ASIC has extended 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.
ASIC has also granted new interim class order relief from the application of the National Consumer Credit Protection Act 2009 (National Credit Act).
Relief from the application of the National Credit Act
Class Order [CO 13/18] Funded representative proceedings and funded proof of debt arrangements exclusion from the National Credit Code, will apply until 12 July 2013*. It will relieve the requirements that would otherwise apply to funded representative proceedings and funded proof of debt arrangements if they amount to 'credit' to which the National Credit Act applies. The relief means funded representative proceedings and proof of debt arrangements can commence or progress without needing to comply with specific requirements, including holding an Australian credit licence and complying with the conduct, disclosure and responsible lending requirements.
Relief from the application of the Corporations Act
Class Order [CO 13/19] extends the relief in Class Order [CO 10/333] Funded representative proceedings and funded proof of debt arrangements until 12 July 2013*.
ASIC first announced class order relief in this space in May 2010 (refer 10-92AD)
The relief has been extended to allow time for the commencement of the Corporations Amendment Regulations 2012 (No. 6) which will commence on 12 July 2013. From that date:
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a litigation scheme and a proof of debt scheme will be exempt from the definition of a managed investment scheme in s9 of the Corporations Act 2001, and
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funders and lawyers providing financial services for litigation schemes and proof of debt schemes will be exempt from the requirements that would otherwise apply under Ch 7 of the Corporations Act, including the licensing, conduct and disclosure requirements, but they must have adequate arrangements to manage conflicts of interest. ASIC released Consultation Paper 185 Litigation schemes and proof of debt schemes: Managing conflicts of interest (CP 185) outlining its proposals on how funders and lawyers can satisfy this conflicts management obligation in August 2012.
In the meantime, CO 10/333 has been extended to avoid any interim disruption that could adversely impact plaintiffs, or interfere with the timely and efficient running of litigation.
Background
The High Court decision in International Litigation Partners Pte Ltd v Chameleon Mining NL (Receivers and Managers Appointed) [2012] HCA 45 has highlighted that, depending upon the terms of a litigation funding agreement, the National Credit Act may apply to funded representative proceedings and funded proof of debt arrangements. The High Court held that a litigation funding agreement was a 'credit facility' within the meaning of regulation 7.1.06 of the Corporations Regulations 2001.
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*Editor's note 1
On 12 July 2013, ASIC extended 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 from the application of the National Consumer Credit Protection Act 2009 (National Credit Act).
Class Order [CO 13/897] extends the relief in Class Order [CO 13/18]Funded representative proceedings and funded proof of debt arrangements exclusions from the National Credit Code until 12 July 2014.
The relief is from the requirements that would otherwise apply to funded representative proceedings and funded proof of debt arrangements if they amount to 'credit' to which the National Credit Act applies. The relief means that funded representative proceedings and proof of debt arrangements can commence or progress without needing to comply with specific requirements, including holding an Australian credit licence and complying with the conduct, disclosure and responsible lending requirements.
*Editor's note 2
On 1 July 2014 ASIC extended the following interim class order relief:
1. Exemption from National Consumer Credit Protection Act 2009
Class Order [CO 14/569] extends the relief in Class Order [CO 13/18] Funded representative proceedings and funded proof of debt arrangements exclusions from the National Credit Code until 12 July 2016. [CO 13/18] grants 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 from the application of the National Consumer Credit Protection Act 2009 (National Credit Act).
The relief is from the requirements that would otherwise apply to funded representative proceedings and funded proof of debt arrangements if they amount to 'credit' to which the National Credit Act applies. The relief means that funded representative proceedings and proof of debt arrangements can commence or progress without needing to comply with specific requirements, including holding an Australian credit licence and complying with the conduct, disclosure and responsible lending requirements.
2. Litigation Schemes Funded by Conditional Costs Agreements Class Order
[CO 14/571] extends the relief in Class Order [CO 13/898] Representative proceedings and proof of debt arrangements funded by conditional costs agreements until 12 July 2016. The relief is from the requirements that may otherwise apply to litigation schemes funded under a conditional costs agreement as ‘managed investment schemes’ under Chapter 5C and Chapter 7 of the Corporations Act 2001 including:
- registering the scheme with ASIC;
- adopting a complying constitution and compliance plan for the scheme;
- appointing an Australian financial services (AFS) licensed public company as ‘responsible entity’;
- preparing a Product Disclosure Statement; and
- providing ongoing disclosure to members of the scheme.
*Editor's Note 3:
On 1 July 2016, ASIC extended the following interim class order relief:
1) Exemption from National Consumer Credit Protection Act 2009
ASIC Credit (Amendment) Instrument 2016/632 extends the relief in Class Order [CO 13/18] Funded representative proceedings and funded proof of debt arrangements exclusions from the National Credit Code until 12 July 2017. [CO 13/18] grants 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 from the application of the National Consumer Credit Protection Act 2009 (National Credit Act).
The relief is from the requirements that would otherwise apply to funded representative proceedings and funded proof of debt arrangements if they amount to 'credit' to which the National Credit Act applies. The relief means that funded representative proceedings and proof of debt arrangements can commence or progress without needing to comply with specific requirements, including holding an Australian credit licence and complying with the conduct, disclosure and responsible lending requirements.
2) Litigation Schemes Funded by Conditional Costs Agreements
ASIC Corporations (Amendment) Instrument 2016/476 extends the relief in Class Order [CO 13/898] Representative proceedings and proof of debt arrangements funded by conditional costs agreements until 12 July 2017. The relief is from the requirements that may otherwise apply to litigation schemes funded under a conditional costs agreement as ‘managed investment schemes’ under Chapter 5C and Chapter 7 of the Corporations Act 2001 including:
- registering the scheme with ASIC;
- adopting a complying constitution and compliance plan for the scheme;
- appointing an Australian financial services (AFS) licensed public company as ‘responsible entity’;
- preparing a Product Disclosure Statement; and
- providing ongoing disclosure to members of the scheme.