Corporations Amendment (Litigation Funding) Regulations 2020 (F2020L00942)

Schedule 1   Amendments

Corporations Regulations 2001

2   Regulation 7.1.04N

Repeal the regulation, substitute:

7.1.04N Specific things that are financial products - funding schemes and arrangements relating to insolvency and litigation

(1) This regulation is made for the purposes of paragraph 764A(1)(m) of the Act.

Insolvency litigation funding schemes and litigation funding arrangements

(2) The following are declared to be financial products:

(a) an interest in an insolvency litigation funding scheme mentioned in regulation 5C.11.01;

(b) an interest in a litigation funding arrangement mentioned in that regulation.

Litigation funding schemes

(3) An interest in a scheme (a litigation funding scheme ) that has all of the following features is declared to be a financial product:

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

(b) the possible entitlement of each of its general members to remedies arises out of:

(i) the same, similar or related transactions or circumstances that give rise to a common issue of law or fact; or

(i) different transactions or circumstances but the claims of the general members can be appropriately dealt with together;

(c) the possible entitlement of each of its general members to remedies relates to transactions or circumstances that occurred before or after the first funding agreement (dealing with any issue of interests in the scheme) is finalised;

(d) the steps taken to seek remedies for each of its general members 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;

(e) 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 scheme is not successful in seeking remedies) to enable the general members of the scheme to seek remedies;

(f) 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.

(4) In this regulation:

general member , in relation to a litigation funding scheme, means a member of the scheme who:

(a) is not the funder; and

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