Corporations Act 2001 Act No. 50 of 2001 as amended This compilation was prepared on 16 July 2008 taking into account amendments up to Act No. 73 of 2008 Volume 3 includes: Table of Contents Chapters 5C-6D (ss. 601EA - 742) The text of any of those amendments not in force on that date is appended in the Notes section The operation of amendments that have been incorporated may be affected by application provisions that are set out in the Notes section Contents Chapter 5C-Managed investment schemes 1 Part 5C.1-Registration of managed investment schemes 1 601EA Applying for registration 1 601EB Registration of managed investment scheme 1 601EC All documents etc. lodged with ASIC to bear ARSN or ABN 2 601ED When a managed investment scheme must be registered 2 601EE Unregistered schemes may be wound up 4 Part 5C.2-The responsible entity 5 Division 1-Responsibilities and powers 5 601FA Responsible entity to be public company and hold Australian financial services licence 5 601FB Responsible entity to operate scheme 5 601FC Duties of responsible entity 6 601FD Duties of officers of responsible entity 7 601FE Duties of employees of responsible entity 8 601FF Surveillance checks by ASIC 9 601FG Acquisition of interest in scheme by responsible entity 9 601FH Liquidator etc. of responsible entity entitled to exercise indemnity rights 10 Division 2-Changing the responsible entity 11 601FJ Changes only take effect when ASIC alters record of registration 11 601FK Requirements of section 601FA must be met 11 601FL Retirement of responsible entity 11 601FM Removal of responsible entity by members 12 601FN ASIC or scheme member may apply to Court for appointment of temporary responsible entity 13 601FP Appointment of temporary responsible entity by Court 13 601FQ Temporary responsible entity to take steps for appointment of new responsible entity 13 Division 3-Consequences of change of responsible entity 15 601FR Former responsible entity to hand over books and provide reasonable assistance 15 601FS Rights, obligations and liabilities of former responsible entity 15 601FT Effect of change of responsible entity on documents etc. to which former responsible entity is party 15 Part 5C.3-The constitution 17 601GA Contents of the constitution 17 601GB Constitution must be legally enforceable 18 601GC Changing the constitution 18 Part 5C.4-The compliance plan 19 601HA Contents of the compliance plan 19 601HB Compliance plan may incorporate provisions from another scheme's plan 20 601HC Directors must sign lodged copy of compliance plan 20 601HD ASIC may require further information about compliance plan 20 601HE Changing the compliance plan 20 601HF ASIC may require consolidation of compliance plan to be lodged 21 601HG Audit of compliance plan 21 601HH Removal and resignation of auditors 26 601HI Action on change of auditor of compliance plan 27 Part 5C.5-The compliance committee 28 601JA When is a compliance committee required? 28 601JB Membership of compliance committee 29 601JC Functions of compliance committee 30 601JD Duties of members 31 601JE Compliance committee members have qualified privilege in certain cases 31 601JF When can responsible entity indemnify compliance committee members? 32 601JG When can responsible entity pay insurance premiums for compliance committee members? 32 601JH Proceedings of compliance committee 33 601JJ Disclosure of interests 33 Part 5C.6-Members' rights to withdraw from a scheme 34 601KA Members' rights to withdraw 34 601KB Non-liquid schemes-offers 35 601KC Non-liquid schemes-only one withdrawal offer to be open at any time 36 601KD Non-liquid schemes-how payments are to be made 36 601KE Non-liquid schemes-responsible entity may cancel withdrawal offer 36 Part 5C.7-Related party transactions 37 601LA Chapter 2E applies with modifications 37 601LB Replacement section 207 37 601LC Replacement section 208 37 601LD Omission of sections 213, 214 and 224 39 601LE Modification of section 225 39 Part 5C.8-Effect of contraventions (civil liability and voidable contracts) 40 601MA Civil liability of responsible entity to members 40 601MB Voidable contracts where subscription offers and invitations contravene this Act 40 Part 5C.9-Winding up 42 601NA Winding up required by scheme's constitution 42 601NB Winding up at direction of members 42 601NC Winding up if scheme's purpose accomplished or cannot be accomplished 42 601ND Winding up ordered by Court 43 601NE The winding up of the scheme 43 601NF Other orders about winding up 44 601NG Unclaimed money to be paid to ASIC 45 Part 5C.10-Deregistration 46 601PA Deregistration-voluntary 46 601PB Deregistration by ASIC 46 601PC Reinstatement 48 Part 5C.11-Exemptions and modifications 49 601QA ASIC's power to make exemption and modification orders 49 601QB Modification by regulations 50 Chapter 6-Takeovers 51 602 Purposes of Chapter 51 602A Substantial interest concept 52 603 Chapter extends to some listed bodies that are not companies 52 604 Chapter extends to listed managed investment schemes 52 605 Classes of securities 53 Part 6.1-Prohibited acquisitions of relevant interests in voting shares 54 606 Prohibition on certain acquisitions of relevant interests in voting shares 54 607 Effect on transactions 56 608 Relevant interests in securities 57 609 Situations not giving rise to relevant interests 59 610 Voting power in a body or managed investment scheme 62 Part 6.2-Exceptions to the prohibition 64 611 Exceptions to the prohibition 64 612 Effect of non-compliance with takeover rules for exceptions 1 to 4 69 613 Bidder not to exercise voting rights if failure to send bids for off-market acquisition-exception 2 or 3 69 615 Treatment of foreign holders under equal access issue- exception 10 69 Part 6.3-The different types of takeover bid 71 616 Off-market bids and market bids 71 Part 6.4-Formulating the takeover offer 72 Division 1-General 72 617 Securities covered by the bid 72 618 Offers must be for all or a proportion of securities in the bid class 72 619 General terms of the offer 73 620 Off-market bid (offer formalities) 74 Division 2-Consideration for the offer 76 621 Consideration offered 76 622 Escalation agreements 77 623 Collateral benefits not allowed 78 Division 3-The offer period 80 624 Offer period 80 Division 4-Conditional offers 81 625 Conditional offers-general 81 626 Maximum acceptance conditions in off-market bids 81 627 Discriminatory conditions not allowed for off-market bids 82 628 Conditions requiring payments to officers of target not allowed in off-market bids 82 629 Conditions turning on bidder's or associate's opinion not allowed in off-market bids 83 630 Defeating conditions 83 Part 6.5-The takeover procedure 86 Division 1-The overall procedure 86 631 Proposing or announcing a bid 86 632 Overview of steps in an off-market bid 87 633 Detailed steps in an off-market bid 87 634 Overview of steps in a market bid 91 635 Detailed steps in a market bid 92 Division 2-The bidder's statement 96 636 Bidder's statement content 96 637 Bidder's statement formalities 99 Division 3-The target's response 100 638 Target's statement content 100 639 Target's statement formalities 101 640 Expert's report to accompany target's statement if bidder connected with target 102 641 Target must inform bidder about securities holdings 103 642 Expenses of directors of target companies 104 Division 4-Updating and correcting the bidder's statement and target's statement 105 643 Supplementary bidder's statement 105 644 Supplementary target's statement 105 645 Form of supplementary statement 106 646 Consequences of lodging a supplementary statement 107 647 To whom supplementary statement must be sent 107 Division 5-General rules on takeover procedure 109 Subdivision A-Experts' reports 109 648A Experts' reports 109 Subdivision B-Sending documents to holders of securities 110 648B Address at which bidder may send documents to holders of securities 110 648C Manner of sending documents to holders of securities 110 Subdivision C-Effect of proportional takeover approval provisions 110 648D Constitution may contain proportional takeover approval provisions 110 648E Resolution to be put if proportional bid made 111 648F Effect of rejection of approval resolution 112 648G Including proportional takeover provisions in constitution 113 648H Effect of Subdivision 116 Part 6.6-Variation of offers 117 Division 1-Market bids 117 649A General 117 649B Market bids-raising bid price 117 649C Market bids-extending the offer period 117 Division 2-Off-market bids (express variation by bidder) 119 650A General 119 650B Off-market bids-consideration offered 119 650C Off-market bids-extension of offer period 121 650D Off-market bids-method of making variation 121 650E Right to withdraw acceptance 122 650F Freeing off-market bids from defeating conditions 124 650G Contracts and acceptances void if defeating condition not fulfilled 124 Division 3-Off-market bids (automatic variations) 125 651A Off-market bid-effect on bid consideration of purchases made outside bid 125 651B How to make an election for new forms of consideration 126 651C Returning securities as part of election 127 Part 6.7-Withdrawal and suspension of offers 128 652A Withdrawal of unaccepted offers under takeover bid 128 652B Withdrawal of takeover offers with ASIC consent 128 652C Withdrawal of market bids 128 Part 6.8-Acceptances 130 653A Acceptance of offers made under off-market bid 130 653B Acceptances by transferees and nominees of offers made under off-market bid 130 Part 6.9-Other activities during the bid period 132 654A Bidder not to dispose of securities during the bid period 132 654B Disclosures about substantial shareholdings in listed companies 132 654C Disclosures about substantial shareholdings in unlisted companies 132 Part 6.10-Review and intervention 134 Division 1-ASIC's power to exempt and modify 134 655A ASIC's power to exempt and modify 134 655B Notice of decision and review rights 135 Division 2-The Takeovers Panel 136 Subdivision A-Review of ASIC's exercise of its exemption or modification powers 136 656A Review of exercise of exemption or modification powers 136 656B Operation and implementation of a decision that is subject to review 137 Subdivision B-Unacceptable circumstances 138 657A Declaration of unacceptable circumstances 138 657B When Panel may make declaration 140 657C Applying for declarations and orders 140 657D Orders that Panel may make following declaration 141 657E Interim orders 142 657EA Internal Panel reviews 143 657EB References by Courts 144 657F Offence to contravene Panel order 144 657G Orders by the Court where contravention or proposed contravention of Panel order 144 657H ASIC may publish report about application to Panel or Court 145 Subdivision C-General provisions 146 658A Power of Panel where a proceeding is frivolous or vexatious 146 658B Evidentiary value of findings of fact by Panel 146 658C Panel's power to make rules 146 658D Inconsistency between Panel rules and ASIC exemption or declaration 147 Division 3-Court powers 148 659A Panel may refer questions of law to the Court 148 659AA Object of sections 659B and 659C 148 659B Court proceedings before end of bid period 148 659C Court proceedings after end of bid period 150 Chapter 6A-Compulsory acquisitions and buy-outs 151 660A Chapter extends to some listed bodies that are not companies 151 660B Chapter extends to listed managed investment schemes 151 Part 6A.1-Compulsory acquisitions and buy-outs following takeover bid 152 Division 1-Compulsory acquisition of bid class securities 152 661A Compulsory acquisition power following takeover bid 152 661B Compulsory acquisition notice 154 661C Terms on which securities to be acquired 155 661D Holder may obtain names and addresses of other holders 156 661E Holder may apply to Court to stop acquisition 156 661F Signpost-completing the acquisition of the securities 157 Division 2-Compulsory buy-out of bid class securities 158 662A Bidder must offer to buy out remaining holders of bid class securities 158 662B Bidder to tell remaining holders of their right to be bought out 158 662C Right of remaining holder of securities in the bid class to be bought out 160 Division 3-Compulsory buy-out of convertible securities 161 663A Bidder must offer to buy out holders of convertible securities 161 663B Bidder to tell holders of convertible securities of their right to be bought out 161 663C Right of holders of convertible securities to be bought out 162 Part 6A.2-General compulsory acquisitions and buy-outs 164 Division 1-Compulsory acquisition of securities by 90% holder 164 664A Threshold for general compulsory acquisition power 164 664AA Time limit on exercising compulsory acquisition power 165 664B The terms for compulsory acquisition 165 664C Compulsory acquisition notice 166 664D Benefits outside compulsory acquisition procedure 168 664E Holder's right to object to the acquisition 169 664F The Court's power to approve acquisition 170 664G Signpost-completing the acquisition of the securities 170 Division 2-Compulsory buy-out of convertible securities by 100% holder 171 665A 100% holder must offer to buy out holders of convertible securities 171 665B 100% holder to tell holders of convertible securities of their right to be bought out 171 665C Right of holders of convertible securities to be bought out 173 Part 6A.3-Completion of compulsory acquisition of securities 174 666A Completing the acquisition of securities 174 666B Statutory procedure for completion 175 Part 6A.4-Experts' reports and valuations 176 667A Expert's report 176 667AA Expert to be nominated 176 667B Expert must not be an associate and must disclose prior dealings and relationships 177 667C Valuation of securities 177 Part 6A.5-Records of unclaimed consideration 179 668A Company's power to deal with unclaimed consideration for compulsory acquisition 179 668B Unclaimed consideration to be transferred to ASIC 180 Part 6A.6-ASIC powers 181 669 ASIC's power to exempt and modify 181 Chapter 6B-Rights and liabilities in relation to Chapter 6 and 6A matters 182 670A Misstatements in, or omissions from, takeover and compulsory acquisition and buy-out documents 182 670B Right to recover for loss or damage resulting from contravention 183 670C People liable on takeover or compulsory acquisition statement to inform maker about deficiencies in the statement 185 670D Defences against prosecutions under subsection 670A(3) and actions under section 670B 186 670E Liability for proposing a bid or not carrying through with bid 188 670F Defences 188 Chapter 6C-Information about ownership of listed companies and managed investment schemes 189 671A Chapter extends to some listed bodies that are not companies 189 Part 6C.1-Substantial holding information 190 671B Information about substantial holdings must be given to company, responsible entity and relevant market operator 190 671C Civil liability 193 Part 6C.2-Tracing beneficial ownership of shares 194 672A Disclosure notices 194 672B Disclosure by member of relevant interests and instructions 194 672C ASIC may pass information on to person who made request 195 672D Fee for complying with a direction given by a company or scheme under this Part 195 672DA Register of information about relevant interests in listed company or listed managed investment scheme 196 672E No notice of rights 199 672F Civil liability 200 Part 6C.3-ASIC powers 201 673 ASIC's power to exempt and modify 201 Chapter 6CA-Continuous disclosure 202 674 Continuous disclosure-listed disclosing entity bound by a disclosure requirement in market listing rules 202 675 Continuous disclosure-other disclosing entities 203 676 Sections 674 and 675-when information is generally available 205 677 Sections 674 and 675-material effect on price or value 206 678 Application of Criminal Code to offences based on subsection 674(2), 674(5) or 675(2) 206 Chapter 6D-Fundraising 207 Part 6D.1-Application of the fundraising provisions 207 700 Coverage of the fundraising rules 207 702 Treatment of offers of options over securities 207 703 Chapter may not be contracted out of 208 703A Operating a clearing and settlement facility is not offering securities etc. 208 Part 6D.2-Disclosure to investors about securities 209 Division 1-Overview 209 704 When disclosure to investors is needed 209 705 Types of disclosure document 209 Division 2-Offers that need disclosure to investors 211 706 Issue offers that need disclosure 211 707 Sale offers that need disclosure 211 708 Offers that do not need disclosure 214 708AA Rights issues that do not need disclosure 220 708A Sale offers that do not need disclosure 223 Division 3-Types of disclosure documents 228 709 Prospectuses, short-form prospectuses, profile statements and offer information statements 228 Division 4-Disclosure requirements 230 710 Prospectus content-general disclosure test 230 711 Prospectus content-specific disclosures 232 712 Prospectus content-short form prospectuses 234 713 Special prospectus content rules for continuously quoted securities 235 714 Contents of profile statement 237 715 Contents of offer information statement 238 715A Presentation etc. of disclosure documents 239 716 Disclosure document date and consents 239 Division 5-Procedure for offering securities 241 717 Overview of procedure for offering securities 241 718 Lodging of disclosure document 243 719 Lodging supplementary or replacement document 243 720 Consents needed for lodgment 245 721 Offer must be made in, or accompanied by, the disclosure document 247 722 Application money to be held on trust 248 723 Issuing or transferring the securities under a disclosure document 249 724 Choices open to person making the offer if disclosure document condition not met or disclosure document defective 250 725 Expiration of disclosure document 253 Part 6D.3-Prohibitions, liabilities and remedies 254 Division 1-Prohibitions and liabilities 254 726 Offering securities in a body that does not exist 254 727 Offering securities without a current disclosure document 254 728 Misstatement in, or omission from, disclosure document 255 729 Right to recover for loss or damage resulting from contravention 257 730 People liable on disclosure document to inform person making the offer about deficiencies in the disclosure document 258 731 Due diligence defence for prospectuses 258 732 Lack of knowledge defence for offer information statements and profile statements 259 733 General defences for all disclosure documents 260 734 Restrictions on advertising and publicity 261 735 Obligation to keep consents and other documents 265 736 Securities hawking prohibited 265 Division 2-Remedies 267 737 Remedies for investors 267 738 Securities may be returned and refund obtained 267 Part 6D.4-ASIC's powers 268 739 ASIC stop orders 268 740 Anti-avoidance determinations 270 741 ASIC's power to exempt and modify 270 Part 6D.5-Miscellaneous 272 742 Exemptions and modifications by regulations 272 Chapter 5C-Managed investment schemes Part 5C.1-Registration of managed investment schemes 601EA Applying for registration (1) To register a managed investment scheme, a person must lodge an application with ASIC. (2) The application must state: (a) the name, and the address of the registered office, of the proposed responsible entity; and (b) the name and address of a person who has consented to be the auditor of the compliance plan. (3) The applicant must have the consent referred to in paragraph (2)(b) when the application is lodged. After the scheme is registered, the applicant must give the consent to the responsible entity. The responsible entity must keep the consent. (4) The following must be lodged with the application: (a) a copy of the scheme's constitution; (b) a copy of the scheme's compliance plan; (c) a statement signed by the directors of the proposed responsible entity that: (i) the scheme's constitution complies with sections 601GA and 601GB; and (ii) the scheme's compliance plan complies with section 601HA. Note: Section 601HC requires that the copy of the compliance plan be signed by the directors of the responsible entity. 601EB Registration of managed investment scheme (1) ASIC must register the scheme within 14 days of lodgment of the application, unless it appears to ASIC that: (c) the application does not comply with section 601EA; or (d) the proposed responsible entity does not meet the requirements of section 601FA; or (e) the scheme's constitution does not meet the requirements of sections 601GA and 601GB; or (f) the scheme's compliance plan does not meet the requirements of section 601HA; or (g) the copy of the compliance plan lodged with the application is not signed as required by section 601HC; or (h) arrangements are not in place that will satisfy the requirements of section 601HG in relation to audit of compliance with the plan. (2) If ASIC registers the scheme, ASIC must give it an ARSN. (3) ASIC must keep a record of the registration of the scheme. (4) For the purpose of determining whether subsection (1) is satisfied in relation to the scheme: (a) references in Parts 5C.3, 5C.4 and 5C.5 to a registered scheme are taken to include a reference to the scheme; and (b) references in those Parts to the responsible entity of a registered scheme are taken to include a reference to the proposed responsible entity of the scheme. 601EC All documents etc. lodged with ASIC to bear ARSN or ABN After a managed investment scheme is registered, all documents relating to the scheme that are lodged with ASIC must set out: (a) the scheme's ARSN; or (b) if the last 9 digits of the scheme's ARSN are the same, and in the same order, as the last 9 digits of its ABN-the scheme's ABN. Note: In any case where the scheme's ARSN would be used, the scheme's ABN may be used instead if section 1344 is satisfied. 601ED When a managed investment scheme must be registered (1) Subject to subsection (2), a managed investment scheme must be registered under section 601EB if: (a) it has more than 20 members; or (b) it was promoted by a person, or an associate of a person, who was, when the scheme was promoted, in the business of promoting managed investment schemes; or (c) a determination under subsection (3) is in force in relation to the scheme and the total number of members of all of the schemes to which the determination relates exceeds 20. (2) A managed investment scheme does not have to be registered if all the issues of interests in the scheme that have been made would not have required the giving of a Product Disclosure Statement under Division 2 of Part 7.9 if the scheme had been registered when the issues were made. (3) ASIC may, in writing, determine that a number of managed investment schemes are closely related and that each of them has to be registered at any time when the total number of members of all of the schemes exceeds 20. ASIC must give written notice of the determination to the operator of each of the schemes. (4) For the purpose of this section, when working out how many members a scheme has: (a) joint holders of an interest in the scheme count as a single member; and (b) an interest in the scheme held on trust for a beneficiary is taken to be held by the beneficiary (rather than the trustee) if: (i) the beneficiary is presently entitled to a share of the trust estate or of the income of the trust estate; or (ii) the beneficiary is, individually or together with other beneficiaries, in a position to control the trustee. (5) A person must not operate in this jurisdiction a managed investment scheme that this section requires to be registered under section 601EB unless the scheme is so registered. (6) For the purpose of subsection (5), a person is not operating a scheme merely because: (a) they are acting as an agent or employee of another person; or (b) they are taking steps to wind up the scheme or remedy a defect that led to the scheme being deregistered. (7) A person who would otherwise contravene subsection (5) because an interest in a scheme is held in trust for 2 or more beneficiaries (see paragraph (4)(b)) does not contravene that subsection if they prove that they did not know, and had no reason to suspect, that the interest was held in that way. 601EE Unregistered schemes may be wound up (1) If a person operates a managed investment scheme in contravention of subsection 601ED(5), the following may apply to the Court to have the scheme wound up: (a) ASIC; (b) the person operating the scheme; (c) a member of the scheme. (2) The Court may make any orders it considers appropriate for the winding up of the scheme. Part 5C.2-The responsible entity Division 1-Responsibilities and powers 601FA Responsible entity to be public company and hold Australian financial services licence The responsible entity of a registered scheme must be a public company that holds an Australian financial services licence authorising it to operate a managed investment scheme. 601FB Responsible entity to operate scheme (1) The responsible entity of a registered scheme is to operate the scheme and perform the functions conferred on it by the scheme's constitution and this Act. (2) The responsible entity has power to appoint an agent, or otherwise engage a person, to do anything that it is authorised to do in connection with the scheme. For the purpose of determining whether: (a) there is a liability to the members; or (b) the responsible entity has properly performed its duties for the purposes of subsection 601GA(2); the responsible entity is taken to have done (or failed to do) anything that the agent or person has done (or failed to do) because of the appointment or engagement, even if they were acting fraudulently or outside the scope of their authority or engagement. Note: A scheme's constitution may provide for the responsible entity to be indemnified for liabilities-see subsection 601GA(2). (3) An agent appointed, or a person otherwise engaged, by: (a) the agent or person referred to in subsection (2); or (b) a person who is taken under this subsection to be an agent of the responsible entity; to do anything that the responsible entity is authorised to do in connection with the scheme is taken to be an agent appointed by the responsible entity to do that thing for the purposes of subsection (2). (4) If: (a) an agent holds scheme property on behalf of the responsible entity; and (b) the agent is liable to indemnify the responsible entity against any loss or damage that: (i) the responsible entity suffers as a result of a wrongful or negligent act or omission of the agent; and (ii) relates to a failure by the responsible entity to perform its duties in relation to the scheme; any amount recovered under the indemnity forms part of the scheme property. 601FC Duties of responsible entity (1) In exercising its powers and carrying out its duties, the responsible entity of a registered scheme must: (a) act honestly; and (b) exercise the degree of care and diligence that a reasonable person would exercise if they were in the responsible entity's position; and (c) act in the best interests of the members and, if there is a conflict between the members' interests and its own interests, give priority to the members' interests; and (d) treat the members who hold interests of the same class equally and members who hold interests of different classes fairly; and (e) not make use of information acquired through being the responsible entity in order to: (i) gain an improper advantage for itself or another person; or (ii) cause detriment to the members of the scheme; and (f) ensure that the scheme's constitution meets the requirements of sections 601GA and 601GB; and (g) ensure that the scheme's compliance plan meets the requirements of section 601HA; and (h) comply with the scheme's compliance plan; and (i) ensure that scheme property is: (i) clearly identified as scheme property; and (ii) held separately from property of the responsible entity and property of any other scheme; and (j) ensure that the scheme property is valued at regular intervals appropriate to the nature of the property; and (k) ensure that all payments out of the scheme property are made in accordance with the scheme's constitution and this Act; and (l) report to ASIC any breach of this Act that: (i) relates to the scheme; and (ii) has had, or is likely to have, a materially adverse effect on the interests of members; as soon as practicable after it becomes aware of the breach; and (m) carry out or comply with any other duty, not inconsistent with this Act, that is conferred on the responsible entity by the scheme's constitution. (2) The responsible entity holds scheme property on trust for scheme members. Note: Under subsection 601FB(2), the responsible entity may appoint an agent to hold scheme property separately from other property. (3) A duty of the responsible entity under subsection (1) or (2) overrides any conflicting duty an officer or employee of the responsible entity has under Part 2D.1. (5) A responsible entity who contravenes subsection (1), and any person who is involved in a responsible entity's contravention of that subsection, contravenes this subsection. Note 1: Section 79 defines involved. Note 2: Subsection (5) is a civil penalty provision (see section 1317E). (6) A person must not intentionally or recklessly be involved in a responsible entity's contravention of subsection (1). 601FD Duties of officers of responsible entity (1) An officer of the responsible entity of a registered scheme must: (a) act honestly; and (b) exercise the degree of care and diligence that a reasonable person would exercise if they were in the officer's position; and (c) act in the best interests of the members and, if there is a conflict between the members' interests and the interests of the responsible entity, give priority to the members' interests; and (d) not make use of information acquired through being an officer of the responsible entity in order to: (i) gain an improper advantage for the officer or another person; or (ii) cause detriment to the members of the scheme; and (e) not make improper use of their position as an officer to gain, directly or indirectly, an advantage for themselves or for any other person or to cause detriment to the members of the scheme; and (f) take all steps that a reasonable person would take, if they were in the officer's position, to ensure that the responsible entity complies with: (i) this Act; and (ii) any conditions imposed on the responsible entity's Australian financial services licence; and (iii) the scheme's constitution; and (iv) the scheme's compliance plan. (2) A duty of an officer of the responsible entity under subsection (1) overrides any conflicting duty the officer has under Part 2D.1. (3) A person who contravenes, or is involved in a contravention of, subsection (1) contravenes this subsection. Note 1: Section 79 defines involved. Note 2: Subsection (3) is a civil penalty provision (see section 1317E). (4) A person must not intentionally or recklessly contravene, or be involved in a contravention of, subsection (1). 601FE Duties of employees of responsible entity (1) An employee of the responsible entity of a registered scheme must not: (a) make use of information acquired through being an employee of the responsible entity in order to: (i) gain an improper advantage for the employee or another person; or (ii) cause detriment to members of the scheme; or (b) make improper use of their position as an employee to gain, directly or indirectly, an advantage for themselves or for any other person or to cause detriment to the members of the scheme. (2) A duty of an employee of the responsible entity under subsection (1) overrides any conflicting duty the employee has under Part 2D.1. (3) A person who contravenes, or is involved in a contravention of, subsection (1) contravenes this subsection. Note 1: Section 79 defines involved. Note 2: Subsection (3) is a civil penalty provision (see section 1317E). (4) A person must not intentionally contravene, or be involved in a contravention of, subsection (1). 601FF Surveillance checks by ASIC (1) ASIC may, from time to time, check whether the responsible entity of a registered scheme is complying with the scheme's constitution and compliance plan and with this Act. Note: For this purpose ASIC may exercise the powers set out in Division 3 of Part 3 of the ASIC Act. (2) The responsible entity and its officers must take all reasonable steps to assist ASIC in carrying out a check under subsection (1). (3) A person must not intentionally or recklessly fail to comply with subsection (2). 601FG Acquisition of interest in scheme by responsible entity (1) The responsible entity of a registered scheme may acquire and hold an interest in the scheme, but it must only do so: (a) for not less than the consideration that would be payable if the interest were acquired by another person; and (b) subject to terms and conditions that would not disadvantage other members. Note: If the responsible entity holds an interest in the scheme, it does so subject to section 253E (certain members cannot vote or be counted). (2) A responsible entity who contravenes subsection (1), and any person who is involved in a responsible entity's contravention of that subsection, contravenes this subsection. Note 1: Section 79 defines involved. Note 2: Subsection (2) is a civil penalty provision (see section 1317E). (3) A person must not intentionally be involved in a responsible entity's contravention of subsection (1). 601FH Liquidator etc. of responsible entity entitled to exercise indemnity rights If the company that is a registered scheme's responsible entity is being wound up, is under administration or has executed a deed of company arrangement that has not terminated: (a) a provision of the scheme's constitution, or of another instrument, is void against the liquidator, or the administrator of the company or the deed, if it purports to deny the company a right to be indemnified out of the scheme property that the company would have had if it were not being wound up, were not under administration, or had not executed a deed of company arrangement; and (b) a right of the company to be indemnified out of the scheme property may only be exercised by the liquidator or the administrator of the company or the deed. Division 2-Changing the responsible entity 601FJ Changes only take effect when ASIC alters record of registration (1) Despite anything in this Division, the company named in ASIC's record of registration as the responsible entity or temporary responsible entity of a registered scheme remains the scheme's responsible entity until the record is altered to name another company as the scheme's responsible entity or temporary responsible entity. (2) A purported change of the scheme's responsible entity is ineffective unless it is in accordance with this Division. 601FK Requirements of section 601FA must be met A company cannot be chosen or appointed as the responsible entity or temporary responsible entity of a registered scheme unless it meets the requirements of section 601FA. 601FL Retirement of responsible entity (1) If the responsible entity of a registered scheme wants to retire, it must call a members' meeting to explain its reason for wanting to retire and to enable the members to vote on a resolution to choose a company to be the new responsible entity. The resolution must be an extraordinary resolution if the scheme is not listed. (2) If the members choose a company to be the new responsible entity and that company has consented, in writing, to becoming the scheme's responsible entity: (a) as soon as practicable and in any event within 2 business days after the resolution is passed, the current responsible entity must lodge a notice with ASIC asking it to alter the record of the scheme's registration to name the chosen company as the scheme's responsible entity; and (b) if the current responsible entity does not lodge the notice required by paragraph (a), the company chosen by the members to be the new responsible entity may lodge that notice; and (c) ASIC must comply with the notice when it is lodged. (3) If the members do not choose a company to be the new responsible entity, or the company they choose does not consent to becoming the scheme's responsible entity, the current responsible entity may apply to the Court for appointment of a temporary responsible entity under section 601FP. (4) A person must not lodge a notice under subsection (2) unless the consent referred to in that subsection has been given before the notice is lodged. 601FM Removal of responsible entity by members (1) If members of a registered scheme want to remove the responsible entity, they may take action under Division 1 of Part 2G.4 for the calling of a members' meeting to consider and vote on a resolution that the current responsible entity should be removed and a resolution choosing a company to be the new responsible entity. The resolutions must be extraordinary resolutions if the scheme is not listed. (2) If the members vote to remove the responsible entity and, at the same meeting, choose a company to be the new responsible entity that consents, in writing, to becoming the scheme's responsible entity: (a) as soon as practicable and in any event within 2 business days after the resolution is passed, the current responsible entity must lodge a notice with ASIC asking it to alter the record of the scheme's registration to name the chosen company as the scheme's responsible entity; and (b) if the current responsible entity does not lodge the notice required by paragraph (a), the company chosen by the members to be the new responsible entity may lodge that notice; and (c) ASIC must comply with the notice when it is lodged. (3) A person must not lodge a notice under subsection (2) unless the consent referred to in that subsection has been given before the notice is lodged. Note: If the members vote to remove the responsible entity but do not, at the same meeting, choose a company to be the new responsible entity, or the company they choose does not consent to becoming the scheme's responsible entity, the scheme must be wound up (see section 601NE). 601FN ASIC or scheme member may apply to Court for appointment of temporary responsible entity ASIC or a member of the registered scheme may apply to the Court for the appointment of a temporary responsible entity of the scheme under section 601FP if the scheme does not have a responsible entity that meets the requirements of section 601FA. 601FP Appointment of temporary responsible entity by Court (1) On application under section 601FL or 601FN, the Court may, by order, appoint a company as the temporary responsible entity of a registered scheme if the Court is satisfied that the appointment is in the interest of the members. (2) The Court may make any further orders that it considers necessary. (3) If the application was made by the current responsible entity, it must, as soon as practicable after the Court's order appointing the temporary responsible entity, lodge a notice with ASIC informing ASIC of the appointment made by the Court. (4) As soon as practicable after the appointment, ASIC must alter the record of the scheme's registration to name the appointed company as the scheme's temporary responsible entity. 601FQ Temporary responsible entity to take steps for appointment of new responsible entity (1) The temporary responsible entity of a registered scheme must call a members' meeting for the purpose of the members, by resolution, choosing a company to be the new responsible entity. The resolution must be an extraordinary resolution if the scheme is not listed. The temporary responsible entity must call the meeting as soon as practicable and, in any event, within 3 months of becoming the temporary responsible entity. (2) Within that 3 months, the temporary responsible entity may call further members' meetings for the purpose of choosing a company to be the new responsible entity. Before the end of the 3 months, it may apply to the Court for an extension of that period. If the Court grants the extension, the temporary responsible entity may, within the extended period, call further members' meetings for the purpose of choosing a company to be the new responsible entity. (3) Provided it still meets the requirements in section 601FA, nothing prevents the company that is the temporary responsible entity from being chosen as the new responsible entity. (4) If the members choose a company to be the new responsible entity and that company has consented, in writing, to becoming the scheme's responsible entity, the temporary responsible entity must, as soon as practicable, lodge a notice with ASIC asking it to alter the record of the scheme's registration to name the chosen company as the scheme's responsible entity. ASIC must comply with the notice when it is lodged. (5) The temporary responsible entity must apply to the Court for an order directing it to wind up the scheme, and the Court may make the order, if: (a) no meeting is called within the 3 months or extended period for the purpose of choosing a new company to be the responsible entity; or (b) the meeting or meetings called within that period for that purpose have not resulted in the members choosing a company to be the new responsible entity that consents to becoming the scheme's responsible entity. ASIC or a member of the scheme may apply for the order if the temporary responsible entity does not do so. (6) The temporary responsible entity must not lodge a notice under subsection (4) unless the consent referred to in that subsection has been given before the notice is lodged. Division 3-Consequences of change of responsible entity 601FR Former responsible entity to hand over books and provide reasonable assistance If the responsible entity of a registered scheme changes, the former responsible entity must: (a) as soon as practicable give the new responsible entity any books in the former responsible entity's possession or control that this Act requires to be kept in relation to the scheme; and (b) give other reasonable assistance to the new responsible entity to facilitate the change of responsible entity. 601FS Rights, obligations and liabilities of former responsible entity (1) If the responsible entity of a registered scheme changes, the rights, obligations and liabilities of the former responsible entity in relation to the scheme become rights, obligations and liabilities of the new responsible entity. (2) Despite subsection (1), the following rights and liabilities remain rights and liabilities of the former responsible entity: (a) any right of the former responsible entity to be paid fees for the performance of its functions before it ceased to be the responsible entity; and (b) any right of the former responsible entity to be indemnified for expenses it incurred before it ceased to be the responsible entity; and (c) any right, obligation or liability that the former responsible entity had as a member of the scheme; and (d) any liability for which the former responsible entity could not have been indemnified out of the scheme property if it had remained the scheme's responsible entity. 601FT Effect of change of responsible entity on documents etc. to which former responsible entity is party (1) If the responsible entity of a registered scheme changes, a document: (a) to which the former responsible entity is a party, in which a reference is made to the former responsible entity, or under which the former responsible entity has acquired or incurred a right, obligation or liability, or might have acquired or incurred a right, obligation or liability if it had remained the responsible entity; and (b) that is capable of having effect after the change; has effect as if the new responsible entity (and not the former responsible entity) were a party to it, were referred to in it or had or might have acquired or incurred the right, obligation or liability under it. (2) Subsection (1) does not apply to a right, obligation or liability that remains a right, obligation or liability of the former responsible entity because of subsection 601FS(2). Part 5C.3-The constitution 601GA Contents of the constitution (1) The constitution of a registered scheme must make adequate provision for: (a) the consideration that is to be paid to acquire an interest in the scheme; and (b) the powers of the responsible entity in relation to making investments of, or otherwise dealing with, scheme property; and (c) the method by which complaints made by members in relation to the scheme are to be dealt with; and (d) winding up the scheme. (2) If the responsible entity is to have any rights to be paid fees out of scheme property, or to be indemnified out of scheme property for liabilities or expenses incurred in relation to the performance of its duties, those rights: (a) must be specified in the scheme's constitution; and (b) must be available only in relation to the proper performance of those duties; and any other agreement or arrangement has no effect to the extent that it purports to confer such a right. (3) If the responsible entity is to have any powers to borrow or raise money for the purposes of the scheme: (a) those powers must be specified in the scheme's constitution; and (b) any other agreement or arrangement has no effect to the extent that it purports to confer such a power. (4) If members are to have a right to withdraw from the scheme, the scheme's constitution must: (a) specify the right; and (b) if the right may be exercised while the scheme is liquid (as defined in section 601KA)-set out adequate procedures for making and dealing with withdrawal requests; and (c) if the right may be exercised while the scheme is not liquid (as defined in section 601KA)-provide for the right to be exercised in accordance with Part 5C.6 and set out any other adequate procedures (consistent with that Part) that are to apply to making and dealing with withdrawal requests. The right to withdraw, and any provisions in the constitution setting out procedures for making and dealing with withdrawal requests, must be fair to all members. 601GB Constitution must be legally enforceable The constitution of a registered scheme must be contained in a document that is legally enforceable as between the members and the responsible entity. 601GC Changing the constitution (1) The constitution of a registered scheme may be modified, or repealed and replaced with a new constitution: (a) by special resolution of the members of the scheme; or (b) by the responsible entity if the responsible entity reasonably considers the change will not adversely affect members' rights. (2) The responsible entity must lodge with ASIC a copy of the modification or the new constitution. The modification, or repeal and replacement, cannot take effect until the copy has been lodged. (3) The responsible entity must lodge with ASIC a consolidated copy of the scheme's constitution if ASIC directs it to do so. (4) The responsible entity must send a copy of the scheme's constitution to a member of the scheme within 7 days if the member: (a) asks the responsible entity, in writing, for the copy; and (b) pays any fee (up to the prescribed amount) required by the responsible entity. Part 5C.4-The compliance plan 601HA Contents of the compliance plan (1) The compliance plan of a registered scheme must set out adequate measures that the responsible entity is to apply in operating the scheme to ensure compliance with this Act and the scheme's constitution, including the arrangements for: (a) ensuring that all scheme property is clearly identified as scheme property and held separately from property of the responsible entity and property of any other scheme (see paragraph 601FC(1)(i)); and (b) if the scheme is required to have a compliance committee (see section 601JA)-ensuring that the compliance committee functions properly, including adequate arrangements relating to: (i) the membership of the committee; and (ii) how often committee meetings are to be held; and (iii) the committee's reports and recommendations to the responsible entity; and (iv) the committee's access to the scheme's accounting records and to the auditor of the scheme's financial statements; and (v) the committee's access to information that is relevant to the responsible entity's compliance with this Act; and (c) ensuring that the scheme property is valued at regular intervals appropriate to the nature of the property; and (d) ensuring that compliance with the plan is audited as required by section 601HG; and (e) ensuring adequate records of the scheme's operations are kept; and (f) any other matter prescribed by the regulations. (2) If: (a) a registration application is made as a result of a resolution passed under subparagraph 1457(1)(a)(i); and (b) the resolution included a direction under subsection 1457(1A); the compliance plan lodged with the application must provide for scheme property to be held by a person other than the responsible entity, or a person that is not related to the responsible entity, as the responsible entity's agent. 601HB Compliance plan may incorporate provisions from another scheme's plan (1) The responsible entity of a registered scheme may lodge with ASIC a compliance plan for the scheme that is expressed to incorporate specified provisions, as in force at a specified time, of a compliance plan of another registered scheme of which it is also the responsible entity. (2) The specified provisions, as in force at the specified time, are taken to be included in the plan. 601HC Directors must sign lodged copy of compliance plan The copy of a scheme's compliance plan that is lodged with ASIC must be signed by all the directors of the responsible entity. 601HD ASIC may require further information about compliance plan (1) ASIC may direct the responsible entity of a registered scheme to give it information about the arrangements contained in the compliance plan. The direction is to be given by notice in writing to the responsible entity. (2) An offence based on subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. 601HE Changing the compliance plan Responsible entity's powers (1) The responsible entity of a registered scheme may modify the scheme's compliance plan or repeal it and replace it with a new compliance plan. ASIC may require modifications (2) ASIC may direct the responsible entity of a registered scheme to modify the scheme's compliance plan, as set out in the direction, to ensure that the plan is consistent with section 601HA. The direction is to be given by notice in writing to the responsible entity. Lodgment of modification or new plan (3) The responsible entity must lodge with ASIC a copy of a modification of the scheme's compliance plan or of a new compliance plan within 14 days after the modification is made or the old plan is repealed. The copy must be signed by all the directors of the responsible entity. 601HF ASIC may require consolidation of compliance plan to be lodged (1) ASIC may direct the responsible entity of a registered scheme to lodge a consolidated copy of the scheme's compliance plan. (2) The consolidation must set out: (a) the plan as modified to the time of lodgment; and (b) if required by ASIC's direction-the full text of provisions taken to be included in the plan by subsection 601HB(2). 601HG Audit of compliance plan (1) The responsible entity of a registered scheme must ensure that at all times a registered company auditor, an audit firm or an authorised audit company is engaged to audit compliance with the scheme's compliance plan in accordance with this section. This auditor, firm or company is referred to as the auditor of the compliance plan. (2) A person is not eligible to act as the individual auditor, lead auditor or review auditor of the compliance plan if the person is: (a) an associate of the responsible entity; or (b) an agent holding scheme property on behalf of the responsible entity or an associate of an agent of that kind; or (c) the auditor of the responsible entity's financial statements. (2A) However: (a) the auditor of the compliance plan and the auditor of the responsible entity's financial statements may work for the same firm of auditors or audit company; and (b) the lead auditor or review auditor of the compliance plan (on the one hand) and the lead auditor or review auditor of the responsible entity's financial statements (on the other hand) may work for the same firm of auditors or audit company. (3) Within 3 months after the end of a financial year of the scheme, the auditor of the compliance plan must: (a) examine the scheme's compliance plan; and (b) carry out: (i) if the scheme has only had one responsible entity during the financial year-an audit of the responsible entity's compliance with the compliance plan during the financial year; or (ii) if the scheme has had more than one responsible entity during the financial year-an audit of each responsible entity's compliance with the compliance plan during that part of the financial year when it was the scheme's responsible entity; and (c) give to the scheme's current responsible entity a report that states whether, in the auditor's opinion: (i) the responsible entity, or each responsible entity, complied with the scheme's compliance plan during the financial year or that part of the financial year when it was the scheme's responsible entity; and (ii) the plan continues to meet the requirements of this Part. Contravention by individual auditor (4) An individual auditor conducting an audit of a compliance plan contravenes this subsection if: (a) the auditor is aware of circumstances that: (i) the auditor has reasonable grounds to suspect amount to a contravention of this Act; or (ii) amount to an attempt, in relation to the audit, by any person to unduly influence, coerce, manipulate or mislead a person involved in the conduct of the audit (see subsection (12)); or (iii) amount to an attempt, by any person, to otherwise interfere with the proper conduct of the audit; and (b) if subparagraph (a)(i) applies: (i) the contravention is a significant one; or (ii) the contravention is not a significant one and the auditor believes that the contravention has not been or will not be adequately dealt with by commenting on it in the auditor's report or bringing it to the attention of the directors; and (c) the auditor does not notify ASIC in writing of those circumstances as soon as practicable, and in any case within 28 days, after the auditor becomes aware of those circumstances. Contravention by audit company (4A) An audit company conducting an audit of a compliance plan contravenes this subsection if: (a) the lead auditor for the audit is aware of circumstances that: (i) the lead auditor has reasonable grounds to suspect amount to a contravention of this Act; or (ii) amount to an attempt, in relation to the audit, by any person to unduly influence, coerce, manipulate or mislead a person involved in the conduct of the audit (see subsection (12)); or (iii) amount to an attempt, by any person, to otherwise interfere with the proper conduct of the audit; and (b) if subparagraph (a)(i) applies: (i) the contravention is a significant one; or (ii) the contravention is not a significant one and the lead auditor believes that the contravention has not been or will not be adequately dealt with by commenting on it in the auditor's report or bringing it to the attention of the directors; and (c) the lead auditor does not notify ASIC in writing of those circumstances as soon as practicable, and in any case within 28 days, after the lead auditor becomes aware of those circumstances. Contravention by lead auditor (4B) A person contravenes this subsection if: (a) the person is the lead auditor for an audit of a compliance plan; and (b) the person is aware of circumstances that: (i) the person has reasonable grounds to suspect amount to a contravention of this Act; or (ii) amount to an attempt, in relation to the audit, by any person to unduly influence, coerce, manipulate or mislead a person involved in the conduct of the audit (see subsection (12)); or (iii) amount to an attempt, by any person, to otherwise interfere with the proper conduct of the audit; and (c) if subparagraph (b)(i) applies: (i) the contravention is a significant one; or (ii) the contravention is not a significant one and the person believes that the contravention has not been or will not be adequately dealt with by commenting on it in the auditor's report or bringing it to the attention of the directors; and (d) the person does not notify ASIC in writing of those circumstances as soon as practicable, and in any case within 28 days, after the person becomes aware of those circumstances. (5) The auditor of the compliance plan: (a) has a right of access at all reasonable times to the books of the scheme; and (b) may require an officer of the responsible entity to give the auditor information and explanations for the purposes of the audit. (6) An officer of the responsible entity must: (a) allow the auditor of the compliance plan to have access to the books of the scheme; and (b) give the auditor information or an explanation required under subsection (5); and (c) otherwise assist the conduct of the audit. (7) The responsible entity must lodge the auditor's report under subsection (3) with ASIC at the same time as the financial statements and reports in respect of the scheme are to be lodged with ASIC (see sections 292 and 321). (7A) An offence based on subsection (1), (3), (6) or (7) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. (8) The auditor of the compliance plan has qualified privilege in respect of: (a) a statement made in a report under subsection (3); or (b) a notification to ASIC under subsection (4). (9) This section does not prevent the responsible entity from arranging for the auditor of the compliance plan to carry out audits in addition to those required by this section. Significant contraventions (10) In determining for the purposes of this section whether a contravention of this Act is a significant one, have regard to: (a) the level of penalty provided for in relation to the contravention; and (b) the effect that the contravention has, or may have, on: (i) the overall financial position of the company, registered scheme or disclosing entity; or (ii) the adequacy of the information available about the overall financial position of the company, registered scheme or disclosing entity; and (c) any other relevant matter. (11) Without limiting paragraph (10)(a), a penalty provided for in relation to a contravention of a provision of Part 2M.2 or 2M.3 includes a penalty imposed on a director, because of the operation of section 344, for failing to take reasonable steps to comply with, or to secure compliance with, that provision. Person involved in audit (12) In this section: person involved in the conduct of an audit means: (a) the auditor; or (b) the lead auditor for the audit; or (c) the review auditor for the audit; or (d) a professional member of the audit team for the audit; or (e) any other person involved in the conduct of the audit. 601HH Removal and resignation of auditors Removal of auditor by responsible entity (1) The responsible entity: (a) must remove the auditor of the compliance plan if the auditor becomes ineligible under subsection 601HG(2) to act as auditor of the compliance plan; and (b) may, with ASIC's consent, remove the auditor of the compliance plan. Resignation of auditor (2) The auditor of the compliance plan may resign by written notice to the responsible entity if: (a) the auditor: (i) applies to ASIC in writing for its consent to the resignation; and (ii) gives the responsible entity written notice of the application at or about the same time as applying to ASIC; and (b) ASIC consents to the resignation. (3) As soon as practicable after receiving the application, ASIC must notify the auditor and the responsible entity whether it consents to the resignation. (4) A statement by the auditor in the application or in answer to an inquiry by ASIC relating to the reasons for the application: (a) is not admissible in evidence in any civil or criminal proceedings against the auditor (other than proceedings for a contravention of section 1308); and (b) may not be made the ground of a prosecution (other than a prosecution for a contravention of section 1308), action or suit against the auditor. A certificate by ASIC that the statement was made in the application, or in answer to an inquiry by ASIC, is conclusive evidence that the statement was so made. (5) The auditor's resignation takes effect on the later of: (a) the day (if any) specified in the notice of resignation; or (b) the day ASIC consents to the resignation; or (c) the day (if any) fixed by ASIC for the purpose. 601HI Action on change of auditor of compliance plan If the auditor of the compliance plan of a registered scheme changes, the responsible entity must, as soon as practicable after the change and in writing, ask ASIC to alter the record of the scheme's registration to show the name of the new auditor as the auditor of the scheme's compliance plan. ASIC must comply with the request if the change complies with this Act. Part 5C.5-The compliance committee 601JA When is a compliance committee required? (1) The responsible entity of a registered scheme must establish a compliance committee if less than half of the directors of the responsible entity are external directors. (2) A director of the responsible entity is an external director if they: (a) are not, and have not been in the previous 2 years, an employee of the responsible entity or a related body corporate; and (b) are not, and have not been in the previous 2 years, a senior manager of a related body corporate; and (c) are not, and have not been in the previous 2 years, substantially involved in business dealings, or in a professional capacity, with the responsible entity or a related body corporate; and (d) are not a member of a partnership that is, or has been in the previous 2 years, substantially involved in business dealings, or in a professional capacity, with the responsible entity or a related body corporate; and (e) do not have a material interest in the responsible entity or a related body corporate; and (f) are not a relative or de facto spouse of a person who has a material interest in the responsible entity or a related body corporate. (3) The responsible entity must establish the compliance committee within 14 days after it is required to do so by subsection (1) or within any longer period that ASIC has agreed to in writing. (3A) A person must not intentionally or recklessly fail to comply with subsection (3). (4) In agreeing to a longer period under subsection (3), ASIC may impose conditions to be complied with and the responsible entity must comply with them. (4A) An offence based on subsection (4) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. 601JB Membership of compliance committee (1) A scheme's compliance committee must have at least 3 members, and a majority of them must be external members. (2) A member of the compliance committee is an external member if they: (a) are not, and have not been in the previous 2 years, a non- external director, a senior manager or an employee of the responsible entity or a related body corporate; and (b) are not, and have not been in the previous 2 years, substantially involved in business dealings, or in a professional capacity, with the responsible entity or a related body corporate; and (c) are not a member of a partnership that is, or has been in the previous 2 years, substantially involved in business dealings, or in a professional capacity, with the responsible entity or a related body corporate; and (d) do not have a material interest in the responsible entity or a related body corporate; and (e) are not a relative or de facto spouse of a person who has a material interest in the responsible entity or a related body corporate. (3) For the purposes of paragraph (2)(a), a person who is a director of a related body corporate, but not of the responsible entity itself, is an external director of the related body corporate if they would have been an external director of the responsible entity under subsection 601JA(2) had they been a director of the responsible entity. (4) A person who is, or has been, either: (a) an external director of the responsible entity; or (b) a member of a compliance committee for the scheme or another registered managed investment scheme operated by the responsible entity; is not, merely because of that directorship or membership, taken to be, or to have been, substantially involved in business dealings, or in a professional capacity, with the responsible entity. (5) If the membership of the scheme's compliance committee ceases to satisfy subsection (1), the responsible entity must make appointments to the committee to satisfy that subsection within 14 days or within any longer period that ASIC has agreed to in writing. (6) In agreeing to a longer period under subsection (5), ASIC may impose conditions to be complied with and the responsible entity must comply with them. (7) An offence based on subsection (5) or (6) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. 601JC Functions of compliance committee (1) The functions of a scheme's compliance committee are: (a) to monitor to what extent the responsible entity complies with the scheme's compliance plan and to report on its findings to the responsible entity; and (b) to report to the responsible entity: (i) any breach of this Act involving the scheme; or (ii) any breach of the provisions included in the scheme's constitution in accordance with section 601GA; of which the committee becomes aware or that it suspects; and (c) to report to ASIC if the committee is of the view that the responsible entity has not taken, or does not propose to take, appropriate action to deal with a matter reported under paragraph (b); and (d) to assess at regular intervals whether the compliance plan is adequate, to report to the responsible entity on the assessment and to make recommendations to the responsible entity about any changes that it considers should be made to the plan. (2) In carrying out its functions, the compliance committee may commission independent legal, accounting or other professional advice or assistance, at the reasonable expense of the responsible entity. 601JD Duties of members (1) A member of a scheme's compliance committee must: (a) act honestly; and (b) exercise the degree of care and diligence that a reasonable person would exercise if they were in the member's position; and (c) not make use of information acquired through being a member of the committee in order to: (i) gain an improper advantage for the member or another person; or (ii) cause detriment to the members of the scheme; and (d) not make improper use of their position as a member of the committee to gain, directly or indirectly, an advantage for themselves or for any other person or to cause detriment to the members of the scheme. (2) A member of the compliance committee is to take all reasonable steps to assist ASIC in carrying out a check under subsection 601FF(1). (3) A person who contravenes, or is involved in a contravention of, subsection (1) contravenes this subsection. Note 1: Section 79 defines involved. Note 2: Subsection (3) is a civil penalty provision (see section 1317E). (4) A person must not intentionally or recklessly contravene, or be involved in a contravention of, subsection (1). 601JE Compliance committee members have qualified privilege in certain cases A member of a scheme's compliance committee has qualified privilege in respect of a statement concerning the operation of the scheme made by or on behalf of the committee, or a member of the committee, to the responsible entity or to ASIC. 601JF When can responsible entity indemnify compliance committee members? (1) A scheme's responsible entity or a related body corporate must not: (a) indemnify a person who is or has been a member of the scheme's compliance committee against a liability incurred by the person as a member; or (b) exempt the person from such a liability. (2) A provision of the scheme's constitution or a body corporate's constitution is void in so far as it provides for the responsible entity or a related body corporate to do something that subsection (1) prohibits. (3) Subsection (1) does not prevent a person from being indemnified against a liability to another person (other than the responsible entity or a related body corporate) unless the liability arises out of conduct involving a lack of good faith. (4) Subsection (1) does not prevent a person from being indemnified against a liability for costs and expenses incurred by them: (a) in defending proceedings, whether civil or criminal, in which judgment is given in favour of them or in which they are acquitted; or (b) in connection with an application, in relation to such proceedings, in which the Court grants relief to them under this Act. (5) In this section: indemnify includes indemnify indirectly through one or more interposed entities. 601JG When can responsible entity pay insurance premiums for compliance committee members? (1) A scheme's responsible entity or a related body corporate must not pay, or agree to pay, a premium in respect of a contract insuring a person who is or has been a member of the scheme's compliance committee against a liability: (a) incurred by the person as a member; and (b) arising out of conduct involving a wilful breach of a duty referred to in section 601JD. (2) If subsection (1) is contravened, the contract is void in so far as it insures the person against the liability. (3) Subsections (1) and (2) do not apply to a liability for costs and expenses incurred by a person in defending proceedings, whether civil or criminal and whatever their outcome. (4) In this section: pay includes pay indirectly through one or more interposed entities. 601JH Proceedings of compliance committee (1) Subject to the requirements of the compliance plan, a scheme's compliance committee may regulate its proceedings as it thinks appropriate. (2) The committee must keep: (a) minutes of its meetings; and (b) records of its reports and recommendations. (3) A committee meeting may be held using any technology agreed to by all the members. 601JJ Disclosure of interests (1) A member of a scheme's compliance committee must disclose to the committee a direct or indirect pecuniary interest that they have in a matter being considered, or about to be considered, by the committee if their interest could conflict with the proper performance of their duties in relation to the consideration of the matter. (2) A disclosure under subsection (1) must occur at the first meeting of the committee after the relevant facts have come to the member's knowledge and must be recorded in the minutes of the meeting. Part 5C.6-Members' rights to withdraw from a scheme 601KA Members' rights to withdraw Withdrawal from schemes that are liquid (1) The constitution of a registered scheme may make provision for members to withdraw from the scheme, wholly or partly, at any time while the scheme is liquid (see subsection 601GA(4)). Withdrawal from schemes that are not liquid (2) The constitution of a registered scheme may make provision for members to withdraw from the scheme, wholly or partly, in accordance with this Part while the scheme is not liquid (see subsection 601GA(4)). Restrictions on withdrawal from schemes (3) The responsible entity must not allow a member to withdraw from the scheme: (a) if the scheme is liquid-otherwise than in accordance with the scheme's constitution; or (b) if the scheme is not liquid-otherwise than in accordance with the scheme's constitution and sections 601KB to 601KE. (3A) An offence based on subsection (3) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. Liquid schemes (4) A registered scheme is liquid if liquid assets account for at least 80% of the value of scheme property. Liquid assets (5) The following are liquid assets unless it is proved that the responsible entity cannot reasonably expect to realise them within the period specified in the constitution for satisfying withdrawal requests while the scheme is liquid: (a) money in an account or on deposit with a bank; (b) bank accepted bills; (c) marketable securities (as defined in section 9); (d) property of a prescribed kind. (6) Any other property is a liquid asset if the responsible entity reasonably expects that the property can be realised for its market value within the period specified in the constitution for satisfying withdrawal requests while the scheme is liquid. 601KB Non-liquid schemes-offers (1) The responsible entity of a registered scheme that is not liquid may offer members an opportunity to withdraw, wholly or partly, from the scheme to the extent that particular assets are available and able to be converted to money in time to satisfy withdrawal requests that members may make in response to the offer. (2) The withdrawal offer must be in writing and be made: (a) if the constitution specifies procedures for making the offer- in accordance with those procedures; or (b) otherwise-by giving a copy of the offer to all members of the scheme or to all members of a particular class. (3) The withdrawal offer must specify: (a) the period during which the offer will remain open (this period must last for at least 21 days after the offer is made); and (b) the assets that will be used to satisfy withdrawal requests; and (c) the amount of money that is expected to be available when those assets are converted to money; and (d) the method for dealing with withdrawal requests if the money available is insufficient to satisfy all requests. The method specified under paragraph (d) must comply with section 601KD. (4) For joint members, a copy of the withdrawal offer need only be given to the joint member named first in the register of members. (5) As soon as practicable after making the withdrawal offer, the responsible entity must lodge a copy of the offer with ASIC. 601KC Non-liquid schemes-only one withdrawal offer to be open at any time Only one withdrawal offer may be open at any time in relation to a particular interest in a registered scheme that is not liquid. 601KD Non-liquid schemes-how payments are to be made The responsible entity of a registered scheme that is not liquid must ensure that withdrawal requests made in response to a withdrawal offer are satisfied within 21 days after the offer closes. No request made under the withdrawal offer may be satisfied while the offer is still open. If an insufficient amount of money is available from the assets specified in the offer to satisfy all requests, the requests are to be satisfied proportionately in accordance with the formula: [pic] 601KE Non-liquid schemes-responsible entity may cancel withdrawal offer (1) The responsible entity of a registered scheme that is not liquid: (a) may cancel a withdrawal offer before it closes if the offer contains a material error; or (b) must cancel a withdrawal offer before it closes if it is in the best interests of members to do so. (2) The cancellation must be made: (a) if the constitution specifies procedures for cancelling the withdrawal offer-in accordance with those procedures; or (b) otherwise-by notice in writing to the members to whom the withdrawal offer was made. (3) The responsible entity must lodge written notice of the cancellation with ASIC. Part 5C.7-Related party transactions 601LA Chapter 2E applies with modifications Chapter 2E applies to a registered scheme with the modifications set out in sections 601LB to 601LE and as if: (a) references to a public company were instead references to the responsible entity of the scheme; and (b) references to a benefit being given to or received by a related party of a public company were instead references to a benefit being given to or received by the responsible entity or a related party; and (c) references to a resolution of a public company were instead references to a resolution of the members of the scheme; and (d) references to a general meeting were instead references to a members' meeting of the scheme; and (e) references to members of a public company were instead references to members of the scheme; and (f) references to the company's best interests were instead references to the best interests of the scheme's members. 601LB Replacement section 207 Chapter 2E applies as if section 207 were replaced by the following section: 207 Purpose The rules in this Chapter, as they apply to a registered scheme, are designed to protect the interests of the scheme's members as a whole, by requiring member approval for giving financial benefits to the responsible entity or its related parties that come out of scheme property or that could endanger those interests. 601LC Replacement section 208 Chapter 2E applies as if section 208 were replaced by the following section: 208 Need for member approval for financial benefit (1) If all the following conditions are satisfied in relation to a financial benefit: (a) the benefit is given by: (i) the responsible entity of a registered scheme; or (ii) an entity that the responsible entity controls; or (iii) an agent of, or person engaged by, the responsible entity (b) the benefit either: (i) is given out of the scheme property; or (ii) could endanger the scheme property (c) the benefit is given to: (i) the person or a related party; or (ii) another person referred to in paragraph (a) or a related party of that person; then, for the person referred to in paragraph (a) to give the benefit, either: (d) the person referred to in paragraph (a) must: (i) obtain the approval of the scheme's members in the way set out in sections 217 to 227; and (ii) give the benefit within 15 months after the approval; or (e) the giving of the benefit must fall within an exception set out in sections 210 to 216. Note: Section 228 defines related party, section 191 defines entity, section 191 defines control and section 229 affects the meaning of giving a financial benefit. (2) If: (a) the giving of the benefit is required by a contract; and (b) the making of the contract was approved in accordance with subparagraph (1)(d)(i) as a financial benefit given to the entity or related party; and (c) the contract was made: (i) within 15 months after that approval; or (ii) before that approval, if the contract was conditional on the approval being obtained; member approval for the giving of the benefit is taken to have been given and the benefit need not be given within the 15 months. (3) Subsection (1) does not prevent the responsible entity from paying itself fees, and exercising rights to an indemnity, as provided for in the scheme's constitution under subsection 601GA(2). 601LD Omission of sections 213, 214 and 224 Chapter 2E applies as if sections 213, 214 and 224 were omitted. Note: Instead of section 224, the rule in section 253E will apply. 601LE Modification of section 225 Chapter 2E applies as if subsection 225(1) were amended by omitting "subsection 224(1)" and substituting "section 253E". Part 5C.8-Effect of contraventions (civil liability and voidable contracts) 601MA Civil liability of responsible entity to members (1) A member of a registered scheme who suffers loss or damage because of conduct of the scheme's responsible entity that contravenes a provision of this Chapter may recover the amount of the loss or damage by action against the responsible entity whether or not the responsible entity has been convicted of an offence, or has had a civil penalty order made against it, in respect of the contravention. (2) An action under subsection (1) must be begun within 6 years after the cause of action arises. (3) This section does not affect any liability that a person has under other provisions of this Act or under other laws. 601MB Voidable contracts where subscription offers and invitations contravene this Act (1) If: (a) a managed investment scheme is being operated in contravention of subsection 601ED(5) and a person (the offeror) offers an interest in the scheme for subscription, or issues an invitation to subscribe for an interest in the scheme; or (b) a person (the offeror) fails to comply with Division 2 of Part 7.9 when offering an interest in a registered scheme for subscription or issuing an invitation to subscribe for an interest in a registered scheme; a contract entered into by a person (other than the offeror) to subscribe for the interest as a result of the person accepting the offer, or of the acceptance of an offer made by the person in response to the invitation, is voidable at the option of that person by notice in writing to the offeror. (2) If the person gives a notice under subsection (1), the obligations of the parties to the contract are suspended: (a) during the period of 21 days after the notice is given; and (b) during the period beginning when an application is made under subsection (4) in relation to the notice and ending when the application, and any appeals arising out of it, have been finally determined or otherwise disposed of. (3) Subject to subsection (6), the notice takes effect to void the contract: (a) at the end of 21 days after the notice is given; or (b) if, within that 21 days, the offeror applies under subsection (4)-at the end of the period when the obligations of the parties are suspended under paragraph (2)(b). (4) Within 21 days after the notice is given, the offeror may apply to the Court for an order declaring the notice to have had no effect. (5) The Court may extend the period within which the offeror may apply under subsection (4), even if the notice has taken effect. (6) On application under subsection (4), the Court may declare the notice to have had no effect if it is satisfied that, in all the circumstances, it is just and equitable to make the declaration. Part 5C.9-Winding up 601NA Winding up required by scheme's constitution The constitution of a registered scheme may provide that the scheme is to be wound up: (a) at a specified time; or (b) in specified circumstances or on the happening of a specified event; but a provision of the constitution that purports to provide that the scheme is to be wound up if a particular company ceases to be its responsible entity is of no effect (including for the purposes of paragraph 601NE(1)(a)). 601NB Winding up at direction of members If members of a registered scheme want the scheme to be wound up, they may take action under Division 1 of Part 2G.4 for the calling of a members' meeting to consider and vote on an extraordinary resolution directing the responsible entity to wind up the scheme. 601NC Winding up if scheme's purpose accomplished or cannot be accomplished (1) If the responsible entity of a registered scheme considers that the purpose of the scheme: (a) has been accomplished; or (b) cannot be accomplished; it may, in accordance with this section, take steps to wind up the scheme. (2) The responsible entity must give to the members of the scheme and to ASIC a notice in writing: (a) explaining the proposal to wind up the scheme, including explaining how the scheme's purpose has been accomplished or why that purpose cannot be accomplished; and (b) informing the members of their rights to take action under Division 1 of Part 2G.4 for the calling of a members' meeting to consider the proposed winding up of the scheme and to vote on any extraordinary resolution members propose about the winding up of the scheme; and (c) informing the members that the responsible entity is permitted to wind up the scheme unless a meeting is called to consider the proposed winding up of the scheme within 28 days of the responsible entity giving the notice to the members. (3) If no meeting is called within that 28 days to consider the proposed winding up, the responsible entity may wind up the scheme. 601ND Winding up ordered by Court (1) The Court may, by order, direct the responsible entity of a registered scheme to wind up the scheme if: (a) the Court thinks it is just and equitable to make the order; or (b) within 3 months before the application for the order was made, execution or other process was issued on a judgment, decree or order obtained in a court (whether an Australian court or not) in favour of a creditor of, and against, the responsible entity in its capacity as the scheme's responsible entity and the execution or process has been returned unsatisfied. (2) An order based on paragraph (1)(a) may be made on the application of: (a) the responsible entity; or (b) a director of the responsible entity; or (c) a member of the scheme; or (d) ASIC. (3) An order based on paragraph (1)(b) may be made on the application of a creditor. 601NE The winding up of the scheme (1) The responsible entity of a registered scheme must ensure that the scheme is wound up in accordance with its constitution and any orders under subsection 601NF(2) if: (a) the scheme's constitution provides that the scheme is to be wound up at a specified time, in specified circumstances or on the happening of a specified event and that time is reached, those circumstances occur or that event occurs; or (b) the members pass an extraordinary resolution directing the responsible entity to wind up the scheme; or (c) the Court makes an order directing the responsible entity to wind up the scheme; or (d) the members pass a resolution removing the responsible entity but do not, at the same meeting, pass a resolution choosing a company to be the new responsible entity that consents to becoming the scheme's responsible entity. Note: For the Court's power to order winding up, see subsection 601FQ(5) and section 601ND. (2) The responsible entity of a registered scheme may wind up the scheme in accordance with its constitution and any orders under subsection 601NF(2) if the responsible entity is permitted by subsection 601NC(3) to wind up the scheme. (3) Interests must not be issued in a registered scheme at a time after the responsible entity has become obliged to ensure the scheme is wound up, or after the scheme has started to be wound up. 601NF Other orders about winding up (1) The Court may, by order, appoint a person to take responsibility for ensuring a registered scheme is wound up in accordance with its constitution and any orders under subsection (2) if the Court thinks it necessary to do so (including for the reason that the responsible entity has ceased to exist or is not properly discharging its obligations in relation to the winding up). (2) The Court may, by order, give directions about how a registered scheme is to be wound up if the Court thinks it necessary to do so (including for the reason that the provisions in the scheme's constitution are inadequate or impracticable). (3) An order under subsection (1) or (2) may be made on the application of: (a) the responsible entity; or (b) a director of the responsible entity; or (c) a member of the scheme; or (d) ASIC. 601NG Unclaimed money to be paid to ASIC If, on completion of the winding up of a registered scheme, the person who has been winding up the scheme has in their possession or under their control any unclaimed or undistributed money or other property that was part of the scheme property, the person must, as soon as practicable, pay the money or transfer the property to ASIC to be dealt with under Part 9.7. Part 5C.10-Deregistration 601PA Deregistration-voluntary Responsible entity may apply for deregistration (1) The responsible entity of a registered scheme may lodge an application for deregistration of the scheme with ASIC. (2) The responsible entity may only apply if: (a) the scheme: (i) has 20 or less members (calculated in accordance with subsection 601ED(4)) and all the members agree that the scheme should be deregistered; and (ii) is not required to be registered by paragraph 601ED(1)(b) or (c); or (b) because of subsection 601ED(2) (exemption based on Division 2 of Part 7.9 not applying), the scheme is not required to be registered and all the members agree that the scheme should be deregistered; or (c) the scheme is not a managed investment scheme. (3) If ASIC is satisfied that the application complies with subsections (1) and (2), it must give notice of the proposed deregistration: (a) on the national database; and (b) in the Gazette. When 2 months have passed since the Gazette notice, ASIC may deregister the scheme. (4) ASIC must give notice of the deregistration to the applicant. 601PB Deregistration by ASIC (1) ASIC may decide to deregister a registered scheme if: (a) the scheme does not have a responsible entity that meets the requirements of section 601FA; or (b) the scheme does not have a constitution that meets the requirements of sections 601GA and 601GB; or (c) the scheme does not have a compliance plan that meets the requirements of section 601HA; or (d) the scheme's property is not being: (i) clearly identified as the scheme's property; and (ii) held separately from property of the responsible entity and property of any other scheme; in accordance with the scheme's compliance plan; or (e) the following conditions are satisfied: (i) the response to a return of particulars given to the responsible entity of the scheme is at least 6 months late; and (ii) no other documents have been lodged by or on behalf of the scheme in the last 18 months; and (iii) ASIC has no reason to believe that the scheme is being operated; or (ea) the scheme's review fee in respect of a review date has not been paid in full at least 12 months after the due date for payment; or (f) the scheme has been wound up. Deregistration procedure (2) If ASIC decides to deregister a scheme under this section, it must give notice of the proposed deregistration: (a) to the scheme's responsible entity; and (b) to any other person who is winding up the scheme; and (c) on the national database; and (d) in the Gazette. If the notice is given under paragraph (1)(a), (b), (c) or (d), the notice must specify the period at the end of which ASIC proposes to deregister the scheme. (3) ASIC may deregister the scheme: (a) if paragraph (1)(a), (b), (c) or (d) applies-at the end of the period set out in the Gazette notice; or (b) if paragraph (1)(e) or (f) applies-when 2 months have passed since the Gazette notice. (4) ASIC does not have to give a person notice under subsection (2) if ASIC does not have the necessary information about the person's address. (5) ASIC must give notice of the deregistration to everyone who was notified of the proposed deregistration under paragraph (2)(a) or (b). 601PC Reinstatement (1) ASIC may reinstate the registration of a managed investment scheme if ASIC is satisfied that the scheme should not have been deregistered or if the defect that led to the scheme being deregistered has been remedied. (2) The Court may make an order that ASIC reinstate the registration of a managed investment scheme if: (a) an application for reinstatement is made to the Court by: (i) a person aggrieved by the deregistration; or (ii) a person who was winding up the scheme; and (b) the Court is satisfied that it is just that the scheme's registration be reinstated. (3) The Court may give any directions it thinks just for putting the scheme and other people in the same position, as far as possible, as if the scheme had not been deregistered. ASIC to give notice of reinstatement (4) ASIC must give notice of a reinstatement in the Gazette. If ASIC exercises its power under subsection (1) in response to an application by a person, ASIC must also give notice of the reinstatement to the applicant. Part 5C.11-Exemptions and modifications 601QA ASIC's power to make exemption and modification orders (1) ASIC may: (a) exempt a person from a provision of this Chapter; or (b) declare that this Chapter applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration. Without limiting this, ASIC may declare that this Chapter applies to a person as if section 601HA included a requirement for scheme property to be held by a person other than the responsible entity as the responsible entity's agent. (2) The exemption or declaration may: (a) apply to all or specified provisions of this Chapter; and (b) apply to all persons, specified persons, or a specified class of persons; and (c) relate to all securities, specified securities or a specified class of securities; and (d) relate to any other matter generally or as specified. (3) An exemption may apply unconditionally or subject to specified conditions. A person to whom a condition specified in an exemption applies must comply with the condition. The Court may order the person to comply with the condition in a specified way. Only ASIC may apply to the Court for the order. (4) The exemption or declaration must be in writing and ASIC must publish notice of it in the Gazette. (5) For the purposes of this section, the provisions of this Chapter include: (a) regulations made for the purposes of this Chapter; and (b) definitions in this Act or the regulations as they apply to references in: (i) this Chapter; or (ii) regulations made for the purposes of this Chapter; and (c) the old Division 11 of Part 11.2 transitionals. 601QB Modification by regulations The regulations may modify the operation of this Chapter or any other provisions of this Act relating to securities in relation to: (a) a managed investment scheme; or (b) all managed investment schemes of a specified class. Chapter 6-Takeovers 602 Purposes of Chapter The purposes of this Chapter are to ensure that: (a) the acquisition of control over: (i) the voting shares in a listed company, or an unlisted company with more than 50 members; or (ii) the voting shares in a listed body; or (iii) the voting interests in a listed managed investment scheme; takes place in an efficient, competitive and informed market; and (b) the holders of the shares or interests, and the directors of the company or body or the responsible entity for the scheme: (i) know the identity of any person who proposes to acquire a substantial interest in the company, body or scheme; and (ii) have a reasonable time to consider the proposal; and (iii) are given enough information to enable them to assess the merits of the proposal; and (c) as far as practicable, the holders of the relevant class of voting shares or interests all have a reasonable and equal opportunity to participate in any benefits accruing to the holders through any proposal under which a person would acquire a substantial interest in the company, body or scheme; and (d) an appropriate procedure is followed as a preliminary to compulsory acquisition of voting shares or interests or any other kind of securities under Part 6A.1. Note 1: To achieve the objectives referred to in paragraphs (a), (b) and (c), the prohibition in section 606 and the exceptions to it refer to interests in "voting shares". To achieve the objective in paragraph (d), the provisions that deal with the takeover procedure refer more broadly to interests in "securities". Note 2: Subsection 92(3) defines securities for the purposes of this Chapter. 602A Substantial interest concept (1) A reference in this Chapter to a substantial interest in a company, listed body or listed managed investment scheme is not to be read as being limited to an interest that is constituted by one or more of the following: (a) a relevant interest in securities in the company, body or scheme; (b) a legal or equitable interest in securities in the company, body or scheme; (c) a power or right in relation to: (i) the company, body or scheme; or (ii) securities in the company, body or scheme. (2) A person does not have a substantial interest in the company, body or scheme for the purposes of this Chapter merely because the person has an interest in, or a relationship with, the company, body or scheme of a kind prescribed by the regulations for the purposes of this subsection. (3) The regulations may provide that an interest of a particular kind is an interest that may constitute a substantial interest in a company, listed body or listed managed investment scheme for the purposes of this Chapter. 603 Chapter extends to some listed bodies that are not companies This Chapter applies to the acquisition of relevant interests in the securities of listed bodies that are not companies but are incorporated or formed in Australia in the same way as it applies to the acquisition of relevant interests in the securities of companies. Note: Section 9 defines company and listed. 604 Chapter extends to listed managed investment schemes (1) This Chapter applies to the acquisition of relevant interests in the interests in a registered scheme that is also listed as if: (a) the scheme were a listed company; and (b) interests in the scheme were shares in the company; and (c) voting interests in the scheme were voting shares in the company; and (d) a meeting of the members of the scheme were a general meeting of the company; and (e) the obligations and powers that are imposed or conferred on the company were imposed or conferred on the responsible entity; and (f) the directors of the responsible entity were the directors of the company; and (g) the appointment of a responsible entity for the scheme were the election of a director of the company; and (h) the scheme's constitution were the company's constitution. Note 1: Paragraph (g): See subsection 610(2). Note 2: Section 9 defines voting interest in a managed investment scheme. (2) The regulations may modify the operation of this Chapter as it applies in relation to the acquisition of interests in listed managed investment schemes. 605 Classes of securities (1) Takeover bids are made for securities within a particular class. Similarly, compulsory acquisition and buy-out rights operate on securities within a particular class. (2) For the purposes of this Chapter and Chapters 6A and 6C, securities are not taken to be different classes merely because: (a) some of the securities are fully-paid and others are partly- paid; or (b) different amounts are paid up or remain unpaid on the securities. Part 6.1-Prohibited acquisitions of relevant interests in voting shares 606 Prohibition on certain acquisitions of relevant interests in voting shares Acquisition of relevant interests in voting shares through transaction entered into by or on behalf of person acquiring relevant interest (1) A person must not acquire a relevant interest in issued voting shares in a company if: (a) the company is: (i) a listed company; or (ii) an unlisted company with more than 50 members; and (b) the person acquiring the interest does so through a transaction in relation to securities entered into by or on behalf of the person; and (c) because of the transaction, that person's or someone else's voting power in the company increases: (i) from 20% or below to more than 20%; or (ii) from a starting point that is above 20% and below 90%. Note 1: Section 9 defines company as meaning a company registered under this Act. Note 2: Section 607 deals with the effect of a contravention of this section on transactions. Sections 608 and 609 deal with the meaning of relevant interest. Section 610 deals with the calculation of a person's voting power in a company. Note 3: If the acquisition of relevant interests in an unlisted company with 50 or fewer members leads to the acquisition of a relevant interest in another company that is an unlisted company with more than 50 members, or a listed company, the acquisition is caught by this section because of its effect on that other company. (1A) However, the person may acquire the relevant interest under one of the exceptions set out in section 611 without contravening subsection (1). Note: A defendant bears an evidential burden in relation to the matter in subsection (1A), see subsection 13.3(3) of the Criminal Code. Acquisition of legal or equitable interest giving rise to relevant interest for someone else (2) A person must not acquire a legal or equitable interest in securities of a body corporate if, because of the acquisition: (a) another person acquires a relevant interest in issued voting shares in a company that is: (i) a listed company; or (ii) an unlisted company with more than 50 members; and (b) someone's voting power in the company increases: (i) from 20% or below to more than 20%; or (ii) from a starting point that is above 20% and below 90%. (2A) However, if the acquisition of the relevant interest is covered by one of the exceptions set out in section 611, the person may acquire the legal or equitable interest without contravening subsection (2). Note: A defendant bears an evidential burden in relation to the matter in subsection (2A), see subsection 13.3(3) of the Criminal Code. 50 member threshold (3) In determining whether the company has more than 50 members for the purposes of subsection (1) or (2), count joint holders of a particular parcel of shares as 1 person. Offers and invitations (4) A person must not: (a) make an offer, or cause an offer to be made on their behalf, if the person would contravene subsection (1) or (2) if the offer were accepted; or (b) issue an invitation, or cause an invitation to be issued on their behalf, if the person would contravene subsection (1) or (2) if: (i) an offer were made in response to the invitation; and (ii) the offer were accepted. Absolute liability offences (4A) An offence based on subsection (1), (2) or (4) is an offence of absolute liability. Note: For absolute liability, see section 6.2 of the Criminal Code. Defences (5) It is a defence to the prosecution of a person for contravening subsection (1), (2) or (4) if the person proves that they contravened the subsection: (a) because of inadvertence or mistake; or (b) because the person was not aware of a relevant fact or occurrence. In determining whether the defence is available, disregard the person's ignorance of, or a mistake on the person's part concerning, a matter of law. Note: A defendant bears a legal burden in relation to a matter mentioned in subsection (5), see section 13.4 of the Criminal Code. Extended meaning of acquiring relevant interests-conversions and increases in voting rights (6) A person is taken for the purposes of subsection (1) or (2) to acquire a relevant interest in voting shares in a company if: (a) securities in which the person already had a relevant interest become voting shares in the company; or (b) there is an increase in the number of votes that may be cast on a poll attached to voting shares that the person already had a relevant interest in. The acquisition occurs when the securities become voting shares or the number of votes increases. Note: Some examples of cases to which this subsection applies are: 1. A person exercises a right to convert a non-voting preference share into an ordinary share that carries votes. 2. A person pays up partly-paid shares with limited votes and this leads to an increase in the number of votes attached to the shares. 607 Effect on transactions A transaction is not invalid merely because it involves a contravention of section 606. 608 Relevant interests in securities Basic rule-relevant interest is holding, or controlling voting or disposal of, securities (1) A person has a relevant interest in securities if they: (a) are the holder of the securities; or (b) have power to exercise, or control the exercise of, a right to vote attached to the securities; or (c) have power to dispose of, or control the exercise of a power to dispose of, the securities. It does not matter how remote the relevant interest is or how it arises. If 2 or more people can jointly exercise one of these powers, each of them is taken to have that power. Extension to control exercisable through a trust, agreement or practice (2) In this section, power or control includes: (a) power or control that is indirect; and (b) power or control that is, or can be, exercised as a result of, by means of or by the revocation or breach of: (i) a trust; or (ii) an agreement; or (iii) a practice; or (iv) any combination of them; whether or not they are enforceable; and (c) power or control that is, or can be made, subject to restraint or restriction. It does not matter whether the power or control is express or implied, formal or informal, exercisable alone or jointly with someone else. It does not matter that the power or control cannot be related to a particular security. Extension to relevant interests held through bodies corporate (3) A person has the relevant interests in any securities that any of the following has: (a) a body corporate, or managed investment scheme, in which the person's voting power is above 20%; (b) a body corporate, or managed investment scheme, that the person controls. Paragraph (a) does not apply to a relevant interest that the body corporate or scheme itself has in the securities merely because of the operation of that paragraph in relation to another body corporate or managed investment scheme. (4) For the purposes of paragraph (3)(b), a person controls a body corporate if the person has the capacity to determine the outcome of decisions about the body corporate's financial and operating policies. (5) In determining whether a person has this capacity: (a) the practical influence the person can exert (rather than the rights they can enforce) is the issue to be addressed; and (b) any practice or pattern of behaviour affecting the body corporate's financial or operating policies is to be taken into account (even if it involves a breach of an agreement or a breach of trust). (6) The person does not control the body corporate merely because the person and an entity that is not an associate jointly have the capacity to determine the outcome of decisions about the body corporate's financial and operating policies. (7) A person is not taken to control a body corporate merely because of a capacity they have if they are under a legal obligation to exercise that capacity for the benefit of: (a) if the person is an individual-someone else; or (b) if the person is a body corporate-someone other than its members. Extension to control in anticipation of performance of agreements etc. (8) If at a particular time all the following conditions are satisfied: (a) a person has a relevant interest in issued securities; (b) the person (whether before or after acquiring the relevant interest): (i) has entered or enters into an agreement with another person with respect to the securities; or (ii) has given or gives another person an enforceable right, or has been or is given an enforceable right by another person, in relation to the securities (whether the right is enforceable presently or in the future and whether or not on the fulfilment of a condition); or (iii) has granted or grants an option to, or has been or is granted an option by, another person with respect to the securities; (c) t