A managed investment scheme must have a constitution and must lodge it with ASIC when applying for registration of the scheme. While there is no prescribed form, the scheme's constitution must be contained in a document that is legally enforceable and binding as between the scheme's responsible entity and its members. As such, a constitution usually takes the form of a trust deed.

A managed investment scheme's constitution may contain any matters that the responsible entity wishes to include, provided those matters are not inconsistent with the provisions in the Corporations Act 2001 (Cth). A provision may be inconsistent with the Corporations Act 2001 (Cth) where it purports to limit or exclude the responsible entity's liability for its contravening acts or omissions, without specifying any qualifications for that limitation or exclusion. The relevant contents of a scheme's constitution would depend on the particular type of scheme.

The only specific requirement under the Corporations Act 2001 (Cth) regarding the content of the scheme's constitution is that it must adequately provide for key specified matters which govern the rights and obligations of the responsible entity and its members, including:

• the consideration required to be paid for persons to acquire an interest in the scheme;

• the responsible entity's powers to invest, borrow, raise money and deal with scheme property;

• the process of handling members' complaints;

• the responsible entity's rights to be paid for the performance of its duties or to be indemnified from the scheme property;

• the members' rights to withdraw from the scheme and the exit price for interests in the scheme; and

• winding up of the scheme.

The requirements for adequate provision of the specified matters are fairly specific and extensive. For example, in order to for a provide members with rights to withdraw from the scheme, the constitution must expressly specify this right and address certain key aspects of the withdrawal process. See Specific contents of constitution.

The content of the scheme's constitution must also be certain and complete in a contractual context. However, ASIC has granted relief from this requirement to responsible entities that are listed companies and to which the listing rules apply because the listing rules override and prevail over the constitution to the extent of any inconsistency and additional provisions may be deemed to be contained or not be contained in the constitution where required by the listing rules.

When the constitution is lodged with an application form to register the managed investment scheme, ASIC will review the constitution to determine whether the specified matters are prescribed in the constitution. Where necessary and appropriate, ASIC may assess the whole constitution, for example, where a provision in the constitution negates the effect of a specified matter.

ASIC will only register a scheme where the constitution complies with the Corporations Act 2001 (Cth). ASIC has the power to deregister a scheme where its constitution does not comply with the Corporations Act 2001 (Cth). ASIC will also assess the scheme's constitution when a modified or new constitution is lodged by the responsible entity.

Members have the right to request a copy of the scheme's constitution from the responsible entity at any time. Upon written request and payment of a fee, the responsible entity must provide a copy of the scheme's constitution within 7 days of the request.

See General contents of constitution .

There are two ways in which a scheme's constitution may be modified or repealed and replaced: by special resolution passed at a meeting of scheme members, or by the responsible entity if it reasonably considers that the proposed amendment(s) will not adversely affect scheme members' rights.

ASIC relief has also been given so that the responsible entity may amend the scheme's constitution where a meeting of scheme members cannot be held because the quorum requirement cannot be satisfied.

To amend the scheme's constitution without member approval, the responsible entity must have a relevant belief or opinion, after assessing the members' rights before and after the proposed amendment, that the proposed amendment will not affect their rights in a way that is disadvantageous to scheme members.

ASIC Class Order 13/655 provides that where the constitution provides a procedure for varying or cancelling rights of a class of members, notwithstanding the constitution any amendments that may adversely affect those rights can only be made by a special resolution being passed by scheme members and the relevant procedures in the scheme's constitution being followed.

Once a scheme's constitution has been modified or repealed and replaced, the responsible entity is required to lodge with ASIC a copy of the modification or the new constitution, and if requested, a copy of the consolidated constitution. Any amendments will take effect only once the copy has been lodged. However, the effect of the amendments may be deferred to a later time by including an appropriate stipulation to that effect in the special resolution which amends the scheme's constitution.

See Changing the constitution.

Practice Tips:

• when preparing the scheme's constitution, ensure that it is contained in an appropriate form and is in a document that is legally enforceable and binding as between the responsible entity and its members;

• identify and consider all statutory obligations imposed on the responsible entity and the extent of those obligations;

• when drafting the scheme's constitution, ensure that the provisions in the scheme's constitution do not negate the effect of matters specified by the Corporations Act 2001 (Cth);

• ensure that powers of the responsible entity are contained in the scheme's constitution if it is intended that the responsible entity should have those powers;

• when amending the scheme's constitution, ensure that all procedures in the scheme's constitution are followed in addition to the procedures outlined in the Corporations Act 2001 (Cth); and

• if amendments are to be made by the responsible entity, ensure that it carefully considers the effect of those amendments on members' rights.