Corporations Amendment (Litigation Funding) Regulations 2020 (F2020L00942)

Schedule 1   Amendments

Corporations Regulations 2001

1   Regulation 5C.11.01

Repeal the regulation, substitute:

5C.11.01 Certain schemes not managed investment schemes

(1) This regulation is made for the purposes of paragraph (n) of the definition of managed investment scheme in section 9 of the Act.

(2) An approved benefit fund (within the meaning of subsection 16B(1) of the Life Insurance Act 1995) is declared not to be a managed investment scheme.

(3) A scheme (an insolvency litigation funding scheme ) that has all of the following features is declared not to be a managed investment scheme:

(a) the scheme relates to a Chapter 5 body corporate;

(b) the creditors or members of the body corporate provide funds (including through a trust), indemnities or both to the body corporate or external administrator;

(c) the funds, indemnities or both enable the external administrator or the body corporate to:

(i) conduct investigations; or

(ii) seek or enforce a remedy against a third party; or

(iii) defend proceedings brought against the body corporate in relation to the external administration of the body corporate (other than in relation to allegations, made by creditors or members of the body corporate, of negligence or non-performance of duties by the external administrator).

(4) An arrangement (a litigation funding arrangement ) that has all of the following features is declared not to be a managed investment scheme:

(a) the dominant purpose of the arrangement is proving claims made by a general member who is an individual under Division 6 of Part 5.6 of the Act (which may include the funding of the preparation and the lodgement of the proofs);

(b) the steps taken under the arrangement include a lawyer providing services in relation to:

(i) making a demand for payment in relation to a claim; or

(ii) lodging a proof of debt; or

(iii) commencing or undertaking legal proceedings; or

(iv) investigating a potential or actual claim; or

(v) negotiating a settlement of a claim; or

(vi) administering a deed of settlement or scheme of settlement relating to a claim;

(c) a person (the funder ) provides funds, indemnities or both under a funding agreement (including an agreement under which no fee is payable to the funder or lawyer if the arrangement is not successful in proving claims) to enable the general member to prove the claims;

(d) the funder is not a lawyer or legal practice that provides a service for which some or all of the fees, disbursements or both are payable only on success;

(e) the arrangement is not:

(i) an insolvency litigation funding scheme; or

(ii) a litigation funding scheme mentioned in subregulation 7.1.04N(3).

(5) An arrangement (a litigation funding arrangement ) that has all of the following features is declared not to be a managed investment scheme:

(a) the dominant purpose of the arrangement is for a general member to seek remedies to which the general member may be legally entitled;

(b) the steps taken to seek remedies include a lawyer providing services in relation to:

(i) making a demand for payment in relation to a claim; or

(ii) lodging a proof of debt; or

(iii) commencing or undertaking legal proceedings; or

(iv) investigating a potential or actual claim; or

(v) negotiating a settlement of a claim; or

(vi) administering a deed of settlement or scheme of settlement relating to a claim;

(c) a person (the funder ) provides funds, indemnities or both under a funding agreement (including an agreement under which no fee is payable to the funder or lawyer if the arrangement is not successful in seeking remedies) to enable the general member to seek remedies;

(d) the funder is not a lawyer or legal practice that provides a service for which some or all of the fees, disbursements or both are payable only on success;

(e) the arrangement is not:

(i) an insolvency litigation funding scheme; or

(ii) a litigation funding scheme mentioned in subregulation 7.1.04N(3).

(6) In this regulation:

external administrator includes an administrator, a liquidator (including a provisional liquidator) and a controller.

general member , in relation to a litigation funding arrangement, means the party to the arrangement who:

(a) is not the funder; and

(b) is not a lawyer providing services for the purposes of the arrangement.