Supplementary Explanatory Memorandum
(Circulated by authority of the Assistant Treasurer and Minister for Financial Services, the Hon Stephen Jones MP)Chapter 2: Parliamentary amendments to Schedule 4 - Off-market share buy backs
Outline of chapter
2.1 The parliamentary amendments to Schedule 4 to the Bill change the date of effect of Part 2 of that Schedule so that part of the measure takes effect on 18 November 2022, the day after the exposure draft legislation was released for public consultation.
Context of amendments
2.2 Schedule 4 to the Bill applies to an off-market buy-back or selective reduction of capital undertaken by a listed public company that is either undertaken or announced to the market on or after 7:30pm, by legal time in the Australian Capital Territory, on 25 October 2022.
2.3 This was the date and time of the public announcement of the amendments in the context of the October 2022-23 Budget.
2.4 The amendments in respect of selective reductions of capital is an integrity measure designed to prevent companies seeking to obtain similar advantages to those available for off-market buy-backs that existed prior to these amendments via selective reductions of capital.
2.5 The changes to a selective reduction of capital were not specifically mentioned in the October 2022-23 Budget announcement and therefore ensure listed public companies can make informed decisions about their capital management.
2.6 The Explanatory Memorandum to the Bill provides further information about Schedule 4.
Summary of amendments
2.7 The amendments change the date of application of Part of Schedule 4 to the Bill to 18 November 2022, the day after the exposure draft legislation was released for public consultation.
Detailed explanation of amendments
2.8 Schedule 4 to the Bill applies to an off-market buy-back or selective reduction of capital undertaken by a listed public company that is either undertaken or announced to the market on or after 7:30pm, by legal time in the Australian Capital Territory, on 25 October 2022.
2.9 This was the date and time of the public announcement of the amendments in the context of the October 2022-23 Budget. The measure was announced as part of the budget and the date of application was set to any transactions that were announced or occurred after this announcement.
2.10 The October 2022-23 Budget announcement did not specifically refer to the amendments to selective reductions of capital, which were designed as an integrity measure.
2.11 Any selective reductions of capital that occurred or were announced between 25 October 2022 and 18 November 2022 would be subject to the amendments made by Schedule 4 and may have included a franked distribution as part of the payment.
2.12 To ensure listed public companies can make fully informed capital management decisions, only such distributions made as part of a selective reduction of capital announced or undertaken on or after 18 November 2022 are unfrankable.
2.13 The parliamentary amendments change this so that the amendments to selective reductions of capital in Part 2 of Schedule 4 to the Bill only applies to transactions announced or undertaken on or after the day after the exposure draft legislation was released for public consultation.