Introducing Australia’s Corporate Collective Investment Vehicle (CCIV)

In 2022 Australia is set to launch the Corporate Collective Investment Vehicle (CCIV), a new corporate structure that offers more choice and greater flexibility to investors

Australia’s Corporate Collective Investment Vehicles (CCIV) will finally become effective on 1 July 2022, after a six-year legislative journey. The new regime will provide investors with a flexible fund structure that offers the option to set up umbrella funds incorporating one or more sub-fund.

The CCIV is an alternative to the well-known Managed Investment Scheme (MIS), which is usually set up as an Australian unit trust vehicle. Unlike the MIS, a CCIV is established as a company limited by shares and therefore has legal personality. As such, it’s similar to Singapore’s Variable Capital Company (VCC) structure or the European Undertakings for Collective Investment in Transferable Securities directive (UCITS).

What are the requirements for Australian CCIVs?

As a company limited by shares, a CCIV would have its own constitution and at least one sub-fund. The CCIV will also need to appoint a corporate director, which needs to be a public company that holds an Australian Financial Services Licence (AFSL).

The AFSL must grant the required authorisations to operate a CCIV. This means that existing AFSL holders will have to apply for a variation to their licence to enable 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 hold one or more shares each, similar to unitholders in a unit trust. A CCIV is allowed to issue shares and debentures as long as any security issued is referable to only one sub-fund of the CCIV. A sub-fund of a CCIV is identifiable through a unique chosen name and Australian Registered Fund Number (ARFN). Any additional sub-funds set up after the registration of the CCIV require a separate process.

The assets of the CCIV and its sub-funds may be held by the CCIV or by another person, who could be a depositary. All CCIVs, whether wholesale or retail, will have the option – but not the requirement – to have a depositary or custodian under the current bill.

In the latest adopted bill, the CCIV is allowed to have cross-investments between different sub-funds. This means that a CCIV may acquire, in respect of one sub-fund, shares that are referable to another sub-fund of the CCIV.

What are the tax rules for Australian CCIVs?

The tax treatment for CCIVs is similar to that for trusts. However, there are some specific rules:

• The assets, liabilities and business linked to a specific sub-fund will be treated as a separate trust.
• The CCIV is considered as the trustee of each sub-fund. This means that each CCIV sub-fund will be treated as a separate unit trust and is therefore referred to as the CCIV sub-fund trust.
• The members of the CCIV are to be treated as the beneficiaries of the CCIV sub-fund trust.

This means that each sub-fund of a CCIV will be treated as a separate trust for tax purposes with the relevant application of taxation laws that apply to trustees, trusts and beneficiaries.

What’s next for Australian CCIVs?

The introduction of the CCIV means fund managers in Australia now have the choice of several vehicles for their investments. This might be particularly attractive to foreign fund managers who are more used to corporate-style fund vehicles than Australian unit trusts under the current MIS regime.

Although the tax rules for CCIVs seem similar to those for unit trusts, the regulatory framework of CCIVs is slightly more complex and adds an extra layer of regulatory control.

As this is a new vehicle in Australia, only time will tell if CCIVs become more popular than the current MIS structures. Fund managers will need to evaluate the pros and cons to determine if the new CCIV regime is suitable for them.

Why Intertrust Group?

• We operate in more than 30 countries, with offices in Sydney and Hong Kong.
• Our team is highly experienced in private capital over a variety of asset classes, including real estate and infrastructure.
• We hold a wholesale Australian Financial Services Licence (AFSL).
• We offer a range of complementary administrative and compliance services such as fund accounting, investor relations and unit registry services.
• Intertrust Group is a publicly listed company with 70 years’ experience in providing world-class trust and corporate services to clients around the world.