Deregistration is not always the end of a scheme. A trustee may have missed a notice, a fee may have been paid late, or the Commission may have been wrong about the facts. Section 273 of the Capital Market Act 2015 provides two routes back onto the register: one through the Commission, one through the National Court.
Reinstatement by the Commission
The Commission may reinstate the registration of a unit trust or managed investment scheme “if the Commission is satisfied that the scheme should not have been deregistered or if the defect that led to the scheme being deregistered has been remedied”.
The first gateway is error. A scheme “should not have been deregistered” if the ground relied on under section 272 did not exist: the review fee had in fact been paid, documents had been lodged, or the scheme was being operated all along. The second gateway is cure. The defect may have been real when the Commission acted, but has since been put right. A scheme deregistered under section 272(1)(a) because it had no trustee meeting section 189 can appoint a licensed corporation as trustee; one deregistered under section 272(1)(b) can have its deed amended by supplementary deed under section 211 to meet sections 210 to 212; one deregistered under section 272(1)(c) can open proper trust accounts and separate its assets. The Commission then has a discretion, not a duty, to reinstate.
The Act does not prescribe a form or a time limit, although section 273(4) contemplates an application “by a person”, who will normally be the trustee or a member. Section 198 requires changes to the trustee to be recorded by the Commission before they take effect, so a trustee appointed to cure a section 189 defect should lodge the appointment notice with the reinstatement application. Reasons, evidence of the cure and an account of the scheme property in the meantime will all help.
Reinstatement ordered by the Court
Section 273(2) lets the Court order the Commission to reinstate the registration if an application is made by “a person aggrieved by the deregistration” or “a person who was winding up the scheme”, and the Court “is satisfied that it is just that the scheme’s registration be reinstated”. The subsection omits the word “and” between its two paragraphs, but both conditions plainly have to be met. A person aggrieved will usually be the trustee or a unit holder, but a creditor who needs the scheme to exist in order to sue the trustee as trustee can also qualify. The person winding up the scheme may need reinstatement when a wound-up scheme turns out to have assets or claims still to be dealt with.
The Court’s most useful power is in section 273(3): it “may give any directions it thinks just for putting the scheme and other people in the same position, as far as possible, as if the scheme had not been deregistered”. Directions can validate distributions and other dealings made during the gap, extend time limits that ran while the scheme was off the register, and confirm the trustee’s authority for acts done in the interval.
| Commission (s 273(1)) | Court (s 273(2)–(3)) | |
|---|---|---|
| Test | Should not have been deregistered, or defect remedied | Just that registration be reinstated |
| Who applies | Any person (in practice the trustee or a member) | A person aggrieved, or the person winding up |
| Extra powers | None stated | Directions restoring the position |
| Cost and speed | Administrative; quicker and cheaper | National Court proceedings |
Whichever route is used, the Commission must publish notice of the reinstatement in the National Gazette and, where it acted on a person’s application, notify that person (section 273(4)). A refusal by the Commission is itself a decision that can be reviewed under the Securities Commission Act 2015, or sidestepped by going to the Court under section 273(2).
Operating a scheme while it is deregistered
The period between deregistration and reinstatement is dangerous. Section 184(1) forbids any person from operating a unit trust or managed investment scheme unless the scheme “is approved and registered by the Commission”, and section 184(2) punishes a breach with a fine of up to K10 million or ten years’ imprisonment, or both. Section 188 adds that the Commission, the trustee or a member may apply to wind up such a scheme, and that every promoter, director, chief executive, chief financial officer and company secretary is guilty of an offence with the same penalty.
For the purpose of section 184(1), a person shall not operate a scheme merely because he “is taking steps to wind up the scheme or remedy a defect that led to the scheme being deregistered”.
That carve-out is the trustee’s protection. Collecting rents on a property the scheme already owns, paying its outgoings, appointing a replacement trustee, amending the deed or preparing a reinstatement application are steps to remedy the defect or to wind up. Issuing new units, taking fresh contributions or making new investments are not; they are operating the scheme. Section 268(3) separately bars issuing units once a winding up is required.
A trustee that learns its scheme has been deregistered should stop issuing units at once, write to all members, keep the scheme property in its separate trust accounts, and decide quickly between reinstatement and winding up. Unit holders who hear of a deregistration should ask the trustee which course it has chosen and, if they get no answer, contact the Commission. A fund deregistered for an unpaid fee can usually be restored within weeks; one whose trustee has lost its licence may need a Court application.
Sources
- Capital Market Act 2015 — ss 184, 187(5), 188, 189, 198, 210–212, 268(3), 272, 273
- Securities Commission Act 2015 — review of Commission decisions
Before relying on anything here, read the current text of the Capital Market Act 2015 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.