The responsible entity of a registered scheme must be a public company that holds an Australian financial services licence authorising it to operate the scheme. If the proposed company is a public company but it does not hold a licence, it can apply to ASIC to obtain one. ASIC has released a number of regulatory guides which provide guidance on how to make applications and the criteria which it will use to assess applications.

Before applying to ASIC for an Australian financial service licence to act as a responsible entity of a registered scheme, the regulatory guides should be properly reviewed and it should be confirmed that the company satisfies the criteria. Amongst other financial, educational and organisational experience factors, matters of good fame and character, expertise and ability are relevant. ASIC will review the application and the type of scheme(s) which the applicant proposes to operate. If satisfied that the applicant meets the criteria, ASIC will issue a licence which may be subject to certain conditions.

An unregistered scheme which is not required to be registered does not need to comply with the requirements in the Corporations Act 2001 (Cth) regarding the scheme's responsible entity. However there may still be a requirement to hold an Australian financial service licence depending on how the unregistered scheme was promoted and how it is operated.

The responsible entity is required to operate the scheme and perform its duties under the scheme's constitution and the Corporations Act 2001 (Cth), including maintaining financial records and reporting. It may appoint an agent to perform the acts that it is authorised to do. In the context of liability, the responsible entity is taken to have done (or failed to do) anything that the agent has done (or failed to do), even if the agent acted fraudulently or outside the scope of the authority. However, the constitution may provide the responsible entity with indemnity for liabilities. As such, consideration should be given to the extent of indemnity provisions in the constitution and the nature and extent of the agency relationship with the responsible entity's agent.

See Financial reporting and disclosure.

In addition to the responsible entity's statutory and fiduciary duty to hold scheme property on trust for its members, it is subject to numerous other specific statutory duties, some of which are similar to those imposed on directors and officers of companies. There are ASIC class orders which provide relief from certain duties, such as the prohibition against differential treatment of members and the requirement to separate assets of the scheme.

Failure to fulfill its statutory duties is a contravention resulting in a civil penalty and potential action for damages. As such, due to the extent of statutory duties imposed on responsible entities (which are in addition to duties imposed by the constitution), care should be given to ensure that the responsible entity fully understands the extent of, and complies with, its duties. Given that the responsible entity must also comply with the scheme's compliance plan, additional duties may be imposed on it from this source.

The officers of a responsible entity are also subject to statutory duties similar to those imposed on directors and officers of companies. In addition, they must ensure that the responsible entity complies with its duties. Any failure to comply with their duties is a contravention which may result in a civil penalty and may also result in compensation orders under s 1317HA of the Corporations Act 2001 (Cth).

Employees (who are not officers) of a responsible entity have only two statutory duties, which are to avoid making use of information acquired through, or improper use of, their position to gain an advantage or cause detriment to scheme members. Failure to comply is also a contravention which may result in a civil penalty.

See Responsibilities and duties.

See Officers of responsible entity.

There could be a change in a responsible entity due to the voluntary retirement of a current responsible entity, the removal of the responsible entity by members where a current responsible entity no longer meets the requirements and criteria to be a responsible entity or where the nominated new responsible entity withholds its consent and an application is brought to the court to appoint a temporary responsible entity.

The process of changing a responsible entity involves five steps:

• in the context of retirement, the scheme members passing a resolution choosing a new responsible entity, or in the context of removal, the scheme members passing a resolution removing the current responsible entity and a resolution choosing a new responsible entity;

• the proposed new company's consent to become the new responsible entity being obtained;

• the lodgement of Form 5107 or Forms 5107 and 5108 requesting ASIC to alter the record of the scheme's registration to reflect the new responsible entity;

• ASIC's consideration of that request and the alteration by ASIC of its record to give effect to the change; and

• in addition to the statutory requirements, there may be provisions in the scheme's constitution which regulate the removal and/or replacement of the responsible entity. Care should be taken to ensure that these provisions are also followed.

Where a temporary responsible entity is appointed by the court upon application, it must call a members' meeting to pass a resolution choosing a new responsible entity within three months or if extended, within the extended period. If a new responsible entity is chosen and it has provided its written consent, Form 5109 must be lodged requesting ASIC to alter the record of the scheme's registration to reflect the new responsible entity.

Once the change of responsible entity is given effect, the rights, obligations and liabilities of the former responsible entity are transferred to the new responsible entity, a novation in favour of the new responsible entity essentially occurs.

See Changing a responsible entity.