Law Council of Australia

Business Law Section

ASIC Consultation Paper 388—Net Tangible Assets requirement for responsible entities

Submission Date: 24 April 2026

This submission is made by the Financial Services Committee (Committee) of the Business Law Section of the Law Council of Australia in response to Consultation Paper 388 (CP 388), published by the Australian Securities and Investments  Commission (ASIC) on 18 March 2026, which seeks feedback on proposals to amend the net tangible assets (NTA) requirement that applies to responsible entities (REs) of registered managed investment schemes (registered schemes) and certain other Australian financial services licensees.

The Committee notes that Treasury is separately conducting a review of the governance and financial requirements framework for registered schemes: see Enhancing oversight and governance of managed investment schemes (Treasury Consultation Paper, 10 February 2026). The Committee encourages ASIC to liaise closely with Treasury to ensure that the outcomes of both reviews are coherent and mutually reinforcing, and to avoid the risk of unnecessary duplication or inconsistency of requirements.

Key Points

The Committee’s key observations are as follows:

  1. The NTA requirement has a single logical regulatory objective, to ensure that an RE is an entity of substance, such that its shareholders have sufficient equity in the business to maintain its ongoing viability. This “barrier to entry” function should be the primary basis on which NTA thresholds are calibrated. The objectives stated in CP 388 at paragraph 6(a), (c) and (d), that NTA can be used to fund operating costs, transition costs and immediate unexpected expenses, are inconsistent with the legal structure of the NTA requirement, which prohibits drawdown of NTA assets for those purposes. All thresholdsetting decisions should flow from the entity-of-substance objective.
  2. A CPI-based increase to restore the real value of thresholds that have been unchanged since 2013 is the most calibrated and principled approach. The Committee supports Option 1 as a standalone measure, subject to ASIC verifying that the 2013 baselines were themselves appropriately set.
  3. The proposal to impose a minimum NTA of $150,000 per scheme operated would impose a disproportionate burden on multi-scheme operators and is not consistent with the entity-of-substance rationale. The Committee strongly opposes this element of Option 2.
  4. A transition period of only six months is inadequate. Many REs would need to raise capital from shareholders or the market, which takes time and may not always be possible at short notice. The transition period should be at least 12 months, and preferably 24 months, consistent with practice for significant regulatory change. Grandfathering should be considered in appropriate cases.
  5. The concessional NTA requirement should be retained. REs and their custodians have structured their arrangements in reliance on it, and abrupt removal would cause significant market dislocation.
  6. The Committee also urges ASIC to take this opportunity to simplify and clarify the drafting of the relevant instruments, which are currently difficult to apply without specialist legal advice.
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Last Updated on 28/04/2026

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