Thinking | 14 February 2022
ASX takes steps to enable CCIV sub-fund listings
By James Morvell, Michelle Eastwell, Vanessa Murphy, Chris Wright and Aron Mazur
The Australian Securities Exchange (ASX) has released a Consultation Paper seeking feedback on proposed amendments to the ASX Listing Rules to facilitate the listing of corporate collective investment vehicle (CCIV) sub-funds. The Listing Rule amendments are a necessary response to the commencement of the CCIV regime scheduled for 1 July 2022, as the current Listing Rules do not cater for the listing of the new vehicles.
Anticipating that CCIVs are likely to become the preferred funds management vehicle in Australia (to align fund structures more closely with other jurisdictions), ASX is taking steps to enable the listing of CCIV sub-funds on the official list of the ASX.
Stakeholders are invited to provide written feedback by 18 March 2022, with the aim of allowing CCIV sub-funds to list on the ASX from 1 July 2022. Given our extensive experience with listed and unlisted REITs, Hall & Wilcox is currently considering the Consultation Paper with a view to making submissions to ASX before the deadline.
Introducing CCIVs and sub-funds
In a nutshell, CCIVs are designed to increase the attractiveness and competitiveness of the Australian financial sector by providing foreign investors with a new and internationally recognised investment vehicle.
A CCIV will be a new form of a company limited by shares registered under the Corporations Act 2001 (Cth). It will provide investors with an alternative to Australia’s existing trust-based funds management market, which is unfamiliar to many foreign investors and often perceived as a barrier to entry for new fund managers seeking to operate in Australia.
A CCIV is an umbrella company with at least one (but potentially multiple) sub-funds sitting underneath it. Each sub-fund has its own allocated assets and liabilities and is required to be operated as a separate business to any other sub-fund within the CCIV. A sub-fund does not have a legal personality and is not a separate legal entity, which means it cannot enter into contracts, directly hold assets or liabilities or commence litigation in its own right. Investors will hold shares in the CCIV itself, which will be referable to a specific sub-fund of that CCIV.
The regime allows for both retail and wholesale CCIVs, with retail CCIVs subject to additional regulatory protections, and wholesale CCIVs subject to a more limited regulatory framework (as is currently the case for wholesale managed investment schemes and registered schemes).
We anticipate that Australian fund managers, who find themselves competing for capital with their overseas competitors, will welcome the introduction of listed CCIV sub-funds to create a more level playing field for the inflow of foreign capital.
The law in brief
On 10 February 2022, the Government passed legislation to implement the CCIV regime. That legislation permits a CCIV to be included in the official list of a prescribed market (including ASX) if it is a retail CCIV with only one sub-fund or a sub-fund of a retail CCIV with a single sub-fund.
The new legislation achieves this through the introduction of a new section 1222N of the Corporations Act, which prohibits wholesale CCIVs, sub-funds of wholesale CCIVs and a sub-fund of a retail CCIV with multiple sub-funds from listing, and notes that this does not restrict other CCIVs or sub-funds being listed.
Takeaways from the Consultation Paper
Recognising that the current Listing Rules do not cater for the admission of CCIVs to the ASX, ASX’s Consultation Paper seeks stakeholder feedback on its proposed changes to the Listing Rules to enable the listing of CCIV sub-funds.
ASX has confirmed that sub-funds, rather than retail CCIVs themselves, will be the appropriate entity for listing (despite sub-funds not having a legal personality). This is because of the way assets and liabilities are allocated to particular sub-funds under the Corporations Act, and is analogous to a registered scheme (which similarly does not have its own legal personality) being listed.
Reflecting the Corporations Act restrictions, a CCIV may, for now, only be listed on the ASX if it has a single sub-fund. However, it is expected that the Government will amend section 1222N in the future to allow retail CCIVs with multiple sub-funds to be listed, once the complexities of doing so have been worked through.
The Consultation Paper is open for comment until 18 March 2022, with the ASX aiming to settle its proposed amendments by 1 July 2022 in time for the commencement of the CCIV regime. As a leading firm advising listed and unlisted REITs, Hall & Wilcox intends to make submissions to ASX before the deadline.
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