ASIC Corporations (Amendment) Instrument 2021/116
This is the Explanatory Statement for ASIC Corporations (Amendment) Instrument 2021/116.
The Explanatory Statement is approved by the Australian Securities and Investments Commission (ASIC).
Summary
- The ASIC Corporations (Litigation Funding Schemes) Instrument 2020/787 (Instrument 2020/787) provides exemptions to responsible entities of litigation funding schemes from certain provisions in Chapter 5C and Chapter 7 of the Corporations Act 2001 (Act).
- Instrument 2020/787 was due to sunset on 1 October 2030, in accordance with the default sunsetting arrangements for legislative instruments provided for under the Legislation Act 2003.
- The instrument amends Instrument 2020/787 to provide for a sunset date of 22 August 2025.
Purpose of the instrument
4. The purpose of the instrument is to reduce the term of Instrument 2020/787 to five years, having regard to:
(a) concerns raised by the Senate Standing Committee for the Scrutiny of Delegated Legislation as to the sunset date for Instrument 2020/787; and
(b) potential impact on the matters addressed by Instrument 2020/787 from the recommendations in the recent report of the Parliamentary Joint Committee on Corporations and Financial Services inquiry into litigation funding and the regulation of the class action industry.
Consultation
5. ASIC has consulted with the Department of the Treasury regarding the effect of the instrument. ASIC did not undertake wider consultation with respect to the instrument as it is machinery in nature.
Operation of the instrument
6. The instrument amends Instrument 2020/787 by inserting a new section 2A after section 2. New section 2A of Instrument 2020/787 provides that Instrument 2020/787 will cease to apply on 22 August 2025.
7. The instrument commences on the day after it is registered on the Federal Register of Legislation.
Legislative authority
8. Subsections 601QA(1), 926A(2) and 1020F(1) of the Act provide the legislative authority for Instrument 2020/787.
9. Under subsection 33(3) of the Acts Interpretation Act 1901 (as in force as at 1 January 2005 and as applicable to the relevant powers because of section 5C of the Act), where an Act confers a power to make any instrument, the power is to be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to amend any such instrument.
10. The instrument is a disallowable legislative instrument.
Regulation Impact Statement
11. As the instrument does not alter the content of the relief provided for under Instrument 2020/787, ASIC considers that a Regulation Impact Statement is not required.
Statement of Compatibility with Human Rights
12. The Explanatory Statement for a disallowable legislative instrument must contain a Statement of Compatibility with Human Rights under subsection 9(1) of the Human Rights (Parliamentary Scrutiny) Act 2011. A Statement of Compatibility with Human Rights is in the Attachment.
Attachment
Statement of Compatibility with Human Rights
This Statement of Compatibility with Human Rights is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
ASIC Corporations (Amendment) Instrument 2021/116
Overview
1. The legislative instrument amends the ASIC Corporations (Litigation Funding Schemes) Instrument 2020/787 to provide for a sunset date of 22 August 2025.
Assessment of human rights implications
2. The instrument does not engage any of the applicable rights or freedoms.
Conclusion
3. The instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
The ASIC Corporations (Amendment) Instrument 2021/116 was enacted to amend the ASIC Corporations (Litigation Funding Schemes) Instrument 2020/787, reducing its term from 2030 to 2025. This adjustment responds to concerns raised by the Senate Standing Committee for the Scrutiny of Delegated Legislation and the potential impacts from the Parliamentary Joint Committee on Corporations and Financial Services' report on litigation funding and the regulation of the class action industry. The instrument was approved by the Australian Securities and Investments Commission (ASIC) and is backed by specific legislative authority under the Corporations Act 2001, including sections 601QA, 926A, and 1020F. ASIC consulted with the Department of the Treasury but did not undertake wider consultation due to the instrument's machinery nature. The instrument is a disallowable legislative instrument and does not require a Regulation Impact Statement as it does not alter the relief provided. A Statement of Compatibility with Human Rights is included, affirming the instrument's compatibility with the human rights recognised in relevant international instruments.
Scope and Application
The ASIC Corporations (Amendment) Instrument 2021/116 applies to responsible entities of litigation funding schemes and amends the ASIC Corporations (Litigation Funding Schemes) Instrument 2020/787 to provide a sunset date of 22 August 2025. This instrument is a regulatory measure issued by the Australian Securities and Investments Commission (ASIC) and is designed to address concerns raised by the Senate Standing Committee for the Scrutiny of Delegated Legislation and the potential impact of recommendations from the Parliamentary Joint Committee on Corporations and Financial Services. The instrument operates on a Commonwealth level, impacting entities involved in litigation funding schemes across Australia. It does not introduce new exemptions or alter the existing relief provided but simply reduces the term of the original instrument from its initial sunset date of 1 October 2030 to 22 August 2025. The instrument is a disallowable legislative instrument, and ASIC did not undertake broader consultation on this specific instrument as it is considered machinery in nature.
Key Provisions
The ASIC Corporations (Amendment) Instrument 2021/116 modifies the ASIC Corporations (Litigation Funding Schemes) Instrument 2020/787, primarily by setting a new sunset date of 22 August 2025 (section 6). The original instrument provided exemptions to responsible entities of litigation funding schemes from certain provisions in Chapter 5C and Chapter 7 of the Corporations Act 2001, but it was set to expire on 1 October 2030. The amendment reduces the term of these exemptions to five years, aligning with concerns raised by the Senate Standing Committee for the Scrutiny of Delegated Legislation and considering the impact of recommendations from the Parliamentary Joint Committee on Corporations and Financial Services inquiry into litigation funding.
Responsible entities of litigation funding schemes governed by this instrument are required to adhere to the amended sunset date, ensuring they comply with the relevant provisions of the Corporations Act 2001 after 22 August 2025. This includes adhering to the regulations and standards set forth for managing litigation funding schemes, ensuring proper disclosure and transparency, and maintaining compliance with the Act's requirements for responsible entities. Failure to comply with these obligations could result in regulatory scrutiny and potential enforcement actions by ASIC.
The instrument does not introduce new offences, but it does impose the requirement that responsible entities must cease to rely on the exemptions provided by Instrument 2020/787 after the sunset date. Non-compliance with the sunset date or failure to revert to the standard provisions of the Corporations Act 2001 post-sunset could result in legal consequences. This could include fines, enforcement actions, or other penalties as prescribed under the Corporations Act 2001. The exact penalties for non-compliance would depend on the specific breach and the relevant provisions of the Act, but they could potentially include substantial fines for corporations and other regulatory sanctions.