Financial Sector Legislation Amendment (Prudential Refinements and Other Measures) Act 2010 (82 of 2010)
Schedule 3 Amendment of the Life Insurance Act 1995
Part 1 Amendments
51 Before section 230B
Insert:
Subdivision A - Recapitalisation directions
230AA Who this Subdivision applies to
This Subdivision applies to a life company that:
(a) is a company that:
(i) is registered under theCorporations Act 2001; and
(ii) has a share capital; and
(b) does not have a judicial manager.
230AB Recapitalisation direction by APRA
(1) APRA may give a life company a direction (a recapitalisation direction ) that requires the company to increase the company's level of capital to the level specified in the direction, if:
(a) the company informs APRA that:
(i) the company considers that the company is likely to become unable to meet the company's obligations; or
(ii) the company is about to suspend payment; or
(b) APRA considers that:
(i) the company may become unable to meet the company's obligations; or
(ii) the company may suspend payment; or
(iii) it is likely that the company will be unable to carry on insurance business in Australia consistently with the interests of the company's policy owners; or
(iv) it is likely that the company will be unable to carry on insurance business in Australia consistently with the stability of the financial system in Australia; or
(c) the company:
(i) becomes unable to meet the company's obligations; or
(ii) suspends payment.
(2) In deciding whether to give a recapitalisation direction, APRA must consult with the Australian Competition and Consumer Commission (the ACCC ), unless the ACCC notifies APRA, in writing, that the ACCC does not wish to be consulted about:
(a) the direction; or
(b) a class of directions that includes the direction.
(3) A recapitalisation direction is not a legislative instrument.
230AC Additional contents of a recapitalisation direction
(1) A recapitalisation direction may direct a life company to issue:
(a) shares, or rights to acquire shares, in the company; or
(b) other capital instruments of a kind specified in the direction.
(2) A direction for the purposes of paragraph (1)(a) may specify that the shares or rights must:
(a) be of a kind specified in the direction; or
(b) have the characteristics specified in the direction.
(3) A direction for the purposes of paragraph (1)(b):
(a) must not specify a kind of capital instrument unless that kind of capital instrument is specified in the regulations; and
(b) may specify that the capital instruments must have the characteristics specified in the direction.
230AD Compliance with a recapitalisation direction
Giving members of the life company notice of share issue etc.
(1) As soon as practicable after a life company issues shares, rights to acquire shares, or other capital instruments, in compliance with a recapitalisation direction, the company must give written notice to the persons who were members (under section 231 of theCorporations Act 2001) of the company just before the issue.
(2) The notice must:
(a) identify the issue; and
(b) explain the effect of the issue of the shares, rights to acquire shares, or other capital instruments on the members' interests.
Issue of shares etc. despite other laws etc.
(3) A life company may issue shares, rights to acquire shares, or other capital instruments, in compliance with a recapitalisation direction despite:
(a) theCorporations Act 2001; and
(b) the company's constitution; and
(c) any contract or arrangement to which the company is a party; and
(d) any listing rules (as defined in section 761A of theCorporations Act 2001) of a financial market (as defined in that section) in whose official list the company is included.
230AE APRA must obtain expert's report on the fair value of shares etc.
(1) APRA must comply with this section before giving a recapitalisation direction that directs a life company to issue shares, or rights to acquire shares, in the company, unless APRA is satisfied that compliance with the section would detrimentally affect:
(a) the policy owners of the company; or
(b) the stability of the financial system in Australia.
(2) APRA must:
(a) obtain a report on the fair value of the shares, or rights to acquire shares, in the company from an expert who is not an associate of the company under Division 2 of Part 1.2 of theCorporations Act 2001; and
(b) consider the report.
(3) The report must set out:
(a) the amount that is, in the expert's opinion, the fair value for each of those shares or rights; and
(b) the reasons for forming the opinion; and
(c) any relationship between the expert and:
(i) the company; or
(ii) a person who is an associate of the company under Division 2 of Part 1.2 of the Corporations Act 2001;
including any circumstances in which the expert gives the company or person advice, or acts on behalf of the company or person, in the proper performance of the functions attaching to the expert's professional capacity or business relationship with the company or person; and
(d) any financial or other interest of the expert that could reasonably be regarded as being capable of affecting the expert's ability to give an unbiased opinion in relation to the matter being reported on.
230AF Determination of the fair value of shares by an expert
(1) In determining the fair value for each share in a life company for the purposes of paragraph 230AE(3)(a), the expert must:
(a) first, assess the value of the company as a whole, in accordance with the assumptions (if any) notified to the expert by the Minister for the valuation of the company; and
(b) then, allocate that value among the classes of shares in the company that:
(i) have been issued; or
(ii) APRA proposes to direct be issued (taking into account the relative financial risk, and voting and distribution rights, of the classes); and
(c) then, allocate the value of each class pro rata among the shares in that class that:
(i) have been issued; or
(ii) APRA proposes to direct be issued (without allowing a premium or applying a discount for particular shares in that class).
(2) The Minister may give the expert written notice of assumptions for the valuation of the company.
(3) The Minister may, by further written notice given to the expert, revoke, but not vary, notice of the assumptions.
(4) A notice given under subsection (2) or (3) is not a legislative instrument.
230AG Determination of the fair value of rights by an expert
(1) In determining the fair value for each right to acquire shares in a life company for the purposes of paragraph 230AE(3)(a), the expert must act in accordance with the assumptions (if any) notified to the expert by the Minister for the valuation of that right.
(2) The Minister may give the expert written notice of assumptions for the valuation of such rights.
(3) The Minister may, by further written notice given to the expert, revoke, but not vary, notice of the assumptions.
(4) A notice given under subsection (2) or (3) is not a legislative instrument.
230AH Ascertaining the fair value of other capital instruments
(1) APRA must comply with this section before giving a recapitalisation direction that directs a life company to issue capital instruments other than shares, or rights to acquire shares, in the company.
(2) APRA must comply with any requirements of the regulations relating to ascertaining the fair value of the capital instruments.
(3) Regulations made for the purposes of this section may specify different requirements in relation to different kinds of capital instruments.
230AI Contravention of certain provisions does not affect the validity of recapitalisation direction etc.
A contravention of:
(a) section 230AE or subsection 230AF(1) or 230AG(1); or
(b) subsection 230AH(1) or regulations made for the purposes of that subsection;
does not affect the validity of a recapitalisation direction or anything done in compliance with the direction.
230AJ Recapitalisation direction not grounds for denial of obligations
(1) This section applies if a life company is party to a contract, whether the proper law of the contract is:
(a) Australian law, including the law of a State or Territory; or
(b) law of a foreign country, including the law of part of a foreign country.
(2) The fact that the company is subject to a recapitalisation direction does not allow the contract, or a party to the contract, other than the company, to do any of the following:
(a) deny any obligation under the contract;
(b) accelerate any debt under the contract;
(c) close out any transaction relating to the contract.
230AK Supply of information about issue and revocation of recapitalisation directions
Power to publish notice of recapitalisation directions in Gazette
(1) APRA may publish in theGazettenotice of a recapitalisation direction.
(2) The notice must include:
(a) the name of the life company that is given the direction; and
(b) a summary of the direction.
Requirement to publish notice of revocation of certain recapitalisation directions in Gazette
(3) If APRA publishes notice of a recapitalisation direction and later revokes the direction, APRA must publish in theGazette notice of that revocation as soon as practicable after the revocation.
(4) Failure to publish notice of the revocation does not affect the validity of the revocation.
Requirement to provide information about recapitalisation direction to Minister and Reserve Bank
(5) If the Minister or the Reserve Bank requests APRA to provide information about:
(a) any recapitalisation directions in respect of a particular life company; or
(b) any recapitalisation directions made during a specified period in respect of any life companies;
APRA must comply with the request.
Power to inform Minister and Reserve Bank of recapitalisation direction
(6) APRA may provide any information that APRA considers appropriate to the Minister or the Reserve Bank about any recapitalisation directions, or revocations of recapitalisation directions, in respect of any life company, at any time.
Requirement to inform Minister and Reserve Bank of revocation of recapitalisation direction if informed of making of direction
(7) If APRA:
(a) provides the Minister or the Reserve Bank with information about a recapitalisation direction; and
(b) later revokes the direction;
APRA must notify that person of the revocation of the direction as soon as practicable after the revocation.
(8) Failure to notify the person does not affect the validity of the revocation.
Secrecy requirements
(9) Information relating to recapitalisation directions and revocations of recapitalisation directions is subject to the secrecy requirements in Part 6 of theAustralian Prudential Regulation Authority Act 1998, unless the information has been published in theGazette.
230AL Non-compliance with a recapitalisation direction
(1) A life company commits an offence if:
(a) the company does, or refuses or fails to do, an act; and
(b) doing, or refusing or failing to do, the act results in a contravention of a recapitalisation direction given to the company.
Penalty: 50 penalty units.
(2) However, subsection (1) does not apply if:
(a) the company made reasonable efforts to comply with the recapitalisation direction; and
(b) the company's contravention is due to circumstances beyond the company's control.
Note: A defendant bears an evidential burden in relation to the matter in subsection (2) (see subsection 13.3(3) of theCriminal Code).
(3) If a life company does, or refuses or fails to do, an act in circumstances that give rise to the company committing an offence against subsection (1), the company commits an offence against that subsection in respect of:
(a) the first day on which the offence is committed; and
(b) each subsequent day (if any) on which the circumstances that gave rise to the company committing the offence continue (including the day of conviction for any such offence or any later day).
Note: This subsection is not intended to imply that section 4K of theCrimes Act 1914 does not apply to offences against this Act or the regulations.
(4) An officer of a life company commits an offence if:
(a) the officer refuses or fails to take reasonable steps to ensure that the company complies with a recapitalisation direction given to the company; and
(b) the officer's duties include ensuring that the company complies with the direction, or with a class of directions that includes the direction.
Penalty: 50 penalty units.
(5) If an officer of a life company refuses or fails to take reasonable steps to ensure that the company complies with a recapitalisation direction given to the company in circumstances that give rise to the officer committing an offence against subsection (4), the officer commits an offence against that subsection in respect of:
(a) the first day on which the offence is committed; and
(b) each subsequent day (if any) on which the circumstances that gave rise to the officer committing the offence continue (including the day of conviction for any such offence or any later day).
Note: This subsection is not intended to imply that section 4K of theCrimes Act 1914 does not apply to offences against this Act or the regulations.
(6) In this section, officer has the meaning given by section 9 of theCorporations Act 2001.
230AM Exceptions to Part IV of the Trade Practices Act 1974
For the purposes of subsection 51(1) of theTrade Practices Act 1974, the following things are specified and specifically authorised:
(a) the acquisition of shares in a life company as a direct result of:
(i) the issue of the shares in compliance with a recapitalisation direction given to the company; or
(ii) the exercise of a right to acquire shares that was issued in compliance with such a recapitalisation direction;
(b) the acquisition of other capital instruments as a direct result of the issue of the other capital instruments in compliance with a recapitalisation direction given to a life company.
Subdivision B - Other directions