On 16 December 2022, the Government announced the commencement of the new litigation funding regulations, the Corporations Amendment (Litigation Funding) Regulations 2022.
Following the commencement of these new regulations, litigation funding arrangements are generally exempt from the managed investment scheme, Australian financial services licensing, product disclosure and anti-hawking regimes in the Corporations Act 2001.
ASIC has extended the relief outlined below because these are not covered by the new regulations. The relief, which was due to expire on 31 January 2023, has been extended for three years until 31 January 2026.
- ASIC Credit (Litigation Funding-Exclusion) Instrument 2020/37 provides relief from the application of the National Credit Code in Schedule 1 to the National Consumer Credit Protection Act 2009 to litigation funding arrangements and proof of debt arrangements; and
- ASIC Corporations (Conditional Costs Schemes) Instrument 2020/38 provides relief from the requirements in Chapters 5C (managed investment schemes) and 7 (financial services licensing and disclosure) of the Corporations Act 2001 to litigation funding arrangements where the members wholly or substantially fund their legal costs under a conditional costs agreement.
The relief has been extended to provide certainty for litigation funders, lawyers and members of litigation funding and proof of debt funding arrangements while the Government considers further its policy position for these types of arrangements.
ASIC has also revoked the now redundant relief for registered litigation funding schemes in ASIC Corporations (Disclosure in Dollars) Instrument 2016/767 and ASIC Corporations (Litigation Funding Schemes) Instrument 2020/787.
The changes to the relief have been made by ASIC Corporations & Credit (Amendment and Repeal) Instrument 2022/1032.
Background
Under the previous regime (Corporations Amendment (Litigation Funding) Regulations 2020), operators of litigation funding schemes that included features set out in the regulations were required to hold an Australian financial services licence, and the schemes were generally subject to the managed investment scheme regime under the Corporations Act 2001.
The Corporations Amendment (Litigation Funding) Regulations 2022 commenced on 10 December 2022.
