Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Act 2008 (105 of 2008)

Schedule 2   Other measures: banking

Banking Act 1959

12   After section 14A

Insert:

14AA ADI statutory manager’s additional powers to facilitate recapitalisation

Powers

(1) An ADI statutory manager of an ADI that is a company that has a share capital and is registered under the Corporations Act 2001 may do one or more of the following acts on terms determined by the ADI statutory manager:

(a) issue shares, or rights to acquire shares, in the company;

(b) cancel shares, or rights to acquire shares, in the company;

(c) reduce the company’s share capital by cancelling any paid-up share capital that is not represented by available assets;

(d) sell shares, or rights to acquire shares, in the company;

(e) vary or cancel rights or restrictions attached to shares in a class of shares in the company.

Note: Before doing such an act, the ADI statutory manager will usually need to get and consider a report on the fair value of each share or right concerned: see section 14AB.

Giving company members notice of exercise of powers

(2) As soon as practicable after doing an act described in paragraph (1)(a), (b), (c) or (e) or subsection (3), the ADI statutory manager must give written notice to the persons who were members (under section 231 of the Corporations Act 2001) of the company just before the act, identifying the act and explaining its effect on their interests as members.

(3) One of the acts to which subsection (2) relates is the offering of shares, or rights to acquire shares, in the company for sale under paragraph (1)(d).

Exercise of powers despite other laws etc.

(4) An ADI statutory manager may do an act under subsection (1) despite:

(a) the Corporations Act 2001; and

(b) the company’s constitution; and

(c) any contract or arrangement to which the company is party; and

(d) any listing rules (as defined in section 761A of the Corporations Act 2001) of a financial market (as defined in that section) in whose official list the company is included.

14AB Considering report before acting under section 14AA

Getting and considering report on fair value of shares or rights

(1) Before determining terms for an act under subsection 14AA(1), the ADI statutory manager must:

(a) obtain a report meeting the requirements in subsection (2) of this section on the fair value of the shares or rights concerned from an expert who is not an associate of the ADI statutory manager, or of the company, under Division 2 of Part 1.2 of the Corporations Act 2001; and

(b) consider the report;

unless APRA determines under subsection (8) that this subsection does not apply in relation to that act relating to those shares or rights.

Content of report

(2) The report must set out:

(a) the amount that is, in the expert’s opinion, the fair value for each share or right concerned; and

(b) the reasons for forming the opinion; and

(c) any relationship between the expert and any of the following persons:

(i) the ADI statutory manager;

(ii) a person who is an associate of the ADI statutory manager under Division 2 of Part 1.2 of the Corporations Act 2001;

(iii) the ADI;

(iv) 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 them advice, or acts on their behalf, in the proper performance of the functions attaching to the expert’s professional capacity or business relationship with them; 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.

Determining fair value of shares

(3) In determining for the purposes of paragraph (2)(a) the amount that is, in the expert’s opinion, the fair value for each share concerned, 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 either have been issued or that the ADI statutory manager proposes to issue (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 either have been issued or that the ADI statutory manager proposes to issue (without allowing a premium or applying a discount for particular shares in that class).

Assumptions for valuation of company

(4) The Minister may give the expert written notice of assumptions for the valuation of the company. The Minister may, by further written notice given to the expert, revoke, but not vary, notice of the assumptions. A notice under this subsection is not a legislative instrument.

Determining fair value of rights

(5) In determining for the purposes of paragraph (2)(a) the amount that is, in the expert’s opinion, the fair value for each right concerned, the expert must act in accordance with the assumptions (if any) notified to the expert by the Minister for the valuation of the right.

Assumptions for valuation of rights

(6) The Minister may give the expert written notice of assumptions for the valuation of the rights concerned. The Minister may, by further written notice given to the expert, revoke, but not vary, notice of the assumptions. A notice under this subsection is not a legislative instrument.

Contravention does not invalidate act

(7) A contravention of subsection (1), (2), (3), (5) or (9) does not affect the validity of anything done under section 14AA.

Exemption from subsection (1)

(8) APRA may determine in writing that subsection (1) does not apply in relation to an act relating to shares or rights if APRA is satisfied that delaying the act to enable compliance with that subsection in relation to the act would detrimentally affect:

(a) depositors with the ADI concerned; and

(b) financial system stability in Australia.

(9) APRA must:

(a) publish a copy of a determination under subsection (8) in the Gazette; and

(b) give a copy of a determination under subsection (8) to the ADI statutory manager concerned (unless that manager is APRA).

(10) A determination made under subsection (8) is not a legislative instrument.

14AC Act under section 14AA not ground for denying obligation

(1) This section applies if an ADI is party to a contract, whether the proper law of the contract is Australian law (including the law of a State or Territory) or law of a foreign country (including the law of part of a foreign country).

(2) The fact that an ADI statutory manager does an act under subsection 14AA(1) relating to the ADI does not allow the contract, or any other party to the contract, to do any of the following:

(a) deny any obligations under that contract;

(b) accelerate any debt under that contract;

(c) close out any transaction relating to that contract.