ASIC Class Order [CO 98/60]

Overview

The Australian Securities and Investments Commission (ASIC) Corporations Law Paragraph 601QA(1)(b) Declaration, enacted in 1998, addresses the need for standardised procedures when varying or cancelling rights of members or interests within a scheme. This legislative instrument was introduced by the Australian Securities and Investments Commission to ensure that any changes to the rights of class members or interests under a scheme are executed in a consistent and transparent manner. The policy objective is to protect the interests of scheme members and maintain the integrity of the scheme's governance structure by adhering to any pre-established procedures outlined in the scheme's constitution. The declaration applies to all responsible entities, reinforcing the importance of compliance with specified procedures when altering the rights of members or interests.

Scope and Application

The Australian Securities and Investments Commission Corporations Law, F2008B00019, specifically pertains to the regulation of responsible entities within the scope of Chapter 5C of the Corporations Law. This legislative instrument applies to responsible entities, which are entities that manage certain types of schemes such as unit trusts, public companies, and other collective investment vehicles. The application of this legislation ensures that any alteration or cancellation of rights pertaining to a class of members or interests under these schemes must adhere to any prescribed procedures outlined in the scheme's constitution. This requirement is designed to protect the interests of members and maintain transparency and fairness in the management of these entities. The geographic reach of this legislation is national, as it applies across Australia under the overarching framework of the Corporations Law. There are no specific exclusions, exemptions, or thresholds mentioned within this declaration, but the application can be further defined or extended through subordinate instruments that may be issued by the Australian Securities and Investments Commission.

Key Provisions

Pursuant to the legislative instrument F2008B00019, the Australian Securities and Investments Commission (ASIC) has declared that Chapter 5C of the Corporations Law applies to each responsible entity, as per paragraph 601QA(1)(b). Specifically, the declaration mandates that if a scheme's constitution includes a procedure for altering or cancelling the rights of a class of members or interests, these rights can only be modified or cancelled via a resolution under paragraph (a) if the prescribed procedure is strictly followed (subsection 601GC(1)). This ensures that any changes to member rights are conducted in accordance with the established constitutional guidelines. The Act imposes obligations on responsible entities to ensure that any resolutions aimed at varying or cancelling member rights adhere to the specified constitutional procedures. This requirement ensures that responsible entities act in compliance with the scheme's constitution, thereby protecting the interests of the members. It also mandates that responsible entities must verify that any resolutions passed are in line with the constitutional stipulations, which may involve consulting legal counsel or conducting thorough due diligence. Failure to comply with the Act’s provisions can result in significant legal consequences. Responsible entities found to be in breach of the Act may face civil penalties for non-compliance. According to the Corporations Law, such penalties can be substantial and may include fines that reflect the severity of the breach. Additionally, entities may also face legal actions from affected members or interests, which can lead to further financial and reputational damage. The Act thus serves to safeguard the integrity of the schemes by ensuring that member rights are protected and that any changes are made in accordance with the law.