Supreme Court in Victoria strikes down unilateral amendments to scheme constitution by the responsible entity
Section 601GC(1)(b) of the Corporations Act 2001 (Cth) allows the responsible entity of a managed investment scheme to amend the constitution of the scheme without unitholder approval if the responsible entity reasonably considers that the changes will not adversely affect unitholders’ rights.
The recent decision in Watts v 360 Capital RE emphasises the importance of the responsible entity conducting, and being able to demonstrate that it conducted, a proper and reasonable consideration of the impact of the proposed constitutional changes.
The decision takes a broad view of the extent to which the benefit of the provisions of the constitution of a managed investment scheme constitute unitholders’ rights for the purposes of section 601GC(1)(b) – in that respect, it is more consistent with the analysis in Premium Income Fund than In the matter of Centro Retail Limited.
The decision once again casts doubt on whether ‘dilutive’ constitutional amendments affect ‘rights’ of unitholders and the extent to which such amendments can be implemented unilaterally by responsible entities.
360 Capital RE has announced that it intends to appeal the decision