Financial Sector (Transfers of Business) Regulations 1999 1999 No. 145
EXPLANATORY STATEMENT
Statutory Rules 1999 No. 145
Issued by the Authority of the Minister for Financial Services and Regulation
Financial Sector (Transfers of Business) Act 1999
Financial Sector (Transfers of Business) Regulations 1999
Section 47 of the Financial Sector (Transfers of Business) Act 1999 (the Act - which received Royal Assent on 17 June 1999 - Act No. 45 of 1999) provides that the Governor-General may make regulations prescribing certain matters as required or permitted by the Act, or that are necessary or convenient for carrying out or giving effect to the Act.
Subsection 43(4) of the Act provides that provisions of another Act may be prescribed and modified by regulation with the effect that they apply, as modified, in relation to transfers of business.
Subsection 11(2) of the Act states that the Australian Prudential Regulation Authority (APRA) must not approve a voluntary transfer of business if, having regard to legislation that is prescribed for the purposes of subsection 43(4), it considers the transfer should not be approved.
For compulsory transfers, failure to comply with the prescribed legislation will not prevent a transfer from taking effect. However, parties to the transfer are still obliged to comply with the prescribed legislation (ie. to have applied for and obtained the relevant approvals) and will be subject to any associated penalties or remedies if they fail to do so.
The primary purpose of the regulations is to ensure that the usual applications and approvals required in the financial sector apply, as relevant, to transfers of business. Other legislative safeguards apply by direct reference to them in section 43 of the Act. The following legislation is prescribed for the purposes of subsection 43(4):
all provisions of the Banking Act 1959 except section 63 (section 63 applies by direct reference to it in subsection 43(8) of the Act); the Financial Sector (Shareholdings) Act 1998 (modified); the Foreign Acquisitions and Takeovers Act 1975; and the Insurance Acquisitions and Takeovers Act 1991.
A second purpose is to modify the operation of the Administrative Decisions (Judicial Review) Act 1977 to balance established rights of review with a need to ensure that transfers of business may be executed expediently given the underlying objective of preserving the stability of the financial sector. Details of the regulations appear in the Attachment.
The proposed regulations are to commence on the date of commencement of the Act. This is the date which is the Transfer Date defined by the Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999.
Authority: Section 47 of the
Financial Sector
(Transfers of Business)
Act 1999
ATTACHMENT
Financial Sector (Transfers of Business) Regulations 1999
Regulation 1
Regulation 1 provides that these regulations are called the Financial Sector (Transfers of Business) Regulations 1999.
Regulation 2 - Commencement
The regulation provides that the regulations are to commence at the same time as the Financial Sector (Transfers of Business) Act 1999. This means that they commence on the Transfer Date defined by the Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999.
Regulation 3 - Definitions
The regulation provides that all references to the term 'Act' within these regulations are to be interpreted as references to the Financial Sector (Transfers of Business) Act 1999. References to the term 'transfer of business' are to be interpreted as references to a transfer of business that takes effect, or may take effect under that Act.
Regulation 4 - Relationship with the Administrative Decisions (Judicial Review) Act 1977
The Administrative Decisions (Judicial Review) Act 1977 will apply to administrative decisions made under the Act. However, its operation is modified by the regulation given the prudential purposes that Transfers of Business may serve. Accordingly, a person may not rely on the grounds that a breach of the rules of natural justice may have occurred in connection with APRA's decisions when applying to a Court for an order to review such decisions. All other grounds for seeking review remain available.
Regulation 5 - Relationship with the Banking Act 1959
The regulation prescribes provisions of the Banking Act 1959 (except section 63) for the purposes of subsection 43(4) of the Act to ensure it applies to transfers of business. Section 63 applies by direct reference to it in subsection 43(8) of the Act.
Regulation 6 - Relationship with the Financial Sector (Shareholdings) Act 1998
The regulation modifies the operation of the Financial Sector (Shareholdings) Act 1998 to ensure that the approvals requirement remains active in respect of transfers of business. There may otherwise be some doubt as to whether the Financial Sector (Shareholdings) Act 1998 applies to transfers of business, given that there may not be a transaction involving a transfer or acquisition of share capital. The Financial Sector (Shareholdings) Act 1998 is modified as it applies to transfers of business by inserting proposed section 13A.
The effect of these modifications is to effectively establish a third (temporary) Financial Sector Company for transfers of business that involve a transfer of more than 15 per cent of the gross assets or liabilities of the transferring body. For the purposes of activating the approvals process in Division 3 of Part 2 of the Financial Sector (Shareholdings) Act 1998, the transferring assets and liabilities are taken to be this third company. The receiving body must then seek, and be granted approval to acquire a 100 per cent stake in this 'third company'. In determining whether the receiving body should be permitted to hold such a stake, a national interest test is applied as is usual practice under the Financial Sector (Shareholdings) Act 1998.
Regulation 7 - Relationship with certain other laws
The regulation retains other requirements of an approvals and notification nature that generally apply to the financial sector. The following laws are prescribed under subsection 43(4) to ensure their application (as relevant) to transfers of business:
* the Foreign Acquisitions and Takeovers Act 1975; and
* the Insurance Acquisitions and Takeovers Act 1991.