media release

11-33AD ASIC grants further extension of Class Order 10/333

Published

ASIC has today announced its intention to extend the interim class order relief granted to lawyers and funders involved in legal proceedings structured as funded representative proceedings and funding claims lodged with liquidators to prove in the winding up of an insolvent company.

The extension of the relief until 30 June 2011 will enable the temporary operation of litigation funding schemes and proof of debt funding schemes without compliance with the requirements of the Corporations Act 2001 (the Act).This is to allow additional time for the Federal Government to implement the legislative reform for litigation funding schemes and proof of debt schemes it previously announced, and to avoid any interim disruption that could adversely impact plaintiffs or interfere with the timely and efficient running of litigation.

The requirements that would apply to a litigation funding scheme and a proof of debt funding scheme without ASIC relief are detailed in Chapters 5C and 7 of the Act. These requirements include:

  • registering the scheme with ASIC;
  • adopting a complying constitution and compliance plan for the scheme;
  • appointing an AFS licensed public company as ‘responsible entity’;
  • preparing a Product Disclosure Statement; and
  • providing ongoing disclosure to members of the scheme.

Following any law reform in this area, ASIC will consider issuing further regulatory guidance about these schemes after public consultation.

Background

ASIC’s decision to extend its relief follows a decision by the Full Court of the Federal Court in Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd [2009] FCAFC 147. The Court held that a funded class action constituted a ‘managed investment scheme’ within the meaning of the Corporations Act. This decision may result in litigation funders being forced to comply with the requirements for a managed investment scheme under Chapter 5C and Chapter 7 of the Act.

On 4 May 2010, the Federal Government announced its plan to exempt representative proceedings and proof of debt arrangements from the definition of ‘managed investment scheme’ in section 9 and Chapter 7 of the Act provided appropriate arrangements are in place to manage conflicts of interest.

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