Corporate collective investment vehicles: what are they and how do they compare with managed investment schemes?
A corporate collective investment vehicle (CCIV) is a new type of company, which is limited by shares, that is intended to be a new form of collective investment vehicle in Australia. A CCIV is an umbrella investment vehicle that is comprised of one or more sub-funds (with segregated assets and liabilities referable to each sub-fund), and is operated by its single corporate director.
Unlike a managed investment scheme, which is typically structured as a unit trust and which may or may not require registration with ASIC, a CCIV is a fund that is a company registered with ASIC.
CCIVs are established and governed by special rules under the Corporations Act 2001.
From a tax perspective, the legislative intention is to tax a CCIV on a flow-through basis, like a unit trust, with the general tax treatment of CCIVs and their members being aligned with the existing tax treatment of AMITs (and their members).
The CCIV regime commences on 1 July 2022.
The origin of the CCIV is the November 2009 report of the Australian Financial Centre Forum, Australia as a Financial Centre: Building on our Strengths (also known as the ‘Johnson report’). The Johnson report also recommended the establishment of the Asia Region Funds Passport.
The essential policy rationale for the CCIV regime was to create a corporate funds vehicle (with features found in similar vehicles in Europe, the United Kingdom and Singapore) and with which offshore investors and fund managers would be comfortable, rather than limiting Australian investment funds to managed investment schemes which are typically structured as a trustee-beneficiary relationship governed by a trust deed. It is also intended to be a vehicle that could be ‘passported’ under the Asia Region Funds Passport to participating Asian economies.
The CCIV regime under the Corporations Act 2001 is complex. Set out below are the essential features of a CCIV:
- A CCIV is a company limited by shares. As a company, it comes into existence on registration with ASIC. A CCIV may also issue debentures.
- A CCIV, being a company, is a legal person. A sub-fund is not a legal person.
- A CCIV does not have any officers or employees itself, other than the corporate director (although liquidators, administrators and receivers are also officers of a CCIV).
- A CCIV is directed or operated by a corporate director. A corporate director is a public company, with its own officers and employees.
- A corporate director requires an Australian financial services licence authorising to operate the business and conduct the affairs of the CCIV. A CCIV does not need an AFSL.
- A CCIV must have at least one sub-fund (which must have at least one member). A sub-fund of a CCIV is all or part of the CCIV’s business that is registered by ASIC as a sub-fund of the CCIV. Assets and liabilities must be allocated to single sub-funds (with apportionment of liabilities possible).
- A CCIV can be either a ‘retail CCIV’ or a ‘wholesale CCIV’. The type of CCIV is stated on registration, but can change later.
- A retail CCIV with a single sub-fund, or a sub-fund of a retail CCIV (that has a single sub-fund), may be listed on a financial market.
- A CCIV must have a constitution. The constitution of a retail CCIV must make adequate provision for certain matters.
- A retail CCIV must have a compliance plan.
The role of the corporate director is to operate the business and conduct the affairs of the CCIV. The corporate director must also perform the functions conferred on it by the CCIV’s constitution and the Corporations Act 2001, as well as ensure the CCIV itself complies with its constitution and the Corporations Act 2001.
The responsibilities of the corporate director are designed to be similar to those of the responsible entity of a registered scheme.
One of the key features, and potential key advantages of a CCIV as a collective investment vehicle, is that the assets and liabilities of a CCIV are allocated to distinct sub-funds of the CCIV. The separate registration with ASIC of each sub-fund of a CCIV, and the clear identification and segregation of the assets and liabilities of each sub-fund of a CCIV, ensures the business of each sub-fund is protected from the business of other sub-funds of the CCIV, enables counterparties and creditors of a CCIV to be able to identify the part of the business of the CCIV with which they have business transactions, including in an insolvency context.
The sub-fund framework allows a CCIV to offer a variety of investment options through multiple sub-funds under a single umbrella CCIV, with the additional benefit of giving investors a protection that the business of the sub-fund in which they hold a share will be quarantined from the business of all other sub-funds of the CCIV. The tax attributes of each sub-fund are also quarantined for the benefit of investors in each sub-fund.
A CCIV might be attractive to fund managers wishing to offer a master trust or platform style investment for investors, with the added benefits described above.
Set out below is a high-level table showing the legal and regulatory similarities and differences between managed investment schemes (both registered and unregistered) and retail and wholesale CCIVs.
| Criterion/feature | Unregistered MIS | Wholesale CCIV | Registered scheme | Retail CCIV |
|---|---|---|---|---|
| Legal personality and structure | ||||
| Legal person? | No | Yes - a company | No | Yes - a company |
| Financial product type | Interest in an MIS (ie a unit) | Share | Interest in an MIS (ie a unit) | Share |
| Sub-funds required? | No | Yes | No | Yes |
| Absolute segregation of assets and liabilities? | No | Yes | No | Yes |
| Master fund/sub-fund structure facilitated | Yes, through sub-trusts | Yes, through cross-investment in sub-funds | Yes, through sub-trusts | Yes, through cross-investment in sub-funds |
| Listing on a financial market possible? | No | No | Yes | Yes |
| Fund operator | ||||
| Operator type? | Trustee | Corporate director | Trustee / Responsible entity | Corporate director |
| Operator structure | Public or proprietary company | Public company | Public company | Public company |
| Role | Administer the trust | Operate the business and conduct the affairs of the CCIV | Administer the trust and statutory RE functions | Operate the business and conduct the affairs of the CCIV |
| Registration with ASIC | ||||
| Fund registration required with ASIC? | No | Yes | Yes | Yes |
| Sub-fund registration required with ASIC? | N/A | Yes | N/A | Yes |
| Constitution requirements | ||||
| Constitution required? | No (but require a trust deed) | Yes | Yes | Yes |
| Prescribed content requirements? | No | No | Yes | Yes |
| Prescribed rules about modification of a constitution? | No | No | Yes | Yes |
| Can ASIC direct the fund operator to modify the constitution? | No | No | No | Yes |
| Legal status of constitution | Trust deed only | Statutory contract | Trust deed plus needs to be legally enforceable | Statutory contract |
| Governance | ||||
| Statutory duties owed by directors of the fund? | No (fund not a legal person) | Yes (the corporate director) | No (fund not a legal person) | Yes (the corporate director) |
| Statutory duties owed by officers and employees of the fund operator? | No | No | Yes | Yes |
| Change of fund operator | ||||
| Voluntary retirement of fund operator possible? | Yes | Yes | Yes | Yes |
| Can members vote to remove the fund operator? | Governed by the trust deed | Yes | Yes | Yes |
| Automatic transfer of rights and obligations? | No | Yes | Yes | Yes |
| Statutory novation of contracts? | No | Yes | Yes | Yes |
| Compliance committee | ||||
| Compliance committee required? | No | No | Yes, if less than half of the RE’s directors are external directors | No, but at least half the directors of the corporate director must be external directors |
| Compliance plan | ||||
| Compliance plan required? | No | No | Yes | Yes |
| Compliance plan auditor required? | No | No | Yes | Yes |
| Disclosure and other consumer protections | ||||
| PDS required for retail clients? | N/A | N/A | Yes | Yes |
| Continuous disclosure applies? | No | No | Yes | Yes |
| FSG required to operate the fund? | No | No | No | No |
| Other financial services consumer protections apply (eg hawking restriction, DDO, cooling off, unsolicited offers regime)? | No | No | Yes | Yes |
| AFSL | ||||
| AFSL required to operate the fund? | Yes, subject to exemptions | Yes | Yes | Yes |
| Share prices | ||||
| Issue price rules? | No | No | Yes | No |
| Redemption price rules? | No | Yes | Yes, under ASIC policy | Yes |
| Distributions/dividends | ||||
| Distribution/dividend subject to solvency test? | No | Yes | No | Yes |
| Redemptions | ||||
| Statutory redemption rules? | No | Yes | Yes | No |
| Redemption subject to solvency test? | No | Yes | No | Yes |
| Member protections and remedies | ||||
| Related party transactions rules apply? | No | No | Yes | Yes |
| Statutory oppression remedy? | No | Yes | No | Yes |
| Statutory derivative action remedy? | No | Yes | No | Yes |
| Rules about varying and cancelling class rights? | No | Yes | No | Yes |
| Rules about share capital reductions and self-acquisition of own shares? | No | Yes | No | Yes |
| Financial assistance rules apply? | No | No | No | No |
| Financial records and financial reports | ||||
| Statutory obligation to keep financial records about the fund? | No | Yes | Yes | Yes |
| Requirement to issue an annual financial report and directors’ report? | No | No | Yes | Yes |
Establishing and operating a CCIV, particularly a retail CCIV, will require compliance with a number of regulatory requirements. ASIC is currently updating its regulatory guidance to cater for the new CCIV regime, and is itself getting ready to accommodate the regime.
We would be pleased to assist fund managers with their queries and structuring options regarding the new CCIV regime.
