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Film Licensed Investment Company Bill 2005

Part 2 The scheme

Division 1 Overview

7   Overview of Part

(1)   This Part sets out the scheme. Division 2 provides for the Minister to make rules that apply to the application process and to determine criteria and procedures for making decisions about granting the licence.

(2)   Division 3 sets out rules for the application process.

(3)   Division 4 sets out the process of granting the licence.

(4)   Division 5 sets out the amount of concessional capital that the FLIC is licensed to raise.

(5)   Division 6 defines the licence period.

(6)   Division 7 sets out the conditions that attach to the scheme (and section 21 allows the Minister to determine further conditions of the scheme by legislative instrument).

(7)   Division 8 sets out how a breach of a condition is to be dealt with.

(8)   Division 9 deals with information and reporting requirements.

(9)   Division 10 deals with a purported transfer of the licence and the allowable deduction percentage.



 

Division 2 Minister to make certain determinations concerning the application process and decision-making criteria

8   Application rules

                   The Minister must, by legislative instrument, determine rules concerning the application process under the scheme. The rules may provide for all or any of the following matters:

                     (a)  the method of calling for applications;

                     (b)  the closing date for a round of applications;

                     (c)  the form of the application and the documentation that must accompany an application;

                     (d)  the establishing of a Selection Advisory Panel to advise the Minister in respect of the applications including the membership of the panel and tenure of panel members;

                     (e)  the rules governing the operation of the Selection Advisory Panel;

                      (f)  any other matter relevant to the application process under the scheme.

9   Minister must determine decision-making criteria and procedures

             (1)  The Minister must, by legislative instrument, determine criteria to be applied and procedures to be complied with by the Minister in deciding whether, and to whom, to grant the concessional capital licence under the scheme.

             (2)  The Minister must also determine the weight to be given to each criterion.



 

Division 3 The application process

10   Rounds of applications

             (1)  The Minister may call for applications for the concessional capital licence under the scheme from interested persons.

             (2)  If, in the first round of applications, the Minister does not grant the licence, the Minister may call for one or more further rounds of applications.

11   Applications

             (1)  A company may apply for the licence to raise concessional capital under the scheme.

             (2)  The application must:

                     (a)  be in the form specified in the Application rules; and

                     (b)  provide such information as is required by the Application rules; and

                     (c)  be given to the Minister.

             (3)  A person may apply under this section for the licence if:

                     (a)  the person has applied to register a company under the Corporations Act 2001 ; and

                     (b)  the company will, if registered, meet the conditions set out in section 13.

12   Further information

             (1)  The Minister may ask the applicant, in writing, to give to the Minister, within the period specified in the request, further information about the application.

             (2)  The Minister may refuse to consider the application unless the applicant provides the information within the period specified in the request.



 

Division 4 Grant of licence

13   Conditions on grant of licence

                   A company may only be granted the concessional capital licence if all of the following conditions are met:

                     (a)  the company is registered under the Corporations Act 2001 ;

                     (b)  the company has not started business or exercised any borrowing power;

                     (c)  the company’s central management and control is ordinarily exercised in a place in Australia;

                     (d)  the chair of the company (however described) and all of the directors of the company are Australian citizens;

                     (e)  the company’s constitution provides that all of the shares in the company are to be fully paid and of the same class.

14   Grant of concessional capital licence

                   Subject to this Part, the Minister may grant a company the licence to raise concessional capital.

15   Form of licence

                   The concessional capital licence under the scheme must:

                     (a)  be in writing; and

                     (b)  set out the effect of section 18; and

                     (c)  state the conditions of the scheme to which the FLIC is subject; and

                     (d)  state that the conditions of the scheme determined by the Minister under section 21 may be altered at any time after consultation with the FLIC.

16   Minister is to have regard to recommendations of Selection Advisory Panel

                   The Minister must have regard to the recommendations of the Selection Advisory Panel in deciding whether to grant the concessional capital licence to a particular applicant under the scheme.

Note:          For Selection Advisory Panel see subsection 6(1).

17   Notice of refusal to grant licence

             (1)  If the Minister refuses to grant an application for the concessional capital licence, the Minister must notify the applicant in writing of the refusal.

             (2)  The notice must include the reasons for the decision.



 

Division 5 Amount of concessional capital FLIC is licensed to raise

18   Amount of concessional capital FLIC is licensed to raise

             (1)  The maximum amount of concessional capital that the FLIC is licensed to raise in the financial year starting on 1 July 2005 is $10 million.

             (2)  The maximum amount of concessional capital that the FLIC is licensed to raise in the financial year starting on 1 July 2006 is $10 million.



 

Division 6 Licence period

19   Licence period

             (1)  The concessional capital licence comes into force on the day on which it is granted.

             (2)  The concessional capital licence stops being in force:

                     (a)  if the licence is revoked—on the day specified by the Minister under section 33 as the day on which the revocation takes effect; or

                     (b)  otherwise—on 30 June 2007.

             (3)  The licence period is the period during which the licence is in force.



 

Division 7 Conditions of scheme

20   General

             (1)  The conditions of the scheme are set out in:

                     (a)  sections 22 to 28; and

                     (b)  a determination made under section 21.

             (2)  The conditions apply for the period of the scheme.

Note:          The scheme ends on 30 June 2009.

             (3)  The conditions do not limit the operation of the Corporations Act 2001 in relation to the FLIC.

21   Conditions in a legislative instrument

             (1)  The Minister may, by legislative instrument, determine conditions that are to apply to the FLIC under the scheme.

             (2)  The Minister may revoke or vary these conditions (including adding new conditions) at any time after consulting the FLIC.

22   Fundraising conditions

                   The FLIC must comply with the following conditions as to raising capital:

                     (a)  the FLIC must raise $5 million of concessional capital during the period of 12 months starting on the day on which the licence is granted;

                     (b)  the FLIC must not, in a financial year referred to in section 18, raise more than the amount of concessional capital it is licensed to raise under section 18 for that financial year;

                     (c)  the FLIC must not issue debentures or convertible notes;

                     (d)  the FLIC must not borrow money during the licence period except during the financial year starting on 1 July 2005 and then only for the short-term purpose of meeting the costs of its administrative expenses;

                     (e)  the FLIC must not raise non-concessional capital before 1 July 2007.

23   Investment conditions

                   The FLIC must comply with the following conditions as to investment of capital raised under the scheme:

                     (a)  the FLIC must invest its concessional capital (less the allowable deduction percentage) in 2 or more provisionally certified films on or before 30 June 2008;

                     (b)  the FLIC must invest its non-concessional capital in 2 or more provisionally certified films (whether or not those films are the same films as those referred to in paragraph (a)) on or before 30 June 2008;

                     (c)  the FLIC must not start the investment referred to in paragraphs (a) and (b) before:

                              (i)  the FLIC has raised $5 million of concessional capital; or

                             (ii)  a period of 12 months has elapsed since the licence was granted;

                     (d)  the FLIC must not invest more than half as much capital (whether concessional capital or non-concessional capital) as a contribution to marketing and distributing a film as it spends as a contribution to the cost of producing that film.

Note 1:       The Minister determines the FLIC’s allowable deduction percentage under section 37.

Note 2:       For provisionally certified film see subsection 6(1).

24   Conditions relating to returns to shareholders

             (1)  The FLIC must comply with the following conditions as to distributions to shareholders:

                     (a)  returns attributable to capital (whether concessional or non-concessional capital) invested by the FLIC in a provisionally certified film must be distributed to shareholders;

                     (b)  any distribution to shareholders must be in equal proportion to the number of shares held by them.

             (2)  Despite paragraph (1)(a), returns described in that paragraph may be invested in an account with an ADI for a reasonable period pending a distribution to shareholders.

25   Film conditions

                   The FLIC must comply with the following conditions in respect of a film it invests in under the scheme:

                     (a)  the film must not be developed or produced by a person who is:

                              (i)  the holder of a licence allocated by the Australian Communications and Media Authority under the Broadcasting Services Act 1992 ; or

                             (ii)  the provider of a broadcasting service in accordance with a class licence determined by the Australian Communications and Media Authority under section 117 of the Broadcasting Services Act 1992 ; or

                            (iii)  the Australian Broadcasting Corporation; or

                            (iv)  the Special Broadcasting Service; or

                             (v)  an associate of one of the persons mentioned in subparagraph (i) or (ii);

                     (b)  the film must receive a final certificate under section 124ZAC of the Income Tax Assessment Act 1936 on or before 30 June 2009.

Note:          For associate (and for other definitions relevant to the definition of associate ) see Schedule 1.

26  Preconditions and conditions in the Minister’s determination under section 21

                   The FLIC must:

                     (a)  continue to comply with the conditions on grant of licence set out in paragraphs 13(a), (c), (d) and (e); and

                     (b)  comply with the conditions set out in a determination made under section 21.

27   Ownership condition

             (1)  The FLIC must not have an unacceptable level of foreign ownership or an unacceptable level of individual ownership.

             (2)  For the purposes of this Act, the FLIC has an unacceptable level of foreign ownership if a group of foreign persons hold, in total, a particular stake in the FLIC of more than 33%.

             (3)  For the purposes of this Act, the FLIC has an unacceptable level of individual ownership if a person holds a particular stake in the FLIC of more than 33%.

             (4)  Schedule 1 sets out definitions of expressions used in this section.

Note 1:       The limits on the ownership of the FLIC relate to a person’s stake in the FLIC.

Note 2:       For stake see Schedule 1.

28   Other conditions

                   The FLIC must comply with the following conditions:

                     (a)  the FLIC must not purport to transfer the licence to another person;

                     (b)  the FLIC must comply with the reporting requirements set out in a determination made under section 35 and with any request for further information made under subsection 35(4);

                     (c)  the FLIC must notify each shareholder in writing of any decision taken by the Minister in relation to the FLIC under section 32 in respect of a breach of a condition;

                     (d)  the FLIC must keep concessional and non-concessional capital separate and for that purpose must maintain separate accounts with an ADI for its concessional capital and non-concessional capital.



 

Division 8 Breach of conditions

29   Minister to notify FLIC of suspected breach of conditions

                   If the Minister is of the opinion that there may be grounds for deciding that the FLIC is in breach of a condition of the scheme, the Minister must:

                     (a)  give the FLIC written notice of the Minister’s opinion specifying the reasons for the opinion; and

                     (b)  invite the FLIC to make a written submission to the Minister within 28 days.

Note:          The conditions of the scheme are set out in sections 22 to 28 and a determination made under section 21.

30   Minister may seek information

                   The Minister may ask the FLIC, in writing, to give to the Minister, within the period specified in the request, information for the purposes of making a decision under section 32.

31   Minister must consider FLIC’s submission and information

                   In making a decision under section 32 in respect of the FLIC, the Minister must have regard to the matters raised in the FLIC’s submission (if any) and any information received by the Minister under section 30.

32   Powers of the Minister in relation to breaches of conditions

             (1)  If the Minister is satisfied that the FLIC has breached a condition of the scheme the Minister may decide:

                     (a)  not to take any action in respect of the breach (other than to take the breach into account in determining a course of action in respect of any further breaches of conditions by the FLIC); or

                     (b)  to take action under the following subsections.

Note:          A decision of the Minister under this section is a reviewable decision (see section 42).

             (2)  The Minister may take any or all of the following actions in respect of the breach:

                     (a)  give the FLIC written notice of a day by which the breach of condition must be remedied;

                     (b)  if the breach occurred during the licence period—revoke the licence;

                     (c)  decide to remove the concessional status of shares that were issued to shareholders by the FLIC during the licence period.

Note:       Section 375-865 of the Income Tax Assessment Act 1997 provides that shareholders whose shares are affected by a decision under this paragraph lose their entitlement to a deduction for the shares.

             (3)  If the FLIC has been notified of a day under paragraph (2)(a) and does not remedy the breach of condition by that day, the Minister may make such decision under subsection (1) as the Minister thinks appropriate.

             (4)  If the Minister, in respect of a breach of condition by the FLIC:

                     (a)  makes a decision under paragraph 32(1)(a); or

                     (b)  revokes the FLIC’s licence; or

                     (c)  decides to remove the concessional status of shares in the FLIC;

the Minister must, within 28 days of making the decision, notify the Commissioner of Taxation in writing of the decision.

             (5)  The Minister must:

                     (a)  give written notice of a decision of the Minister under this section to the FLIC; and

                     (b)  include reasons for the decision in the notice.

Note:          The FLIC is required as a condition of the scheme to notify each of its shareholders if the Minister makes a decision under this section in respect of a breach by the FLIC of a condition (see paragraph 28(c)).

33   Revocation of licence

             (1)  If the Minister decides to revoke the FLIC’s licence, the notice given under subsection 32(5) must specify the day on which the revocation takes effect.

             (2)  The day specified by the Minister must be no earlier than the seventh day after the day on which the Minister makes a decision under section 32 to revoke the licence.

             (3)  The revocation of the licence takes effect on the day specified by the Minister.

             (4)  If:

                     (a)  the Minister decides to revoke the FLIC’s licence under section 32; and

                     (b)  the FLIC has, at the day of the revocation, raised an amount of concessional capital;

the revocation of the licence does not of itself remove the concessional status of shares issued by the FLIC before the revocation.

34   FLIC must invest in provisionally certified films within 6 months if licence revoked

             (1)  If the Minister revokes the FLIC’s licence under section 32 but does not decide to remove the concessional status of the shares in the FLIC, the FLIC must ensure that the concessional capital is invested in provisionally certified films within 6 months from the day on which the revocation of the licence took effect.

             (2)  If the Minister is of the opinion that there may be grounds for deciding that the FLIC has not complied with subsection (1), the Minister may ask the FLIC, in writing, to give the Minister, within the period specified in the request, information for the purposes of making a decision under subsection (4).

             (3)  In making a decision under subsection (4) in respect of the FLIC, the Minister must have regard to the matters raised in the information received by the Minister under subsection (2).

             (4)  If the Minister is satisfied that the FLIC has not complied with subsection (1), the Minister may decide to remove the concessional status of shares that were issued to shareholders by the FLIC during the licence period.

Note 1:       A decision of the Minister under this subsection is a reviewable decision (see section 42).

Note 2:       Section 375-865 of the Income Tax Assessment Act 1997 provides that shareholders whose shares are affected by a decision under this subsection lose their entitlement to a deduction for the shares.

             (5)  The Minister must:

                     (a)  give written notice of a decision of the Minister under subsection (4) to the FLIC; and

                     (b)  if the Minister decides to remove the concessional status of the shares include reasons for the decision in the notice.

             (6)  If the Minister decides under this section to remove the concessional status of shares the Minister must, within 28 days of doing so, notify the Commissioner of Taxation of that decision.



 

Division 9 Information and reporting requirements

35   Reporting requirements

             (1)  For the purposes of:

                     (a)  monitoring compliance with the Act; and

                     (b)  evaluating the scheme;

the Minister may, by legislative instrument, determine reporting requirements that the FLIC must comply with.

             (2)  Subject to subsection (3), the Minister may only require the FLIC to give a report on 30 June 2006 and at 6 monthly intervals after that.

             (3)  Reporting requirements determined under subsection (1) for the purpose of monitoring compliance with section 34 may require the FLIC to give a report to the Minister within 6 months of the date of the revocation of the licence.

             (4)  The Minister may ask the FLIC, in writing, to give to the Minister, within the period specified in the request, further information concerning any report made by the FLIC.

36   Provision of information to the Commissioner of Taxation

             (1)  The Secretary must advise the Commissioner of Taxation as soon as possible after the end of the financial years starting on 1 July 2005 and 1 July 2006 of the following information in respect of the FLIC:

                     (a)  the name and registered address of the FLIC;

                     (b)  the details of any breach of conditions by the FLIC during the year;

                     (c)  the details of a decision taken by the Minister under section 32 in respect of the breach;

                     (d)  all other matters that:

                              (i)  the Secretary and the Commissioner of Taxation agree are to be provided; and

                             (ii)  are necessary to the administration of Subdivision 375-H of the Income Tax Assessment Act 1997 .

             (2)  The Secretary must advise the Commissioner of Taxation as soon as possible after the end of the financial years starting on 1 July 2005 and 1 July 2006 of the following information in respect of the FLIC:

                     (a)  the number of shares issued during the year by the FLIC; and

                     (b)  the names and addresses of the shareholders to whom the shares were issued and the amount paid by each shareholder for the shares.

             (3)  The Secretary’s advice must be in writing.



 

Division 10 Other requirements

37   Minister may determine allowable percentage for administrative costs

             (1)  The Minister may, in writing, determine the FLIC’s allowable deduction percentage.

             (2)  The FLIC’s allowable deduction percentage is a percentage of the concessional capital raised by the FLIC that may be used by the FLIC to meet the costs of its administration.

             (3)  The Minister may, after consultation with the FLIC, amend a determination under subsection (1) to increase the allowable deduction percentage.

38   Transfer of licence void

                   The purported transfer of the licence is void.