am. = amended     rep. = repealed     rs. = repealed and substituted