Earlier in the month, the Australian Securities Exchange Ltd (ASX) released a consultation paper seeking feedback from the public on proposed amendments to the ASX Listing Rules to facilitate the listing of Corporate Collective Investment Vehicle (CCIV) sub-funds.
As the Listing Rules are currently drafted, admission to the official list of the ASX is only available to closed-ended funds and there is no provision for CCIV sub-funds. The proposed amendments to the Listing Rules are a necessary response to the planned commencement of the CCIV regime pursuant to Corporate Collective Investment Vehicle and Other Measures Bill 2021 (the Bill) as passed on 10 February 2022 which is to commence on 1 July 2022.
What is a CCIV sub-fund?
A CCIV is an investment vehicle with a new type of corporate structure for funds management, featuring an umbrella company with at least one sub-fund sitting underneath it.
A CCIV can have many sub-funds sitting underneath it with each sub-fund being allocated assets and liabilities with the requirement to be operated as a separate business to any other sub-fund within that CCIV.
A sub-fund is not a separate legal personality, nor a separate legal entity. This is different from a traditional company as it cannot enter into contracts, cannot directly hold assets or liabilities or cannot sue or be sued in its own name.
It is proposed that the investors will hold shares in the CCIV itself which will be referrable to a specific sub-fund of that CCIV. The CCIV is designed to increase the attractiveness and competitiveness of the Australian financial sector by providing foreign investors with a new and internationally recognised investment vehicle.
The Bill provides that a CCIV will constitute a new form of company limited by shares under the Corporations Act 2001 (Cth) (Corporations Act). This will give investors an alternative to Australia’s existing trust-based funds management market which is unfamiliar to many foreign investors.
Consistent with wholesale managed investment schemes and registered schemes, retail CCIVs are subject to additional regulatory protections, whereas wholesale CCIVs are subject to a more limited regulatory framework.
Corporations Act
On 10 February 2022, the Federal Government of Australia passed the Bill to implement the CCIV regime.
The amendments allow a CCIV to be included in the official list on a prescribed market (such as ASX) if it is a retail facility with only one sub-fund or a sub-fund of a retail CCIV with a single sub-fund.
This legislation achieves through its construction the introduction of Section 1222N which provides:
The following must not be included in the official list of a prescribed financial market operated in this jurisdiction:
(a) a wholesale CCIV;
(b) a retail CCIV that has more than one sub fund;
(c) a sub fund of a wholesale CCIV;
(d) a sub fund of a retail CCIV that has more than one sub fund.
The notes of this section provide that a retail CCIV will be a listed company if its single sub fund is included in such an official list even if the retail CCIV is not so included.
ASX and the Consultation paper
The ASX has advised that stakeholders interested in making a submission on the consultation package to do so by close of business 18 March 2022.
Subject to receipt of necessary regulatory approvals, ASX is aiming to have the amended listing rules in force on (or as soon as practicable after) 1 July 2022.
ASX has confirmed that sub-funds rather than CCIVs themselves will be an appropriate entity for listing. This is counter-intuitive given sub-funds do not have a legal personality, however given the way the CCIVs are structured with assets and liabilities being allocated to particular sub-funds under the Corporations Act, this is analogous to a registered scheme being listed.
Given the Corporations Act restrictions, a CCIV may for now only be listed on the ASX if it is a single sub-fund. It is anticipated that the Federal Government will amend this Section 1222N in the future to allow multiple sub-funds to be listed.
If you wish to discuss the amendments or require any assistance in submitting comments on these amendments, please do not hesitate to contact our Corporate Advisory and Governance team.