House of Representatives

Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Scott Morrison MP)

Chapter 4 - Transfer powers

Outline of chapter

4.1 Schedule 4 to this Bill amends the Transfer Act to enhance the operation and scope of APRA's compulsory transfer powers.

Context of amendments

4.2 Part 4 of the Transfer Act provides for compulsory transfers of business between regulated entities. Following amendments to the Act in 2008 and 2010, the compulsory transfer of business provisions now extend to ADIs (and related parties of ADIs), general insurers, and life companies.

4.3 Compulsory transfer of business powers are an important tool in the package of resolution options available to APRA. The Transfer Act enables some or all of the business of a regulated entity (including assets, liabilities, legal rights and obligations, data and systems) to be transferred to another regulated entity in the same category, which could include transfers to a newly established bridge entity or asset management vehicle.

4.4 APRA may effect a compulsory transfer without the need for the approval of owners, shareholders, creditors, or the separate novation (by private contractual means) of liabilities. The power to implement transfers in this way could be used, in the course of resolution, to facilitate the sale of all or part of the business of a distressed entity to one or multiple buyers, depending on the situation. This may be particularly relevant in ensuring the continuity of an entity's critical functions in resolution, where part or all of the regulated business of a regulated entity might be transferred to another existing regulated entity or a newly established bridge entity for this purpose.

4.5 By international standards, the existing Transfer Act provides a comprehensive framework for compulsory transfers of business in resolution. However, there are certain areas in which the provisions could be enhanced to provide APRA with greater flexibility and certainty when arranging a compulsory transfer in a resolution.

4.6 For example, in some situations, rather than transferring all of the assets and liabilities comprising the business of a failed regulated entity, it would be more expedient for APRA to be able to transfer ownership of the shares in the entity. Additional amendments, which ensure that compulsory transfer of business powers apply to certain related entities of a regulated entity, will further align the Transfer Act with international best practice. The Key Attributes note that resolution authorities should have at their disposal a broad range of resolution powers, including those necessary to effect transfers of business from a failed entity (and, in certain circumstances, its related entities), and the power to transfer the ownership of shares in a failed entity.

Summary of new law

4.7 Schedule 4 to this Bill amends the Transfer Act to:

·
enable APRA to compulsorily transfer the shares in a failing regulated entity to another body corporate;
·
widen the scope of Part 4 of the Transfer Act to apply to related entities of insurers; and
·
remove the requirement for complementary State or Territory legislation to be in place in relation to transfers of business.

Comparison of key features of new law and current law

New law Current law
Compulsory transfer of shares
In certain circumstances aligned with the preconditions for a compulsory transfer of business under the Transfer Act, APRA may transfer the shares in a failing regulated entity from the existing shareholders to a body corporate. Under the Transfer Act, APRA has no power to transfer the shares in a failing regulated entity to another body corporate.
Widening the scope to include related entities of insurers
In addition to what APRA may determine under the current law, APRA may determine that there is to be a total or partial transfer of business from a body corporate that is related to a general or life insurer (but is not itself an ADI, general insurer or life insurer) to another body corporate under certain circumstances. Under the Transfer Act, APRA may determine that there is to be a total or partial transfer of business from a body corporate that is related to an ADI (but is not itself an ADI, general insurer or life insurer) to another body corporate under certain circumstances. There are no equivalent provisions in the Transfer Act in respect of a body corporate related to an insurer.
Removing the requirement for complementary State or Territory legislation to be in place
APRA may give effect to transfers of business even in the absence of State or Territory legislation being in place to facilitate transfers of business. For a transfer of business to occur, APRA must be satisfied that legislation to facilitate the transfer is in place in the State or Territory in which the transferring and receiving bodies are established.

Detailed explanation of new law

Compulsory transfer of shares

4.8 APRA's powers under the Transfer Act enable it to compulsorily transfer all of the assets and liabilities of a failing regulated entity to another regulated entity. However, there is no explicit power to transfer the failing entity's shares to another body corporate as a means of achieving the same outcome. This is because shares in an entity are not assets of the failing entity but rather are assets of the shareholders. The interest of a shareholder in a share is not 'business' that is transferrable under the Transfer Act.

4.9 The ability to transfer the shares of a failing regulated entity could in some circumstances provide a more efficient and simpler means of achieving an orderly resolution, than effecting a full transfer of all of the assets and liabilities of the entity.

4.10 The amendments in the Bill rely to a large extent on the existing architecture and mechanics of the Transfer Act to enable a compulsory transfer of shares in certain circumstances, with the majority of amendments being minor consequential changes to existing definitions and supporting provisions, as articulated below.

Title

4.11 The Bill amends the long title of the Transfer Act by inserting 'to provide for transfers of shares and other interests in some kinds of financial institutions'. [Schedule 4, item 1, Title of the Transfer Act]

4.12 The Bill also amends the short title of the Transfer Act, which may be cited as the Financial Sector (Transfer and Restructure) Act 1999. [Schedule 4, item 2, section 1 of the Transfer Act]

4.13 These amendments reflect the expanded operation of the Act, which now provides for compulsory transfers of shares.

Definitions

4.14 The Bill amends a variety of definitions under subsection 4(1) of the Transfer Act to enable a compulsory transfer of shares.

4.15 Firstly, the Bill amends paragraph (b), and includes a new paragraph (c), in the definition of 'certificate of transfer' to mean the following, respectively:

·
in relation to a voluntary transfer of business - a certificate issued under section 18;
·
in relation to a compulsory transfer of business - a certificate issued under section 33; and
·
in relation to a compulsory transfer of shares - a certificate issued under section 33. [Schedule 4, item 4, subsection 4(1) of the Transfer Act]

4.16 The Bill amends the definitions of 'partial transfer' and 'total transfer', to mean, respectively:

·
a partial transfer means a transfer of business described in existing subsection 8(2) (which provides that a transfer of business is a partial transfer if it relates to some, but not all, of the transferring body's business); and
·
a total transfer means a transfer of business described in existing subsection 8(3) (which provides that a transfer of business is a total transfer if it relates to all of the transferring body's business. [Schedule 4, items 7 and 13, subsection 4(1) of the Transfer Act]

4.17 The Bill amends the definition of 'compulsory transfer determination', to mean:

·
a compulsory transfer of business determination; or
·
a compulsory transfer of shares determination.

4.18 The Bill further defines these two new terms as:

·
'compulsory transfer of business determination' means a determination under existing section 25 (the section conferring power on APRA to determine a compulsory transfer of business in certain situations); and
·
'compulsory transfer of shares determination' means a determination under section 25AA (which is a new provision inserted by the Bill, discussed below). [Schedule 4, items 5 and 6, subsection 4(1) of the Transfer Act]

4.19 These amendments clarify that there are now two potential options available to APRA under which to determine a compulsory transfer.

4.20 The Bill expands the definition of 'receiving body' to clarify that in relation to a transfer of shares under Part 4 of the Transfer Act, the receiving body is a body corporate to which shares in another body corporate are to be transferred, or have been transferred under that Part. [Schedule 4, item 8, subsection 4(1) of the Transfer Act]

4.21 This amendment is to differentiate a receiving body in the context of the two different types of compulsory transfers.

4.22 The Bill also expands the definition of 'transferring body' to clarify that in relation to a transfer of shares under Part 4, the transferring body is a body corporate, shares in which are to be transferred, or have been transferred, to another body corporate under that Part'. [Schedule 4, item 14, subsection 4(1) of the Transfer Act]

4.23 This amendment is to ensure that the existing architecture and mechanics of the Transfer Act can apply in the context of a share transfer. However, it is recognised that in the case of a transfer of shares, the actual transfer of ownership will be from the holders of the shares, not from the body corporate itself.

4.24 Separately, the Bill extends the definition of 'regulated body' to include a general insurer, and subsequently extends the definition of 'regulated business' to include a general insurer's business (within the meaning of the Insurance Act). [Schedule 4, items 9 and 10, subsection 4(1) of the Transfer Act]

4.25 These amendments correct technical errors in the Transfer Act, which did not previously include a general insurer in the definitions, despite the compulsory transfer provisions applying equally to general insurers as a result of amendments to the Transfer Act in 2010. It should be noted that these amendments will not bring general insurers within the voluntary transfer of business provisions in Part 3 of the Transfer Act.

4.26 The Bill repeals the existing definition of 'related' in the Transfer Act and inserts a new definition of 'related' and a separate definition of 'related body corporate' The existing stand-alone definition of 'related' (in relation to bodies corporate) is replaced with a standard definition providing that whether a body corporate is related to another body corporate is to be determined in the same way as in the Corporations Act. This does not change the substantive meaning of the term 'related' in the Transfer Act. ' [Schedule 4, items 12 and 15, subsection 4(1) and section 4A of the Transfer Act]

4.27 The Bill extends the meaning of 'share' to mean:

·
a legal or equitable right or interest in a share; and
·
an interest in a share that is an interest of a kind specified in the regulations. [Schedule 4, item 79, section 36AD of the Transfer Act]

4.28 The adoption of a broad definition for 'share', including the ability to specify additional interests in regulations, ensures that the powers in the Transfer Act can operate to transfer all relevant ownership interests in the shares of the regulated entity.

Substantive transfer of shares amendments

4.29 The Bill amends the overview provisions in existing section 8 of the Transfer Act to include a transfer of shares as a kind of transfer that is permitted under the Act,noting that the Act also provides for compulsory transfers of shares in regulated entities. [Schedule 4, item 19, subsection 8(1A) of the Transfer Act]

4.30 For a compulsory transfer of shares to take effect, APRA must:

·
assuming the preconditions for doing so are satisfied (see 4.35), make a determination (the compulsory transfer of shares determination) that there is to be a transfer of shares in a body (the transferring body) to another body corporate (the receiving body); and
·
issue a certificate (the certificate of transfer) stating that the transfer is to take effect under existing section 33 of the Act.

4.31 For clarity, the transfer of shares takes effect when the certificate of transfer comes into force. [Schedule 4, item 22, subsection 8(5A) of the Transfer Act]

4.32 Separately, the Bill inserts notes into the Transfer Act to clarify that regulated entities making applications under the voluntary provisions in Part 3 cannot be general insurers. [Schedule 4, items 20 and 23, subsections 8(4) and 9(1) of the Transfer Act]

4.33 This is because the Insurance Act provides the mechanism for facilitating a voluntary transfer of a general insurer's business (see existing Part III Division 3A of the Insurance Act).

Preconditions for a transfer of shares

4.34 The Bill amends the Transfer Act to specify the preconditions under the Act that must be satisfied for a compulsory transfer of shares to be determined.

4.35 APRA may only make a compulsory transfer of shares determination if any of the following preconditions are met:

·
for an ADI, either the Minister has declared that a transfer of shares should occur, or APRA is satisfied that any of the various specified conditions have been satisfied;
·
for a life insurance company, APRA is satisfied that any of the various conditions have been satisfied; or
·
for a general insurer, APRA is satisfied that any of the various conditions have been satisfied; and
·
APRA has considered the interests of depositors or policy owners (as applicable) of the transferring body (when viewed as a group) and considers that, having regard to their interests, it would be appropriate for the transfer to be made; and
·
if the receiving body is an ADI, life company or general insurer, APRA is satisfied that the transfer is appropriate, having regard to the interests of depositors or policy owners of the receiving body (as applicable) when viewed as a group; and
·
the conditions relating to the consent of the receiving body, the interests of the financial system as a whole and other relevant matters, and the consent of the Minister (or a decision by the Minister that their consent is not required).

4.36 The amendments provide that APRA cannot make a compulsory transfer of shares determination if the transferring body is any of the following:

·
a foreign ADI (has the same meaning as in the Banking Act);
·
a foreign general insurer (has the same meaning as in the Insurance Act); or
·
an eligible foreign life insurance company (has the same meaning as in the Life Insurance Act).

4.37 APRA, in making a determination, must include particulars of the transfer, including the names of the transferring body and the receiving body, as well as a statement of the reasons detailing why the determination has been made.

4.38 The Bill provides that such determinations made by APRA are not legislative instruments. The provision is included to assist readers, as such a determination is not a legislative instrument within the meaning of subsection 8(1) of the Legislation Act 2003. [Schedule 4, item 55, section 25AA of the Transfer Act]

Ministerial declaration

4.39 The Bill extends the scope of existing section 25A in the Transfer Act to allow the Minister to also declare that a compulsory transfer of shares in a specified ADI to another specified body corporate can occur.

4.40 The Bill provides that such declarations made by the Minister are not legislative instruments. The provision is included to assist readers, as such a determination is not a legislative instrument within the meaning of subsection 8(1) of the Legislation Act 2003. [Schedule 4, item 56, section 25A of the Transfer Act]

4.41 The Bill extends the scope of existing section 29 in the Transfer Act to also provide that a Minister's consent to a compulsory transfer of shares is not required if the Minister has determined prior that his or her consent is not required in relation to the transfer. [Schedule 4, items 62 and 63, subsection 29(1) of the Transfer Act]

4.42 The Bill further clarifies the status of determinations made under existing subsection 29(1) to bring consistency and certainty to the legislation. As a result, for a determination dealing with the consent for a particular transfer, the Bill clarifies that this is not a legislative instrument. The provision is included to assist readers, as such a determination is not a legislative instrument within the meaning of subsection 8(1) of the Legislation Act 2003. Alternatively, for a determination that consent is not required in relation to a class of transfers, the Bill clarifies that this is a legislative instrument. [Schedule 4, item 64, subsections 29(2) and 29(3) of the Transfer Act]

Content of a compulsory transfer of shares determination

Agreements about matters connected with the transfer

4.43 The Bill extends the scope of existing section 30 in the Transfer Act to also include a compulsory transfer of shares. In this instance, the transferring and receiving bodies may provide APRA with a written statement specifying a mechanism for determining things that are to happen, or that are to be taken to happen, in relation to a transfer of shares. [Schedule 4, item 65, subsection 30(1) of the Transfer Act]

4.44 This mechanism, read in conjunction with existing subsection 35(3) of the Transfer Act, can be used to ensure that legal and practical issues arising from the transfer of shares are dealt with, resolved or satisfied, or this is taken to be the case. This might be relevant, for example, where registration requirements need to be addressed following a transfer of shares.

Certificate of transfer

4.45 The Bill extends the scope of existing section 33 in the Transfer Act to also include a compulsory transfer of shares, so that APRA can rely on the existing machinery to specify provisions within the certificate of transfer to help facilitate a transfer of shares. [Schedule 4, item 73, subsection 33(3) of the Transfer Act]

4.46 This amendment affords APRA flexibility to include provisions specifying, or specifying a mechanism for determining, things that are to happen, or that are taken to be the case, in relation to shares that are to be transferred, or in relation to the transfer of shares that is to be effected.

Process for a compulsory transfer of shares determination

4.47 The Bill amends the Transfer Act to specify the timing and effect once a compulsory transfer of shares has been determined.

In this instance, when the certificate of transfer comes into force, all the shares in the transferring body, wherever those shares are located, become shares held by the receiving body without any transfer, conveyance or assignment, and free from any trust, liability or other encumbrance. [Schedule 4, item 76, section 35A of the Transfer Act]

4.48 All the shares in the transferring body, wherever those shares are located, become (respectively) shares held by the receiving body without any transfer, conveyance or assignment, and free from any trust, liability or other encumbrance. [Schedule 4, item 76, section 35A of the Transfer Act]

Ancillary provisions

Regulations

4.49 The Bill inserts a regulations-making power in the Transfer Act to allow special provisions to be made in regard to a compulsory transfer of shares. As such, the regulations may provide in relation to any of the following matters:

·
the payment to the holder of shares in the transferring body of a purchase price for those shares;
·
the resolution of disputes involving a holder of shares in the transferring body (including the resolution of such disputes by the Federal Court);
·
the conferral of jurisdiction on the Federal Court for the purpose of the resolution of such disputes;
·
the publication of information relating to the compulsory transfer of shares by APRA, the transferring body and the receiving body;
·
the freeing of shares in the transferring body from any trust, liability or other encumbrance when they become shares held by the receiving body; and
·
any matter incidental to the compulsory transfer of shares, or proposed compulsory transfer of shares, or any of the other matters mentioned in this subsection. [Schedule 4, item 79, subsection 36AE(1) of the Transfer Act]

4.50 In the case of a transfer of shares, calculating and arranging payment of a purchase price or compensation to shareholders (who may be numerous), and/or persons who have securities or similar interests in relation to shares, might require special arrangements. Rather than set out detailed machinery for these sorts of arrangements in the Bill, it will be possible to do so in the regulations. This is not intended to limit APRA's ability to provide for such matters and payment and compensation in approved section 30 statements or under a certificate of transfer. The regulations may also address other incidental matters relating to compulsory share transfers. It is not intended that this limit the general regulation-making power in section 47 of the Transfer Act. Existing section 44 of the Transfer Act, which provides for compensation in certain circumstances where there has been a compulsory transfer of business, will also apply as a 'safety net' to a compulsory transfer of shares. [Schedule 4, item 79, subsection 36AE(3) of the Transfer Act]

4.51 The regulations may prescribe penalties, not exceeding 50 penalty units, for offences against the regulations. It is not anticipated that this will be used extensively, but if it is, a possible example of use may be to ensure that false or improper claims for compensation are not made in relation to any arrangements of the kind described above. [Schedule 4, item 79, subsection 36AE(2) of the Transfer Act]

Information sharing

4.52 The Bill extends the scope of existing section 42 in the Transfer Act to allow APRA to provide information (including personal or confidential commercial information) to the receiving body in connection with:

·
the transferred shares; and
·
the business of the transferring body. [Schedule 4, item 92, section 42 of the Transfer Act]

4.53 For clarity, information about the business of the transferring body would be covered by the secrecy provision under section 56 of the APRA Act, so this amendment would allow APRA to share information with the receiving body without breaching the secrecy provision.

Widening the scope to include related entities of insurers

4.54 Currently, under subsection 25(1B) of the Transfer Act, APRA may determine that there is to be a total or partial compulsory transfer of business from a body corporate related to an ADI, which is not itself an ADI, general or life insurer, to another body corporate in certain circumstances.

4.55 This may be necessary, for example, where an ADI's assets and liabilities are being transferred under the Transfer Act as part of a resolution, and a related entity of the ADI provides critical intra-group services essential to the ADI's continued operation. The same rationale applies to insurers but there is no equivalent to subsection 25(1B) in respect of a body corporate related to an insurer.

4.56 The Bill amends the Transfer Act to enable APRA to make a determination concerning a transfer from a body corporate related to an insurer to another body. [Schedule 4, items 47 and 52, subsections 25(1DA) and 25(1G) of the Transfer Act]

4.57 The Bill also amends existing subsections 25(1D) and 25(1F) in the Transfer Act by omitting 'only the business' and substituting 'only business'. [Schedule 4, items 45 and 50, subsections 25(1D) and 25(1F) of the Transfer Act]

4.58 Accordingly, instead of reading 'APRA may make a written determination that there is to be a transfer of only the business that is not regulated business from [an insurer] to a body corporate that is not [an insurer]' these subsections will provide 'APRA may make a written determination that there is to be a transfer of only business that is not regulated business from [an insurer] to a body corporate that is not [an insurer]'.

4.59 These amendments clarify that a transfer of unregulated business of a regulated entity to a non-regulated entity does not have to be a transfer of all the unregulated business of the transferor.

Removing the requirement for complementary State or Territory legislation to be in place

4.60 To give effect to transfers of business, the Transfer Act currently imposes the precondition that APRA be satisfied that legislation to facilitate the transfer must be in place in the State or Territory in which the transferring and receiving bodies are established.

4.61 A number of other Commonwealth transfer regimes, for instance those under the Insurance and Life Insurance Acts, do not impose preconditions of this nature. Although this is a matter which APRA and other relevant bodies would expect to address in the ordinary course, the absence of such State or Territory legislation should not prevent APRA from making a transfer of business under the Transfer Act.

4.62 The Bill therefore amends the Transfer Act so that APRA may make a voluntary or compulsory transfer determination, even in the absence of relevant State or Territory legislation. [Schedule 4, items 28 to 31, 53, 54, 59 and 61, paragraphs 11(1)(d) and 25(2)(f), subsections 11(1A) and 25(2A), and sections 14 and 28 of the Transfer Act]

4.63 The Bill clarifies that the requirement for State or Territory legislation referred to in paragraph 25(2)(f) must include provision to ensure that when a certificate of transfer comes into force under Division 3 of the Transfer Act, the receiving body is taken to be the successor in law to the transferring body (to the extent of the transfer). This only applies in relation to a compulsory transfer of business. This requirement does not apply to a compulsory transfer of shares. [Schedule 4, item 60, section 28 of the Transfer Act]

Consequential amendments

Compulsory transfer of shares and restructure approvals

4.64 The Bill makes consequential amendments to Part 4A of the Transfer Act (Restructures) to widen the application of that Part so that it covers a restructure arrangement (under Part 5.1 of the Corporations Act) that facilitate compliance with a requirement under a direction or prudential standard. [Schedule 4, items 80 to 86, sections 36A to 36L of the Transfer Act]

4.65 Part 4A of the Transfer Act currently applies to a restructure that for the purposes of making a regulated entity (an 'operating body') a subsidiary of a NOHC. An operating body may apply to the Minister for a restructure approval, including a restructure instrument. A restructure instrument may give relief to the operating body and group entities from certain provisions in Division 1 of Part 2J.1, or Part 2J.2, of the Corporations Act in relation to restrictions on share capital and the self-acquisition of shares. A restructure instrument may also give relief from section 254T of the Corporations Act, which relates to the circumstances in which dividends may be paid. The instrument comes into force when a court makes an order under subsection 411(4) of the Corporations Act approving the restructure arrangement. Further, if the Minister issues a restructure approval, APRA may issue internal restructure certificates giving effect to the transfer of specified assets and liabilities between entities within the group.

4.66 As a result of the amendments to Part 4A, an operating body (an ADI, general insurer or life insurer) may apply to the Minister for a restructure approval where the restructure would facilitate compliance by the operating body (or a related body corporate of the operating body) with a direction (under section 11CA of the Banking Act, 104 of the Insurance Act or 230B of the Life Insurance Act) or prudential standard. (under section 11AF of the Banking Act, 32 of the Insurance Act or 230A of the Life Insurance Act). This would include, for example, a restructuring to meet general requirements of a prudential standard relating to group structure for the purposes of addressing potential barriers to resolution during normal times, in case a crisis should occur at some time in the future. [Schedule 4, items 80 to 83, sections 36A and 36B of the Transfer Act]

4.67 As is currently the case in relation to NOHC restructures of the kind currently covered by Part 4A of the Transfer Act, the Minister may impose conditions on a restructure approval made under the amended provisions. [Schedule 4, item 84, section 36E of the Transfer Act]

4.68 A restructure approval under the amended Part 4A may include a restructure instrument granting relief from Part 2J.1, or Part 2J.2 and section 245T of the Corporations Act, as is currently the position. [Schedule 4, item 85, section 36G of the Transfer Act]

4.69 APRA's power to issue an internal transfer certificate, giving effect to the transfer of assets and liabilities for the purposes of the restructure, is extended to cover both types of restructures under the amended Part 4A (that is, the kinds of NOHC restructures currently covered, and the prudential/direction restructures covered by the amended provisions). [Schedule 4, item 86, section 36L of the Transfer Act]

4.70 Consequential amendments are also made to the information-gathering power in existing section 41 of the Transfer Act. [Schedule 4, items 88 to 91, section 41 of the Transfer Act]

4.71 Section 41 currently confers power on APRA to exercise information- gathering powers in the Industry Acts for purposes connected with a voluntary or compulsory transfer of business under the Transfer Act. The situations where APRA can currently use those powers to obtain information are where a transfer is from or to an ADI or from or to a life company. APRA may also obtain information for the purposes of an internal restructure of a group that includes an ADI, life company or general insurer.

4.72 The amendments will ensure that the information-gathering powers apply in the following additional situations. First, they will correct a gap in subsection 41(3) which does not currently allow APRA to use the Insurance Act information-gathering powers to obtain information for the purposes of a (compulsory) transfer of business from or to a general insurer. Secondly, it will be possible to use the information-gathering powers for the purposes of a transfer of shares in an ADI, general insurer or life insurer. In summary, the powers may be used to obtain information for the purposes of: a transfer of business from or to an ADI, general insurer or life company; a compulsory transfer of shares in an ADI, general insurer or life company; and an internal restructure (under Part 4A of the Transfer Act) of a group that includes an ADI, general insurer or life company. [Schedule 4, items 88 to 91, section 41 of the Transfer Act]

4.73 The Bill makes consequential amendments to the Transfer Act to insert provisions and update references in multiple provisions to reflect the addition of a compulsory transfer of shares, and to help differentiate where necessary between the two different types of compulsory transfer available under the Act. [Schedule 4, items 16 to18, 21, 22, 32 to 38, 42, 47, 50, 52, 57, 58, 63, 66 to 72, 74, 75, 79, 87 and 93 to 95, paragraphs 8(1)(a), 8(1)(b), subsection 8(1), paragraph(8)(5)(a), subsection 8(5), paragraph 24(1)(a), subsections 24(1A) and 24(1B),24(2) to 24(5), paragraphs 25(1B)(a), 25(1DA)(a), subsection 25(1F) paragraph25(1G)(a) section 26, subsection 27(1), section 29, subsection 31(1), paragraphs 31(1)(a),31(1)(b), section 32, paragraphs 33(1)(c), 33(2)(b), 33(2)(c), section 35, subsection 35(1), section 36AC, paragraphs 37(1)(c) and 37(1)(d). subsections 43(4), 43(9), and paragraphs 43(9A)(a) and 43(9A)(b) of the Transfer Act]

4.74 The Bill amends the existing paragraphs 25(1)(a)(iii) and (v) to correct an anomaly in the existing provisions. Under section 13A of the Banking Act, APRA has power to investigate an ADI or appoint a person to investigate the ADI. APRA also has power to take control of an ADI or appoint a person to take control of the ADI. The intention is that each of these four actions be a potential trigger for transfer of business (subject of course to any other relevant preconditions being satisfied as well). However the wording of the existing paragraphs (iii) and (iv) only covers where APRA has appointed an investigator and where APRA has appointed a statutory manager (the latter inadvertently being covered twice, once in each paragraph). The amendments will correct this by defining the relevant preconditions as APRA investigating or appointing a person to investigate, or a statutory manager being appointed (which will cover both where APRA is the statutory manager and where APRA appoints an administrator as statutory manager). [Schedule 4, item 41, paragraph 25(1)(a) of the Transfer Act]

4.75 The Bill makes consequential amendments to the Income Tax Assessment Act 1997, Insurance Act, Life Insurance Act, APRA Act and PSN Act to update references to reflect the new short title of the Transfer Act. [Schedule 2, item 51, paragraph 62ZI(2)(aa) of the Insurance Act; Schedule 3, items 46 and 61, paragraph 175(2)(aa) and subsection 190(5) of the Life Insurance Act; Schedule 5, item 2, section 5 of the PSN Act; Schedule 6, item 1, paragraph 3(1)(f) of the APRA Act; Schedule 7, items 4, 5, 6, 9, 10, and 11, paragraph 202-47(1)(a),section 320-300, paragraphs 320-305(b), 615-35(a), subsection 703-37(1) and paragraph 703-37(4)(a) of the Income Tax Assessment Act 1997;

4.76 The Bill makes consequential amendments to the Insurance and Life Insurance Acts to include a compulsory transfer of shares as a possible course of action that a judicial manager can recommend in its report. [Schedule 2, item 52, paragraph 62ZI(2)(ab) of the Insurance Act; Schedule 3, item 47, paragraph 175(2)(ab) of the Life Insurance Act]

4.77 The Bill amends the triggers for a transfer of business from a life insurance company or general insurer to include the appointment of a statutory manager to the insurer as a trigger (subject to any other relevant preconditions for transfer). [Schedule 4, items 44, 46, 49 and 51, paragraphs 25(1C)(a)(iv), 25(1D)(a)(iii),25(1E)(a) and 25(1F)(a)(iii) of the Transfer Act])]

4.78 The Bill clarifies that section 28, which sets out the matters to be included in State or Territory legislation supporting transfers of business, is enacted only for the purposes of paragraph 25(2)(f). As noted above, paragraph 25(2)(f) will be amended to provide that APRA must consider whether such legislation is in place in certain circumstances but may decide to undertake a transfer of business even if it is not or does not meet the requirements of section 28. Neither paragraph 25(2)(f) nor section 28 will apply to a compulsory transfer of shares under Part 4 [Schedule 4, item 61, subsection 28(2) of the Transfer Act]


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