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Portfolio: Finance
Commencement: As specified in the `Main Provisions' section of this Digest
Purpose
To provide for the sale of the CSL Limited. A number of requirements will be imposed on the privatised body, including:
* a provision in the articles of association preventing the votes attaching to all significant foreign shareholdings being counted for the appointment, replacement, or removal of more than one- third of company directors;
* a provision in the articles of association requiring the principal facilities used by CSL and any subsidiaries producing human blood plasma products always be located in Australia;
* a provision in the articles of association requiring that CSL remain incorporated in Australia;
* a provision in the articles of association requiring that, at all times, the Chairperson and at least two- thirds of directors are Australian citizens; and
* that Ministerial approval be obtained before the disposal, granting of an interest in, or granting of a security interest in the Broadmeadows blood plasma plant.
Background
The Commonwealth Serum Laboratories (CSL) were established by the Federal Government in 1916 following the outbreak of the World War I when difficulties were experienced obtaining sufficient supplies of antitoxins from European or American sources to meet Australian requirements. In 1923, CSL was one of only four laboratories world wide to commence production of insulin on a large scale. Penicillin was first made experimentally at CSL in 1943 and Australia was the first country in the world to make penicillin commercially available for civilian use. In 1952, CSL fractionation commenced for the production of albumin, fibrinogen and gamma globulin and antihaemophiliac factor. In 1953, Triple Antigen vaccine, for the immunisation of infants and young children against diphtheria, whooping cough and tetanus, were introduced. In 1956, CSL commenced production of Salk activated poliomyelitis vaccine. Other notable achievements of CSL include anti- sera and anti- venoms for specific Australian pests and diseases, such as the funnel- web spider.
CSL is an unlisted public company with assets of $224.5 million. CSL sales revenue totalled $151.6 million in 1991- 92, an increase of 6.7% above the previous year. Net assets fell from $245 million in 1990- 91 to $227.2 million in 1991- 92. Net profits fell by 20% in 1991- 92 from $12.1 million to $9.7 million. However, operating profit before income tax was $19.7 million, an increase of 20% above the previous year. Return on funds employed increased from 9% to 10.2% in 1991- 92. CSL's dividend to the Commonwealth totalled $1.334 million in 1991- 92. CSL's debt fell from $20.5 million in 1990- 91 to $4.3 million in 1991- 92. The Commonwealth's equity in CSL increased from $154.5 million in 1990- 91 to $162.8 million in 1991- 92. 1
During 1990- 91, CSL was incorporated as a public company. All of the issued shares of CSL are held by the Commonwealth. The Government announced in the 1992- 93 Budget that CSL would be sold. The Government has placed a number of conditions on the sale of CSL. These conditions include a 5% limit on individual foreign holdings and that the company should remain under independent Australian control. Estimates as to how much revenue will be raised by the sale vary between $90 million and $250 million. 2Objection to the proposed sale of CSL has been limited. It was reported in The Age of 14 December 1992 that according to venom toxicologist, Dr Struan Sutherland, the `... proposed sale of the Commonwealth Serum Laboratories to private enterprise has placed the future of venom and antivenom research in Australia in doubt.'. Dr Sutherland is reported as saying that `Researching and refining treatments for snake and spider bites was often unprofitable, and would have little appeal compared with products such as influenza vaccine or human blood products,... .'.
Main Provisions
Sale Day: Clause 4 provides that the Minister for Finance is, by Gazettal, to declare a specified day to be the sale day. The sale day will be the day that, in the opinion of the Minister for Finance, is the first day after Royal Assent on which a majority of the voting shares in CSL are bought by a person/s other than the Commonwealth or its nominee. Clause 4 will commence on the day on which this proposed Act receives the Royal Assent (clause 2).
A new Part 3A (proposed section 19A- 19ZA), that contains provisions imposing certain `national interest' restrictions on the privatised body, will be inserted into the Principal Act by clause 7. Clause 7 of this Bill will commence on the day it receives the Royal Assent (clause 2).
Mandatory Articles of Association: Proposed section 19C requires, from the sale day, that CSL's articles of association contain certain provisions, including:
* a provision preventing the votes attaching to all significant foreign shareholdings being counted for the appointment, replacement, or removal of more than one- third of the directors of CSL;
* a provision requiring the head office of CSL to be always located in Australia;
* a provision requiring the principal facilities used by CSL and any subsidiaries producing human blood plasma products derived from blood or plasma donated in Australia always be located in Australia;
* a provision requiring that, at all times, the Chairperson and at least two- thirds of the directors of CSL be Australian citizens; and
* a provision prohibiting CSL from becoming incorporated outside Australia.
`Significant foreign shareholding' is defined by proposed section 19C to mean a holding of at least 5% of CSL voting shares by a foreign person.
Injunctions to Ensure Performance of Mandatory Requirements: Proposed section 19E requires CSL, from the sale day, to maintain a register of foreign- held voting shares. Where requested to by the Minister, CSL is to give the Minister the register or a copy of the register.
Proposed section 19F will allow the Minister to apply to the Federal Court of Australia (the Court) for an injunction restraining CSL or any person from engaging in certain conduct, or requiring CSL or any person to do anything the Court thinks appropriate. The conduct in relation to which the Minister may apply for an injunction includes a contravention of a mandatory CSL article of association (see proposed section 19C above) or proposed section 19E (see above); or inducing or attempting to induce, whether by threats, promises or otherwise, a person to contravene a mandatory CSL article of association or proposed section 19E. The Court may discharge or vary an injunction.
Proposed section 19G will allow the Court, where an application has been made by the Minister for an injunction under proposed section 19F, and it thinks it appropriate, to grant an injunction by consent of all parties to the proceedings.
Where it thinks it appropriate, the Court may grant an interim injunction pending determination of an application for an injunction under proposed section 19F (proposed section 19H).
If the Court has power to grant an injunction under proposed section 19F, it may as well as, or instead of, granting an injunction, make such other orders as it thinks appropriate against CSL or any other person involved in a prohibited conduct (proposed section 19M).
Restriction on Disposal of Broadmeadows Facility: The principal effect of proposed section 19P will be to prevent CSL or a wholly- owned CSL subsidiary, without Ministerial approval, from disposing of the whole of the Broadmeadows facility; granting an interest in the Broadmeadows facility; or granting a security interest in the Broadmeadows facility, or any part of that facility. Ministerial approval may be subject to conditions. The term `security interest' is defined to mean an interest in or power over property which secures a debt or any other obligation. (Note: The `Broadmeadows facility' is a blood plasma fractionation plant nearing completion at Broadmeadows in Victoria).
Injunctions to Ensure Performance of Plasma Products Contracts: Under proposed subsections 19Q(3) and 19Q(4), the Court must if:
(a) CSL has engaged, is engaging, or proposing to engage in conduct that would breach a provision of a contract between CSL or a CSL subsidiary and the Commonwealth relating to the production of human blood plasma products; or
(b) CSL has refused or failed, is refusing or failing, or is proposing to refuse or fail, to do anything required under a contract referred to above to do;
on application of the Minister, grant, with respect to (a) above, an injunction on such terms as it thinks appropriate restraining CSL from engaging in the conduct; or if the Court thinks it appropriate, requiring CSL to do anything to ensure that the contract is performed; and with respect to (b) above, grant an injunction on such terms as it thinks appropriate requiring CSL to do that thing. The Court may discharge or vary an injunction [proposed subsection 19Q(7)].
Proposed section 19R allows the Court, if it thinks it appropriate, where an application has been made for an injunction under proposed subsections 19Q(3) and 19Q(4) to grant an injunction by consent of all parties to the proceedings.
Proposed section 19S allows the Court, if it thinks it appropriate, to grant an interim injunction pending determination of an application for an injunction under proposed subsection 19Q(3) or 19Q(4).
The power accorded to the Court to grant an injunction under proposed subsection 19Q(3) restraining CSL from engaging in conduct must be exercised:
* whether or not it appears to the Court CSL intends to engage again, or continues engaging, in conduct of that kind;
* whether or not CSL has previous engaged in conduct of that kind;
* whether or not there is an imminent danger of substantial damage to any person if CSL engages, or continues to engage, in conduct of that kind; and
* whether or not the Commonwealth has or may have any other remedy available to it in relation to the conduct [proposed subsection 19T(1)].
Provisions the same in effect to the above will apply in relation to the power accorded to the Court under proposed subsection 19Q(4) to require CSL to do a thing where it has refused or failed, is refusing or failing, or is proposing to refuse or fail, to do anything it is required to do under a contract with the Commonwealth [proposed subsection 19U(1)].
If the Court has power to grant an injunction under proposed subsections 19Q(3) or 19Q(4), it may as well as, or instead of, granting an injunction, make such other orders as it thinks appropriate against CSL or any other person involved in a prohibited conduct (proposed section 19W).
Exemption from State and Territory Taxes: Clause 47 provides that State or Territory tax will not be payable in respect of certain exempt matters. These matters relate to the sale of CSL and include:
* the issue or allotment of shares by CSL to the Commonwealth or another person on or before the sale day;
* the transfer of shares in CSL by the Commonwealth or its nominee to another person; or
* the receipt of money by the Commonwealth, CSL or another person acting on their behalf, from persons buying or subscribing for shares in CSL on or before the sale day.
The Minister, the Secretary to the Department, or an authorised delegate may certify that a specified matter, or thing, is an exempt matter or has been done because of, or for a purpose connected with or arising out of, a specified exempt matter. Where this occurs, the specified matter or thing will be exempt from State or Territory tax. No exemption will apply in relation to fees payable under the Corporations Law of a State or Territory. Proposed section 47 will commence on the day this proposed Act receives the Royal Assent (clause 2).
Other Provisions Relating to Sale of CSL: Other provisions of this Bill principally relate to the terms and conditions of employment of CSL employees. For example, clauses 15- 21 contain transitional and savings provisions relating to CSL employee long service leave entitlements under the Long Service Leave (Commonwealth Employees) Act 1976. The principal effect of these provisions is the preservation of benefits accrued by CSL employees prior to the sale day.
Endnotes
1. CSL Limited, Annual Report 1991- 92, pp. 26- 46.
2. See: The Age of 10 April 1993; The Australian of 10 November 1992; The Australian Financial Review of 10 November 1992; and The Age of 3 March 1992.
Ian Ireland (Ph. 06 2772438)
Bills Digest Service 27 October 1993
Parliamentary Research Service
This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.
Commonwealth of Australia 1993.
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Published by the Department of the Parliamentary Library, 1993.