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Film Licensed Investment Company Bill 1998

1996-97-98

 

The Parliament of the

Commonwealth of Australia

 

HOUSE OF REPRESENTATIVES

 

 

 

 

Presented and read a first time

 

 

 

 

 

 

 

 

Film Licensed Investment Company Bill 1998

 

No.      , 1998

 

(Communications, the Information Economy and the Arts)

 

 

A Bill for an Act to establish the film licensed investment company scheme, and for related purposes

   

   

   



Contents

Part 1—Preliminary                                                                                                               

1............ Short title............................................................................................

2............ Commencement..................................................................................

3............ Overview............................................................................................

4............ Objects of the pilot scheme................................................................

5............ Extraterritorial operation....................................................................

6............ Definitions..........................................................................................

7............ Application of the Criminal Code .....................................................

Part 2—The pilot scheme                                                                                                   

Division 1—Overview                                                                                                  

8............ Overview of Part................................................................................

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

9............ Application rules................................................................................

10.......... Minister must determine decision-making criteria and procedures....

Division 3—The application process                                                                   

11.......... Rounds of applications......................................................................

12.......... Applications.......................................................................................

13.......... Further information............................................................................

Division 4—Grant of licence                                                                                   

14.......... Minister to determine number of licences to be granted and amount of concessional capital FLICs are licensed to raise..........................................................................................................

15.......... Conditions on grant of licence..........................................................

16.......... Grant of concessional capital licence................................................

17.......... Form of licence.................................................................................

18.......... Minister is to have regard to recommendations of Selection Advisory Panel          

19.......... Notice of refusal to grant licence......................................................

Division 5—Term of licence                                                                                   

20.......... Term of licence.................................................................................

Division 6—Conditions of scheme                                                                      

21.......... General.............................................................................................

22.......... Conditions in a disallowable instrument..........................................

23.......... Fundraising conditions.....................................................................

24.......... Investment conditions......................................................................

25.......... Film conditions.................................................................................

26.......... Preconditions and conditions in the Minister’s determination under section 22     

27.......... Ownership condition........................................................................

28.......... Other conditions...............................................................................

Division 7—Breach of conditions                                                                        

29.......... Minister to notify FLIC of suspected breach of conditions............

30.......... Minister may seek information........................................................

31.......... Minister must consider FLIC’s submission and information..........

32.......... Powers of the Minister in relation to breaches of conditions..........

33.......... Revocation of licence........................................................................

Division 8—Information and reporting requirements                              

34.......... Reporting requirements....................................................................

35.......... False or misleading statement...........................................................

36.......... Provision of information to the Commissioner of Taxation.............

Division 9—Other requirements                                                                         

37.......... Minister may determine allowable percentage for administrative costs                  

38.......... Transfer of licence void....................................................................

Part 3—Offences concerning ownership restrictions                                       

39.......... Meaning of terms used in this Part..................................................

40.......... Acquisitions of shares......................................................................

41.......... Anti-avoidance.................................................................................

Part 4—General administrative matters of the scheme                                 

42.......... Review of decisions..........................................................................

43.......... Disallowable instruments.................................................................

44.......... Delegation.........................................................................................

Schedule 1—Ownership definitions                                                          

1............ Object...............................................................................................

2............ Definitions........................................................................................

3............ When foreign citizens are ordinarily resident in Australia...............

4............ Entering into an agreement or arrangement.......................................

5............ Associates........................................................................................

6............ Power to appoint director................................................................

7............ Meaning of entitled to acquire ..........................................................

8............ Meaning of interest in a share ..........................................................

9............ Certain interests in shares to be disregarded....................................

10.......... Voting power....................................................................................

11.......... Stake in a company..........................................................................

12.......... Direct control interests in a company..............................................

13.......... Substantial interests in trust estates.................................................

 



A Bill for an Act to establish the film licensed investment company scheme, and for related purposes

The Parliament of Australia enacts:



Schedule 1 Ownership definitions

   

   

1   Object

                   The object of this Schedule is to define terms used in the conditions of the scheme set out in subparagraph 25(a)(v) (which deals with film making restrictions), section 27 (which deals with ownership restrictions) and in Part 3 (which sets out offences concerning ownership restrictions).

2   Definitions

                   In subparagraph 25(a)(v), section 27, Part 3 and in this Schedule, unless the contrary intention appears:

acquisition includes an agreement to acquire, but does not include:

                     (a)  an acquisition by will or by devolution by operation of law; or

                     (b)  an acquisition by way of enforcement of a loan security.

aggregate substantial interest , in relation to a trust estate, has the meaning given by clause 13.

agreement means any agreement, whether formal or informal and whether express or implied.

arrangement has the meaning given by clause 4.

associate has the meaning given by clause 5.

company means a body corporate.

constituent document , in relation to a company, means:

                     (a)  the memorandum and articles of association of the company; or

                     (b)  any rules or other documents constituting the company or governing its activities.

direct control interest has the meaning given by clause 12.

director includes any person occupying the position of director of a company, by whatever name called.

discretionary trust means a trust where:

                     (a)  a person (who may include the trustee) is empowered (either unconditionally or on the fulfilment of a condition) to exercise any power of appointment or other discretion; and

                     (b)  the exercise of the power or discretion, or the failure to exercise the power or discretion, has the effect of determining, to any extent, either or both of the following:

                              (i)  the identities of those who may benefit under the trust;

                             (ii)  how beneficiaries are to benefit, as between themselves, under the trust.

foreign citizen means an individual who is not an Australian citizen.

foreign company means a company incorporated outside Australia.

foreign person means:

                     (a)  a foreign citizen not ordinarily resident in Australia; or

                     (b)  a company where:

                              (i)  a foreign citizen not ordinarily resident in Australia; or

                             (ii)  a foreign company;

                            holds a particular type of stake in the company of 33% or more; or

                     (c)  a company where a group of 2 or more persons, each of whom is either:

                              (i)  a foreign citizen not ordinarily resident in Australia; or

                             (ii)  a foreign company;

                            holds, in total, a particular type of stake in the company of 33% or more; or

                     (d)  the trustee of a trust estate in which a foreign citizen not ordinarily resident in Australia or a foreign company holds a substantial interest; or

                     (e)  the trustee of a trust estate in which 2 or more persons, each of whom is either a foreign citizen not ordinarily resident in Australia or a foreign company, hold an aggregate substantial interest.

group includes:

                     (a)  one person alone; or

                     (b)  a number of persons, even if they are not in any way associated with each other or acting together.

increase , in relation to a stake in a company, includes an increase from a starting point of nil.

interest in a share has the meaning given by clause 8.

lending money includes providing non-equity finance where the provision of the finance may reasonably be regarded as equivalent to lending money.

loan security means a security held solely for the purposes of a moneylending agreement.

moneylending agreement means an agreement entered into in good faith in the ordinary course of carrying on a business of lending money, but does not include an agreement dealing with any matter unrelated to the carrying on of that business.

officer , in relation to a company, includes:

                     (a)  a director, secretary or employee of the company; or

                     (b)  a receiver and manager of any part of the undertaking of the company appointed under a power contained in any instrument; or

                     (c)  a liquidator of the company appointed in a voluntary winding-up.

ordinarily resident in Australia has the meaning given by clause 3.

ownership provisions means subparagraph 25(a)(v), section 27, Part 3 and this Schedule.

power to appoint a director of a company has a meaning affected by clause 6.

relative , in relation to a person, means:

                     (a)  the person’s spouse; or

                     (b)  another person who, although not legally married to the person, lives with the person on a bona fide domestic basis as the husband or wife of the person; or

                     (c)  a parent or remoter lineal ancestor of the person; or

                     (d)  a son, daughter or remoter issue of the person; or

                     (e)  a brother or sister of the person.

scheme means:

                     (a)  any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; and

                     (b)  any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise.

share , in relation to a company, means a share in the share capital of the company, and includes:

                     (a)  stock into which any or all of the share capital of the company has been converted; or

                     (b)  an interest in such a share or in such stock.

stake , in relation to a company, has the meaning given by clause 11.

substantial interest , in relation to a trust estate, has the meaning given by clause 13.

voting power has the meaning given by clause 10.

3   When foreign citizens are ordinarily resident in Australia

                   For the purposes of the ownership provisions, a foreign citizen is ordinarily resident in Australia at a particular time if, and only if:

                     (a)  the foreign citizen has been in Australia during 200 or more days in the period of 12 months immediately preceding that time; and

                     (b)  at that time, one of the following subparagraphs applies:

                              (i)  the foreign citizen is in Australia and has permission to remain in Australia indefinitely;

                             (ii)  the foreign citizen is not in Australia but has a right to re-enter Australia and, on re-entry, to be granted permission to remain in Australia indefinitely;

                            (iii)  the foreign citizen is in Australia and has a special category visa under section 32 of the Migration Act 1958 ;

                            (iv)  the foreign citizen is not in Australia and, on re-entry to Australia, would have the right to be granted a special category visa under section 32 of the Migration Act 1958 .

4   Entering into an agreement or arrangement

             (1)  For the purposes of the ownership provisions, a person is taken to have proposed to enter into an agreement or arrangement if the person takes part in, or proposes to take part in, negotiations with a view to entering into the agreement or arrangement.

             (2)  A reference in the ownership provisions to entering into an agreement or arrangement includes a reference to altering or varying an agreement or arrangement.

             (3)  A reference in the ownership provisions to entering into an arrangement is a reference to entering into any formal or informal scheme, arrangement or understanding, whether expressly or by implication and, without limiting the generality of the foregoing, includes a reference to:

                     (a)  entering into an agreement; or

                     (b)  creating a trust, whether express or implied; or

                     (c)  entering into a transaction;

and a reference in the ownership provisions to an arrangement is to be construed accordingly.

             (4)  A reference in the ownership provisions to an arrangement does not include a reference to a moneylending agreement.

5   Associates

             (1)  For the purposes of the ownership provisions, the following persons are associates of a person:

                     (a)  a relative of the person;

                     (b)  a partner of the person;

                     (c)  a company of which the person is an officer;

                     (d)  if the person is a company—an officer of the company;

                     (e)  an employee or employer of the person;

                      (f)  an officer of a company of which the person is an officer;

                     (g)  an employee of an individual of whom the person is an employee;

                     (h)  the trustee of a discretionary trust where the person or another person who is an associate of the person by virtue of another paragraph of this subclause benefits, or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust, either directly or through any interposed companies, partnerships or trusts;

                      (i)  a company whose directors are accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the person;

                      (j)  a company where the person is accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the company;

                     (k)  a company in which the person has, apart from this paragraph, a particular type of stake of not less than 33%;

                      (l)  if the person is a company—a person who holds, apart from this paragraph, a particular type of stake in the company of not less than 33%;

                    (m)  a person who is, because of this subclause, an associate of any other person who is an associate of the person (including a person who is an associate of the person by any other application or applications of this paragraph).

             (2)  If a person (the first person ) enters, or proposes to enter, into an arrangement with another person (the second person ) that relates to any of the following matters:

                     (a)  the first person and the second person being in a position, by acting together, to control any of the voting power in a company;

                     (b)  the power of the first person and the second person, by acting together, to appoint or remove a director of a company;

                     (c)  the situation where one or more of the directors of a company are accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the first person and the second person acting together;

then, the second person is taken to be an associate of the first person for the purposes of the application of a provision of the ownership provisions in relation to the matter concerned.

6   Power to appoint director

             (1)  A reference in the ownership provisions 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.

             (2)  For the purposes of the ownership provisions, a person is taken to have the power to appoint a director if:

                     (a)  the person has the power (whether exercisable with or without the consent or concurrence of any other person) to veto such an appointment; or

                     (b)  a person’s appointment as a director of the company follows necessarily from that person being a director or other officer of the first-mentioned person.

7   Meaning of entitled to acquire

                   For the purposes of the ownership provisions, a person is entitled to acquire any thing if the person is absolutely or contingently entitled to acquire it, whether because of any constituent document of a company, the exercise of any right or option or for any other reason.

8   Meaning of interest in a share

             (1)  Subject to this clause, for the purposes of the ownership provisions, a person holds an interest in a share if the person has any legal or equitable interest in the share.

             (2)  For the purposes of the ownership provisions, a person is taken to hold an interest in a share if:

                     (a)  the person has entered into a contract to purchase the share; or

                     (b)  the person has a right (otherwise than because of having an interest under a trust) to have the share transferred to the person or to the person’s order (whether the right is exercisable presently or in the future and whether or not on the fulfilment of a condition); or

                     (c)  the person has a right to acquire the share, or an interest in the share, under an option (whether the right is exercisable presently or in the future and whether or not on the fulfilment of a condition); or

                     (d)  the person is otherwise entitled to acquire the share or an interest in the share; or

                     (e)  the person is entitled (otherwise than because of having been appointed as a proxy or representative to vote at a meeting of members of the company or of a class of its members) to exercise or control the exercise of a right attached to the share.

             (3)  Subclause (2) does not, by implication, limit subclause (1).

             (4)  A person is taken to hold an interest in a share even if the person holds the interest in the share jointly with another person.

             (5)  For the purpose of determining whether a person holds an interest in a share, it is immaterial that the interest cannot be related to a particular share.

             (6)  An interest in a share is not to be disregarded only because of:

                     (a)  its remoteness; or

                     (b)  the manner in which it arose; or

                     (c)  the fact that the exercise of a right conferred by the interest is, or is capable of being made, subject to restraint or restriction.

9   Certain interests in shares to be disregarded

             (1)  For the purposes of the ownership provisions, an interest in a share held by a person whose ordinary business includes the lending of money (if the person holds the interest as a loan security) must be disregarded.

             (2)  For the purposes of the ownership provisions, if:

                     (a)  a person holds an interest in a share as a loan security; and

                     (b)  the ordinary business of the person includes the lending of money; and

                     (c)  the loan security is enforced; and

                     (d)  as a result of the enforcement of the loan security, the person becomes the holder of the share; and

                     (e)  the person holds the share for a continuous period (the holding period ) beginning at the time when the security was enforced;

the person’s interest in the share must be disregarded at all times during so much of the holding period as occurs during whichever of the following periods is applicable:

                      (f)  the period of 90 days beginning when the security was enforced; or

                     (g)  if the Minister, by written notice given to the person, allows a longer period—the end of that longer period.

10   Voting power

             (1)  A reference in the ownership provisions to the voting power in a company is a reference to the total rights of shareholders to vote, or participate in any decision-making, concerning any of the following:

                     (a)  the making of distributions of capital or profits of the company to its shareholders;

                     (b)  the constituent document of the company;

                     (c)  any variation of the share capital of the company.

             (2)  A reference in the ownership provisions to control of the voting power in a company is a reference to control that is direct or indirect, including control that is exercisable as a result of or by means of arrangements or practices:

                     (a)  whether or not having legal or equitable force; and

                     (b)  whether or not based on legal or equitable rights.

             (3)  If the percentage of total rights to vote or participate in decision-making differs as between different types of voting or decision-making, the highest of those percentages applies for the purposes of this clause.

             (4)  If a company:

                     (a)  is limited both by shares and by guarantee; or

                     (b)  does not have a share capital;

this clause has effect as if the members or policy holders of the company were shareholders in the company.

11   Stake in a company

             (1)  A particular type of stake that a person holds in a company at a particular time is the aggregate of:

                     (a)  the direct control interests in the company of that type that the person holds at that time; and

                     (b)  the direct control interests in the company of that type held at that time by associates of the person.

             (2)  In calculating the stake that a person holds in a company, a direct control interest held because of subclause 12(5) is not to be counted under paragraph (1)(a) to the extent to which it is calculated by reference to a direct control interest in the company that is taken into account under paragraph (1)(b).

             (3)  For the purpose of calculating the total of the stakes of a particular type that a group of persons holds in a company, if a particular stake that a person holds in a company would be counted more than once because the person is an associate of one or more other persons in the group, that interest is to be counted only once.

12   Direct control interests in a company

             (1)  A person holds a direct control interest in a company at a particular time equal to the percentage of the total paid-up share capital of the company in which the person holds an interest at that time.

             (2)  A person also holds a direct control interest in a company at a particular time equal to the percentage of the voting power in the company that the person is in a position to control at that time.

             (3)  A person also holds a direct control interest in a company at a particular time equal to the percentage that the person holds, or is entitled to acquire, at that time of the total rights to distributions of capital or profits of the company to its shareholders on winding-up.

             (4)  A person also holds a direct control interest in a company at a particular time equal to the percentage that the person holds, or is entitled to acquire, at that time of the total rights to distributions of capital or profits of the company to its shareholders, otherwise than on winding-up.

             (5)  Subject to subsection (6), if:

                     (a)  a person holds a particular type of direct control interest (including a direct control interest that is taken to be held because of one or more previous applications of this subclause) in a company (the first level company ); and

                     (b)  the first level company holds the same type of direct control interest in another company (the second level company );

the person is taken to hold that type of direct control interest in the second level company equal to the percentage worked out using the formula:

where:

first level percentage means the percentage of the direct control interest held by the person in the first level company.

second level percentage means the percentage of the direct control interest held by the first level company in the second level company.

             (6)  In determining, for the purposes of subsection 27(2) or subparagraph 40(b)(ii), the total of the stakes of a particular type that a group of foreign persons holds in a FLIC, if:

                     (a)  a foreign company (the first company ) holds that type of direct control interest in the FLIC; and

                     (b)  in a case where that interest is held because of subclause (5)—that interest was not worked out under that subclause on the basis that one or more foreign companies were interposed between the first company and the FLIC; and

                     (c)  apart from this subclause, a foreign person other than the first company would be taken under subclause (5) to hold that type of direct control interest in the FLIC equal to a particular percentage; and

                     (d)  the direct control interest mentioned in paragraph (c) was worked out under subclause (5) directly or indirectly by reference to the direct control interest mentioned in paragraph (a);

the direct control interest mentioned in paragraph (c) is not to be counted.

             (7)  For the purposes of subclause (6), a foreign company is a company that is a foreign person.

13   Substantial interests in trust estates

             (1)  For the purposes of the ownership provisions:

                     (a)  a person is taken to hold a substantial interest in a trust estate if the person, alone or together with an associate or associates, holds a beneficial interest in not less than 33% of the corpus or income of the trust estate; and

                     (b)  2 or more persons are taken to hold an aggregate substantial interest in a trust estate if the persons, together with an associate or associates, hold, in the aggregate, beneficial interests in not less than 33% of the corpus or income of the trust estate.

             (2)  For the purposes of subclause (1), if, under the terms of a trust, a trustee has a power or discretion as to the distribution of the income or corpus of the trust estate to beneficiaries, each beneficiary is taken to hold a beneficial interest in the maximum percentage of income or corpus of the trust estate that the trustee is empowered to distribute to that beneficiary.