Federal Register of Legislation - Australian Government

Primary content

ASIC Class Order [CO 02/303]

Authoritative Version
CO 02/303 Orders/ASIC Class Orders as amended, taking into account amendments up to ASIC Class Order [CO 14/757]
Administered by: Treasury
Registered 27 Aug 2014
Start Date 07 Aug 2014
End Date 28 Sep 2016
Date of repeal 28 Sep 2016
Repealed by ASIC Corporations (Repeal) Instrument 2016/898

ASIC Class Order [CO 02/303]

Management rights schemes — amendment

This instrument has effect under s601QA(1)(a), 911A(2)(l) and 992B(1)(a) of the Corporations Act 2001.

This compilation was prepared on 14 August 2014 taking into account amendments up to [CO 14/757]. See the table at the end of this class order.

Prepared by the Australian Securities and Investments Commission.

Corporations Act 2001 — Paragraphs 601QA(1)(a), 911A(2)(l) and 992B(1)(a) — Revocation and Exemption

1          Under paragraph 601QA(1)(a) of the Corporations Act 2001 (the “Act”) the Australian Securities and Investments Commission (“ASIC”) hereby revokes Class Order [98/2287].

2          Under paragraph 601QA(1)(a) of the Act ASIC hereby exempts the persons referred to in Schedule A in the case referred to in Schedule B on the conditions set out in Schedule C from section 601ED of the Act.

3          Under paragraphs 911A(2)(l) and 992B(1)(a) of the Act ASIC hereby exempts, the persons referred to in Schedule A in the case referred to in Schedule B on the conditions set out in Schedule C from:

(a)        sections 992A and 992AA of the Act; and

(b)       the requirement to hold an Australian financial services licence in relation to dealing in interests in a managed investment scheme of the kind referred to in Schedule B.

4          Under paragraph 992B(1) of the Act ASIC hereby exempts the persons referred to in Schedule D in the case of an offer to sell an interest in a managed investment scheme referred to in Schedule B on the conditions set out in Schedule E from sections 992A and 992AA of the Act.

SCHEDULE A — WHO IS EXEMPT — PRIMARY OFFERS

Any person (“Operator”) who operates a scheme of the kind specified in Schedule B (“Scheme”) and any person offering an interest in such a scheme for issue (“Promoter”) other than a person who is aware that either:

(a)        any Product Disclosure Statement required to be given to a person under the Act in relation to the Scheme was not given or was given but does not comply with the Act; or

(b)       any disclosure statement required to be given to a person under this instrument in relation to the Scheme was not given or was given but does not comply with this instrument.

SCHEDULE B — SCHEMES EXEMPTED

Making offers to issue interests in and operating a managed investment scheme:

(a)        that involves registered proprietors (“Investors”) of strata title units, community title interests or similar real property interests (“Strata Units”), in the Investor's discretion, making their Strata Unit available for use as part of a serviced apartment, hotel or resort complex; and

(b)       where interests in the Scheme (“Interests”) have only been offered on the following basis:

(i)        each Strata Unit is not subject to any restrictions on use by the Investor for residential purposes, whether by design or local authority zoning;

(ii)       there is no pooling of income;

(iii)      each Investor and the Operator may withdraw from participation in the Scheme on no more than 90 days' notice and each Investor may, if the Investor withdraws, appoint another person to manage their Strata Unit;

(iv)      the Operator is licensed in relation to the conduct of the letting services under the law of a State or Territory in this jurisdiction or is a financial services licensee;

(v)       no payment is liable to be made by an Investor to participate in the Scheme other than:

(A)       payment of money to buy the Strata Unit; and

(B)       one or more payments of the Investor’s reasonable proportion of the Operator's fees and expenses with respect to the  management of the Scheme where each such payment:

(I)        relates to a period of no more than 3 months; and

(II)       is reasonably commensurate with the work done or to be done, or the expenses incurred or likely to be incurred (as the case may be) by the Operator during that period;

(vi)      sale of the Strata Unit is not and was not conditional on participation in the Scheme;

(vii)     there is no obligation on any person to ensure that other owners of Strata Units agree to participate on the same or similar terms;

(viii)    under the agreement entered into or to be entered into between the Operator and each Investor participating in the Scheme, if the Operator has any rights with respect to any property that facilitate the use of the Strata Units (including under a lease or contract with the body corporate or as a registered proprietor) and a majority of investors (excluding the Operator and any of its associates if they own a unit) based on their voting rights in relation to matters concerning the body corporate to which the Strata Units relate resolve that those rights should be assigned to another person, it is a term of the agreement that the Operator will assign those rights to that person at their market value; and

(c)        where an offer of an interest in the Scheme for issue or sale was made before 15 May 1999 to a person other than the Promoter or the Operator or any of their associates; and

(d)       which has not at any time been a registered scheme; and

(e)        in relation to which an approved deed under Division 5 of Part 7.12 of the Corporations Law as it stood prior to 1 July 1998 has not at any time been in force.

SCHEDULE C — CONDITIONS ON OPERATORS AND PROMOTERS

1          The Operator must ensure that any part of the Scheme property held in cash or on deposit with a financial institution must be held on trust for the members in a trust account and subject to audit as to whether the moneys have been dealt with in accordance with the terms of the trust by a registered company auditor or an affected auditor (as defined in ASIC Class Order [CO 14/757]) at least annually;

2          Each person that is involved in making an offer of Interests in the Scheme for issue ("Promoter") must:

(a)        not engage in any misleading or deceptive conduct or conduct that is likely to mislead or deceive in connection with those offers; and

(b)       during the transition period (within the meaning of subsection 1438(3) of the Act) ensure that a disclosure statement complying with Schedule F is given to each person to whom an offer is made at or before the making of the offer:

(c)        during the transition period (within the meaning of subsection 1438(3) of the Act) ensure that the disclosure statement is signed and dated by the Operator or, if the Operator is not knowingly concerned in the offer, by a Promoter; and

3          The Operator must provide on request by a Seller of an Interest in the Scheme a notice that is signed by the Operator and dated on the day of issue setting out the following:

(a)        the name and address of the registered or principal office of the Operator:

(i)         in the place in which the Operator was incorporated or registered if the Operator is a body corporate ; and

(ii)        if the office is outside this jurisdiction — within this jurisdiction; 

(b)       the date on which the Scheme was established and if the Scheme has a fixed duration, the duration of the Scheme; 

(c)        a place where any agreements that will bind a person buying from a Seller and the Operator may be inspected; 

(d)       the extent of the liability of the Investors to make any contribution to the Scheme; 

(e)        the rights that a person buying from a Seller will have in relation to the use of their Strata Unit, income and voting; 

(f)        the amount (if any) paid to each class of Investors in each of the previous 5 financial years preceding the offer; 

(g)       if no amount has been paid out in respect of the rights or interests of a particular class of Investor in the previous 5 financial years — a statement to that effect which identifies each such class; 

(h)       if the Operator is a body corporate — the names and addresses of the directors of the body corporate; and

(i)        a copy of the most recent audit report in relation to the audit of the trust account for the Scheme.

SCHEDULE D — WHO IS EXEMPT FOR SECONDARY OFFERS

Any member of a scheme of the kind specified in Schedule B other than the Operator or a Promoter of the Scheme (“Seller”).

SCHEDULE E — CONDITIONS ON SELLERS

A Seller must not offer to sell their Interest in the Scheme unless:

(a)        the Seller has a notice issued by the Operator that the Seller reasonably believes to be current and that the Seller has no reason to believe does not comply with condition 3 in Schedule C; and

(b)       the offer is accompanied by a copy of the notice signed and dated by the Operator or by a statement that the notice will be given free of charge to a person who asks for it.

SCHEDULE F — THE DISCLOSURE STATEMENT

1          The disclosure statement must:

(a)        describe the main features of the Interests in the Scheme;

(b)       set out the main terms and conditions of the offer; and

(c)        provide answers to the questions set out in paragraph 2 of this Schedule (the questions need not be set out, and the answers can be provided in any order or format),

sufficiently to enable a typical investor in those Interests to make an informed decision whether to invest in those Interests, having regard to every matter which is material to such a decision that is known to any person who authorised or caused the issue of the disclosure statement.

2          The questions are:

(a)        What is being offered?

(i)         If rights in relation to the Scheme are being offered in conjunction with any Strata Unit, how are the Investor’s property rights affected by holding an Interest in the Scheme?

(ii)        What key rights will Investors have in relation to the use of their Strata Unit by the Operator?

(iii)       What sort of serviced apartment, hotel or resort complex is being operated under the Scheme and how will it be operated?

(iv)       What are the key terms of any lease, licence or rights that Investors are to confer on the Operator in relation to the operation of the Scheme?

(v)        Does the Operator own or have rights in relation to any property that may adversely affect:

(A)       the operation of the Scheme by a new Operator if the Operator were changed; or

(B)       the rights of the Investor in relation to either their property or Interest in the Scheme if the Operator’s rights to property cease to be available (for whatever reason) for their intended purpose as part of the overall property or part of the Scheme ,

and, if so, what are those rights?

(b)       What are the risks and returns of the investment?

(i)         How, in general terms, will the operation of the serviced apartment, hotel or resort complex generate returns for Investors?

(ii)        When and how are these returns to be calculated and made available to Investors?

(iii)       Are Investors in the Scheme guaranteed or promised that they will receive a particular rate of return from the Scheme? If so:

(A)       what are the conditions for receiving the benefits of this guarantee or promise?

(B)       what (if any) are the circumstances in which the person providing the guarantee or promise may not be able to honour it?

(C)       what is the financial position of the guarantor or  promisor?; and

(D)       on what basis do Investors receive returns once the guarantee or promise expires?

(iv)       If no particular rate of return is guaranteed or promised:

(A)       is the Operator aiming to achieve a particular return;

(B)       can Investors expect any particular return; or

(C)       are returns from the Scheme uncertain?

(v)        If returns from the Scheme may vary from what is aimed for or expected, or are otherwise uncertain, what are the main factors which will affect the level of return? If occupancy rates will affect the rate of return what are main factors that will affect occupancy rates?

(vi)       Do Investors have potential liability to pay moneys in relation to the Scheme or their ownership of a Strata Unit in any circumstances? If so what are these liabilities and what main factors will affect the amount of these liabilities? For instance, how will any repairs, refurbishment or replacement of any part of the serviced apartment, hotel or resort complex and its furniture and fittings be paid for?

(vii)      Is there a suggested minimum period of time that an Investor’s investment should remain in the Scheme? If so, why is that period of time suggested and what, if any, are the kinds of qualifications on that suggestion?

(viii)     What are the main factors that will affect the value of any Strata Unit that is offered for sale in conjunction with the offer of an Interest in the Scheme, at the time of sale, during the operation of the Scheme and on termination of the Scheme?

(c)        What are the fees, charges, expenses and taxes associated with the Scheme?

(i)         What fees, charges, expenses or taxes, if any, are payable by an Investor in respect of participating in the Scheme? 

(ii)        What fees, charges, expenses or taxes, if any, are payable by an Investor in respect of withdrawal from the Scheme?

(iii)       What other fees, charges, expenses or taxes are deducted from the assets or income of the Scheme or are otherwise borne by Investors?

(iv)       What general kinds of tax are likely to be payable on an Investor’s returns on investment in the Scheme?

(d)       Who is the Operator?

(i)         If the Operator signs the disclosure statement, who is it and what are its credentials in operating hotels, resorts or serviced apartment complexes (including details of its principal activities and relevant experience)?

(ii)        If the Operator does not sign the disclosure statement, how will the Operator be selected and what credentials will it have?

(iii)       If the Operator is to engage a person to operate the complex on its behalf what credentials will that person have to operate the serviced apartment, hotel or resort complex?

(iv)       What are the custodial arrangements for the Scheme assets?

(e)        When can investments be withdrawn and transferred?

(i)         When and how can an Investor withdraw from the Scheme?

(ii)        Can the Interest in the Scheme be transferred and if so in what circumstances and what legal requirements apply?

(f)        What information can be obtained?

(i)         How can the entity signing the disclosure statement be contacted?

(ii)        Is there any particular information available to a prospective or existing Investor on request made to that entity? If so, how can that information be obtained?

(iii)       When and how is the Operator to report to an Investor in the scheme on the operations of the Scheme (including the Scheme’s performance)?

3          The disclosure statement must also include a prominent statement to the effect that a person should consider whether to consult:

(a)        an investment adviser who is either a financial services licensee or an authorised representative of a financial services licensee;

(b)       a taxation adviser; and

(c)        a lawyer,

before making a decision to become a member of the Scheme or signing any contract to buy a Strata Unit on the basis that the person will become a member.

Interpretation

In this instrument:

1          “financial services licensee” means:

(a)        a financial services licensee within the meaning of the Act; and

(b)       a person who on 11 March 2002 is the holder of a dealers licence within the meaning of the old Corporations Act (as defined in subsection 1410(1) of the Act), until the earlier of:

(i)         if ASIC revokes the person's dealers licence - the date of that revocation; or

(ii)        11 March 2004; and

2          “offer” is to be interpreted in accordance with subsection 1010C(2) of the Act.

Note: In this instrument, “this jurisdiction” means Australia, ss 5 and 9 (definition of “this jurisdiction”). 

Commencement

This instrument takes effect on the commencement of Schedule 1 to the Financial Services Reform Act 2001.

Notes to ASIC Class Order [CO 02/303]

Note 1

ASIC Class Order [CO 02/303] (in force under s601QA(1)(a), 911A(2)(l) and 992B(1)(a) of the Corporations Act 2001) as shown in this compilation comprises that Class Order amended as indicated in the tables below.

Table of Instruments

Instrument number

Date of making or FRLI registration

Date of commencement

Application, saving or transitional provisions

[CO 02/303]

8/3/2002 (see F2007B00623)

11/3/2002

 

[CO 14/757]

7/8/2014 (see F2014L01082)

7/8/2014

-

 

 

 

 

Table of Amendments

ad. = added or inserted     am. = amended     rep. = repealed     rs. = repealed and substituted

Provision affected

How affected

Sch C, para 1...............

am. [CO 14/757]