EXPLANATORY STATEMENT
Issued by the Australian Prudential Regulation Authority
Life Insurance Act 1995
Prudential Rules Number 39
Subsection 252(1) of the Life Insurance Act 1995 (the “Act”) provides that the Australian Prudential Regulation Authority (“APRA”) may, in writing, make rules prescribing all matters required or permitted by the Act to be prescribed by Prudential Rules. Subsection 252(2) of the Act provides that such Prudential Rules are disallowable instruments for the purposes of section 46A of the Acts Interpretation Act 1901.
In accordance with paragraphs 16L(3)(c) and 16Q(3)(c) of the Act, before APRA approves benefit fund rules or amendments of approved benefit fund rules, it must be satisfied that the rules or amendments have been adequately adopted.
Subsection 16B(2) of the Act provides for adequate adoption of benefit fund rules. This Prudential Rule sets out the required method of adoption of benefit fund rules or amendments of approved benefit fund rules in order that they may be considered as having been adequately adopted for the purposes of subsection 16B(2) of the Act.
In the case of a new benefit fund with benefit fund rules not yet approved, the appropriate method of adoption may be either by resolution of the board of directors of the friendly society or by a special resolution of the members of the friendly society, at the discretion of the friendly society. A resolution by the board of directors would be the usual method of adoption for a new benefit fund, given that the benefit fund would not normally have any members. However, this Prudential Rule does not preclude the friendly society seeking the approval of the other members of the friendly society.
For a friendly society wishing to amend the approved benefit fund rules of an existing approved benefit fund, the appropriate method of adoption may be either by special resolution of the members of the friendly society (in accordance with the requirements of Corporations Law) or by resolution of the board of directors of the society. Resolution by the board of directors is appropriate in certain circumstances as set out in the Prudential Rule.
In addition to the requirements in this Prudential Rule, in accordance with paragraph 16B(2)(b) of the Act, the benefit fund rules or amendment of benefit fund rules can only be considered to have been adequately adopted if APRA considers that the method of adoption adequately takes into account the interests of the members.
If a friendly society applies to APRA for approval of a proposed amendment of its approved benefit fund rules in relation to a restructure of benefit funds pursuant to section 52 of the Act or a termination of a benefit fund pursuant to section 53 of the Act, the society may, under rule 3, adopt the amendments by a resolution of the board of directors. In this case, it is considered that resolution by the board of directors will not prejudice the rights of members of the benefit fund provided the requirements of Prudential Rule 36 or 37 (as applicable) are complied with.