INCOME TAX ASSESSMENT ACT 1936

SCHEDULE 2H - DEMUTUALISATION OF MUTUAL ENTITIES OTHER THAN INSURANCE COMPANIES AND HEALTH INSURERS  

Division 326 - DEMUTUALISATION  

Subdivision 326-B - How demutualisation is to be effected  

SECTION 326-60   CONTINUITY OF BENEFICIAL INTEREST TEST  

326-60(1)  
This section sets out a test (the continuity of beneficial interest test ) that must be satisfied before this Division applies to the demutualisation of a mutual entity.

326-60(2)  
The continuity of beneficial interest test is satisfied if:


(a) an opportunity is given to each existing member of the mutual entity:


(i) to take up shares in the demutualised entity or in a holding company to which shares in the demutualised entity are issued; or

(ii) to have shares in the demutualised entity issued to a trustee on behalf of the member; and


(b) where the demutualisation is implemented by the method set out in section 326-45 , 326-50 or 326-55 - of the ordinary shares in the demutualised entity or holding company that are issued in connection with the demutualisation (the issued shares ), the total number that are issued to existing members or to a trustee on behalf of existing members constitutes at least 90% of the issued shares; and


(ba) where the demutualisation is implemented by the method set out in section 326-52 :


(i) of the ordinary shares in the demutualised entity that are issued to members other than the holding company in connection with the demutualisation (the issued entity shares ), the total number that are issued to existing members constitutes at least 90% of the issued entity shares; and

(ii) of the ordinary shares in the holding company that are issued in connection with the demutualisation (the issued holding company shares ), the total number that are issued to existing members constitutes at least 90% of the issued holding company shares; and


(c) the accumulated surplus of the mutual entity is allocated or distributed in the form of shares, or cash from the sale of shares, to existing members in proportions that broadly accord with any one or more of the following:


(i) the respective amounts contributed by the members to the entity;

(ii) the respective values of the membership rights of the members;

(iii) the respective rights of the members on the winding up of the entity.

326-60(3)  
In this section:

accumulated surplus
, in relation to a demutualised entity, means the net assets of the entity on the demutualisation resolution day.


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