SECTIONS OF THE CORPORATIONS ACT YOU MAY HAVE MISSED: S 601LA

Section 601LA of the Corporations Act 2001 (Cth) extends the related-party transaction rules in Chapter 2E to registered managed investment schemes (MIS). While Chapter 2E governs public companies, s 601LA ensures the same accountability and transparency applies when a scheme’s responsible entity (RE) proposes to give a financial benefit to a related party.

In essence, the RE must obtain member approval before conferring any such benefit, unless an exception applies. The most common exceptions mirror those in Chapter 2E: when the transaction is at arm’s length, or on terms no more favourable to the related party than would be available to an independent third party.

Who Counts as a Related Party?

Related parties can include directors of the RE, their spouses and relatives, controlling entities, and entities they control. The definition is deliberately broad to capture indirect or disguised conflicts of interest.

How is Member Approval Obtained?

If approval is required, it must be obtained through a member resolution, and the RE must provide members with an explanatory statement outlining who the related party is, the nature of the benefit, and sufficient information for members to make an informed decision. Once approved, the benefit must be given within 15 months.

Why Does it Matter?

A breach of s 601LA carries serious legal and regulatory consequences. ASIC or scheme members may seek an injunction, and civil penalties can apply. Ultimately, s 601LA ensures that MIS operators manage investor funds with integrity and transparency, so related-party dealings are properly disclosed, justified, and in the best interests of members.