ASIC Class Order [CO 98/57]

Overview

The Class Order [98/57] was enacted in 1998 by the Australian Securities and Investments Commission (ASIC) under the Corporations Law. This legislation was introduced to address the administrative burden on management companies of managed investment schemes that are not required to be registered under section 601ED of the Corporations Act. The Class Order provides an exemption from the requirement to call a unitholders' meeting under section 1457 of the Act, aiming to offer relief to management companies in specific circumstances. This relief is contingent upon certain conditions being met, such as the agreement of all unitholders that the scheme need not be registered and the management company lodging a notice of exemption. The policy objective behind this Class Order is to streamline the regulatory process for certain managed investment schemes, reducing unnecessary administrative obligations on management companies. By allowing exemptions under specific conditions, the legislation seeks to balance the need for oversight with the practicalities of managing these schemes. This approach is consistent with broader regulatory efforts to ensure that the administrative burden on businesses is proportionate and justifiable, thereby promoting efficiency without compromising investor protection.

Scope and Application

Class Order [98/57], under the legislative instrument F2008B00016, applies to management companies that are exempt from the requirement to call a unitholders' meeting as stipulated in section 1457 of the Corporations Law. Specifically, the exemption applies to cases where the managed investment scheme is not mandated to be registered under section 601ED. The relief granted is outlined in Policy Statement 135, with particular reference to PS 135.47. The Australian Securities and Investments Commission issues these exemptions pursuant to paragraph 601QA(1)(a) of the Corporations Law. The exemption applies to situations where all holders of prescribed interests have agreed in writing that the scheme does not require registration, all interests were issued by excluded issues, and the management company has notified that no meeting will be called under section 1457(1)(a). Furthermore, if the scheme is wound up before one year from the commencement date, the exemption ceases to apply on 30 June 2000. This legislative instrument extends its application through the Schedule, which details specific cases where the exemption applies.

Key Provisions

Under the Class Order [98/57], certain management companies are exempt from the requirement to call a meeting of unitholders under section 1457 of the Corporations Law (section 1457). This exemption applies when the managed investment scheme is not required to be registered under section 601ED of the Law. This exemption is outlined in the Schedule of the legislative instrument, which specifies the conditions under which the exemption applies. The first condition (Schedule item 1) is where the holders of prescribed interests have agreed that section 1453 of the Law will cease to apply to their interests and, one year after commencement, the scheme would not need to be registered under section 601ED if Division 11 of Part 11.2 of the Law did not apply. The second condition (Schedule item 2) is where all holders of prescribed interests were issued their interests by excluded issue, all holders have agreed in writing that the scheme is not required to be registered, and the management company has notified that there will be no meeting due to these conditions. The third condition (Schedule item 3) is where the scheme has commenced being wound up before one year after commencement, in which case the exemption ceases to apply on 30 June 2000. The Class Order imposes specific obligations on management companies and unitholders to ensure compliance with the exemption provisions. Management companies must lodge a notice with the Australian Securities and Investments Commission (ASIC) if they are exempt from calling a meeting of unitholders under section 1457. This notice must detail the reasons for the exemption, based on the conditions specified in the Schedule. Unitholders must agree in writing that the scheme is not required to be registered and that section 1453 will cease to apply to their interests. If these conditions are met, the management company is exempt from the meeting requirement. Failure to comply with the provisions of this Class Order may have legal consequences. While the legislative instrument itself does not detail specific offences or penalties, breaches of the Corporations Law, including non-compliance with ASIC regulations, can result in civil or criminal penalties. Under the Corporations Act 2001, individuals or companies found in breach of certain provisions may face fines, imprisonment, or both, depending on the nature and severity of the breach. The exact penalties can vary widely based on the specific provision violated and the circumstances of the case.