On 10 February 2022, the Corporate Collective Investment Vehicle Framework and Other Measures Bill 2021 (“CCIV”) passed both houses of parliament to amend the Corporations Act 2001. This new framework will commence from 1 July 2022.
what is a cciv
The long awaited CCIV offers a corporate funds structure which has some familiar features to those seen in foreign fund structures. Below is a table of the comparative features of the CCIV with other investments fund structures in various jurisdictions:
|Jurisdiction||Open/close-ended||Legal structure||Number of directors required||Types of investors||Regulated or non-regulated and name of regulatory authority|
|Australia||Can be both open or close-ended||– Corporate Collective Investment Vehicle
– 1 legal entity with at least one sub-fund
|1 corporate director required||Retail or wholesale investors||Australian Securities and Investments Commission|
|Hong Kong||Open-ended||– Hong Kong Open-ended Fund Company (OFC)
– Protected cell regime with sub-funds within one legal fund. Cross sub-fund investments may be enabled
|At least two directors required||Retail and non-retail||Regulated by the Securities and Futures Commission|
|Singapore||Can be both open or close-ended||– Singapore Variable Capital company
– 1 single legal entity with sub-funds as separate cells (without legal personality)
|At least 3 retail directors and 1 non retail director||Retail and non-retail investors||Monetary Authority of Singapore and Accounting and Corporate Regulatory Authority|
|UK||Open-ended||– Open-ended investment company with variable capital
– Operates as an umbrella fund with the ability to have sub-funds
|1 director||Retail and non-retail investors||Financial Conduct Authority|
|Luxembourg||Can be both open or close-ended and can be a public limited company (SA) or a the limited liability company (société à responsabilité limitée – S.à r.l.), the (commonly used) partnership limited by shares (SCA), the simple partnership with legal personality (société en commandite simple – SCS), the special limited partnership without legal personality (société en commandite spéciale – SCSp), or the cooperative in a form of a public limited company (société coopérative organisée sous forme de société anonyme – SCSA).||– Société d’investissement à Capital Variable established under the SIF law enacted 13 February 2007
– Operates as an umbrella fund with the ability to have segregated sub-funds
|3 directors required||Professional investor, institutional investor or/and other investors who have confirmed in writing that they adhere to the “well-informed” investor status, and who either invest a minimum of EUR 125,000 in the specialised investment fund (”SIF”) or have been assessed by a credit institution, investment firm or management company which certifies the investors’ expertise, experience and knowledge in adequately appraising an investment in the SIF.||Commission de Surveillance du Secteur Financier
|Cayman Islands||Open-ended||Exempted Company – body corporate with separate legal personality. However, can also be registered as an exempted segregated portfolio company with protected cells or portfolios||At least 1 director||Retail or Institutional investors||Cayman Islands Monetary Authority|
A key objective of the new regime is to enable Australia to compete with other jurisdictions to attract foreign investment, in a legal structure that is legally sensible and not disadvantageous.
A CCIV is a new type of company, limited by shares that is used primarily for funds management. A single CCIV can offer multiple products and investment strategies within the same vehicle. The CCIV will be a single legal entity and must have at least one sub-fund. Each sub fund is similar to a unit trust which is used under the existing managed investment scheme regime. Each sub-fund is not a separate legal entity, but the assets and liabilities will be separated from the assets and liabilities of other sub-funds. This has been a traditional concern expressed by foreign investors in relation to the managed investment scheme regime.
A CCIV with a retail client in it, will be a retail CCIV. Otherwise, it will be wholesale. Both retail and wholesale CCIVs must be registered with ASIC, like a OEIC it must have a corporate director and hold an Australian Financial Services Licence (“AFSL”). Both retail and wholesale will have a constitution, but only retail CCIVs must have a compliance plan.
An important area of difference from the current registered scheme provisions is the introduction of a third party asset-holder with an obligation to supervise the operator of the CCIV. This harks back to the pre-1998 environment in Australia where the responsibilities between manager and trustee were segregated, and secondly, this does present an attractive opportunity for custodians and depositary companies to consider dialling-up their Australian operations. Similarly to UK OIECs, retail CCIVs are required to appoint a depositary. For UK OEICs, the appointed depositary is recognised by the FCA, and holds legal title to an OEIC’s investments and is responsible for safe custody of investments.
The general tax objective of the CCIV framework is that members align with the existing tax treatment of attribution managed investment trusts (“AMITs”) and flow-through income. The ATO states that where a CCIV sub-fund trust meets the AMIT eligibility criteria it will be taxed as an AMIT under the attribution flow-through tax regime. If the CCIV fails to meet the AMIT criteria, it will be taxed in accordance with general trust provisions. Similarly, investors in CCIVs will generally be taxed as if they had invested directly in the underlying assets. The CCIV will be treated for tax purposes as if it were a different tax entity and will have flowthrough tax treatment.
Development work on CCIVs has been ongoing for some time in Australia. Discussions around them were raised in the 2009 Johnson report (entitled Australia as a Financial Centre) and then repeated in a 2016 FSC report (Australia as a Financial Centre: 7 Years On). The first draft of legislation for CCIVs took place in 2017 and had multiple rounds of public consultation, draft legislation and industry feedback.
Acting CEO of the Financial Services Council, Blake Briggs has stated that the CCIV opens up new export opportunities and that it also increases legal certainty, efficiency and reduces costs. He notes that Australia has “one of the largest funds industries in the world, but regulatory settings have discouraged us from using this strong base to export our expertise to the rest of the world”.
ready at last?
It is exciting for the local industry to have access to the new regime, and it is clear that a number of factors which have made the Australian registered scheme regime unattractive to foreign investors have been addressed. However, the take-up of CCIVs by local issuers will depend on their ability to rationalise their products and the regime achieving a reasonable outcome in relation to withholding tax treatment compared to the alternative treatments offered elsewhere. Further, the success of the regime will also depend on whether the Australian industry and regulators are able to compete with their offshore competitors like the UK in terms of price and efficiency.
We will be watching these developments closely.
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