EXPLANATORY STATEMENT
STATUTORY RULES 198 NO 208
ISSUED BY THE AUTHORITY OF THE TREASURER
BANKS (SHAREHOLDINGS) ACT 1972
BANKS (SHAREHOLDINGS) REGULATIONS (AMENDMENT)
Section 10 of the Banks (Shareholdings) Act 1972 (the Act) generally limited the nominal amount of the voting shares of a bank incorporated in Australia in which a person (including a corporation) may have an interest to 10 per cent of the total nominal amount of the voting shares of the bank, or 15 per cent with an exemption from the Treasurer.
David Jones Limited (DJL), owned as to 45.1 per cent by the Adelaide Steamship Company Limited (Adsteam), applied to the Treasurer for exemptions from compliance with the 10 per cent limit in sub-section 10(1), so as to allow it to increase its holding of voting shares in National Australia Bank Limited (NAB) from 9.8 to 15 per cent. The Treasurer has granted to DJL, Adsteam a number of other persons owning shares in DJL and the relevant officers of the companies concerned with the requested exemptions pursuant to sub-sections 10(2) and 10(2B) since he has seen no objection in the national interest to doing so.
Under section 9 of the Act the associates (such as affiliates and subsidiaries) of the above companies are deemed to have the same interest in NAB as the companies themselves. These associates could represent a large and ever-changing group of persons (both natural persons and corporations). Rather than attempt to list them and make specific exemptions from time to time, pursuant to sub-section 10(2), it is convenient to prescribe these interests as provided for by section 17 and paragraph 8(9)(d).
Paragraph 8(9)(d) of the Act provides that a prescribed interest in a share that is an interest of such person, or of the persons included in such class of persons, as is prescribed shall be disregarded. The Banks (Shareholdings) Regulations (the Regulations) currently prescribe interests in shares in the banks listed at one place in the Schedule to the Regulations, and prescribe classes of persons who are associates of shareholders listed at another place in the Schedule and whose interests are deemed to exist only by virtue of sub-section 9(2) of the Act, that is by virtue of an associate relationship.
The amending regulation has added a class of persons - the associates of the companies and natural persons in the Adsteam group listed below, other than the relevant officers of the companies concerned - in respect of their associates interests in voting shares in NAB. The effect of such a regulation is that such interests on the part of associates of these persons are disregarded for the purposes of the Act, although the restriction remains that DJL, Adsteam and the other persons listed below will not be able to acquire through associates an interest in more than 15 per cent of voting shares in NAB without contravening the Act.
Detail of the regulation is as follows:
The Schedule to the Banks (Shareholdings) Regulations is amended by adding the following corporations and natural persons to the Schedule in relation to National Australia Bank Limited.
• Georges of Melbourne Pty Ltd
• David Jones Limited
• The Adelaide Steamship Company Limited
• Adsteam Finance & Investments Pty Ltd
• M.J. Kent
• B.L. Walsh
• K.W. Russell
• J.G. Spalvins
• National Consolidated Limited
• Australian Inhibitor Paper Pty Ltd
• Fawldapp Pty Ltd
• Westall Pty Ltd
• D.P.S. Nominees Pty Ltd
• J.A. Duncan
• David Jones Ltd Special Staff Superannuation Plan
• Trustees of David Jones Employees Provident Fund
• Buckleys Provident Fund Securities Pty Ltd
• R.J. Aird
• Chakra Pty Ltd
• J.O. Curry
• K.B. Timms
Overview
The Banks (Shareholds) Regulations (Amendment) 2004 (C2004L00980) was introduced to amend the existing regulations under the Banks (Shareholds) Act 1972. The Act was originally enacted to regulate the shareholdings of banks in Australia, particularly to prevent any single entity from gaining too much control over a bank through voting shares. The problem or gap it addressed was the need for legislative oversight on the concentration of shareholdings to ensure the stability and integrity of the banking system. The policy objective, as outlined in the explanatory statement, is to facilitate certain exemptions for specific companies and individuals to own a larger share of voting shares in a bank, without contravening the Act's restrictions. This regulation was issued by the authority of the Treasurer, pursuant to the powers conferred by the Act, and aims to maintain the balance between regulatory control and operational flexibility for certain stakeholders.
Scope and Application
The Banks (Shareholdings) Regulations (Amendment) Statutory Rules 198 No 208, issued under the authority of the Treasurer, modify the Banks (Shareholdings) Regulations to alter the application of the Banks (Shareholdings) Act 1972. The Act generally restricts the total voting share holdings of any person or entity in an Australian incorporated bank to 10 per cent of the total nominal amount of voting shares, with a possible exemption to 15 per cent granted by the Treasurer. This amendment specifically addresses the exemptions granted to David Jones Limited (DJL), The Adelaide Steamship Company Limited (Adsteam), and their associates, allowing them to collectively hold up to 15 per cent of voting shares in National Australia Bank Limited (NAB). The regulation achieves this by prescribing a class of persons, which includes associates of the specified companies and natural persons, whose interests in NAB's voting shares are disregarded for the purposes of the Act's shareholding limits. Despite these exemptions, the regulation maintains that these entities and their associates cannot collectively exceed a 15 per cent shareholding in NAB without contravening the Act.
Key Provisions
The Banks (Shareholdships) Regulations (Amendment) Statutory Rule 2004 No. 188 issued under the Banks (Shareholdings) Act 1972 primarily modifies the Schedule to the Banks (Shareholdings) Regulations. This amendment adds a specific class of persons, namely the associates of certain companies and natural persons in the Adsteam group, regarding their interests in voting shares of National Australia Bank Limited (NAB). The objective is to disregard these associates' interests for the purposes of the Act, while still ensuring that the primary entities involved cannot collectively acquire more than 15 per cent of voting shares in NAB.
These amendments impose obligations on the specified companies and individuals, particularly those listed in the Schedule, by deeming their associates' interests in NAB shares to be disregarded for compliance with the shareholding limits set out in the Act. This means that while the associates' interests are not counted towards the 15 per cent limit, the primary entities themselves must still ensure that their direct and indirect holdings in NAB do not exceed this threshold.
Failure to comply with the provisions of the Banks (Shareholdings) Act 1972 and the accompanying Regulations could result in significant legal consequences. If a person or entity breaches the shareholding limits, they may face civil or criminal penalties. The Act does not specify maximum penalties within the explanatory statement, but generally, violations can lead to fines or other enforcement actions. Furthermore, persistent or significant breaches might attract more severe penalties, potentially including imprisonment, depending on the nature and severity of the contravention.
The regulatory framework is designed to maintain financial stability and protect the interests of the banking sector. By ensuring that no single entity or group of associated entities can gain excessive control over a bank through shareholding, the Act helps to preserve the integrity and independence of the banking system. The amendments ensure that the oversight is comprehensive, covering not just the primary shareholders but also their associates, thereby maintaining the balance intended by the legislation.