Approval to hold the transferring business of a financial sector company No. 2 of 2021
Financial Sector (Shareholdings) Act 1998
To: Horizon Credit Union Ltd ABN 66 087 650 173 (the applicant) SINCE:
- the applicant has applied to the Treasurer under subsection 13(1) of the Financial Sector (Shareholdings) Act 1998 (the Act) for approval to hold a stake of more than 20% in Lysaght Credit Union Ltd ABN 79 087 650 226 (the financial sector company);
B. 100% of the gross assets and liabilities of the financial sector company are to be transferred to the applicant as a voluntary transfer of business under the Financial Sector (Transfer and Restructure) Act 1999; and
C. I am satisfied that it is in the national interest to approve the applicant holding a stake of more than 20% in the financial sector company,
I, Lara Douglas, a delegate of the Treasurer, under paragraph 14(1)(a) of the Act, APPROVE the applicant holding a stake of 100% in the financial sector company.
This instrument takes effect on the day it is made and remains in force indefinitely. Dated: 12 February 2021
[Signed]
Lara Douglas General Manager Banking Division
Interpretation
In this instrument:
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.
Notes
Note 1 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 2 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 3 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 4 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 5 Under section 14 of the Act, the Treasurer must give written notice of this Approval to theapplicant and financial sector company concerned and this instrument will be registered in the Federal Register of Legislation as a notifiable instrument.
Note 6 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 7 Under subsection 32(3) of the Act, if a person has engaged in or is proposing to engage in anyconduct 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 to regulate shareholdings in financial sector companies, ensuring that such holdings do not lead to unacceptable situations that could compromise the stability and integrity of the financial system. This Act addresses the problem of potentially harmful concentrations of ownership in financial institutions, which could pose systemic risks. The legislation was introduced by the Australian Parliament with the policy objective of maintaining a robust and secure financial sector, capable of withstanding economic shocks. The Act empowers the Treasurer to approve or disapprove shareholdings exceeding certain thresholds and to impose conditions on such approvals. The notifiable instrument F2021N00031 pertains to the approval for Horizon Credit Union Ltd to hold a 100% stake in Lysaght Credit Union Ltd, following a voluntary transfer of business, and is deemed to be in the national interest. This instrument, dated 12 February 2021, is an exercise of the delegate's authority under the Act and is intended to remain in force indefinitely until varied or revoked by the Treasurer.
Scope and Application
The Financial Sector (Shareholdings) Act 1998 applies to entities and individuals seeking to hold a significant stake in financial sector companies. Specifically, it governs the approval process for holding a stake of more than 20% in a financial sector company, ensuring that such holdings are in the national interest. This Act applies to all Commonwealth jurisdictions, encompassing financial institutions and their stakeholders. The Act includes provisions for flow-on approvals, which means that if an approval is granted for a holding company, it extends to its 100% subsidiaries. However, the Act does not apply to entities that do not qualify as financial sector companies as defined in the Act. Furthermore, the Act allows for the variation or revocation of approvals under certain conditions, and it sets out specific penalties for reckless acquisitions that result in unacceptable shareholding situations. The Act’s application can be extended or restricted through subordinate instruments, which may include conditions or further definitions to clarify its scope and enforcement.
Key Provisions
The notifiable instrument F2021N00031 provides Horizon Credit Union Ltd with approval to hold a 100% stake in Lysaght Credit Union Ltd, a financial sector company, under the Financial Sector (Shareholdings) Act 1998 (the Act). This approval is granted by Lara Douglas, a delegate of the Treasurer, who is satisfied that it is in the national interest for Horizon Credit Union Ltd to hold this stake (paragraph B). This approval is effective immediately upon issuance and remains in force indefinitely (paragraph C).
Under the Act, the obligations imposed on Horizon Credit Union Ltd include compliance with the terms of the approval and adherence to any conditions that may be specified by the Treasurer. The Act also mandates that Horizon Credit Union Ltd must ensure that the transfer of gross assets and liabilities from Lysaght Credit Union Ltd is conducted as a voluntary transfer under the Financial Sector (Transfer and Restructure) Act 1999 (section 13(1)). Additionally, Horizon Credit Union Ltd must comply with all relevant provisions of the Act, including those related to unacceptable shareholding situations and reckless acquisitions of shares.
Failure to comply with the Act’s provisions may result in significant penalties. Section 11 of the Act outlines that individuals or entities who acquire shares in a financial sector company and cause an unacceptable shareholding situation to arise or increase are guilty of an offence. The maximum penalty for such an offence is 400 penalty units for individuals and 2,000 penalty units for bodies corporate, as stipulated by subsection 4B(3) of the Crimes Act 1914. Furthermore, any person found to be engaging in conduct in contravention of the conditions of the approval may face an injunction from the Federal Court, which can restrain such conduct and, if deemed necessary, require specific actions to be taken (subsection 32(3)).
The consequences for breaches of the Act are severe, reflecting the importance of maintaining stability and compliance within the financial sector. An offence under section 11 is classified as an indictable offence, highlighting the seriousness with which such breaches are treated. These provisions ensure that Horizon Credit Union Ltd and other financial sector entities adhere to the regulatory framework designed to protect the national interest and maintain the integrity of the financial system.