{"id":"F2006L03854","name":"Innovation Investment Fund Program Round Three Direction No. 1 of 2006","slug":"innovation-investment-fund-program-round-three-direction-no-1-of-2006","collection":"legislative_instrument","jurisdiction":"commonwealth","status":"in_force","isInForce":true,"actNumber":null,"makingDate":null,"administeringDepartment":null,"currentVersion":{"id":60747,"registerId":"commonwealth-F2006L03854-current","compilationNumber":null,"startDate":"2026-04-02","status":"InForce","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"1","sectionType":"section","heading":"Innovation Investment Fund Program Round Three Direction No. 1 of 2006","content":"Commonwealth of Australia\n\nIndustry Research and Development Act 1986\n\nInnovation Investment Fund Program Round Three\n\nDirection No. 1 of 2006\n\nI, IAN ELGIN MACFARLANE, Minister for Industry, Tourism and Resources, acting under subsection 19(1) and 20(1) of the Industry Research and Development Act 1986, give the following direction to the Industry Research and Development Board (the Board).\n\nDated 8/11/06\n\nIan Macfarlane\n\nMinister for Industry, Tourism and Resources\n\nPART 1—PRELIMINARY\n\nName of directions\n\n1.  These directions are the Innovation Investment Fund Program Round Three, Direction No. 1 of 2006.\n\nCommencement\n\n2. These directions commence on the day on which particulars of the directions are published in the Gazette.\n\nObject of these directions\n\n3. The object of this instrument is to give directions to the Board in relation to:\n\n(a) additional functions of the Board, namely the administration of the IIF program including the provision of competitive merit based assessments and ranking of eligible applications under the IIF program; and\n\n(b) the policies and practices to be followed by the Board in the performance of the function.\n\nInterpretation\n\n4. In this direction:\n\n“applicant” means an entity that makes an eligible application.\n\n“Board” means the Industry Research and Development Board and includes its successors.\n\n“Board may” is permissive and not mandatory.\n\n“Commonwealth program capital” means amounts invested in or provided to a licensed fund by the Commonwealth.\n\n“Department” means the Department of Industry, Tourism and Resources.\n\n“early stage companies” means companies at the seed, start-up and early expansion stages (as defined in the Innovation Investment Fund Round Three guidelines).\n\n“eligible application” means an application for a licence under the IIF program in a form required by the Program Delegate from time to time that is an application that the Program Delegate has determined is eligible for competitive merit based assessment and ranking by the Board in accordance with the Innovation Investment Fund Round Three guidelines.\n\n“equity” includes any form of debt financing that is approved by the Program Delegate which does not compel the borrower or debtor to pay the interest, coupon or other charge in the nature of interest prior to the end of the term of the debt, except in the event of default.\n\n“governing documents” in relation to a licensed fund includes:\n\n(a) the licence with the Commonwealth;\n\n(b) the trust deed, constitution or other documents establishing the fund; and\n\n(c) any documents between the fund, its manager and the investors (or any of them).\n\n“Government sourced capital” means amounts invested in a licensed fund by:\n\n(a) a person or persons funded directly or indirectly by the Commonwealth; or\n\n(b) any person whom the Program Delegate considers is directly or indirectly in receipt of funding from a source or sources which is or are funded directly or indirectly by the Commonwealth to such an extent that, in the opinion of the Program Delegate, it is appropriate to treat any amount invested in or provided to the fund by that person as Government sourced capital,\n\nbut excludes any amount of that funding that, the Program Delegate considers would be inappropriate to treat as Government sourced capital.\n\n“IIF program” means round three of the Commonwealth’s Innovation Investment Fund Program.\n\n“include” “includes” and “including” do not limit the generality of the words which precede them or to which they refer.\n\n“innovation” means the process whereby ideas are transformed, through economic activity, into sustainable, value-creating outcomes. It can generate changes in output such as new products, processes and services.\n\n“Innovation Investment Fund Round Three guidelines” means the guidelines that are made by the Minister to the Department, as in force from time to time for the delivery of the IIF program.\n\n“key personnel” in relation to a fund manager, means those individuals determined by the Program Delegate to be key personnel because of their level of technical and managerial expertise, time commitment and their day to day involvement in the management of the relevant licensed fund. This includes any additions or replacements to that team approved by the Program Delegate.\n\n“licence” means the licence to be granted to a successful applicant in accordance with the Innovation Investment Fund Round Three guidelines.\n\n“licensed fund” means a fund whose manager has been granted a licence in respect of the IIF program.\n\n“Minister” means the Minister for Industry, Tourism and Resources.\n\n“new manager” means an entity:\n\n(a) which has not previously raised a venture capital investment fund in Australia; and\n\n(b) whose management team for a fund in respect of which the entity has applied for a licence under the IIF program must include either or both:\n\n1.  personnel experienced in managing venture capital funds;\n2.  personnel who do not have significant experience in managing venture capital funds but who have other relevant and contemporary management experience, as determined by the Board.\n\n“private capital” means amounts invested in or provided to a licensed fund that are not Commonwealth program capital.\n\n“privately sourced capital” means amounts invested in or provided to a licensed fund that are not, in the opinion of the Program Delegate, Government sourced capital.\n\n“Program Delegate” means an employee of the Department who has been empowered by the Minister, or otherwise duly authorised, to carry out the relevant function in respect of the IIF program.\n\n“R&D activities” means systematic investigation or experimentation activities:\n\n(a) that involve innovation, technology transfer into Australia or technical risk;\n\n(b) that are carried out in Australia; and\n\n(c) the object of which is new knowledge (with or without a specific practical application) or new or improved materials, products, devices, processes or services.\n\nA reference in this direction to “the IIF guidelines, licensing agreement or other contractual documents” or similar words is a reference to any one or more or all of them.\n\nA reference in these directions to the singular includes the plural and vice versa.\n\nPART 2 - CONSIDERATION OF APPLICATIONS TO PARTICIPATE IN PROGRAM\n\nBoard to have regard to certain policy objectives\n\n5. The Board must have regard to the following policy objectives in giving effect to these directions:\n\n(a) to develop fund managers with experience in the early stage venture capital industry;\n\n(b) by addressing capital and management constraints, to encourage the development of new companies which are commercialising research and development;\n\n(c) to establish in the medium term a “revolving” or self funding scheme; and\n\n(d) to develop a self-sustaining Australian early stage, venture capital market.\n\nProcedure\n\n6.\n\n(a) Subject to clause 7, the Board will assess eligible applications and provide a technical merit ranking of those applications to the Program Delegate.\n\n(b) The Board must consider eligible applications as soon as practicable after those applications have been provided to the Board.\n\n(c) The Board may interview any applicant as part of the merit ranking process for applications.\n\n(d) The Board and Program Delegate may request additional information from applicants after the lodgement of an application in order to assist in ranking and assessing eligible applications.\n\nBoard may decline to provide merit ranking\n\n7. The Board may decide to refuse to provide a merit ranking in respect of a particular eligible application if is not satisfied with the level of merit of an eligible application in relation to one or more of the merit criteria.\n\nPART 3 – ASSESSMENT AND MERIT RANKING OF APPLICATIONS\n\nAssessment of applications\n\n8. Subject to clause 7, the Board must assess each eligible application on its merit according to the extent to which the application meets the merit criteria (as set out in clause 9 below).\n\nMerit Criteria\n\n9. The technical merit of eligible applications must, amongst other things, be assessed against the following criteria:\n\n(a) whether the proposed applicant has effective strategies to contribute to the training and developing of Australian based staff in all aspects of making venture capital investments in early stage companies;\n\n(b) the proposed size of the fund and ratio of privately sourced capital to Commonwealth program capital (subject to the Commonwealth program capital not exceeding a 1:1 ratio to the privately sourced capital and the Commonwealth program capital being no more than $20 million);\n\n(c) the level and structure of management fees proposed;\n\n(d) the applicant’s capacity and experience in early stage equity investing giving particular attention to realising returns from investments, sourcing investment opportunities and managing an investment portfolio;\n\n(e) whether the applicant has a balanced management team including relevantly qualified and skilled personnel;\n\n(f) whether the applicant has an understanding of, and experience in, dealing with issues related to Australian and international investments, products, services and markets; and\n\n(g) whether the applicant has a demonstrated willingness to operate within the intent of the IIF program.\n\nOther Matters\n\n10. The Board may in its absolute discretion attribute a preference to applicants who are new managers.\n\n11. The Board may attribute a higher level of relative importance to one or more of the merit criteria. In order to encourage new managers, the Board will not require applicants to demonstrate their ability, to access the required level of privately sourced capital, until after short listing.\n\n12. The Board may have regard to the accessibility of the program for industry around Australia.\n\n13. The Board may have regard to additional criteria and undertake other enquiries in order to consider the suitability of applicants.\n\n14. The Program Delegate may make policies of general application in relation to the administration of the IIF program. When making such policies the Program Delegate will seek the advice of the Board.\n\n15. The Program Delegate may make decisions and guidelines in relation to the administration of the IIF program. When making such decisions and guidelines the Program Delegate may seek the advice of the Board.\n\n16. The Program Delegate will seek the advice of the Board on the following matters:\n\n(a) new investments by a licensed fund beyond the fifth anniversary of the granting of a licence;\n\n(b) changes to the key personnel of a licensed fund;\n\n(c) changes in the structure of a licensed fund;\n\n(d) the application of sanctions against a manager or investor;\n\n(e) the suspension of funding in relation to a licensed fund;\n\n(f) the termination of a licence; and\n\n(g) investee company eligibility.\n\nPART 4 – ASSESSMENT OF PROPOSALS FOR VARIATION TO GOVERNING DOCUMENTS\n\n17. In making a decision on whether to vary any provision of the governing documents, the Program Delegate will seek the advice of the Board and may seek the advice of other third parties.\n\nPART 5 — BOARD TO HAVE ADMINISTRATIVE RESPONSIBILITY FOR THE PROGRAM\n\n18. The Board has administrative responsibility for the IIF program, subject to the restrictions imposed by the Industry Research and Development Act 1986, in particular section 19A, on the functions that may be conferred on the Board.\n\nWhere the Board provides advice to the Program Delegate in accordance with these directions, the Program Delegate must consider the advice of the Board and advise the Minister of any such advice where requested to do so by the Board.\n\n19. The Board may advise the Minister, or the Minister may request advice from the Board, on non-financial administration matters relating to the program, including the extent to which the program is meeting its objectives.\n\n20. The Board may collect and analyse data on the performance of the program, provide advice to the Minister on such performance, and will cooperate with any independent evaluation of the program.","sortOrder":0}],"analysis":{"flash_summary":{"complexity_score":5,"scope_assessment":{"changed":false,"description":"This Direction implements Round Three of the IIF program by assigning assessment and administrative duties to the Board and by setting detailed merit criteria and procedures. It confines itself to implementing, operationalising and specifying selection and governance rules for that program round rather than extending the legal scope of the Industry Research and Development Act. The Direction therefore does not materially broaden the legislative purpose; it provides program-specific operational detail (see cl. 3, cl. 4, Part 3 and cl. 18) while remaining subject to the Act’s limits (including s.19A referenced in cl. 18)."},"complexity_factors":["Approximately 25 defined terms in the interpretation section (cl. 4).","Multiple cross-references to external documents and instruments (Industry Research and Development Act 1986, the IIF Round Three guidelines, licences and governing documents).","Several layers of discretion: phrases such as \"Board may\", \"in its absolute discretion\", and Program Delegate determinations (cl. 6–7, cl. 11, cl. 4 definitions).","Conditional limits and exceptions: private:Commonwealth capital capped at 1:1 and Commonwealth capital capped at $20 million per fund (cl. 9(b)); new managers exception delaying private-capital proof until shortlisting (cl. 10–11).","Dual governance structure with overlapping roles: Board performs merit ranking while Program Delegate retains eligibility and policy-making powers and must consider Board advice (cl. 6, cl. 14–18).","Multiple decision points requiring consultation or advice (changes to key personnel, new investments after year 5, sanctions, licence termination) (cl. 16–17).","Open-ended criteria and additional enquiries permitted (Board may apply additional criteria and undertake other enquiries) (cl. 13).","References to subjective tests (e.g. Program Delegate’s opinion about what counts as Government sourced capital) which create conditional logic (cl. 4 definition of Government sourced capital)."],"plain_english_summary":"**What this instrument does (mechanically)**\n\n- This Direction gives the Industry Research and Development Board (the Board) extra administrative and assessment duties for Round Three of the Commonwealth’s Innovation Investment Fund (IIF) program. In particular, the Board is to run technical, merit-based assessments and produce rankings of licence applications from fund managers (see Parts 1–3, especially cl. 3 and cl. 6).\n\n- It sets out who does what: the Board performs merit assessments and can interview applicants and request more information (cl. 6). The Program Delegate (an authorised Department employee) retains decision-making authority over eligibility, policies and some administrative decisions but must seek or consider the Board’s advice in many areas (cl. 14–16, cl. 18).\n\n- It defines key terms used in the process (for example, “Commonwealth program capital”, “licensed fund”, “Program Delegate”, and “eligible application”) and sets rules on how applications will be judged (cl. 4; Part 3).\n\n\n**Who is affected**\n\n- Applicants: entities applying for licences to manage an IIF Round Three fund (definitions and Parts 2–3).\n- Fund managers and their teams: the Direction sets expectations about management experience, key personnel and training obligations (cl. 4 definitions; cl. 9(a), 9(d)–(e)).\n- Investors: the Direction distinguishes Commonwealth-provided capital (Commonwealth program capital) from privately sourced capital and sets investment ratios and caps (cl. 4; cl. 9(b)).\n- The Department/Program Delegate and the Minister: retain policy and final decision functions and receive the Board’s advice where required (cl. 14–16; cl. 18–19).\n- Early stage companies (indirectly): are potential investee companies targeted by the program (cl. 4 definition of early stage companies; cl. 5(b)).\n\n\n**Key operational rules and limits**\n\n- Merit-based ranking: the Board must assess eligible applications on the merit criteria listed (Part 3, cl. 8–9).\n\n- Merit criteria include: training and development plans for Australian staff, fund size and the ratio of private to Commonwealth capital (Commonwealth capital cannot exceed a 1:1 ratio to private capital and must be no more than $20 million), management fees, investing experience and team balance, and demonstrated willingness to operate within the program (cl. 9(a)–(g)).\n\n- New managers: the Board may preference applicants who have not previously raised an Australian VC fund (cl. 10). To encourage new managers, applicants are not required to show they can raise the full private capital until after shortlisting (cl. 11).\n\n- Discretion and refusals: the Board may refuse to provide a merit ranking if an application lacks sufficient merit (cl. 7). The Board may give differing weight to merit criteria and use additional criteria as needed (cl. 11–13).\n\n- Program Delegate powers: the Program Delegate can make program-wide policies and guidelines, consult the Board, and decide on eligibility and administration (cl. 14–16). The Program Delegate also assesses whether particular investments or investors count as Government-sourced capital (cl. 4 definition of Government sourced capital).\n\n- Governance changes and sanctions: the Program Delegate will seek Board advice before approving variations to fund governing documents, changes to key personnel, suspension of funding, licence termination, sanctions and other significant decisions (cl. 16; cl. 17).\n\n- Administration and reporting: the Board holds administrative responsibility for the program subject to legislative limits, can advise the Minister on non-financial matters, and will collect program performance data and assist with independent evaluations (cl. 18–20).\n\n\n**Why this matters — incentives, costs, trade-offs and implementation mechanics**\n\n- Who pays: the Commonwealth supplies program capital (subject to the 1:1 private:Commonwealth cap and a $20 million ceiling per licensed fund) and taxpayers bear the direct cost of that capital and program administration if licences are granted (cl. 9(b); cl. 4 definitions).\n\n- Who decides and how: final administrative authority rests with the Program Delegate and Minister, but the Board performs the technical merit ranking and provides advice that the Program Delegate must consider. That dual structure splits technical evaluation (Board) from administrative/policy decisions (Program Delegate/Minister) (cl. 6; cl. 14–16; cl. 18).\n\n- Incentives created: the selection criteria encourage fund managers to (a) train Australian-based staff in venture investing (cl. 9(a)), (b) assemble balanced management teams and demonstrate investing experience (cl. 9(d)–(e)), and (c) raise matching private capital (cl. 9(b)). The instrument also deliberately encourages the entry of new managers by allowing preference and relaxing private-capital proof until shortlisting (cl. 10–11).\n\n- Trade-offs and opportunity costs: public program capital substitutes for private funding and commits Commonwealth resources to particular funds rather than alternative uses. The 1:1 cap and $20 million ceiling limit the per-fund subsidy but still direct public capital toward selected managers and portfolios (cl. 9(b)).\n\n- Compliance and administrative burdens: applicants must prepare applications in the form required by the Program Delegate, may be interviewed, and must provide additional information on request (cl. 4; cl. 6). Licensed funds face ongoing administrative oversight — changes to key personnel or fund structure require advice/approval processes (cl. 16; cl. 17).\n\n- Discretion and implementation risk: several clauses give the Board and Program Delegate broad discretion (for example, weighting of merit criteria, determining Government-sourced capital, and whether to rank an application) (cl. 7; cl. 11; cl. 4 definition of Government sourced capital). That discretion requires transparent procedures to limit unpredictability and reduces the degree to which outcomes are solely rule-based.\n\n- Concentrated benefits and diffuse costs: benefits (capital, licences) will flow to selected fund managers and their investors; costs (program capital and administrative overhead) are borne by the Commonwealth/taxpayers. The instrument’s preference for new managers concentrates a potential advantage in specific entrants (cl. 10–11).\n\n\n**What changes mechanically from ordinary grant schemes**\n\n- This Direction sets a formal, merit-ranking role for the Board rather than leaving all selection to the Departmental delegate. It also embeds program-specific criteria (including explicit public:private capital ratios and a per-fund cap) and a stated emphasis on manager training and development (cl. 3; cl. 9).\n\n\n**Where to look in the text for specifics**\n\n- Definitions and scope: cl. 4.\n- Policy objectives the Board must have regard to: cl. 5.\n- Assessment procedure and Board powers: cl. 6–7.\n- Merit criteria: cl. 9–13.\n- Program Delegate and Board interactions, and matters requiring advice: cl. 14–17.\n- Administrative responsibility, reporting and evaluation: cl. 18–20.\n\n"},"flash_summary_failed":{"failed":true,"reason":"A positive credit balance is required for all requests, including BYOK, so fallback providers remain available. Add credits at https://vercel.com/d?to=%2F%5Bteam%5D%2F%7E%2Fai%3Fmodal%3Dtop-up to continue.","source":"analysis-cron"},"kimi_summary":{"content_quality":"ok","complexity_score":4,"scope_assessment":{"changed":false,"description":"The legislation remains focused on its original purpose of establishing administrative procedures for Round Three of the IIF Program. The scope covers application assessment, merit criteria, and division of responsibilities between the Board and Program Delegate—all consistent with the stated object in clause 3. There is no significant mission creep or expansion beyond the core function of selecting and overseeing venture capital fund managers under this specific program round."},"complexity_factors":["18 defined terms in the interpretation section (clause 4), including nested definitions like 'Government sourced capital' which itself contains discretionary exclusions","Multiple cross-references to external documents (Innovation Investment Fund Round Three guidelines, licensing agreements, contractual documents) that are not reproduced in the instrument","Conditional logic in merit criteria, particularly clause 9(b) which contains mathematical constraints (1:1 ratio, $20 million cap) and clause 11 which creates a staged assessment process (short-listing before capital demonstration)","Permissive vs mandatory language distinctions explicitly defined ('Board may' is declared permissive in clause 4)","Discretionary powers scattered throughout (Board 'may' decline ranking under clause 7, 'may' attribute preference to new managers under clause 10, 'may' attribute relative importance to criteria under clause 11)","Dual decision-making structure requiring coordination between Board (assessment and ranking) and Program Delegate (final licensing and policy decisions), with advisory obligations in both directions"],"plain_english_summary":"This ministerial direction sets rules for Round Three of the Innovation Investment Fund: it directs the Industry Research and Development Board to run a competitive process to select fund managers who will receive government matching capital (up to $20 million per fund, dollar-for-dollar) to invest in early-stage Australian companies. \n\nIt affects fund managers (with a preference for new managers), early-stage firms seeking capital, the Board that assesses merit, and the Program Delegate who decides licences — aiming to grow a self‑sustaining domestic venture capital market."}},"importantCases":[],"_links":{"self":"/api/acts/innovation-investment-fund-program-round-three-direction-no-1-of-2006","history":"/api/acts/innovation-investment-fund-program-round-three-direction-no-1-of-2006/history","analysis":"/api/acts/innovation-investment-fund-program-round-three-direction-no-1-of-2006/analysis","conflicts":"/api/acts/innovation-investment-fund-program-round-three-direction-no-1-of-2006/conflicts","importantCases":"/api/acts/innovation-investment-fund-program-round-three-direction-no-1-of-2006/important-cases","documents":"/api/acts/innovation-investment-fund-program-round-three-direction-no-1-of-2006/documents"}}