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Financial Sector (Shareholdings) Bill 1998

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 ·  Financial Sector (Shareholdings) Bill 1998

Financial Sector (Shareholdings) Bill 1998  · 

 

 

 

 

 

 

 

 

 

 

1998

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

FINANCIAL SECTOR (SHAREHOLDINGS) BILL 1998

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

(Circulated by authority of the Treasurer,

the Honourable Peter Costello MP)

 

 

 

 

13645

 



 

 · Financial Sector (Shareholdings) Bill 1998

 

Table of contents



.Begin Table C.

Outline     1

Financial Impact Statement    2

Abbreviations     3

Summary of key measures of the bill 4

Explanation of Items    5

Part 1  - Preliminary   5

Part 2  - Restrictions on shareholdings of financial sector companies   7

Part 3  - Anti-avoidance      15

Part 4  - Injunctions   16

Part 5  - Offences      18

Part 6  - Civil Liability     20

Part 7  - Miscellaneous 22

Schedule 1  - Ownership Definitions 24

.End Table C.

 



Outline

Outline

 

Financial Sector (Shareholdings) Bill 1998  · 

1

Outline

1.1   This Bill forms a part of a package of legislation to implement the Government's response to the recommendations of the Financial System Inquiry as announced by the Treasurer, the Hon. Peter Costello, MP, in the House of Representatives on 2ÿSeptember 1997.

1.2   The Final Report of the Inquiry and the Government's response to it are directed to the fundamental goals of the Government: to increase competition and improve efficiency, while preserving the integrity, security and fairness of the financial system.

1.3   Consistent with these goals, the regulation of ownership and acquisitions of prudentially regulated financial institutions fulfils a prudential purpose by creating a diversity of ownership within institutions thus ensuring that no nexus exists between the financial health of a prudentially regulated financial institution and the fortunes of an individual person and/or their associates.

1.4   The Government supports the general principle of a diversity of ownership to ensure the risks associated with a concentration of ownership are minimised.  Such a principle underpins the overall stability of, and enhances the level of confidence in, the financial system.

1.5   The Bill gives the Treasurer the power to approve the acquisition of more than 15 per cent in a prudentially regulated financial institution or its holding company, subject to a national interest test.  This is achieved through the streamlining of existing legislation by the adoption of a single Act covering ownership of prudentially regulated financial institutions with a common 15 per cent shareholding limit.  These financial institutions will be regulated by the Australian Prudential Regulation Authority (APRA) and include banks, other authorised deposit-taking institutions and insurance companies, and their holding companies.  Approvals which apply for holding companies will carry through to wholly-owned members of the group, thereby simplifying the administration and compliance task.

1.6   The Bill further provides that the Treasurer may apply a 'practical control' test where a person and their associates have effective control over the operations and policies of a financial sector company, even though the shareholdings of the person and their associates do not breach the 15 per cent limit.

1.7   The Bill will replace the Banks (Shareholdings) Act 1972 (BSA) and will allow the repeal of Part 2 of the Insurance Acquisitions and Takeovers Act 1991 (IATA) which deals with shareholdings in Australian-registered insurance and related companies.

1.8   The transitional arrangements of the Bill allow for shareholdings already approved under the BSA and the IATA to be maintained.

Financial Impact Statement

1.9   It is not envisaged that this Bill will have a financial impact on the operations of government.



Abbreviations

 

 

2

Abbreviations

The following abbreviations are used in this explanatory memorandum.

 

ADI

-

Authorised Deposit-taking Institution

APRA

-

Australian Prudential Regulation Authority

APSC

-

Australian Payments System Council

BSA

-

Banks (Shareholdings) Act 1972

FSI

-

Financial System Inquiry

IATA

-

Insurance Acquisitions and Takeovers Act 1991

NBFI

-

Non-Bank Financial Institution

RBA

-

Reserve Bank of Australia

 



Summary of Key Measures

Summary of Key Measures

3

Summary of key measures of the bill

3.1   This Bill subjects prudentially regulated financial sector companies  to:

·     a 15 per cent shareholding limit by any one person (and their associates), or

·     a shareholding limit of such higher percentage as the Treasurer may determine as being in the national interest.

3.2   The Bill allows the Treasurer to declare a person to have practical control (the power to control the policies and operations of the financial institution), regardless of the size of their shareholding. 

3.3   The Bill requires a person to ensure that their stake (voting power of the person and their associates) does not exceed 15 per cent and that they do not have practical control.  It streamlines regulation by applying common rules to the deposit-taking and insurance sectors, and by allowing approvals for holding companies to carry through to all regulated members of the company group. 

3.4   Regulations may require records to be kept, and information to be given, for the purposes of determining the restrictions on shareholdings. 

3.5   This Bill will replace the BSA and will allow repeal of Part 2 of the IATA which deals with acquisitions of Australian-registered insurance companies.  These aspects are dealt with in Schedules 3 and 8 of the Financial Sector Reform (Amendments and Transitional Provisions) Bill 1998.



Explanation of Items

Explanation of Items

4

Explanation of Items

Part 1  - Preliminary

Part 1 describes the necessary formal clauses underpinning the Bill.  These include details on commencement of the Bill, relevance of the Bill to external territories and the application of the Criminal Code to all offences against provisions of the Bill.

Clause 1  - Short Title

4.1   Upon enactment, the Bill will be known as the Financial Sector (Shareholdings) Act 1998.

Clause 2  - Commencement

4.2   The Bill when enacted will commence at the same time as the commencement of the Australian Prudential Regulation Authority Act 1998, reflecting that some sections of the Bill relate to and depend on this Act.

Clause 3  - Definitions

4.3   This clause of the Bill defines various words and phrases used in the Bill.

Clause 4  - Holding Companies

4.4   This clause defines a holding company.  For the purposes of this Bill, if a company is a 100ÿperÿcent subsidiary of another company, the latter company is the holding company of the first company.

Clause 5  - Crown is bound by this Act

4.5   The Crown is bound in all its capacities, but is not liable to be prosecuted for an offence. 

Clause 6  - External Territories

4.6   The Bill extends to all external Territories of Australia. 

Clause 7  - Extra-territorial operation

4.7   The Bill extends the application of the Act outside Australia.

4.8   The purpose of this clause is to ensure that the provisions of the Bill cannot be evaded by transactions (such as share dealings) outside Australia.



Part 2  - Restrictions on shareholdings of financial sector companies

Part 2 provides that prudentially regulated financial sector companies are subject to a 15 per cent shareholding limit.  The Treasurer may approve a higher percentage on national interest grounds.  Part 2 allows the Treasurer to declare a person to have practical control (the power to control the operations and policies of an institution) regardless of the size of their shareholding.  Partÿ2 also provides for regulations to be made that may require records to be kept, and information to be given for the purposes of determining the restrictions on shareholdings.

Division 1  - Introduction

Clause 8  - Simplified Outline 

4.9   Clause 8 sets out a simplified outline of the Bill. 

Clause 9  - Ownership Definitions in Schedule 1

4.10  The definitions used in Part 2 of the Bill are set out in Schedule 1 to the Bill.

Division 2  - 15ÿperÿcent shareholding limit

Clause 10  - Meaning of unacceptable shareholding situation

4.11  This clause provides that an "unacceptable shareholding situation" exists in relation to a financial sector company if a person (and their associates) holds a stake in the company of more than 15 per cent, or a stake that is higher than the percentage specified by the Treasurer in the proposed Division 3. 

Clause 11  - Acquisition of Shares

4.12  This clause creates an offence if a person or persons recklessly (including knowingly or with intent) acquire shares in a financial sector company where the acquisition creates an "unacceptable shareholding situation", as defined by clauseÿ10.

4.13  On conviction a penalty not exceeding 400 penalty units applies.

Clause 12  - Remedial Orders

4.14  Subclauses 1, 2, 3 and 4 provide that, if an unacceptable shareholding situation exists or has existed in relation to a financial sector company, the Federal Court may, on application by the Treasurer or the company, make orders it considers appropriate, including to ensure that the situation ceases to exist.  Such orders may include (but are not limited by) a direction to dispose of the shares, to restrain the exercise of such rights attached to such shares, to stop the payment of any funds to the person associated with ownership of the shares and to not exercise any rights attached to the shares.

4.15  Subclause 5 provides the Federal Court with additional power to make an order directing any person to do or refrain from doing a specified act, or to make an order containing ancillary or consequential provisions that the Federal Court thinks just.

4.16  Before making an order under this clause, subclause 6 allows the Court to give notice of the application to such persons or publish in any manner it thinks fit or both.

4.17  Subclause 7 allows the Federal Court to make an order to rescind, vary, discharge or suspend the operation of an order made by it under this clause.

Division 3  - Approval to exceed 15 per cent shareholding limit

Clause 13  - Application for approval to exceed 15 per cent shareholding limit 

4.18  Subclause 1 allows a person to apply to the Treasurer for approval to hold a stake in a financial sector company of more than 15 per cent.

4.19  Subclause 2 states the requirements such an application must meet.  It states the application must specify the person's current stake in the financial sector company (if any), the stake being sought, the person's reasons for the application, and that the application must be accompanied by a prescribed fee.

Clause 14  - Approval of application

4.20  Subclause 1 provides that the Treasurer may approve an applicant to hold a stake in the financial sector company of more than 15 per cent if the applicant satisfies the Treasurer that it is in the national interest to do so.

4.21  Subclause 2 specifies the requirements the Treasurer must meet to grant the application.  The Treasurer must give written notice of approval to the applicant, specify the percentage stake permitted (which may not be the percentage applied for) and, either specify the period the approval will remain in force, or specify that the approval will remain in force indefinitely.

4.22  Subclause 3 requires the Treasurer to notify the applicant in writing of a refusal to grant an application.  Subclause 4 requires the Treasurer, upon granting an approval, to arrange to publish the notice in the Gazette and give a copy of the notice to the company concerned.

Clause 15  - Duration of approval

4.23  Subclause 1 provides that an approval under clause 14 remains in force until the end of the period or the extended period specified by the Treasurer, or otherwise indefinitely.

4.24  Subclauses 2 to 6 deal with extensions of the Treasurer's approval.

4.25  Subclauses 2 and 3 state that a person with an approval for a specified period may apply to the Treasurer for an extension of the approval, and the application must set out the person's reasons for seeking an extension and include a prescribed fee.

4.26  Subclause 4 specifies that the Treasurer has the power to grant an extension if the applicant satisfies the Treasurer it is in the national interest to do so.

4.27  Subclause 5 states that in granting an approval the Treasurer must give written notice of the approval to the applicant and specify the period the approval remains in force (which may not be the period applied for).

4.28  Subclause 6 requires the Treasurer to give written notice to the applicant of any refusal to grant an application.

4.29  Subclause 7 provides that if the Treasurer grants an extension, the Treasurer is required to have a copy of the notice published in the Gazette and a copy given to the financial sector company concerned. 

Clause 16  - Conditions of approval

4.30  Clause 16 deals with the Treasurer's power to impose conditions on an approval, and the procedures the Treasurer must follow to do so.

4.31  Subclauses 1 and 2 provide the Treasurer with the power to impose conditions (if any) on an approval granted to an applicant, or to revoke or vary any conditions already imposed on an applicant's approval.

4.32  Subclause 3 allows the Treasurer to impose, revoke or vary conditions on an applicant's approval either on the Treasurer's own initiative or by application by the person holding the approval.  In the latter case subclause 4 requires the applicant to set out the reasons for making the application and that the application must be accompanied by the prescribed fee.

4.33  Subclauseÿ5 requires the Treasurer to provide written notice to an applicant if their application is refused. 

4.34  Subclause 6 requires the Treasurer to have a copy of the notice published in the Gazette and a copy given to the financial sector company concerned.

Clause 17  - Varying percentage stake approved

4.35  Clause 17 deals with the situation of a person that holds an approval applying to vary the percentage specified in the approval. 

4.36  Subclause 1 allows a person that holds an approval applying to vary the percentage specified in the approval.  Subclause 2 requires that such an application must specify the person's current and desired holdings, set out the reasons for the application and that the application be accompanied by the prescribed fee.

4.37  Subclause 3 requires the applicant to satisfy the Treasurer that it is in the national interest to grant a higher percentage.  Subclause 4 requires the Treasurer to advise the applicant of the Treasurer's decision in writing and specify any variation granted (which may not be the same as that applied for).  Subclause 5 requires that if the Treasurer refuses an application the Treasurer must give written notice to the applicant. 

4.38  Subclause 6 enables the Treasurer, on the Treasurer's own initiative, to notify the person in writing of his approval to vary the percentage of the holding provided the Treasurer is satisfied it is in the national interest.

4.39  Under subclauses 7 and 8, if the Treasurer varies a percentage upwards it takes effect on the day of the notice, and variations downwards take effect on the day specified in the notice of variation but at least 90 days after the day of notice (in order to allow the person time to vary their holdings).

4.40  Subclause 9 requires that a copy of the Treasurer's notice of variation be published in the Gazette and be given to the financial sector company concerned. 

Clause 18  - Revoking an approval

4.41  Subclause 1 allows the Treasurer to revoke an approval in writing if the Treasurer is satisfied it is in the national interest to do so, if a  unacceptable shareholding situation exists, or if the person contravenes any condition of the approval. 

4.42  Subclause 2 provides that a revocation will take effect at least 90 days after the day the notice is given (in order to allow a person time to vary their holdings). 

4.43  Subclause 3 provides that if a holder of an approval requests the Treasurer to revoke an approval, the Treasurer must provide written notice of the revocation to the holder.  The revocation takes effect on the day specified in the notice.  Subclause 4 provides that a copy of the Treasurer's notice of revocation must be published in the Gazette and given to the financial sector company concerned.

Clause 19  - Flow-on approvals

4.44  If a person has approval to hold a stake in a financial sector company of more than 15 per cent, and that financial sector company is a wholly owned holding company of another financial sector company, subclause 1 deems that the person's approval flows through to the 100% subsidiaries of the holding company. 

4.45  Subclause 2 provides that if a financial sector company that is a subsidiary of a holding company ceases to be a 100 per cent subsidiary of that holding company, the flow-through approval to the person in subclause 1 is taken to be in force for 90 days after that day, or if during that 90 day period the person becomes the holder of another approval under clause 14, when that other approval comes into force. 

4.46  Subclause 3 provides that if a company has the Treasurer's approval to hold a stake higher than 15 per cent in a financial sector company, each officer in the approval company is deemed to have approval to hold the same percentage stake in the financial sector company.  The purpose of this subclause is to make clear that because a company and its officers are associates, the limitation applies to the company and its officers in respect of all shares held.

Clause 20  - Further information about applications

4.47  This clause provides for the Treasurer to seek further information from an applicant within a specified period beyond that already provided in the application.  The Treasurer must write to the applicant to seek the additional information, and the Treasurer may refuse to consider an application until the additional information is provided.

Clause 21  - Electronic lodgement of applications

4.48  Clause 21 permits applications to be made electronically (by electronic transmission or via a data storage device) in accordance with specified software and authentication requirements.  If an application is made electronically an application fee is required within 7 days of the date of transmission.  Data storage device is defined in subclauseÿ3.

Division 4  - Practical control where 15 per cent shareholding limit not exceeded

4.49  Division 4 deals with the situation where a person has practical control of a financial sector company irrespective of their stake in the financial sector company.

Clause 22  - Meaning of control

4.50  Clause 22 provides an open definition of control, where control is defined to include the use of trusts, agreements, arrangements, understandings and/or practices, whether or not they have legal or equitable force, or are based on legal or equitable rights. 

Clause 23  - Treasurer may declare a person to have practical control of a financial sector company

4.51  Clause 23 provides that the Treasurer may declare that a person has practical control of a financial sector company, even though the stake of the person in the financial sector company is less than 15 per cent.  The clause also outlines the date of effect of the declaration, the circumstances under which it can be revoked, and the requirements for notification of the making or revoking of a declaration. 

4.52  Subclause 1 states that to make a declaration that a person has practical control of a financial sector company the Treasurer must be satisfied that:

(a)   the directors of the financial sector company, or the company itself, are subject to the directions, instructions or wishes (ie control) of a person and their associates;

(b)   that the person alone or with associates have not more than a 15 per cent stake in the financial sector company; and

(c)   it is in the national interest to make the declaration.

4.53  Subclauseÿ3 requires the Treasurer to revoke the declaration if the Treasurer is no longer satisfied that a situation of practical control as defined under subclause 1 applies.  Subclause 4 requires the Treasurer to arrange for a copy of the declaration or revocation to be provided to the financial sector company and the person concerned.

Clause 24  - Requirement to relinquish practical control or reduce stake

4.54  Clause 24 outlines what steps the person declared to have practical control of a financial sector company must take in order to relinquish that practical control, and the penalties involved if they do not comply.

4.55  Subclause 1 requires that in order to relinquish practical control, the person must take steps to ensure that they and their associates no longer control the directors of a financial sector company (as described in clause 23) or the financial sector company itself.

4.56  Subclause 2 states that the steps in subclause 1 must be undertaken within 90 days of receipt of the most recent declaration, or within any longer period as specified by the Treasurer in a written notice to the person.

4.57  Subclause 3 states that a person is guilty of an offence and will face a penalty of 400 penalty units if they are subject to a requirement under this clause and recklessly (ie knowingly or with intent) contravene it.

Clause 25  - Remedial orders

4.58  Subclause 1 outlines the remedial orders the Federal Court may apply, on application by the Treasurer, to ensure that the person alone (or with associates) no longer controls the directors of a financial sector company or the company itself, while holding less than a 15ÿperÿcent stake in the financial sector company.

4.59  Subclause 2 outlines what types of orders the Federal Court may include.  The Federal Court may make orders to the person to dispose of the shares, to not exercise any rights attached to the shares or to disregard those rights, or to deny the person access to any sums due to the person related to their shareholding.

4.60  Subclause 3 states that the orders the Federal Court may apply are not limited by those orders specified in subclause 2.

4.61  In order to secure compliance with the Federal Court's orders, subclause 4 provides the Federal Court with further powers to direct any person to do (or not to do) certain acts, or to make an order with any ancillary or consequential provisions the Federal Court considers just.



4.62  Subclause 5 allows the Federal Court to require that, before it makes an order, it may notify such persons it thinks fit of the Treasurer's application, and/or to publish a notice of the Treasurer's application in any manner it thinks fit.

4.63  Subclause 6 allows the Federal Court to make an order to rescind, vary, suspend, or discharge any order made by it under this section.

Division 5  - Record keeping and giving of information

Clause 26  - Record keeping and giving of information

4.64  Subclause 1 states that the regulations may be made to require a person to:

(a)   keep and retain records relevant to an "ownership matter" (defined in subclause 6); and

(b)   give to the Treasurer information relevant to an ownership matter; or

(c)   give to a financial sector company information relevant to an ownership matter concerning the financial sector company.

4.65  Subclause 2 provides that the regulations may require that information given to the Treasurer or a financial sector company under subclause 1 be verified by a statutory declaration. 

4.66  Subclause 3 provides that a person is not required to give information that might tend to incriminate the person or expose the person to a penalty.

4.67  Subclause 4 provides that a person must not recklessly contravene a requirement covered by this clause and imposes a maximum penalty of 50 penalty units.  (Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.)

4.68  Subclause 5 provides that regulations made for the purposes of clause 26 may confer discretionary powers on the Treasurer including, for example, a power for the Treasurer to require that specified information be provided by a financial sector company within a specified period on an ownership matter.

4.69  Subclause 6 defines each of the following to be an "ownership matter":

(a)   whether a person holds a stake in a financial sector company and the level of that stake;

(b)   whether the directors of a financial sector company are accustomed or under an obligation to act in accordance with directions, instructions or wishes of a person; and

(c)   whether a person alone or with associates is in a position to exercise control (as defined in clause 22) over a financial sector company.



Division 6  - Ancillary matters

Clause 27  - Provision to attract the corporations power, the banking power and the insurance power

4.70  Subclause 1states that the proposed Part 2 applies only to a financial sector company that is a constitutional corporation or a body corporate that carries on a banking business or an insurance business.  Banking business and insurance business are defined to exclude State banking or insurance business not extending beyond the limits of the State concerned. 

4.71  Subclause 2 states that subclause 1 applies to a financial sector company whether banking/insurance is the sole or the principal business carried on by that company.

Clause 28  - Current operation of State/Territory laws

4.72  Clause 28 provides that proposed Part 2 is not to apply to the exclusion of State or Territory law, where that law is capable of operating concurrently with Part 2.

Clause 29  - Validity of acts done in contravention of this part

4.73  Clause 29 provides that an act is not invalidated by the fact that it constitutes an offence under Part 2. 

Clause 30  - Acquisition of property

4.74  Clause 30 provides that the Federal Court must not make an order under the proposed Part 2 if the order would result in the acquisition of property from a person on terms that would not be just, or if the order would be invalid because of paragraph 51(xxxi) of the Constitution.



Part 3  - Anti-avoidance

Part 3 provides for the Treasurer to terminate a shareholding agreement where the agreement is established to avoid the application of any clause in Part 2.

Clause 31 - Anti-avoidance

4.75  Subclause 1 empowers the Treasurer, by written notice, to direct that a stakeholder must cease holding a stake in a financial sector company where:

(a)   one or more persons enters into a scheme which would result in an increase in the stakeholder's stake in a financial sector company; and

(b)   all or part of that scheme is carried out for the sole or dominant purpose of avoiding the application of any provision of Partÿ2.

4.76  Subclause 1(c) defines two terms used in the clause.

4.77  Subclause 2 provides that a person is guilty of an offence if that person is subject to a direction under subclause 1 and that person intentionally contravenes that direction.  A penalty of 400 penalty units is imposed for the offence.



Part 4  - Injunctions

Part 4 provides for the granting of injunctions where a person contravenes certain provisions of the Bill.

Clause 32  - Injunctions

4.78  Subclause (1) provides for the Federal Court to grant, on application by the Treasurer, an injunction restraining a person from engaging in conduct that contravenes clause 11 of this Bill (obtaining an unacceptable shareholding situation) and, if it is desirable, requiring the person to do something.

4.79  Subclause (2)  provides for the Federal Court to grant, on application by a financial sector company, an injunction restraining a person from engaging in conduct that contravenes clause 11 of this Bill and, if it is desirable, requiring the person to do something, if the contravention relates to the existence of an unacceptable shareholding situation in relation to a financial sector company.

4.80  Subclause 3 provides for the Federal Court to grant, on application by the Treasurer, an injunction restraining a person from engaging in conduct, or requiring the person to do something, where the person's conduct is, or is intended to be, a contravention of a condition of an approval granted under clause 14.

4.81  Subclause 4 provides for the Federal Court to grant, on application by the Treasurer, an injunction requiring a person who has refused or failed to do something, where that refusal or failure causes a contravention of clauses 26 or 31 of the Bill, to do that thing.

4.82  Subclause 5 provides for the Federal Court to grant, on application by a financial sector company, an injunction requiring a person who:

(a)   has or is proposing to refuse or fail to do something; and

(b)   where that refusal or failure causes a contravention of subclause 26(4) relating to a requirement covered by subclause 26(1)(c) of the Bill to give information to a financial sector company;

to do that thing.

4.83  Subclause 6 provides that if a person does not do an act or thing that is required as a condition of an approval under clause 14, on application by the Treasurer the Federal Court may grant an injunction requiring the person to do that act or thing.

Clause 33  - Interim injunctions

4.84  Subclause 1 provides that the Federal Court may grant an interim injunction that restrains a person from engaging in certain conduct before considering an application lodged under clause 32. 

4.85  Subclause 2 provides that the Federal Court is not to require an applicant for an injunction under clause 32 to give any undertakings as to damages as a condition of an interim injunction.

Clause 34  - Discharge etc of injunctions

4.86  Clause 34 allows the Federal Court to discharge or vary an injunction granted under Part 4.

Clause 35  - Certain limits on granting injunction not to apply

4.87  Subclause 1 provides that the Federal Court may grant an injunction under Part 4 that restrains a person from engaging in conduct of a particular kind:

(a)   if the Court is satisfied that the person has engaged in conduct of that kind, regardless of whether or not it appears that the conduct will continue or recommence; or

(b)   if the Court is satisfied that if an injunction is not granted that it is likely that the person will engage in conduct of that kind.

4.88  Subclause 2 provides that the court may grant an injunction under this Part which requires a person to do something:

(a)   if the court is satisfied that the person has refused or failed to do that thing, regardless of whether or not it appears to the court that the person intends to refuse or fail again or to continue to refuse or fail; or

(b)   if it appears to the court that it is likely that the person will refuse or fail to do that thing, regardless of whether or not the person has previously refused or failed to do that thing and whether or not there is an imminent danger of substantial damage to any person if the person refuses or fails to do that thing.

Clause 36  - Other powers of the Federal Court unaffected

4.89  Clause 36 provides that the powers conferred on the court under Partÿ4 are in addition to, and do not substitute for, any other powers of the Court.



Part 5  - Offences

Part 5 provides the offence provisions for this Bill in relation to false or misleading statements and incorrect records, and states where an offence is an indictable offence.

Clause 37  - False or misleading statements

4.90  Clause 37 provides that a person is guilty of an offence if the person makes a statement to a person who is exercising powers or performing functions under the Bill or in purported compliance with clause 26(1)(c), and that statement is false or misleading or omits any matter or thing without which the statement is misleading.

4.91  A maximum penalty of imprisonment for 6 months is imposed for this offence.

Clause 38  - Incorrect records

4.92  Clause 38 provides that a person is guilty of an offence if the person makes a record in purported compliance with a requirement of clause 26(1)(a) in such a way that it does not correctly record the matter or thing.

4.93  A maximum penalty of imprisonment for 6 months is imposed for this offence.

Clause 39  - Indictable offences

4.94  Clause 39 provides that an offence against sections 11 (acquisition of shares), 24 (requirement to relinquish practical control or reduce stake) or 31 (anti-avoidance) are indictable offences. 

Clause 40  Application of the Criminal Code

4.95  Clause 40 provides that Chapter 2 of the Criminal Code applies to all offences against this Bill.

Clause 41  Service of summons or process on foreign corporations  criminal proceedings

4.96  Subclause 1 provides that proposed section 41 applies to a summons or process in any criminal proceedings under the Bill where service of a summons or process is required to be served on a body corporate incorporated outside Australia and the body corporate does not have a registered office or principal office, but does have an agent, in Australia.

4.97  Subclause 2 provides that the summons or process may be served on the agent.

4.98  Subclause 3 provides that proposed subclause 2 has effect in addition to section 28A of the Acts Interpretation Act 1901, which deals with the service of documents.

4.99  Subclause 4 defines a criminal proceeding to include a proceeding to determine whether a person should be tried for an offence.



Part 6  - Civil Liability

Part 6 provides, in relation to a civil proceeding under the Bill, the requirement to establish the state of mind of a corporation or a person other than a corporation and the requirement to establish whether a corporation or person other than a corporation has engaged in a certain conduct.

Clause 42  Civil liability of corporations

4.100 Subclause 1 provides that if, in a civil proceeding under the Bill in respect of conduct engaged in by a corporation, it is necessary to establish the state of mind of a corporation, it is sufficient to show that a director, employee or agent of the corporation engaged in that conduct and was acting within the scope of their actual authority and they had that state of mind.

4.101 Subclause 2 provides that if a conduct is engaged in on behalf of a corporation by a director, employee or agent and the conduct is within the scope of their actual authority then the conduct is taken for the purposes of a civil proceeding under the Bill to have been engaged in by the corporation.  The exception to this is where the corporation can establish that it took reasonable precautions and exercised due diligence to avoid the conduct.

4.102 Subclause 3 provides that a reference in proposed subsection (1) to the state of mind of a person includes a reference to, and reasons for, the knowledge, intention, opinion, belief or purpose of the person.

4.103 Subclause 4 provides that a reference in proposed section 42 to a director of the corporation includes a reference to a constituent member of a body corporate incorporated for a public purpose by a law of the Commonwealth, a State or a Territory.

4.104 Subclause 5 provides that a reference in proposed section 42 to engaging in conduct includes a reference to failing or refusing to engage in conduct.

Clause 43  - Civil liability of persons other than corporations

4.105 Subclause 1 provides that if, in a civil proceeding under the Bill in respect of conduct engaged in by a person other than a corporation it is necessary to establish the state of mind of the person, it is sufficient to show that the conduct was engaged in by an employee or agent of the person within the scope of his or her actual or apparent authority and the employee or agent had that state of mind.

4.106 Subclause 2 provides that if conduct is engaged in on behalf of another person other than a corporation by an employee or agent of the person, and the conduct is within the employee's or agent's actual or apparent authority, then the conduct is taken, for the purposes of a civil proceeding under the Bill, to have been engaged in by the person.  The exception to this is where the person can establish that he or she took reasonable precautions and exercised due diligence to avoid the conduct. 

4.107 Subclauses 3 and 4 define the state of mind of a person and the extended meaning of engaging in conduct.



Part 7  - Miscellaneous

Part 7 provides a number of miscellaneous provisions that are required to give effect to the purpose of the Bill.

Clause 44  - Delegation by Treasurer

4.108 Subclause 1 provides that the Treasurer may delegate any or all of the Treasurer's powers under the Bill to the Chief Executive Officer of APRA, a member of the board of management of APRA or a staff member of APRA.

4.109 Subclause 2 provides that the delegate is subject to the directions of the Treasurer in the exercise of any delegated power.

Clause 45  - 'Foreign Acquisitions and Takeovers Act 1975' and this Bill to operate independently of each other

4.110 Clause 45 provides that this Bill and the Foreign Acquisitions and Takeovers Act 1975 are to operate independently of each other and, in particular, that a decision under either has effect only for the purposes of that Act or Bill.

Clause 46  - Regulations

4.111 Clause 46 provides that the Governor-General may make regulations to prescribe matters required or permitted by this Bill, or to prescribe matters necessary or convenient for carrying out or giving effect to this Bill.

Clause 47  - Transitional  pre-commencement stakes in financial sector companies

4.112 Subclause 1 provides that the proposed section 47 applies if a person held a stake greater than 15 per cent in a particular financial sector company immediately before the commencement of this Bill and the holding did not contravene a provision of the BSA or IATA.

4.113 Subclause 2 provides that the Bill has effect as if the Treasurer had, immediately after the commencement of this clause, granted written approval under clause 14 of this Bill for the person to hold the same percentage stake in the financial sector company.

4.114 Subclause 2 provides that the Bill has effect as if the Treasurer had, immediately after the commencement of this clause, granted written approval under clause 14 of this Bill for the person to hold the same percentage stake in the financial sector company.



4.115 Subclause 47(4) provides that for the purposes of proposed sectionÿ47, a company that is a financial sector company immediately after the commencement of this section is taken to have been a financial sector company immediately before the commencement of this section.



Schedule 1  - Ownership Definitions

1.    Object

The object of the Schedule is to provide the necessary definitions in respect of Part 2 (which deal with restrictions on shareholdings).

2.    Definitions

Item 2 defines the following terms: acquisition, arrangement, associate, constituent document, direct control interest, director, discretionary trust, increase, interest in a share, lender, lending money, loan security, management employee, money lending agreement, officer, ownership provisions, power to appoint a director of a company, practical control, relative, share, stake and voting power.

3.    Entering into an agreement or arrangement

Item 3 provides clarification of the interpretation of entering into an agreement or arrangement for the purposes of the Bill.

4.    Associates

Item 4 defines persons who are considered to be associates of a person, and sets out those matters where a person would be considered to enter, or propose to enter, an arrangement with another person.

5.    Power to appoint director

Item 5 states that a reference to a power to appoint a director includes a reference to such a power whether exercisable with or without the consent or concurrence of any other person, and defines the circumstance when a person is taken to have the power to appoint a director.

6.    Meaning of entitled to acquire

Item 6 defines the circumstance where a person is considered to be entitled to acquire something.

7.    Meaning of interest in a share

Item 7 defines the circumstances where a person is considered to hold an interest in a share.

8.    Certain interests in shares to be disregarded

Item 8 states that certain specified interests must be disregarded for the purposes of the ownership provisions.

9.    Voting power

Item 9 defines the reference in the ownership provisions to voting power, and control of the voting power.

10.   Stake in a company

Item 10 defines the stake that a person holds in a company at a particular time.

11.   Direct control interests in a company

Item 11 defines the circumstance where a person holds a direct control interest in a company at a particular time.