EXPLANATORY STATEMENT for
ASIC Corporations (Amendment) Instrument 2016/514
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
The Australian Securities and Investments Commission (ASIC) makes ASIC Corporations (Amendment) Instrument 2016/514 (amending instrument) under subsection 601QA(1) of the Corporations Act 2001 (Act).
Subsection 601QA(1) of the Act provides that ASIC may exempt a person from a provision of Chapter 5C of the Act or declare that Chapter 5C applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration.
Under subsection 33(3) of the Acts Interpretations Act 1901 (as applicable to the relevant powers because of section 5C of the Act), where an Act confers a power to make, grant or issue any instrument (including rules, regulations or by-laws), the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend or vary any such instrument.
- Background
On 5 May 2016, the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (and supporting legislation) created a new tax system for managed investment trusts.
ASIC Corporations (Attribution Managed Investment Trusts) Instrument 2016/489 (the principal instrument) provides relief to, among other things, enable a responsible entity of a registered scheme to change the scheme's constitution without a members' meeting where it reasonably considers the changes to be necessary for or incidental to the scheme being able to be operated as an attribution managed investment trust in a manner permitted by the Income Tax Assessment Act 1997.
A responsible entity may make a change to the scheme's constitution in reliance on relief provided by the principal instrument where it has followed the procedure in notional subsection 601GCA(3) (as inserted by the principal instrument).
2. Purpose of the instrument
The purpose of the amending instrument is to amend the principal instrument to clarify that where all members of a registered scheme acquired their interests in the scheme as wholesale clients, the responsible entity of a registered scheme may rely on either the procedure under notional paragraph 601GCA(3)(a) or 601GCA(3)(b) in order to change the constitution under notional subsection 601GCA(1) (as inserted by the principal instrument).
3. Operation of the instrument
The amending instrument amends section 6 of the principal instrument by omitting 'other' from notional paragraph 601GCA(3)(b).
4. Consultation
ASIC did not undertake a formal consultation process on the amending instrument on the basis that it makes a minor amendment to clarify the intended effect of the principal instrument.
Overview
The ASIC Corporations (Amendment) Instrument 2016/514 was enacted by the Australian Securities and Investments Commission (ASIC) under the Corporations Act 2001. This amending instrument aims to address a gap in the ASIC Corporations (Attribution Managed Investment Trusts) Instrument 2016/489, specifically concerning the procedures available to a responsible entity for altering the constitution of a registered scheme where all members are wholesale clients. The instrument was introduced to clarify the application of these procedures, thereby ensuring that responsible entities can effectively manage their schemes in line with the new tax system for managed investment trusts established by the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016. ASIC determined that a formal consultation process was unnecessary for this minor amendment, which seeks to align the instrument with its intended purpose.
Scope and Application
The ASIC Corporations (Amendment) Instrument 2016/514 applies to responsible entities of registered schemes under the Corporations Act 2001. This instrument is instrumental in providing relief to these entities, enabling them to alter the scheme’s constitution without convening a members’ meeting, provided the changes are deemed necessary for the scheme to operate as an attribution managed investment trust in accordance with the Income Tax Assessment Act 1997. The instrument specifically targets the scenario where all members of a registered scheme acquired their interests as wholesale clients, allowing the responsible entity to choose between two specified procedures to effect constitutional changes. Geographically, this legislation applies nationally, as it pertains to the Corporations Act 2001, which is a Commonwealth statute. The instrument does not explicitly state exclusions, exemptions, or thresholds but operates under the broader framework of the Act, which includes powers for ASIC to exempt or modify provisions as necessary. Additionally, the instrument amends the ASIC Corporations (Attribution Managed Investment Trusts) Instrument 2016/489, clarifying procedural aspects for the responsible entities.
Key Provisions
The ASIC Corporations (Amendment) Instrument 2016/514 (the amending instrument) serves to amend the ASIC Corporations (Attribution Managed Investment Trusts) Instrument 2016/489 (the principal instrument). The main operative sections of this legislation involve the amendment of the principal instrument to clarify the procedures for changing the constitution of a registered scheme when all members acquired their interests as wholesale clients. Specifically, section 6 of the principal instrument is amended to clarify that a responsible entity may rely on either procedure outlined in notional paragraph 601GCA(3)(a) or 601GCA(3)(b) to make changes to the scheme’s constitution (section 6). This amendment omits the word 'other' from notional paragraph 601GCA(3)(b), thus ensuring that the responsible entity has the flexibility to choose the appropriate procedure for making necessary changes.
The amending instrument imposes specific obligations on the parties it governs. Responsible entities of registered schemes are required to ensure that any changes to the scheme’s constitution made under this legislation are in compliance with the procedures specified in the Act. These procedures must be followed diligently to maintain the integrity and legal standing of the scheme. Furthermore, responsible entities must maintain accurate records of any changes made to the scheme’s constitution, including the rationale behind the changes and the procedures followed, to ensure transparency and accountability.
Breach of the provisions outlined in the amending instrument may result in legal consequences. While the specific offences, penalties, or consequences for non-compliance are not detailed within the explanatory statement, it is clear that failure to adhere to the legislative requirements could lead to civil or criminal penalties. Such penalties may include fines, imprisonment, or other sanctions as prescribed by the Corporations Act 2001. The precise penalties would be determined by the courts, taking into account the severity and circumstances of the breach. It is therefore imperative for responsible entities to fully understand and comply with the legislative requirements to avoid any adverse legal repercussions.