A new pooled investment structure is coming to Australia called- Corporate Collective Investment Vehicle (CCIV). A CCIV conceptually is like a “corporatised trust”. The key aim in introducing the CCIV is to increase international competitiveness of Australia’s managed funds industry, i.e., to attract offshore investment. A CCIV retains many of the advantages of the trust structure, with added regulatory protections and commercial benefits of a corporate structure.
CCIV are proposed to commence on 1st July 2022. The federal government is currently seeking submissions to its proposed legislation which sets out the regulatory and tax treatments of the new regime. Anyone considering starting a fund should consider the CCIV as we move into the latter part of 2022.
The proposed new law updates the Corporations Act, to set out the framework for establishing and operating a CCIV, in a manner that is fair, efficient, and competitive. The proposed laws operate in conjunction with the existing financial services regulations.
The laws set out strong protective mechanisms for retail investors.
The Corporate Collective Investment Vehicle is intended to be a new type of company used for collective investment. It will operate as an alternative to the current structure in Australia, the trust-based managed investment scheme. For each CCIV:
- The CCIV company is limited by shares.
- It must have a single corporate director (i.e., the director must not be a natural person).
- The corporate director must be a public company, with an Australian Financial Services Licence (AFSL) authorising its relevant functions.
- The CCIV may not have any other officers.
- All CCIVs must register with ASIC. To do so, it must meet certain basic requirements.
- At registration, it must have at least one sub-fund, which has at least one member.
- Within a CCIV, one or more sub-fund may be established; each sub-fund’s registration with ASIC is a ‘standalone’ process.
The CCIV must register as retail or wholesale. If even one investor is retail, the CCIV must register as retail, and must comply with additional regulatory requirements designed to protect retail investors.
Given the CCIV is a corporate structure, it will generally be subject to the ordinary rules under the Corporations Act, with some particular provisions. Most of the powers, rights, duties, and characteristics of a company will apply.
What are the advantages of a CCIV?
- Global alignment
- Flow-through tax
- Share capital structure flexibility
- Retail investor protections
- Can be listed on an Australian exchange
The sub-fund structure enables a single CCIV to offer multiple products and investment strategies. In particular, recent modifications to the proposed legislation facilitate appropriate cross-investments between sub-funds within a CCIV, enabling a CCIV to utilize funds management strategies such as hedge or master-feeder structures.
The CCIV is a new structure for pooled investments, slated to commence on 1st July 2022. Its unique structure offers commercial flexibility through its sub-funds and combines many of the advantages of both trusts and companies. It should also be more attractive to overseas investors, as its structure is more closely aligned to global investment structures.
