ASIC Credit (Litigation Funding—Exclusion) Instrument 2020/37

The instrument establishes a small set of legal concepts and operational points that control its scope. The key textual concepts are: the National Credit Code (the "Code"), the ASIC power exercised to make the instrument, the phrase "a provision of credit constituted by", "litigation funding arrangement", and "proof of debt funding arrangement", each used in the operative exclusion at s 5.

Code: Section 4 defines "Code" as the National Credit Code and includes a note identifying the Code’s location in Schedule 1 to the National Consumer Credit Protection Act 2009. The instrument thus operates by reference to a pre‑existing statutory code; it does not purport to amend or recast the Code. The inclusion of the note locates the Code within the broader statutory structure that governs consumer credit regulation, but the instrument itself is limited to adjusting the Code’s application.

ASIC authority: Section 3 records the instrument is made under subsection 6(17) of the National Credit Code. That identifies the statutory power relied upon by ASIC to make an exclusion instrument. The text of the instrument does not reproduce subsection 6(17); therefore the instrument must be read as an exercise of power conferred by that provision. The instrument does not create general rulemaking beyond that power.

Provision of credit constituted by: The exclusion language is phrased narrowly. It excludes "a provision of credit constituted by" the specified arrangements. That phrasing distinguishes a funding arrangement per se from instances in which that arrangement constitutes a "provision of credit" as defined in the Code. The instrument therefore permits a textual and potentially fact sensitive inquiry as to whether a given funding structure in substance amounts to a provision of credit. The instrument excludes only those provisions of credit that are constituted by litigation funding or proof of debt funding arrangements; it leaves open the possibility that other credit provisions , for example, separate loans or ancillary credit facilities unconnected to the litigation funding aspect , remain captured by the Code.

Litigation funding arrangement: The instrument defines this term functionally, by reference to arrangements "for participating in, conducting and funding legal proceedings brought by or on behalf of a person or persons" (s 5(1)(a)). The phrase is broad in subject matter, covering funding for the conduct and financing of legal proceedings and participation in those proceedings. The instrument’s text does not elaborate procedural criteria for qualifying arrangements; it specifies the purpose and scope of the arrangement as the test.

Proof of debt funding arrangement: Subsection 5(1)(b) targets arrangements "for proving claims made by a person or persons under Division 6 of Part 5.6 of the Corporations Act 2001", and explicitly includes "funding of the preparation and lodgment of the proofs". The instrument therefore treats funding directed to the proof of debt process under the Corporations Act distinctly. The inclusion of the specific activity , preparation and lodgment of proofs , removes doubt that such preparatory expenses fall within the exclusion where they constitute a provision of credit by the funding arrangement.

Temporal limit: The exclusion is time‑bound, ceasing at the end of 31 January 2029 (s 5(2)). The instrument therefore creates a temporary regulatory perimeter change rather than a permanent reclassification.

Documentary components: The instrument contains a name clause (s 1) and a definitions clause (s 4) that ties the text to the Code. Endnotes record compilation, amendment and legislative history. The instrument’s structure, with a short, focused Part 2 and a single substantive section of exclusion, indicates its purpose as targeted deregulation of specified financing structures from the Code for a fixed period.

Taken together, these concepts frame an operational test: does a funding arrangement, whose purpose is litigation funding or proof of debt funding as described, constitute a "provision of credit" as contemplated in the Code? If so, and if it falls within the period to 31 January 2029, ASIC’s instrument removes the Code’s application to that provision of credit.

The instrument affects three principal groups directly and several others indirectly, as indicated by the text and its cross‑references. The primary direct subjects are entities that provide or structure funding for legal proceedings or for proof of debt processes; the secondary direct subject is the regulatory regime under the National Credit Code; and the tertiary group is persons who receive funding under such arrangements. The instrument also has indirect relevance to lawyers, insolvency practitioners, corporations seeking to prove claims under the Corporations Act, and any counterparty or creditor whose rights are influenced by funded litigation or proofs.

Funders. Entities that design, offer or provide litigation funding arrangements and proof of debt funding arrangements are directly affected because the instrument changes whether the Code applies to provisions of credit constituted by those arrangements (s 5(1)). For providers who had been treating their financial support as credit subject to the Code, the exclusion may remove obligations that arise under the Code for the period to 31 January 2029. The instrument therefore alters the regulatory compliance calculus for such funders. The text does not delineate types of funders , for example, specialised litigation funders, hedge funds, law practices, or private investors , so any provider whose arrangement constitutes a "provision of credit" and falls within the specified purposes is in scope by wording.

Funded parties. Persons who receive litigation funding or proof of debt funding are affected because the statutory protections and obligations that the Code would otherwise apply to a provision of credit may not be available where the funding constitutes such a provision and is excluded (s 5). The instrument does not adjust consumer protections directly, but it changes the legal context in which consumers or corporates obtain funding for litigation or proof of debt. The text does not identify categories of recipients such as individuals, corporations, or insolvency creditors, but the descriptive phrases "a person or persons" in s 5(1) are broad.

Regulators and advisers. ASIC, by issuing the instrument under its statutory power (s 3), is the deciding regulator. Credit regulators and compliance officers must interpret and implement the exclusion across affected arrangements. Legal advisers, compliance teams and accountants advising funders or funded persons will need to assess whether particular arrangements meet the "constituted by" test. The instrument does not create new licensing regimes; it changes the regulatory landscape that advisers must apply to client arrangements.

Corporations Act stakeholders. Subsection 5(1)(b) explicitly links to Division 6 of Part 5.6 of the Corporations Act 2001. Entities engaged in proving claims under that Division, including creditors in insolvency contexts, are affected insofar as funding arrangements for proofs of debt fall within the exclusion (s 5(1)(b)). Insolvency practitioners, liquidators, and corporate creditors will therefore need to consider how funded proofs of debt are characterised for Code purposes.

Consumers of credit law protections. The instrument alters who may rely on the Code’s protections when their funding is structured as litigation or proof‑of‑debt funding. Because the instrument is an exclusion rather than an affirmative regulatory replacement, the end users of funding may find statutory credit protections temporarily unavailable where the funding is a provision of credit constituted by the listed arrangements.

Other market participants. Opposing parties to funded litigation, insurers, and third‑party service providers may see consequences in negotiation, settlement dynamics and contractual structuring. The instrument does not expressly regulate these downstream relationships, but it changes the incentives and regulatory constraints faced by funded parties and funders, which may affect costs and strategic choices in litigation and insolvency contexts.

Temporal boundary. All of the above is qualified by the sunset at the end of 31 January 2029 (s 5(2)). Entities that enter into multi‑year funding arrangements should take particular note that the exclusion is not permanent and that Code application may resume for similar arrangements after the specified date unless extended or replaced.

The instrument itself does not impose explicit new duties or create affirmative rights beyond the legal effect of an exclusion; it changes the set of statutory duties and rights that apply to certain funding arrangements by excluding specified provisions of credit from the National Credit Code. The operative legal duties and rights therefore must be inferred from what the exclusion removes and from the textual allocation of who decides (ASIC under s 3) and what is excluded (s 5).

Duty to determine whether the exclusion applies. Parties to a funding arrangement bear an immediate practical duty to determine whether the arrangement constitutes "a provision of credit" as contemplated by the Code and, if so, whether it is constituted by a litigation funding arrangement or proof of debt funding arrangement as described in s 5(1). That determination is legal in nature and will affect whether Code obligations apply. The instrument does not prescribe a process for that determination; it follows from the exclusion mechanism that parties, or their advisers, must assess the arrangement’s character.

Removal of Code obligations for excluded provisions. Where an arrangement constitutes a provision of credit and is for the purposes described in s 5(1), the Code will not apply to that provision of credit until 31 January 2029 (s 5(2)). In practical terms, any duties, disclosure obligations, responsible lending requirements, or consumer remedies that flow from the Code are, by operation of the exclusion, not available in respect of the excluded provision of credit. The instrument does not itself list which Code duties are removed; it operates by reference to the Code’s non‑application.

Right to structure arrangements. The exclusion creates a legal space in which funders and funded parties can structure arrangements for litigation funding and proof of debt funding without being subject to the Code in respect of the excluded provision of credit for the duration of the exclusion. That is a right in the sense of a regulatory freedom conferred by non‑application of the Code. The instrument does not condition that right on any registration, licensing or disclosure requirement within this instrument.

Obligation to account for Corporations Act interface. Subsection 5(1)(b) expressly ties the exclusion to claims under Division 6 of Part 5.6 of the Corporations Act 2001, including funding of proof preparation and lodgment. That cross‑reference imposes a duty on parties to consider the interaction with the Corporations Act when characterising proof of debt funding arrangements. The instrument does not alter the operation of the Corporations Act itself; it only identifies certain funding for those proofs as falling within the scope of the exclusion.

Time‑limited nature of the rights and altered duties. The exclusion is expressly temporary (s 5(2)). Parties therefore have a duty to consider timeframe risk: agreements that extend beyond 31 January 2029 may be subject to different regulatory treatment after the sunset date. The instrument does not contain transitional provisions addressing pre‑existing arrangements except by operation of the dated exclusion; parties must plan for the cessation of the exclusion.

Recordkeeping and evidential duties implied by uncertainty. Although the instrument does not prescribe recordkeeping, the operative wording ("constituted by") implies that the substantive terms and documentation of an arrangement will be relevant to assess whether the exclusion applies. Funders and funded persons have a practical duty to generate and retain records and contractual language that evidence the purpose and mechanics of funding, if they wish to rely on the exclusion.

No direct new enforcement duties contained. The instrument does not create new investigatory or enforcement powers for ASIC within its text beyond the instrument being made under ASIC’s statutory authority (s 3). The removal of Code application may change how ASIC or other regulators approach oversight of funders, but those supervisory effects are not stated in the instrument.

In sum, the instrument relocates duties and rights by removing the Code from specified funding arrangements, leaving parties with duties to determine characterisation, manage temporal risk, and document arrangements in case of later scrutiny, while conferring the practical freedom to operate outside the Code for the excluded provisions until the sunset date.

The instrument is an exclusionary regulatory instrument; it does not itself create criminal offences, civil penalties, or administrative sanctions within its text. Its enforcement consequence is indirect: by excluding certain provisions of credit from the National Credit Code, the instrument removes the Code’s substantive regime, including any penalties or enforcement mechanisms that would have applied under the Code to those provisions of credit. The instrument does not replicate or substitute other enforcement powers. Readers should therefore treat the enforcement impact as a shifted perimeter rather than the creation of new punitive measures.

No penalties in the instrument. Section 5 sets out what is excluded and the temporal limit. There is no section in the instrument that prescribes penalties for non‑compliance with the instrument itself because the primary legal effect is the absence of Code application rather than the imposition of obligations by the instrument. Consequently, there are no instrument‑specific penalty provisions to enforce.

Enforcement by reference to the Code and other statutes. Because the instrument removes the Code’s application to the specified provisions of credit, ASIC and other regulators cannot enforce Code provisions against excluded arrangements during the exclusion period. However, the instrument does not alter enforcement or remedy provisions that operate outside the Code. For example, the Corporations Act reference in s 5(1)(b) remains operative; the instrument does not affect the enforcement mechanisms in that Act. The instrument therefore shifts the domain of potential enforcement from the credit law regime toward other relevant regulatory or common law remedies, but the instrument text itself does not define which of those other enforcement regimes will be used.

Regulatory discretion and legal disputes. The exclusion creates a potential locus for disputes about characterisation: whether a given arrangement "constitutes" a provision of credit as contemplated by the Code. Such disputes would be resolved through the ordinary processes of legal interpretation, potentially involving litigation or regulatory decisions. The instrument does not express a formal dispute resolution mechanism; it allocates the interpretative burden to parties, advisers and the courts or tribunals that may be asked to decide.

ASIC’s power to exclude. Section 3 records the instrument is made under subsection 6(17) of the Code. The instrument itself therefore reflects an exercise of ASIC’s statutory power to exclude. Any legal challenge to ASIC’s exercise of that power would need to engage the enabling provision (subsection 6(17)), which is not reproduced in the instrument. The instrument does not specify internal ASIC enforcement or compliance approaches that would follow from the exclusion.

Temporal enforcement window. The instrument’s sunset at 31 January 2029 (s 5(2)) also affects enforcement. After that date, the Code may again apply to arrangements that were previously excluded, which will raise transitional enforcement questions for ongoing arrangements entered during the exclusion period. The instrument supplies no transitional enforcement rules; arrangers and regulators will need to consider how enforcements and remedies apply to arrangements that carry on beyond the exclusion.

In short, enforcement under this instrument is largely negative: it removes the Code as an enforcement ground for specified funding‑related provisions of credit for a defined period. The instrument does not itself impose penalties or outline enforcement procedures; it reallocates the regulatory landscape and leaves parties, advisers and courts to deal with characterisation disputes and the consequences of the exclusion.

The instrument operates by reference to the National Credit Code and the Corporations Act and therefore interacts with those statutes by changing which funding arrangements the Code governs and by recognising particular activities under the Corporations Act. The instrument’s text explicitly ties the exclusion to the Code and to Division 6 of Part 5.6 of the Corporations Act 2001, producing a cross‑statutory effect that practitioners must account for.

Relationship to the National Credit Code. Section 4 defines "Code" as the National Credit Code and the note confirms the Code is in Schedule 1 to the National Consumer Credit Protection Act 2009. Section 5 excludes from the application of the Code "a provision of credit constituted by" the specified arrangements. That exclusion is a direct interaction: the instrument alters the regulatory perimeter of the Code by rendering certain provisions of credit outside its reach for the specified period. The instrument does not amend the Code; it operates via ASIC's statutory exclusion power. Consequently, obligations, licensing requirements, disclosure rules and statutory protections that are located within the Code will not be available in respect of an excluded provision of credit. The instrument therefore creates an operational gap between credit‑law governance and funding activities in the litigation and proof‑of‑debt space.

Interaction with the Corporations Act. Subsection 5(1)(b) explicitly refers to "Division 6 of Part 5.6 of the Corporations Act 2001" and states that proof of debt funding arrangements include funding of the preparation and lodgment of proofs. That shows the instrument recognises that funding directed to the specific statutory process for proving claims in insolvency contexts has been considered. The instrument does not modify the Corporations Act; it simply identifies that certain funding activities tied to that Act, when constituted as a provision of credit, are excluded from the Code. Therefore, rights and duties that arise under the Corporations Act (including substantive insolvency rules, priority, and statutory processes for proofs) remain in place and are unaffected by this instrument; the instrument only removes duplicate or overlapping Code regulation in respect of the funding element where characterised as credit.

Complementarity and regulatory displacement. Because the instrument removes Code coverage for certain funding arrangements, other regulatory regimes , statutory, contractual and common law , remain the operative legal framework for oversight and dispute resolution. The instrument does not specify which alternative regimes will apply; it merely signals that the Code will not apply to the identified provisions of credit. This opens an interaction where, for example, consumer protection law outside the Code, contract law, unconscionability doctrines, or provisions in the Corporations Act might govern behaviour that otherwise would have been captured by the Code.

Temporal interaction and transitional risk. The sunset clause in s 5(2) means the displacement of Code application is temporary. Arrangements entered into during the exclusion period may continue beyond the sunset date, producing potential cross‑period issues. The instrument itself does not provide transitional rules for arrangements that survive past 31 January 2029. Parties must therefore consider the downstream interaction between their contracts, insolvency law, the Code if it becomes applicable again, and any other relevant statutes.

Statutory hierarchy and scope. The instrument is made under subsection 6(17) of the Code, so its interaction with other legislation must respect the limits of that enabling provision. The instrument does not purport to displace non‑credit regulatory duties (for example, obligations under the Corporations Act or other financial services laws). Practitioners therefore must map funding arrangements against multiple statutory regimes to identify which obligations remain and which are displaced by the exclusion.

In sum, the instrument reframes the legal field by excising certain funding‑related credit provisions from the Code and by recognising proof of debt funding under the Corporations Act as within the exclusion’s scope. The practical effect is regulatory displacement for the excluded provisions, with other statutes and common law remaining operative.

The compiled instrument includes an amendment history recorded in the endnotes. Those entries identify the original instrument and subsequent amending instruments by registration and commencement dates. The instrument’s Part 2 substantive provision (section 5) is the target of recorded amendments.

Original instrument and commencement. The ASIC Credit (Litigation Funding,Exclusion) Instrument 2020/37 was registered on 21 January 2020 and commenced on 22 January 2020, according to Endnote 3. That registration is recorded in the legislation history table in Endnote 3 under the instrument name and dates.

Amendments. The legislation history records two subsequent amending instruments that affect the compiled text:

• ASIC Corporations and Credit (Amendment and Repeal) Instrument 2022/1032, registered 15 December 2022 and commenced 16 December 2022 (Endnote 3). Endnote 4 lists section 5 as having been amended by instrument 2022/1032.

• ASIC Corporations and Credit (Amendment) Instrument 2025/809, registered 12 December 2025 and commenced 13 December 2025 (Endnote 3). Endnote 4 lists section 5 as having been amended by instrument 2025/809.

The compiled text of section 5 as included in this document reflects those amendments to date, with the compilation date recorded as 13 December 2025 at the head of the compilation. Endnote 1 explains that the compilation shows the amended text in force on that date.

Endnote annotations. Endnote 4 contains a provision‑level amendment history table which notes that section 2 was repealed under s 48D LA and that section 5 received amendments in 2022 and 2025. The compilation does not reproduce the earlier version of section 5 or indicate precisely what textual changes the amendments made; it records only that the amendments occurred and that the current compiled text reflects them.

Uncommenced amendments and underlining practice. The compilation materials contain a general note about uncommenced amendments and underlining in the endnotes, but no uncommenced amendment specific to this instrument is shown in the compiled text. The compilation notes that uncommenced amendments would be underlined in endnotes if present.

Modifications and transitional provisions. The endnotes include statements that if the compiled law is modified by another law, such modifications operate as modified but may not be shown in the text, and that application, saving and transitional provisions are annotated where necessary. For this instrument, the legislation history table lists the amending instruments with commencement dates but does not list any separate application, saving or transitional provisions in the compilation. Practitioners should consult the original amending instruments and their notices if a matter of transitional effect is material to an arrangement.

Administrative detail. The compilation header identifies this document as Compilation No. 2 with compilation date 13 December 2025 and notes that the compilation includes amendments listed (F2025L01575). The endnotes explain the compilation practice and point readers to the Register for any uncommenced or modified content beyond the compilation.

In practical terms, the recorded amendment history shows that ASIC has revisited section 5 on at least two occasions since the instrument’s original commencement in 2020 and that the current wording should be read as reflecting those amending instruments. The compilation does not provide the text of the amending instruments themselves within the endnotes, so readers requiring the legislative drafting history should consult the amending instruments identified in Endnote 3.

The instrument’s compiled record contains no reported judicial decisions, tribunal determinations or administrative litigation that interpret or test the exclusion. The endnotes and the body of the instrument do not cite case law. The absence of litigation history in the compilation means that, as of the compilation date (13 December 2025), there is no authoritative court or tribunal guidance included within this instrument on how to characterise whether an arrangement "constitutes" a provision of credit under the Code for the purposes of this exclusion.

Implications of the absence of judicial guidance. The lack of a litigation record in the source creates legal uncertainty in two respects. First, the phrase "a provision of credit constituted by" is fact sensitive and potentially contested; absent case law, parties have no settled judicial tests recorded in this compilation for deciding when a funding arrangement amounts to a provision of credit. That will leave factual characterisation and legal argumentation for prospective disputes.

Second, the interface with Division 6 of Part 5.6 of the Corporations Act, as recognised in s 5(1)(b), is also untested in this instrument. Where funding covers preparation and lodgment of proofs, questions may arise about whether and when Code protections would be excluded. Courts or regulators may be asked to determine how funding that touches both litigation and insolvency processes should be characterised and whether the exclusion applies.

Potential dispute types. Based on the instrument’s text, the most likely points of dispute that could have been litigated (but are not recorded here) include: (a) whether a given arrangement is properly described as a litigation funding arrangement within the meaning of s 5(1)(a); (b) whether funding for costs associated with participating in legal proceedings constitutes a "provision of credit" for Code purposes; (c) whether funding of preparation and lodgment of proofs under the Corporations Act falls within the proof of debt funding arrangements captured by s 5(1)(b); and (d) the consequences for remedies available to recipients of funding if the Code is excluded. The instrument’s text does not resolve these factual or legal issues.

Regulatory review and administrative decisions. The compilation does not include any ASIC administrative decisions or public rulings that clarify the instrument’s application. Where ASIC has issued public guidance, it is not reflected in this instrument as compiled. Practitioners should therefore expect that guidance, administrative practice or eventual court decisions will be the main mechanisms by which the instrument’s scope is clarified going forward.

Prospects for future litigation. The sunset date (s 5(2)) and the recorded amendments in 2022 and 2025 (Endnotes 3 and 4) may influence the timing and appetite for litigation. Parties may be more or less inclined to litigate characterisation questions depending on commercial stakes and the temporary nature of the exclusion. The compilation does not provide a litigation posture, so users must be prepared for interpretative disputes to be resolved through standard adjudicative processes.

In summary, the compiled instrument contains no litigation history; that absence implies that parties must rely on textual analysis and legal advice when characterising arrangements and anticipating how courts or regulators might treat contested cases.

This instrument is compact in text but generates several practical issues and traps for parties relying on its exclusionary effect. The following are concrete points to watch, each tethered to the instrument’s wording.

Characterisation risk: The exclusion applies only to "a provision of credit constituted by" the specified arrangements (s 5(1)). That phrasing means the exclusion is not automatic for every litigation funding arrangement or proof of debt funding arrangement; it applies only where the arrangement constitutes a provision of credit. Parties that draft funding contracts without explicit attention to whether the arrangement constitutes credit risk having the Code apply despite intending to rely on the exclusion. Conversely, a funding provider who assumes the exclusion applies may be mistaken if the arrangement contains features that, legally, constitute credit distinct from the litigation funding purpose.

Scope of "participating in, conducting and funding legal proceedings": Section 5(1)(a) uses this tripartite phrasing. The practical question is how courts or regulators will treat peripheral activities , for example, funding of alternate dispute resolution, pre‑prospective investigations, or enforcement of judgements , and whether those are captured. The instrument’s language is specific but not exhaustively descriptive; absence of judicial guidance in the compilation (see Litigation history) means that interpretation remains uncertain.

Proof of debt funding including preparation and lodgment: Subsection 5(1)(b) explicitly includes "funding of the preparation and lodgment of the proofs." That is narrower than all possible insolvency‑related funding. Funders who pay for legal advice, forensic accounting, or strategic claims assessment that precede proofs might be uncertain whether those activities are included. The text includes preparation and lodgment but is purposive; parties should not assume every insolvency‑adjacent expense is captured.

Temporal risk and contract duration: The exclusion expires at the end of 31 January 2029 (s 5(2)). Funding arrangements that extend beyond that date may face shifting regulatory treatment mid‑contract. Parties entering long duration arrangements must address the sunset in their documentation, including potential renegotiation triggers, compliance plans if the Code resumes, and risk allocation for post‑sunset liabilities.

Interplay with other credit components: The instrument excludes only provisions of credit constituted by the listed arrangements. If a funder offers an ancillary loan, credit card facility, or an arrangement that includes interest or fees unrelated to the litigation funding purpose, those elements may remain within the Code. Drafting that aggregates multiple financial facilities into one agreement without segregating the litigation funding credit can expose the funder to unintended Code obligations.

Documentation evidence burden: Because the exclusion turns on composition and constitution of credit, courts or regulators will likely examine contracts, schedules, invoices, recourse clauses, security interests, and repayment triggers to characterise the arrangement. Poorly drafted documentation that lacks clarity on purpose and repayment mechanisms is a practical "gotcha".

No instrument‑level consumer protections or standards: The instrument removes the Code’s reach for the excluded provisions; it does not replace the Code with standards, disclosure obligations, or complaint resolution mechanisms. Funders and recipients should be aware that statutory creditor protections under the Code may not apply; the instrument makes no provision for substitute consumer safeguards.

Amendment history and legislative flux: The instrument has been amended at least twice (Endnotes 3-4). Future amendments could further alter scope or duration. Relying on the exclusion as a structural feature of business models requires monitoring legislative and instrument amendment history.

Regulatory interpretation risk: The instrument is made under ASIC’s power (s 3). ASIC’s interpretative approach, administrative guidance or enforcement priorities regarding the exclusion are not contained in the compiled instrument. Parties cannot assume any particular regulatory stance and should seek clarity where possible.

Cross‑border and assignment complications: The instrument is silent on funding arrangements involving multiple jurisdictions. If a funder or recipient is foreign, or if funds are routed through overseas entities, parties must still determine whether a provision of credit is constituted for Code purposes. The instrument does not address assignment, sub‑funding, or securitisation of funding receivables which could create features characterised as credit.

In short, the main "gotchas" arise from narrow wording that shifts focus to factual characterisation, temporal limitations, documentation and the residual applicability of other laws. Each point is rooted in the instrument’s operative language, particularly s 5(1)-(2).

Compliance under this instrument requires an analytic and documentary exercise rather than adherence to newly imposed statutory duties. The instrument excludes certain provisions of credit from the Code; parties therefore need to prepare to demonstrate whether, and to what extent, their arrangements are within the exclusion. The following practical steps flow from the instrument’s wording and the risks identified above.

1. Undertake a legal characterisation review. Determine whether your funding arrangement "constitutes" a provision of credit as contemplated by the National Credit Code. Because the exclusion is phrased as applying to "a provision of credit constituted by" litigation funding or proof of debt funding arrangements (s 5(1)), this assessment will require legal analysis of your agreement’s payment, repayment, interest, security and default mechanics. Document the legal advice and the reasoning used to reach the conclusion.

2. Align contractual drafting with the exclusion’s purpose. Ensure that the operative agreement and schedules clearly identify the funding purpose as litigation funding or proof of debt funding, as described in s 5(1)(a)-(b). Where the exclusion is to be relied on, include covenants, fund utilisation clauses and reporting mechanisms that make evident funds are for participating in, conducting and funding legal proceedings, or for preparation and lodgment of proofs under Division 6 of Part 5.6 of the Corporations Act. Clear documentation reduces characterisation disputes when scrutiny occurs.

3. Segregate ancillary credit facilities. If the arrangement includes other credit components (for example, working capital loans, bridging finance, or non‑litigation advances), segregate those facilities into separate documents or clearly label and delineate them within the contract. Because the exclusion applies only to provisions of credit constituted by the specified arrangements (s 5(1)), mixing multiple credit purposes can defeat the exclusion.

4. Address the sunset date in contractual risk allocation. The exclusion ceases at the end of 31 January 2029 (s 5(2)). For multi‑year funding agreements, include clauses that address the consequences of the exclusion expiring: renegotiation triggers, conversion options, compliance undertakings in the event the Code becomes applicable post‑sunset, and indemnities for liabilities arising from changed regulatory status.

5. Maintain comprehensive records. Retain contemporaneous records showing how funds were applied, invoices for legal costs, evidence of lodgment of proofs where applicable, and communications with funded parties. The instrument’s reliance on the arrangement’s constitution suggests that documentary evidence will be central to demonstrating that a provision of credit falls within the exclusion.

6. Consider disclosure and client communications. The instrument does not impose disclosure obligations, but funders and advisers should consider whether voluntary disclosure to funded persons about the consequences of the exclusion is prudent. This includes explaining that Code protections may not apply to the funding and what alternative dispute resolution, contractual protections, or complaint mechanisms exist.

7. Map interactions with the Corporations Act. Where proof of debt funding is involved, ensure practitioners understand Division 6 of Part 5.6 of the Corporations Act and the funding’s relationship to that statutory process. Subsection 5(1)(b) expressly covers funding for preparation and lodgment of proofs, so maintain evidence of such activities and of their purpose under the Corporations Act.

8. Monitor amendments and ASIC guidance. The instrument has been amended (Endnotes 3-4). Funders and advisers should monitor legislative and instrument registers for further amendments, and seek any ASIC guidance or public statements that clarify the interpretation and application of the exclusion under s 3. Administrative positions or policy papers may materially affect compliance strategies.

9. Plan for dispute contingencies. Because characterisation disputes may arise, include procedural provisions in funding agreements dealing with dispute resolution, choice of law, governing law clauses, jurisdiction and whether arbitration or court determination will be used to resolve interpretative questions.

10. Obtain tailored legal and tax advice. The instrument’s effect is legal and regulatory. Parties should obtain legal advice about the Code characterisation, and consider tax and accounting consequences of the arrangement’s classification, particularly for long‑term arrangements spanning the sunset date.

11. Review insurance and security structures. Where arrangements involve security interests or insurance cover, verify that those structures do not inadvertently convert a funding arrangement into a form of credit outside the intended exclusion. Clarify how security and recourse are structured in documents.

12. Engage ASIC or regulators where uncertainty is material. If a funding model presents novel features and the commercial stakes are material, consider seeking confirmation or guidance from ASIC or regulators. The instrument does not create a formal rulings mechanism, but proactive engagement may reduce regulatory risk.

Each of the above steps follows directly from the instrument’s operative text, especially s 5(1)-(2), and from practical risks identified in the "Gotchas" section. Implementing disciplined documentation, clear purpose clauses and sunset planning is the principal compliance pathway under this exclusionary instrument.