Foreign Acquisitions and Takeovers Act 1975 - Prohibition Order Under Subsection 67(2)

Overview

The Foreign Acquisitions and Takeovers Act 1975 was enacted to safeguard Australia's national security by regulating significant foreign acquisitions and takeovers that may pose a threat to the country's interests. The Act empowers the Treasurer to intervene in proposed transactions that are deemed contrary to the national interest. In this instance, the Treasurer, Joshua Anthony Frydenberg, exercised his authority under the Act to prohibit the consortium comprising CK Asset Holdings Limited, CK Infrastructure Holdings Limited, and Power Assets Holdings Limited from acquiring up to 100 per cent of the units in the Australian Pipeline Trust and the APT Investment Trust, as these acquisitions were considered contrary to Australia's national interest. The Foreign Acquisitions and Takeovers Act 1975 is administered by the Parliament of Australia. In this specific case, the Treasurer's order to prohibit the acquisitions was made in accordance with the policy objective of protecting Australia's critical infrastructure and maintaining national security. The decision was based on a thorough assessment that the proposed acquisitions by the consortium, including any actions by CKM Australia Bidco Pty Ltd on behalf of the consortium, would negatively impact the nation's interests. This intervention demonstrates the government's commitment to preserving the integrity of Australia's essential sectors and preventing potential risks posed by foreign entities.

Scope and Application

The Foreign Acquisitions and Takeovers Act 1975 applies to acquisitions of interests in Australian entities by foreign persons and entities, including companies, partnerships, trusts, and unincorporated associations. The Act's jurisdictional reach is national, as it is a Commonwealth Act. The Act regulates acquisitions that could be contrary to Australia's national security or economic interests, and it applies to both direct and indirect acquisitions of interests in Australian entities, as well as the acquisition of shares or other securities in an Australian entity. The Act also extends to acquisitions made by nominees or intermediaries on behalf of foreign persons or entities. In this case, the order under the Act prohibits the proposed acquisitions of up to 100 per cent of the units in the Australian Pipeline Trust and the APT Investment Trust by CK Asset Holdings Limited, CK Infrastructure Holdings Limited, Power Assets Holdings Limited, and CKM Australia Bidco Pty Ltd, as these acquisitions have been determined to be contrary to the national interest. The Act allows for the Treasurer to make orders prohibiting acquisitions that are considered to be contrary to the national interest, and these orders have the force of law. The Act does not apply to acquisitions that fall below a certain monetary threshold, and certain acquisitions are exempt from the Act's provisions, such as acquisitions by Australian entities of interests in foreign entities. The Act also allows for the making of subordinate instruments to extend or restrict its application.

Key Provisions

The Foreign Acquisitions and Takeovers Act 1975 (the Act) regulates foreign acquisitions of Australian businesses and assets, particularly those deemed contrary to the national interest. Under section 40(1) of the Act, significant actions involving the acquisition of an interest in securities in an entity are subject to scrutiny and possible prohibition. In this case, the Treasurer, under section 67(2), has issued an order prohibiting certain acquisitions by a consortium of companies, namely CK Asset Holdings Limited, CK Infrastructure Holdings Limited, and Power Assets Holdings Limited, along with CKM Australia Bidco Pty Ltd, who may act on behalf of the consortium, from acquiring up to 100 per cent of the units in the Australian Pipeline Trust and the APT Investment Trust. These acquisitions, referred to as APT acquisitions and APTIT acquisitions respectively, have been determined to be significant actions under the Act, and the Treasurer has concluded that proceeding with these acquisitions would be contrary to the national interest. The Act imposes obligations on the parties involved, particularly in relation to notification and approval processes. Section 40(2) of the Act requires any person intending to take a significant action to notify the Treasurer, who must then decide whether to approve or prohibit the action. The Treasurer's decision can be made under section 67(2) if it is determined that the action would be contrary to the national interest. In this instance, the Treasurer, satisfied with the potential implications of the acquisitions on the national interest, has exercised his power to prohibit the proposed acquisitions entirely. Should any party or entity disregard the prohibition order issued under the Act, they may face serious legal consequences. Section 67(4) of the Act stipulates that any person who contravenes an order made by the Treasurer is liable to a penalty. For individuals, the penalty can reach up to $10,000, as outlined in section 133(1) of the Act, while corporations face a penalty of up to $50,000 under the same section. Additionally, any contravention of the Act may also result in civil or criminal proceedings, leading to further penalties and legal ramifications. These provisions underscore the importance of compliance with the Act and the severe consequences of non-compliance.