ASIC Corporations (Changing Scheme and Retail CCIV Constitutions) Instrument 2019/700

This ASIC legislative instrument inserts targeted, operative subsections into two places in the Corporations Act 2001 to alter how a scheme or a retail corporate collective investment vehicle (retail CCIV) can have its constitution changed. Mechanically, the instrument:

• Declares its name and authority (see s 1 and s 3). It is made under subsections 601QA(1) and 1243(2) of the Corporations Act 2001 (the Act) (s 3). The instrument defines only one term, that Act means the Corporations Act 2001 (s 4).
• Modifies the operation of Chapter 5C for registered schemes by inserting new subsections after subsection (1) of section 601GC of the Act. Those additions appear in section 5 of the instrument and are reproduced as subsections (1B), (1C), (1D) and (1E) in the text that the instrument directs be read into s 601GC (s 5).
• Modifies the operation of Part 8B.3 for retail CCIVs by inserting new subsections after subsection (2) of section 1223D of the Act. Those additions appear in section 6 of the instrument and are reproduced as subsections (2A), (2B), (2C) and (2D) in the text that the instrument directs be read into s 1223D (s 6).

Operationally, the inserted subsections do three categories of work.

First, they confirm that if a constitution itself prescribes a particular procedure for varying or cancelling rights of a class of members or interests, that internal procedure must be complied with before a resolution under the relevant Act provision can vary those rights (see s 5(1B) for registered schemes and s 6(2A) for retail CCIVs). This preserves any contractually specified class-rights process in the constitution.

Second, they create a specific carve-out to permit the responsible entity (for a registered scheme) or the corporate director (for a retail CCIV) to modify the constitution to ensure it is consistent with the Passport Rules for the relevant jurisdiction and to specify withdrawal rights consistent with Division 7.1 of Part 7 of the Passport Rules. Those changes may be made before the scheme or sub-fund attains the status of an Australian passport fund but will only have operative effect while the Passport Rules apply in relation to the fund (see s 5(1C) for schemes and s 6(2B) for retail CCIVs).

Third, they create a discrete pathway allowing the responsible entity or corporate director to modify, or repeal and replace, the constitution without calling a members meeting where one of a small set of conditions exists at the time of the intended change. For registered schemes the conditions are: a meeting cannot be held because the quorum requirement (either subsection 252R(2) or the constitution) cannot be satisfied because the scheme has an insufficient number of members; every member is not entitled to vote because of section 253E; or all interests were issued in situations that did not require a product disclosure statement or disclosure under certain disclosure provisions (s 5(1D)-(1E)). For retail CCIVs the instrument sets similar scenarios (s 6(2C)-(2D)), with a streamlined disclosure condition limited to shares issued without requiring a product disclosure statement.

In each “other scenarios” case the instrument conditions the power to make unilateral constitutional changes on the responsible entity or corporate director providing each member and specified auditors with all information that it reasonably expects to be material to members’ decisions, and then obtaining written consent from every member (s 5(1E) and s 6(2D)). The instrument contains no novel penalty or enforcement clauses; it operates by varying how the Act’s existing provisions are applied to schemes and retail CCIVs (s 3; see also the inserted subsections in ss 5 and 6).

The instrument commenced in two stages: the primary instrument (2019/700) commenced 13 September 2019 and a later amending instrument (2022/0940) commenced 15 November 2022 (Endnote 1). The 2022 amendment notably added the retail CCIV material now in section 6 (Endnote 2).

The instrument’s operative thrust turns on a few technical but consequential concepts as they are used in the instrument text.

• Constitution-prescribed class-rights procedure. The instrument recognises that a scheme’s or retail CCIV’s constitution may itself set out a specific procedure for varying or cancelling rights attached to a class of members or interests. Where the constitution contains such a procedure, the inserted subsections require that the constitution’s own procedure be complied with before a resolution that would otherwise vary those class rights can take effect (registered schemes: s 5(1B); retail CCIVs: s 6(2A)). The instrument therefore elevates the internal procedural terms of a constitution into a gating rule for statutory variation by resolution.

• Passport Rules and Australian passport funds. Both s 5(1C) and s 6(2B) permit an entity to modify constitutions to ensure consistency with section 4 of the Passport Rules for the jurisdiction and to specify a right of withdrawal and related processes consistent with Division 7.1 of Part 7 of those Rules. The instrument treats the Passport Rules as an external regulatory standard with which constitutions may be aligned as a pre-emptive step. The text also permits those modifications to be made before a scheme or sub-fund has passport status, but makes those modifications operative only while the Passport Rules for the jurisdiction apply to the fund (s 5(1C) and s 6(2B)). The instrument therefore distinguishes between the timing of the corporate act of modification and the temporal scope of its operative effect.

• Other scenarios (unavailability of member meeting). The instrument identifies discrete factual circumstances in which it is permissible for the responsible entity or corporate director to modify or replace the constitution without a members’ meeting: (a) meeting cannot be held because the quorum requirement in either subsection 252R(2) or the constitution cannot be satisfied owing to an insufficient number of members; (b) every member is not entitled to vote because of section 253E; (c) for registered schemes, all interests were issued in particular non-disclosure situations (no PDS and no Part 6D.2 or old Division 2 of Part 7.12 disclosure); and for retail CCIVs, all shares were issued in situations that did not require a PDS (s 5(1D) and s 6(2C)). The instrument adds these as objective factual gates applicable at the time of the proposed change.

• Information and unanimous written consent. The power granted in the “other scenarios” is conditional. Before making the modification or replacement the responsible entity or corporate director must provide each member and the scheme’s auditors (and the auditor of the compliance plan) with all information the entity “reasonably expects to be material to the decision of a member” and then obtain the written consent of every member (s 5(1E)(a)-(b); s 6(2D)(a)-(b)). The instrument therefore imposes a two-step precondition: disclosure of material information as reasonably anticipated by the decision‑maker, and unanimity in written consents from members.

The instrument identifies specific actor roles and stakeholders who acquire or face obligations or choices as a direct result of its text.

• Decision-makers: responsible entities of registered schemes and corporate directors of retail CCIVs. These are the entities empowered to modify constitutions under the inserted subsections. For registered schemes the responsible entity is referenced repeatedly (s 5(1C), s 5(1D)-(1E)). For retail CCIVs the corporate director occupies the parallel role (s 6(2B), s 6(2C)-(2D)).

• Members: every member of the scheme or retail CCIV. Members are recipients of material information the decision-maker must provide in the “other scenarios”, and they are required to give written consent for the modification or replacement to be effective under that pathway (s 5(1E)(a)-(b); s 6(2D)(a)-(b)). The instrument therefore makes members the effective gatekeepers when the “other scenarios” route is used, because unanimity is required.

• Auditors and compliance-plan auditors: for registered schemes the responsible entity must provide the auditor of the scheme and the auditor of the scheme’s compliance plan with the material information it reasonably expects to be material (s 5(1E)(a)). For retail CCIVs the corporate director must provide the auditor of the retail CCIV and the auditor of the retail CCIV’s compliance plan (s 6(2D)(a)). The instrument thus engages audit and compliance-monitoring functions as recipients of the pre‑modification disclosures.

• Holders of class rights and classes of interests. If a constitution sets out a procedure for varying or cancelling rights of a class of members or class of interests, those class rights cannot be varied by a resolution under paragraph (1)(a) of s 601GC (for schemes) or under the equivalent paragraph of s 1223D (for CCIVs) unless the constitution’s own procedure is complied with (s 5(1B); s 6(2A)). The instrument therefore protects pre-existing class-specific procedural arrangements.

• Entities or persons involved in passporting and withdrawal processes. The instrument expressly targets constitution content that must be aligned with the Passport Rules for the jurisdiction, and it requires constitutions to specify rights of withdrawal and processes consistent with Division 7.1 of Part 7 of the Passport Rules (s 5(1C); s 6(2B)). Those working on cross-jurisdiction fund passporting or withdrawal processing will be directly affected.

• Schemes and retail CCIVs that have issued interests or shares in situations where no product disclosure statement (PDS) was required, or where particular disclosure regimes did not apply. The instrument makes these issuance circumstances a condition that can trigger the “other scenarios” pathway, so prior issuers may find constitutional modification more accessible under the instrument’s text (s 5(1D)(c); s 6(2C)(c)).

The instrument creates no standalone statutory rights beyond those embedded in the modifications it makes to the Act, but it does create, clarify or condition a series of duties and procedural rights. The principal duties and rights are:

• Duty to comply with constitutionally prescribed class-rights procedures. Where a constitution sets out a procedure for varying or cancelling rights of a class of members or of a class of interests, those rights may only be varied or cancelled by a resolution under the relevant Act provision if the constitution’s procedure is complied with (registered schemes: s 5(1B); retail CCIVs: s 6(2A)). This imposes a duty on any entity seeking to vary class rights to follow the constitutionally specified pathway first.

• Conditional power to modify constitutions for Passport Rules compatibility. The responsible entity (schemes) or corporate director (retail CCIVs) may modify the constitution to the extent they reasonably consider necessary to ensure the constitution is consistent with section 4 of the Passport Rules for the jurisdiction and to specify a right of withdrawal and processes consistent with Division 7.1 of Part 7 of those Rules (s 5(1C) and s 6(2B)). The duty is framed as a constrained discretion: the decision-maker must act within the bounds of what it reasonably considers necessary.

• Temporal limitation on operative effect. Modifications made under the Passport Rules pathway may be made before the scheme or sub-fund gains Australian passport fund status, but they only have operative effect while the Passport Rules for the jurisdiction apply in relation to the fund (s 5(1C); s 6(2B)). This creates a duty on the responsible entity or corporate director to track the applicability of Passport Rules to ensure the constitution’s operative clauses are not treated as perpetually in force.

• Power to modify or replace constitution in specified “other scenarios”. The responsible entity or corporate director may modify, or repeal and replace, the constitution if at the time of modification one of the enumerated circumstances exists: inability to convene a meeting because of quorum incapacity under s 252R(2) or the constitution due to insufficient members; every member not being entitled to vote under s 253E; or all interests/shares were issued without PDS or without specific disclosure obligations (s 5(1D); s 6(2C)). This grants a targeted procedural right to act without a members’ meeting in defined factual situations.

The instrument contains no express penalty provisions, criminal offences or administrative pecuniary penalties within its own text. It operates by varying the application of provisions of the Corporations Act 2001; consequently, enforcement mechanisms, liability regimes and penalties relevant to any breach remain those provided for in the Act and ancillary regulatory instruments. The text of the instrument itself does not create novel enforcement processes.

What this means in practice based on the instrument’s text:

• No new penalty clauses. The inserted subsections (s 5(1B)-(1E) and s 6(2A)-(2D)) impose procedural conditions but they do not specify penalties, fines or infringement notices for failure to meet those conditions. The instrument’s power is exercised under statutory authority (s 3) to vary how certain Act provisions apply; the instrument does not purport to add enforcement sanctions.

• Enforcement by reference to the Act. Any compliance failure that also constitutes a breach of the Act’s provisions into which these subsections are inserted (for example, procedural or fiduciary duty obligations of a responsible entity or corporate director under the Act) would be subject to the Act’s existing enforcement regimes. The instrument itself is silent on which specific enforcement pathway would be used, but it is made under the Act and therefore sits within the Act’s regulatory ecosystem (s 3). Users should therefore look to the Corporations Act and ASIC enforcement practice for remedies and sanctions in the event of non‑compliance.

• Evidentiary and interpretive exposure. The instrument’s use of reasonableness standards,“reasonably considers necessary” in the Passport Rules pathway and “reasonably expects to be material” in the disclosure requirement,creates potential grounds for contested interpretation. While the instrument imposes no enforcement mechanism, disputes over whether the decision-maker satisfied those reasonableness tests could give rise to civil claims or regulatory action under existing Act provisions if the underlying conduct also breaches duties in the Act. The instrument itself does not specify that outcome; it merely sets the textual standard (s 5(1C); s 5(1E)(a); s 6(2B); s 6(2D)(a)).

• Role of auditors. The requirement to provide the auditors with the information the decision-maker reasonably expects to be material gives auditors contemporaneous notice of the contemplated change. If auditors identify material non‑disclosure or other concerns, their reactions would be governed by their statutory and professional obligations, not by the instrument. The instrument does not specify an enforcement role for auditors beyond their status as recipients of information (s 5(1E)(a); s 6(2D)(a)).

The instrument is explicitly designed to interact with and modify the application of specified provisions of the Corporations Act and with external regulatory materials identified in the instrument text. Key interactions set out in the instrument are as follows.

• Modifies Chapter 5C and Part 8B.3 of the Corporations Act. The instrument directs that Chapter 5C applies as if section 601GC were modified by inserting specified subsections (s 5). Similarly, Part 8B.3 applies in relation to a retail CCIV as if section 1223D were modified by inserting specified subsections (s 6). The instrument therefore directly changes how those parts of the Act operate in relation to constitution changes.

• Cross-references to quorum and voting entitlement provisions. The instrument’s “other scenarios” pathway relies on existing Act provisions about meetings and voting: specifically subsection 252R(2) for quorum requirements and section 253E for voting entitlement (s 5(1D)(a)-(b)). For retail CCIVs the instrument includes notes confirming that s 252R and s 253E apply to CCIVs subject to statutory modifications elsewhere in Part 8B.3 (s 6(2C) notes). Those cross-references mean the instrument’s effect is conditional on the operation of these meeting and voting provisions in the Act.

• Interaction with disclosure regimes. The instrument refers to product disclosure statements and disclosure obligations under Part 6D.2 and Division 2 of Part 7.12 of the old Corporations Law. For registered schemes, one of the “other scenarios” is that all interests were issued in situations that did not require a PDS and did not need disclosure under Part 6D.2 or Division 2 of Part 7.12 of the old Corporations Law (s 5(1D)(c)(i)-(ii)). For retail CCIVs the disclosure-related scenario is framed as all shares being issued without requiring a PDS (s 6(2C)(c)). The instrument therefore interacts with the Act’s disclosure architecture, and the factual availability of the “other scenarios” route depends on historical disclosure decisions or exemptions.

• Passport Rules and Division 7.1 of Part 7. The instrument requires constitution modifications, when taken under the Passport Rules pathway, to be consistent with section 4 of the Passport Rules for the jurisdiction and to specify withdrawal rights and provisions consistent with Division 7.1 of Part 7 of those Rules (s 5(1C); s 6(2B)). The instrument therefore imports normative content from the Passport Rules into the constitution-modification process. The instrument does not itself restate the Passport Rules; it prescribes conformity with them.

The instrument includes a concise amendment history documented in the endnotes. The key chronological facts in the instrument are:

• Original registration and commencement. ASIC Corporations (Changing Scheme and Retail CCIV Constitutions) Instrument 2019/700 was registered on the Federal Register of Legislative Instruments on 12 September 2019 and commenced on 13 September 2019 (Endnote 1).

• Subsequent amendment. A later instrument, 2022/0940, was registered on 14 November 2022 and commenced on 15 November 2022. The compilation supplied is the version in force on 15 November 2022 and includes amendments up to that date (Endnote 1).

• Specific provisions amended or added by the 2022 instrument. Endnote 2 records the changes by provision:

  • Section 1 (the name provision) was amended by 2022/0940.
  • Section 2 was repealed (reference to s 48D of the Legislation Act is shown as rep., although the compilation does not include a separate section 2).
  • Section 3 (authority) was amended by 2022/0940.
  • Section 5 (the heading) was repealed and substituted by 2022/0940.
  • Section 6 (the retail CCIV material) was added by 2022/0940.

• Compilation note. The instrument document supplied is Compilation No. 1 and was prepared by ASIC. The compilation indicates that it includes any commenced amendment affecting the legislative instrument to the compilation date (Compilation No. 1, in force on 15 November 2022). The endnotes therefore provide the authoritative trail for the instrument’s enactment and the 2022 modification that added retail CCIV-related material (Endnotes 1 and 2).

From the text, the 2022 change was substantive in that it added section 6, which applies the same structural approach to retail CCIVs that section 5 applies to registered schemes. The 2022 amending instrument also adjusted drafting (for example the heading to section 5) and updated the authority clause. The instrument’s endnotes are explicit about which provisions were added or amended, enabling users to track content changes between the original 2019 instrument and the version current as at 15 November 2022.

The instrument text and its endnotes contain no citations to judicial decisions and name no cases. There is no litigation history recorded in the instrument. The document is an administrative legislative instrument that amends the application of provisions of the Corporations Act; it does not itself record court proceedings or determinations.

That said, the instrument creates interpretive points that could give rise to disputes if contested, because it:

• Uses reasonableness standards that are fact sensitive. The Passport Rules pathway requires the decision-maker to act to the extent it “reasonably considers necessary” to ensure consistency (s 5(1C); s 6(2B)), and the disclosure duty is qualified by providing information the decision-maker “reasonably expects to be material” (s 5(1E)(a); s 6(2D)(a)). Those standards create scope for disagreement about what constitutes reasonable necessity or reasonable expectations of materiality, and any such disagreement could form the basis of litigation invoking statutory duties in the Act.

• Requires unanimity. The “every member has given their written consent” requirement (s 5(1E)(b); s 6(2D)(b)) is a high-threshold condition. Disputes over what constitutes valid written consent, or whether all members were properly identified and given information, could produce litigation arising from challenges to the validity of constitutional modifications made under the instrument’s pathways.

• Interacts with other Act provisions and disclosure regimes. The instrument’s reliance on the absence of a PDS, or on non-applicability of particular disclosure provisions, as a factual trigger may prompt factual disputes about whether those disclosure obligations did or did not apply at the time interests were issued (s 5(1D)(c); s 6(2C)(c)). Those factual disputes could involve regulatory enforcement or civil litigation under the Act’s disclosure and misleading-conduct regimes if there are allegations that disclosure obligations were incorrectly assessed.

Although no litigation is referenced in the instrument text, the combination of reasonableness standards, unanimity requirements and cross-references to disclosure and meeting provisions establishes plausible vectors for future disputes about procedural sufficiency, materiality of information provided, and the validity of members’ consents. The instrument itself contains no litigation history and lists no cases.

The instrument is short and tightly drafted, but it creates several practical pitfalls and areas where implementation detail matters. The following are specific “gotchas” grounded in the instrument’s text.

• Unanimity requirement for the “other scenarios” route. The instrumental precondition that “every member” must give written consent (s 5(1E)(b); s 6(2D)(b)) is unanimity, not a simple majority. That is operationally exacting. If even one member fails to provide written consent, the responsible entity or corporate director cannot rely on the “other scenarios” pathway to modify or replace the constitution.

• “Reasonably expects to be material” is subjective. The disclosure duty requires the decision-maker to provide “all the information that the responsible entity reasonably expects to be material to the decision of a member” (s 5(1E)(a); s 6(2D)(a)). That is a subjective, ex ante standard. Recordkeeping and contemporaneous documentation of why particular items were considered material will be essential because the standard is amenable to dispute.

• Auditors must be provided the information. The decision-maker must give the material information not only to members but also to the auditor of the scheme/CCIV and the auditor of the compliance plan (s 5(1E)(a); s 6(2D)(a)). Failure to supply auditors could vitiate the process in practice, even if members consent.

• Passport Rules modifications are limited in scope and temporal effect. The instrument authorises modifications only to the extent reasonably necessary for consistency with section 4 of the Passport Rules and to specify withdrawal rights and processes consistent with Division 7.1 of Part 7 of those Rules (s 5(1C); s 6(2B)). Those modifications can be made before passport status is achieved, but they are operative only while the Passport Rules apply. An entity that treats such modifications as permanently operative may be mistaken; the instrument conditions operative effect on the continuing applicability of the Passport Rules.

• The “other scenarios” factual gates are narrow and technical. For registered schemes, one gate is that all interests were issued in situations that did not require a PDS and did not need disclosure under Part 6D.2 or the old Division 2 of Part 7.12 (s 5(1D)(c)). For retail CCIVs the gate is limited to shares issued without requiring a PDS (s 6(2C)(c)). Entities will need to confirm precisely which disclosure regimes applied to past issuances; historical disclosure choices matter for present constitutional flexibility.

The instrument prescribes a small number of concrete actions and thresholds. Compliance is primarily about process, documentation and unanimity. The following steps are grounded in the instrument’s text and state what must be done to rely on the instrument’s pathways.

1. Identify which subsection you intend to rely on.

   • If you propose to vary class rights that your constitution itself addresses, follow the constitution’s own procedure first. The instrument bars variation by resolution unless the constitution’s procedure is complied with (s 5(1B); s 6(2A)).
   • If the proposed change is to make the constitution consistent with the Passport Rules, confirm that the intended amendment is limited to what you reasonably consider necessary for consistency with section 4 of the Passport Rules and to specify withdrawal rights and processes consistent with Division 7.1 of Part 7 (s 5(1C); s 6(2B)).
   • If a meeting cannot be held because of quorum incapacity under s 252R(2) or the constitution due to too few members, if members are not entitled to vote because of s 253E, or if all interests/shares were issued without PDS (and for registered schemes without disclosure under Part 6D.2 or the old Division 2 of Part 7.12), prepare to use the “other scenarios” route (s 5(1D); s 6(2C)).

2. For Passport Rules modifications.

   • Document your reasoning that the changes are “reasonably necessary” to ensure consistency with section 4 of the Passport Rules and that withdrawal provisions are consistent with Division 7.1 of Part 7. The instrument conditions the power on the decision-maker’s reasonable consideration; contemporaneous records will support that subjective finding (s 5(1C); s 6(2B)).
   • Remember that such modifications may be made before the fund becomes an Australian passport fund, but they only operate while the Passport Rules apply to the fund. Track the application of the Passport Rules so you know when those constitution clauses are operative (s 5(1C); s 6(2B)).

3. For the “other scenarios” pathway.

   • Confirm factual eligibility. Establish that, at the time of the proposed modification or repeal and replacement, one of the enumerated conditions in s 5(1D) or s 6(2C) is satisfied.
   • Prepare the disclosure package. Compile all information that you, as the responsible entity or corporate director, reasonably expect to be material to each member’s decision whether to consent. The duty is to provide “all the information” you reasonably expect to be material; document why you treat items as material (s 5(1E)(a); s 6(2D)(a)).