The text clarifies the application of segregated liability to sub-funds under section 1405. It states that this provision does not apply to an umbrella fund which was authorized and started trading before 30 June 2005, except under certain conditions:

• The umbrella fund's members must pass a special resolution for section 1405(1) to apply to the fund.
• The special resolution must take effect in accordance with the provisions.

An umbrella fund is considered to have begun trading before 30 June 2005 if:

• Shares were issued in any sub-fund before this date and were still in issue at that time.
• The umbrella fund entered into an agreement prior to this date, which gives the capacity to use assets of any sub-fund to satisfy any liability of any other sub-fund.

The special resolution referred to above will take effect on the date it's passed or 31 days after the notice to creditors, whichever is later. But in the case that an application to the court is made, special resolution doesn't take effect until certain conditions are met.

Furthermore, notice of meetings to consider this special resolution must meet certain requirements. These include being accompanied by audited financial statements, being given to all creditors of the umbrella fund, and being delivered to the Registrar with the statement of assets and liabilities.

Once notice of the meeting is given, creditors are then notified. This requirement is fulfilled if a written notice is sent out to each relevant creditor and a notice is published in at least one national newspaper to state the intention of availing section 1405(1).

At this point, a creditor can object the resolution by making an application to the court. Only if the court considers it fair, an order preventing any resolution may be passed. These orders have a specific duration and can only be made by relevant creditors that meet certain criteria.

The court, in order to decide if the order is to be made, will consider factors like terms of any agreement, course of dealings, conduct of the umbrella fund or its delegates towards the creditor or creditors, and the extent of representation or reasonable expectations for recourse to the assets of any other sub-fund.