ASIC Class Order [CO 02/305]

ASIC Class Order [CO 02/305]

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 [00/570].

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 compliance with 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 for the provision of financial services by that person in relation to dealing in interests in a managed investment scheme of the kind and offered on the basis referred to in Schedule B.

4. Under paragraphs 992B(1) of the Act ASIC hereby exempts a person (other than a person referred to in Schedule A) in the case of an offer to sell an interest in a managed investment scheme referred to in Schedule B and offered on a basis that appears to comply with Schedule C, from sections 992A and 992AA of the Act.

SCHEDULE A — WHO IS EXEMPT

“Any person (“Operator”) who operates a scheme of the kind specified in Schedule B (“Scheme”) other than a person who is aware that:

(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.

SCHEDULE B — SCHEMES EXEMPTED

A managed investment scheme that involves registered proprietors (“Investors”) of strata title units, community title interests or similar interests in real property (“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 in relation to which on 1 March 2000 there was no person who had bought or agreed to buy a Strata Unit and who, before agreeing to buy, had been offered an interest in the Scheme, where:

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

(b) 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:

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

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

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

(d) 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;

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

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

(ii) 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:

(A) 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

(B) 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;

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

(a) 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

(b) 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;

(f) 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

(g) the serviced apartment, hotel, motel or resort complex is operated in accordance with a written agreement entered into or to be entered into between the Operator and each Investor which agreement includes provisions as specified in Schedule E.

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. 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) 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;

2A. 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; and

3. The Operator must comply with the provisions specified in Schedule E which are included in the agreement referred to in paragraph (g) of Schedule B.

SCHEDULE E — PROCEDURES FOR TRANSFERRING MANAGEMENT RIGHTS

1 Transfer of management rights

(a) If a majority of Scheme members advise the Operator in writing that they wish to terminate the Operator's engagement, the Operator must within 9 months transfer the management rights to a person that is chosen by the Operator that has not been involved in the operation (including promotion) of the Scheme and is not controlled by a person that has been involved in the operation (including promotion) of the Scheme.

(b) If an Operator fails to complete that transfer within the 9 month period, the Operator must cause the transfer of the management rights to a replacement operator named in a written notice given by a majority of Scheme members, at a price specified in the notice. 

(c) A transfer referred to in paragraphs (a) or (b) must be done as soon as practicable, but if there is a body corporate for the real property to which the Scheme relates, there must be a reasonable time for members of the body corporate to consider whether to make a decision referred to in paragraph 2(b) unless the body corporate has consented to the transfer.

2 Consent of body corporate to new caretaking arrangements

(a) If an Operator receives a notice under paragraph 1(b) of this Schedule, the Operator must advise all body corporate members of the name of the person to whom the transfer is to be made.

(b) Unless the body corporate has consented to the transfer, an Operator does not have to transfer the management rights to the person named in the notice described in paragraph 1(b) of this Schedule if a majority of body corporate members state in writing to the Operator that the person should not be engaged by the body corporate to perform caretaking functions.

(c) If a majority of body corporate members make a decision referred to in paragraph 2(b) of this Schedule, a majority of Scheme members may then at any time name a replacement operator by a written notice, to whom the Operator must transfer the management rights at a price specified in the notice and the notice will be taken to be given in accordance with paragraph 1(b) of this Schedule.

(d) This paragraph 2 does not apply if the body corporate or a majority of body corporate members agree in writing to the transfer to the person named in a notice under paragraph 1(b) or 2(c) of this Schedule before that notice is given to the Operator.

3 Price payable on transfer

The price specified by Scheme members in a notice under paragraph 1(b) of this Schedule must be one of the following:

(a) the average of two valuations of the management rights by independent qualified valuers nominated by the Australian Property Institute (or another relevant independent professional body approved by ASIC); or

(b) the highest bona fide bid for the management rights (excluding a bid by the Operator or its associates) at an auction of which at least 60 days' notice had been given; or

(c) the highest bona fide amount tendered (excluding any tender by the Operator or its associates) for the management rights following reasonable efforts to market the property for at least 60 days.

4 Voting

(a) In determining if there is a majority of Scheme members or body corporate members, the Operator and its associates and any person nominated as a replacement operator and associates of that person must not be counted.

(b) For Scheme members, a majority is based on their entitlement to vote at body corporate meetings if there is a body corporate for the property to which the Scheme relates, and otherwise each member shall have one vote.

(c) For body corporate members, a majority is based on their entitlement to vote at body corporate meetings.

(d) A Scheme member or a body corporate member makes a  decision by signing a document that sets out the decision.

5 Costs

(a) Any member may arrange a valuation or auction of, or may market, the management rights before or after the expiration of the 9 month period referred to in paragraph 1(a) of this Schedule for the purposes of determining a price to be specified in a notice under paragraph 1(b) of this Schedule.

(b) If a member incurs any reasonable valuation, auction or marketing costs under paragraph 5(a) of this Schedule that member is entitled to be reimbursed out of the price payable by any person nominated by the members as transferee of the management rights when the price is paid to the Operator.

6 Assistance

The Operator must give reasonable assistance to enable the transferee to operate the resort, hotel, motel or serviced apartment complex including making available information concerning any prospective bookings.

7 Definitions

In this Schedule E:

“Scheme members” means Investors in the Scheme excluding the Operator and its associates;

“management rights” means all real or personal property (including contractual rights) held by the Operator or any of its associates that facilitates the operation of the Scheme; and

“transfer” in relation to management rights means to assign or transfer the management rights or to cause another person to become the holder of those rights or rights substantially the same as those rights.

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 paragraph (g) 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.

Commencement

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

Notes to ASIC Class Order [CO 02/305]

Note 1

ASIC Class Order [CO 02/305] (in force under paragraphs 601QA(1)(a),  911A(2)(l) and  992B(1)(a) 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