In 2022, Australia is set to launch the Corporate Collective Investment Vehicle (CCIV), a new corporate structure that offers more choice and flexibility to investors
Australia’s Corporate Collective Investment Vehicles (CCIVs) will finally come into force on July 1, 2022, after a six-year legislative journey. The new regime will offer investors a flexible fund structure offering the possibility of setting up umbrella funds incorporating one or more compartments.
The CCIV is an alternative to the well-known Managed Investment Scheme (MIS), which is typically set up as an Australian unit trust vehicle. Unlike the MIS, a CCIV is set up in the form of a public limited company and therefore has legal personality. As such, it is similar to Singapore’s Variable Capital Company (VCC) structure or the EU Undertakings for Collective Investment in Transferable Securities (UCITS) Directive.
What are the requirements for Australian CCIVs?
As a public limited company, a CCIV would have its own constitution and at least one compartment. The CCIV will also need to appoint a company director, who must be a public company with an Australian Financial Services License (AFSL).
The AFSL must grant the necessary authorizations for the operation of a CCIV. This means that current AFSL holders will need to apply for an amendment to their license to allow them to operate a CCIV. In addition, the CCIV must be registered as a company with the Australian Securities and Investments Commission (ASIC), which is not currently the case for MIS structures.
A CCIV can be used for both wholesale and retail fund purposes. However, it would be subject to more comprehensive regulatory requirements if set up as a retail fund.
CCIVs have members who can each hold one or more shares, like the unitholders of a mutual fund. A CCIV is authorized to issue shares and bonds provided that any security issued is attached to a single sub-fund of the CCIV. A sub-fund of a CCIV is identifiable by a chosen unique name and an Australian Registered Fund Number (ARFN). Any additional compartments created after the registration of the CCIV require a separate procedure.
The assets of the CCIV and its sub-funds may be held by the CCIV or by another person, who could be a custodian. All CCIVs, whether wholesale or retail, will be able – but not required – to have a custodian or custodian under the current bill.
In the last adopted bill, the CCIV is authorized to have cross-investments between different compartments. This means that a CCIV may acquire, in respect of a sub-fund, shares which belong to another sub-fund of the CCIV.
What are the tax rules for Australian CCIVs?
The tax treatment of CCIVs is similar to that of trusts. However, there are specific rules:
The assets, liabilities and affairs relating to a specific sub-fund will be treated as a separate trust.
The CCIV is considered to be the custodian of each compartment. This means that each sub-fund of the CCIV will be treated as a separate mutual fund and is therefore referred to as the CCIV mutual fund.
The members of the CCIV are assimilated to the beneficiaries of the trust fund of the CCIV compartment.
This means that each sub-fund of a CCIV will be treated for tax purposes as a separate trust with the corresponding application of the tax laws that apply to trustees, trusts and beneficiaries.
What’s next for Australian CCIVs?
The introduction of the CCIV means that fund managers in Australia now have a choice of vehicles for their investments. This could be particularly attractive to overseas fund managers who are more accustomed to corporate-type fund vehicles than Australian mutual funds under the current MIS regime.
Although the tax rules for CCIVs seem similar to those for mutual funds, the regulatory framework for CCIVs is slightly more complex and adds an additional layer of regulatory scrutiny.
As this is a new vehicle in Australia, only time will tell if CCIVs become more popular than current MIS structures. Fund managers will need to weigh the pros and cons to determine if the new CCIV regime is right for them.
Why the Intertrust Group?
We operate in over 30 countries, with offices in Sydney and Hong Kong.
Our team is highly experienced in private equity across a variety of asset classes including real estate and infrastructure.
We hold an Australian Wholesale Financial Services License (AFSL).
We offer a range of complementary administrative and compliance services such as fund accounting, investor relations and share registration services.
Intertrust Group is a publicly traded company with 70 years of experience providing world-class trust and corporate services to clients around the world.