Approval to hold a stake in a financial sector company of more than 15%

Administered by Department of the Treasury

Legislation au C2017G00691 In force Gazette

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Approval to hold a stake in a financial sector company of more than 15%

Financial Sector (Shareholdings) Act 1998

 

To: Fairfax Financial Holdings Limited (Fairfax), 1102952 B.C. Unlimited Liability Company (BCULC), Fairfax Financial Holdings (Switzerland) GmbH (FFHSG),

Fairfax (Switzerland) GmbH (FSG), Mr Prem Watsa, OMERS Administration Corporation (OMERS) and OCM Goldfish Inc. (OCM).

 

SINCE

 

  1. On 20 May 2014, Allied World Assurance Company Holdings, AG (AWACHA) and Allied World Assurance Company Holdings, Ltd (AWACHL) were granted approval under subsection 14(1) of the Financial Sector (Shareholdings) Act 1998 (the Act) to hold a 100% stake in each of AWACHL and Allied World Assurance Company, Ltd ABN 54 163 304 907 (AWACL), financial sector companies under the Act;

 

B. On 23 February and 18 May 2017, Fairfax (on behalf of itself, BCULC, FFHSG, FSG and Mr Prem Watsa), and, on 19 April and 19 May 2017, OMERS (on behalf of itself and OCM), applied to the Treasurer under section 13 of the Act for the following approvals (the Approvals):

 

(i)       Fairfax, BCULC, FFHSG, FSG, Mr Prem Watsa, OMERS and OCM to hold up to a 100% stake in each of AWACL and AWACHL, financial sector companies under the Act;

 

(ii)     Fairfax, BCULC, FFHSG, Mr Prem Watsa, OMERS and OCM to hold up to a 100% stake in each of AWACHA and FSG, financial sector companies under the Act; and

 

(iii)  Fairfax, BCULC, Mr Prem Watsa, OMERS and OCM to hold up to a 100% stake in FFHSG, a financial sector company under the Act; and

 

C. I am satisfied it is in the national interest to grant the Approvals.

 

 

 

 

 

 

 

 

I, Jennifer Balding, a delegate of the Treasurer:

 

(a)          under subsection 14(1) of the Act, APPROVE:

 

(i)            Fairfax, BCULC, FFHSG, FSG, Mr Prem Watsa, OMERS and OCM to hold up to a 100% stake in each of AWACL and AWACHL;

 

(ii)         Fairfax, BCULC, FFHSG, Mr Prem Watsa, OMERS and OCM to hold up to a 100% stake in each of AWACHA and FSG; and

 

(iii)       Fairfax, BCULC, Mr Prem Watsa, OMERS and OCM to hold up to a 100% stake in FFHSG; and

 

(b)   under subsection 16(1) of the Act, IMPOSE the conditions set out in the Schedule in relation to the Approvals.

 

 

The Approvals are effective from the date that FFHSG acquires the outstanding shares in AWACHA and remain in force indefinitely.

 

Dated: 20 June 2017

 

[Signed]

 

 

 

 

 

Jennifer Balding

Acting General Manager

Specialised Institutions Division

 

 

Interpretation

 

In this Notice:

 

100% subsidiary has the meaning given in section 3 of the Act.

financial sector company has the meaning given in section 3 of the Act.

stake in relation to a company, has the meaning given in clause 10 of Schedule 1 to the Act.

unacceptable shareholding situation has the meaning given in section 10 of the Act.

 

Note 1   Under paragraph 16(2)(a) of the Act, the Treasurer may, by written notice given to a person who holds an Approval under section 14, impose one or more conditions or further conditions to which the Approval is subject. Under paragraph 16(2)(b) of the Act, the Treasurer may revoke or vary any conditions imposed under paragraph 16(2)(a) of the Act or specified in the Notice of Approval. The Treasurer’s powers under subsection 16(2) may be exercised on the Treasurer’s own initiative or an application made to the Treasurer in accordance with the requirements of subsection 16(4) of the Act, by the person who holds the Approval (see subsection 16(3) of the Act).

 

Note 2   A person who holds an Approval under section 14 of the Act may apply to the Treasurer under subsection 17(1) of the Act, to vary the percentage specified in the Approval.

 

 

Note 3   Under subsection 17(6) of the Act, the Treasurer may, on the Treasurer’s own initiative, by written notice given to a person who holds an Approval under section 14, vary the percentage specified in the Approval if the Treasurer is satisfied it is in the national interest to do so.

 

Note 4   The circumstances in which the Treasurer may revoke a person’s Approval under section 14 are

set out in subsection 18(1) of the Act.

 

Note 5   Section 19 of the Act provides for flow-on approvals. If an Approval has been granted for the holding of a stake in a financial sector company and the financial sector company is a holding company for an authorised deposit-taking institution or an authorised insurance company, then an approval is taken to exist for the holding of a stake of equal value in each financial sector company that is a 100% subsidiary of the holding company.

 

Note 6   Under section 14 of the Act, the Treasurer must give written notice of this Approval to the applicant and financial sector company concerned and must publish a copy of this notice in the Gazette.

 

Note 7   Under section 11 of the Act, a person or 2 or more persons under an arrangement are guilty of an offence if the person(s) acquires shares in a company and the acquisition has the result, in relation to a financial sector company, that:

(i)          an unacceptable shareholding situation comes into existence; or

(ii) if an unacceptable shareholding situation already exists in relation to the company and in relation to a person – there is an increase in the stake held by the person in the company;

 

and the person(s) was reckless as to whether the acquisition would have that result. A maximum penalty of 400 penalty units applies or by virtue of subsection 4B(3) of the Crimes Act 1914, in the case of a body corporate, a penalty not exceeding 2,000 penalty units. By virtue of section 39 of the Act, an offence against section 11 is an indictable offence.

 

Note 8   Under section 32(3) of the Act, if a person has engaged in or is proposing to engage in any conduct in contravention of a condition to which an approval under section 14 is subject, the Federal Court may, on the application of the Treasurer, grant an injunction:

(i)          restraining the person engaging in the conduct; and

(ii)         if in the court’s opinion, it is desirable to do so, requiring the person to do something.

SCHEDULE – the conditions imposed on the Approvals

 

 

  1. OMERS and OCM must not at any time hold a direct control interest in AWACL, AWACHL, AWACHA, FSG or FFHSG of more than 30%.

 

 

Interpretation

In this Schedule:

direct control interest in a company has the meaning given in clause 11 of Schedule 1 to the Act.

 

Overview

The Financial Sector (Shareholdings) Act 1998 was enacted to address the problem of unacceptable shareholding situations in the Australian financial sector, which could potentially compromise the stability and integrity of financial institutions. The Act aims to ensure that no individual or entity gains excessive control over financial sector companies, thereby protecting the national interest. This legislation was enacted by the Australian Parliament and its policy objective is to maintain the soundness and reliability of the financial sector by regulating shareholdings in financial sector companies. The Act allows the Treasurer to grant approvals for shareholdings in financial sector companies, subject to conditions that are deemed necessary to protect the national interest. The legislation provides mechanisms for the imposition, variation, and revocation of these approvals, as well as for the enforcement of conditions through the Federal Court.

Scope and Application

The Financial Sector (Shareholdings) Act 1998 applies to certain entities and individuals who wish to hold a stake in financial sector companies. The Act specifically governs shareholdings exceeding 15% in financial sector companies, which are defined under section 3 of the Act. The entities and individuals covered under this approval include Fairfax Financial Holdings Limited, 1102952 B.C. Unlimited Liability Company, Fairfax Financial Holdings (Switzerland) GmbH, Fairfax (Switzerland) GmbH, Mr. Prem Watsa, OMERS Administration Corporation, and OCM Goldfish Inc. The Act has a national jurisdictional reach, meaning it applies throughout Australia at the Commonwealth level. The Act allows for the extension or restriction of its application through subordinate instruments, such as the conditions imposed on the Approvals by the Treasurer. These conditions include limiting OMERS and OCM to not holding more than a 30% direct control interest in specified companies. The Act also outlines offences for reckless acquisition of shares that result in unacceptable shareholding situations and provides for potential penalties.

Key Provisions

The Financial Sector (Shareholdings) Act 1998 governs the approval of certain shareholdings in financial sector companies, with key provisions outlined in sections 13, 14, 16, and 17. Under section 13, an application for approval to hold a stake in a financial sector company must be made to the Treasurer. Section 14 grants the Treasurer the authority to approve such holdings, while section 16 allows the Treasurer to impose conditions on these approvals, and section 17 provides for the variation of approved percentages. The Act mandates that the Treasurer must notify the applicant and the relevant financial sector company of the approval and publish a notice in the Gazette, as per section 14. The Act imposes several obligations on the parties involved, including the requirement to apply for approval to hold a stake in a financial sector company (section 13) and to adhere to any conditions imposed by the Treasurer (section 16). Additionally, entities holding an approval must not engage in conduct that would result in an unacceptable shareholding situation without approval (section 11). The Act also allows the Treasurer to impose, vary, or revoke conditions on an approval (sections 16 and 17) and to grant flow-on approvals for subsidiaries of approved companies (section 19). Breaching the provisions of the Act can result in significant penalties. Under section 11, an individual or corporation that recklessly acquires shares in a financial sector company resulting in an unacceptable shareholding situation may be subject to a penalty of up to 400 penalty units for an individual, or 2,000 penalty units for a body corporate. Furthermore, section 32(3) empowers the Federal Court to grant injunctions to restrain conduct in contravention of conditions imposed on an approval. These offences are indictable, as per section 39 of the Act.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.