Financial Sector Legislation Amendment (Prudential Refinements and Other Measures) Act 2010 (82 of 2010)
Schedule 1 Amendment of the Banking Act 1959
Part 1 Amendments
25 After Subdivision A
Insert:
Subdivision AA - Recapitalisation directions by APRA
13D Who this Subdivision applies to
This Subdivision applies to an ADI that:
(a) is a company that:
(i) is registered under theCorporations Act 2001; and
(ii) has a share capital; and
(b) does not have an ADI statutory manager.
13E Recapitalisation direction by APRA
(1) APRA may give an ADI a direction (a recapitalisation direction ) that requires the ADI to increase the ADI's level of capital to the level specified in the direction if:
(a) the ADI informs APRA that:
(i) the ADI considers that the ADI is likely to become unable to meet the ADI's obligations; or
(ii) the ADI is about to suspend payment; or
(b) APRA considers that, in the absence of external support:
(i) the ADI may become unable to meet the ADI's obligations; or
(ii) the ADI may suspend payment; or
(iii) it is likely that the ADI will be unable to carry on banking business in Australia consistently with the interests of the ADI's depositors; or
(iv) it is likely that the ADI will be unable to carry on banking business in Australia consistently with the stability of the financial system in Australia; or
(c) the ADI:
(i) becomes unable to meet the ADI'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) The regulations may specify that a particular form of support is not external support for the purposes of paragraph (1)(b).
(4) A recapitalisation direction is not a legislative instrument.
13F Additional contents of a recapitalisation direction
(1) A recapitalisation direction may direct the ADI to issue:
(a) shares, or rights to acquire shares, in the ADI; 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.
13G Compliance with a recapitalisation direction
Giving members of the ADI notice of share issue etc.
(1) As soon as practicable after an ADI issues shares, rights to acquire shares, or other capital instruments, in compliance with a recapitalisation direction, the ADI must give written notice to the persons who were members (under section 231 of theCorporations Act 2001) of the ADI 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) An ADI 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 ADI's constitution; and
(c) any contract or arrangement to which the ADI 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 ADI is included.
13H 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 an ADI to issue shares, or rights to acquire shares, in the ADI, unless APRA is satisfied that compliance with this section would detrimentally affect:
(a) the depositors with the ADI; 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 ADI 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 ADI; or
(ii) a person who is an associate of the ADI under Division 2 of Part 1.2 of the Corporations Act 2001;
including any circumstances in which the expert gives the ADI or person advice, or acts on behalf of the ADI or person, in the proper performance of the functions attaching to the expert's professional capacity or business relationship with the ADI 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.
13J Determination of the fair value of shares by an expert
(1) In determining the fair value for each share in an ADI for the purposes of paragraph 13H(3)(a), the expert must:
(a) first, assess the value of the ADI as a whole, in accordance with the assumptions (if any) notified to the expert by the Minister for the valuation of the ADI; and
(b) then, allocate that value among the classes of shares in the ADI 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.
13K Determination of the fair value of rights by an expert
(1) In determining the fair value for each right to acquire shares in an ADI for the purposes of paragraph 13H(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.
13L Ascertaining the fair value of other capital instruments
(1) APRA must comply with this section before giving a recapitalisation direction that directs an ADI to issue capital instruments other than shares, or rights to acquire shares, in the ADI.
(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.
13M Contravention of certain provisions does not affect the validity of recapitalisation direction etc.
A contravention of:
(a) section 13H or subsection 13J(1) or 13K(1); or
(b) section 13L 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.
13N Recapitalisation direction not grounds for denial of obligations
(1) This section applies if an ADI 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 ADI is subject to a recapitalisation direction does not allow the contract, or a party to the contract, other than the ADI, 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.
13P 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 ADI 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 ADI; or
(b) any recapitalisation directions made during a specified period in respect of any ADIs;
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 ADI, 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.
13Q Non-compliance with a recapitalisation direction
(1) An ADI commits an offence if:
(a) the ADI 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 ADI.
Penalty: 50 penalty units.
(2) However, subsection (1) does not apply if:
(a) the ADI made reasonable efforts to comply with the recapitalisation direction; and
(b) the ADI's contravention is due to circumstances beyond the ADI'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 an ADI does, or refuses or fails to do, an act in circumstances that give rise to the ADI committing an offence against subsection (1), the ADI 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 ADI 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 an ADI commits an offence if:
(a) the officer refuses or fails to take reasonable steps to ensure that the ADI complies with a recapitalisation direction given to the ADI; and
(b) the officer's duties include ensuring that the ADI complies with the direction, or with a class of directions that includes the direction.
Penalty: 50 penalty units.
(5) If an officer of an ADI refuses or fails to take reasonable steps to ensure that the ADI complies with a recapitalisation direction given to the ADI 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.
13R 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 an ADI as a direct result of:
(i) the issue of the shares in compliance with a recapitalisation direction given to the ADI; 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 an ADI.