Approval to hold a stake in a financial sector company of more than 15% - ACGL, ARL, AFHE and AFHA

Administered by Department of the Treasury

Legislation au C2019G00175 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:  Arch Capital Group Ltd (ACGL), Arch Reinsurance Ltd (ARL), Arch Financial Holdings Europe III Limited (AFHE) and Arch Financial Holdings Australia Pty Ltd ABN 18 605

164 627 (AFHA)

 

SINCE  

 

  1. ACGL, ARL, AFHE and AFHA (the applicants) have applied to the Treasurer under section 13 of the Financial Sector (Shareholdings) Act 1998 (the Act) for approval to hold a 100% stake in Arch LMI Pty Ltd ABN 60 601 356 174 (Arch LMI), a financial sector company under the Act; 

 

B.     ACGL, ARL and AFHE have applied to the Treasurer under section 13 of the Act for approval to hold a 100% stake in AFHA, a financial sector company under the Act; 

 

C.     ACGL and ARL have applied to the Treasurer under section 13 of the Act for approval to hold a 100% stake in AFHE, a financial sector company under the Act;

 

D.     ACGL has applied to the Treasurer under section 13 of the Act for approval to hold a 100% stake in ARL, a financial sector company under the Act;

 

E.     I am satisfied that it is in the national interest to approve the applicants holding a 100% stake in each of ARL, AFHE, AFHA and Arch LMI (as relevant); 

 

I, Brandon Kong Leong Khoo, a delegate of the Treasurer under section 14(1) of the Act, APPROVE:

 

(i)                  ACGL, ARL, AFHE and AFHA holding a 100% stake in Arch LMI; and 

(ii)                ACGL, ARL and AFHE holding a 100% stake in AFHA;

(iii)               ACGL and ARL holding a 100% stake in AFHE; 

(iv)              ACGL holding a 100% stake in ARL; and  

 

This instrument comes into force on 17 January 2019 and remains in force indefinitely.  

 

 

Dated 16 January 2019

 

[Signed]

 

 

 

………………………

Brandon Kong Leong Khoo

Executive General Manager

Diversified Institutions Division

Interpretation

In this Notice:

 

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 of 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 applicants 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.

 

 

 

 

 

 

Overview

The Financial Sector (Shareholdings) Act 1998 was enacted by the Australian Parliament to address the problem of excessive concentration of ownership within the financial sector, which could potentially lead to unacceptable shareholding situations that might threaten the stability of the financial system. This Act allows the Treasurer to grant approvals for the acquisition of stakes in financial sector companies, subject to certain conditions, ensuring that the national interest is safeguarded. The policy objective of the Act is to maintain the integrity and stability of Australia’s financial sector by preventing undue concentration of ownership that could pose systemic risks. The Act empowers the Treasurer to impose conditions on approvals, revoke or vary those conditions, and manage the stakes held by entities within the financial sector to protect against unacceptable shareholding situations.

Scope and Application

The Financial Sector (Shareholdings) Act 1998 applies to any entity or person seeking to acquire a stake in a financial sector company that exceeds 15%, with specific provisions for approval processes for significant shareholdings. The Act governs entities and individuals within Australia, including those applying for stakes in financial sector companies. Approvals under this Act can be subject to conditions, variation, or revocation by the Treasurer, who has the authority to impose conditions or alter the percentage of a specified stake in the national interest. This legislative framework ensures that significant shareholdings in financial sector companies are scrutinized to maintain the stability and integrity of the financial system. The Act encompasses a broad range of financial sector companies, with specific examples provided in the Gazette, and applies nationally across the Commonwealth of Australia. There are no explicit exclusions stated within the text, but the Act’s provisions allow for the Treasurer to impose conditions that may effectively restrict certain types of shareholdings. The application of the Act can be extended or restricted through subordinate instruments, as noted in the various subsections detailing the Treasurer’s powers.

Key Provisions

The Financial Sector (Shareholdings) Act 1998 (the Act) includes several main sections that are relevant to the approval of shareholdings in financial sector companies. Section 13 provides the mechanism through which companies can apply to the Treasurer for approval to hold a stake in a financial sector company. Section 14 allows the Treasurer to grant such approvals, and section 16 empowers the Treasurer to impose, vary, or revoke conditions on such approvals. The Act also includes provisions for flow-on approvals under section 19, which means that if an approval is given for a holding in a company, then an approval is deemed to exist for holdings in any subsidiary companies of equal value. Section 17 of the Act allows for variations in the percentage of shares that can be held subject to approval. The Act imposes certain obligations on the parties or entities it governs. Firstly, the applicants must apply to the Treasurer for approval to hold a stake in a financial sector company, as stipulated in section 13. Secondly, the Treasurer must give written notice of the approval to the applicants and the relevant financial sector company, and publish a copy of this notice in the Gazette, as required by section 14 and section 16 respectively. Furthermore, any conditions imposed on the approval must be adhered to, and the applicants must ensure that the shareholding situation does not result in an unacceptable shareholding situation as defined in section 10 of the Act. The Act also establishes offences and penalties for breaches. Section 11 of the Act makes it an offence for a person or persons under an arrangement to acquire shares in a company if the acquisition results in an unacceptable shareholding situation or increases an existing unacceptable shareholding situation, if done recklessly. The penalty for such an offence is a maximum of 400 penalty units for individuals, and 2,000 penalty units for body corporates, as per subsection 4B(3) of the Crimes Act 1914. An offence under section 11 of the Act is an indictable offence, as stated in section 39. Additionally, under section 32(3) of the Act, the Federal Court may grant an injunction to restrain a person from engaging in conduct that contravenes a condition of an approval, or to require the person to take specific actions if deemed desirable. In summary, the Financial Sector (Shareholdings) Act 1998 sets out the framework for approving shareholdings in financial sector companies, imposes obligations on applicants and the Treasurer, and establishes penalties and consequences for breaches, including indictable offences and potential injunctions.

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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.