Notice of Approval under the Financial Sector (Shareholdings) Act 1998 - AIA Group Limited

Financial Sector (Shareholdings) Act 1998 (the Act)

Notice of Approval under Subsections 14(1) and 16(1)

I, JOSH FRYDENBERG, Treasurer, being satisfied that it is in the national interest:

•                 under subsection 14(1) the Act, approve AIA Group Limited and each company specified in Column A of the Schedule, to hold a stake of 100 per cent in The Colonial Mutual Life Assurance Society Limited (ABN 12 004 021 809) and approve AIA Group Limited and each company specified in Column B of the Schedule, to hold a stake of 100% in AIA Australia Limited, subject to the conditions specified in the Schedule; and

•                 under subsection 16(1) of the Act, vary the customer data accessibility conditions contained in the approval previously granted to AIA Group Limited, AIA Company Limited and AIA International Limited dated 18 September 2018, by replacing the conditions set out in that approval with the customer data accessibility conditions set out in the Schedule to this approval (on the basis that references to the ‘Applicant’ are to AIA International Limited).

This approval comes into force on the date signed and remains in force indefinitely.

Dated: 29 October 2019

JOSH FRYDENBERG

Treasurer

Schedule

TAX CONDITIONS

In relation to the approval granted to AIA Australia Limited (the Applicant) to hold a stake of 100 per cent in The Colonial Mutual Life Assurance Society Limited (CMLA), and in accordance with section 16 of the Financial Sector (Shareholdings) Act 1998 (Cth), the following conditions are imposed. These conditions apply until a termination event[1] occurs.

1. The Applicant must comply with the taxation laws of the Commonwealth of Australia in relation to the action, and any transactions, operations or assets in connection with the assets or operations acquired as a result of the action. The Applicant does not breach this condition if it has taken reasonable care to comply with the relevant taxation laws and has a reasonably arguable position.
2. The Applicant must use its best endeavours to ensure, and within its powers must ensure, that entities in its control group[2] comply with the taxation laws of the Commonwealth of Australia in relation to the action and any transactions, operations or assets in connection with the assets or operations acquired as a result of the action. The Applicant does not breach this condition if entities in its control group have taken reasonable care to comply with the relevant taxation laws and have a reasonably arguable position.
3. The Applicant must provide any documents or information[3] that is required to be provided to the Australian Taxation Office (ATO) in accordance with the taxation laws of the Commonwealth of Australia in relation to the action and any transactions, operations or assets in connection with assets or operations acquired as a result of the action. These documents or information must be provided within the timeframe specified by the ATO.
4. The Applicant must use its best endeavours to ensure, and within its powers must ensure, that entities in its control group provide any documents or information that is required to be provided to the ATO in accordance with the taxation laws of the Commonwealth of Australia in relation to the action and any transactions, operations or assets in connection with assets or operations acquired as a result of the action. These documents or information must be provided within the timeframe specified by the ATO.
5. The Applicant must pay its outstanding taxation debt under the taxation laws of the Commonwealth of Australia, and must use its best endeavours to ensure, and within its powers must ensure, that entities in its control group pay any outstanding taxation debt under the taxation laws of the Commonwealth of Australia, which is due and payable at the time of the proposed action. This condition does not apply to payment arrangements agreed with the ATO or where the ATO has exercised its discretion to defer part or all of the payment of a disputed amount, to the extent that those arrangements are complied with.
6. The Applicant must provide an annual report to the Foreign Investment Review Board on compliance with these conditions. The first report must cover the period from the date the action takes place to the end of the Applicant’s income year for tax purposes. All subsequent reports must cover the Applicant’s income year for tax purposes. If the action takes place less than 90 days before the end of the first income year, then that period can be incorporated in the next report. Each report must be provided by the due date for lodgement of the Applicant’s tax return for that year.
7. The Applicant must advise the Foreign Investment Review Board within 60 days of taking the action that it has done so.
8. The Applicant must advise the Foreign Investment Review Board within 60 days of a termination event that the event has taken place.

Additional tax condition 1: Further information to be provided

The Applicant to provide the following information to Treasury (FIRBCompliance@treasury.gov.au) within 90 days of the transaction Joint Cooperation Agreement (JCA) completing:

9.         The funding of the proposed acquisition, including the nature and sources of the debt and equity finance utilised.

10.     The nature and proposed tax and accounting treatment of the upfront payment on commencement of the JCA.

11.     The nature and proposed tax and accounting treatment of the income derived from the life insurance business under the JCA.

12.     Confirmation of the quota share reinsurance arrangement and upfront reinsurance payment treatment outcomes.

13.     The tax treatment and the effect on the entry consolidation cost setting treatment of the Colonial Mutual Life Assurance Society Limited and other members from the upfront payment, upfront reinsurance rebate from HLRA and any subsequent payments to CBA prior to the completion of the share sale agreement.

14.     Copies of the JCA agreement and other related agreements with CBA entities to ensure business continuity.

15.     Confirmation of the tax and accounting outcomes (if any) on the termination of the JCA.

Additional tax condition 2: Further information to be provided

The Applicant to provide the following information to Treasury within 90 days of the Completion of the Share Sale Agreement:

16.     Confirmation of the final consideration to be provided under the Share Sale Agreement.

17.     The funding used for the completion of the Share Sale Agreement, including the nature and sources of the debt and equity finance utilised. Using the below table, provide details of the proposed capital structure of Australian entities, including for the purpose of acquiring the JCA entities;

18.     Having regard to the Practical Compliance Guideline 2017/4 (PCG 2017/4), advise for each cross-border related party financing arrangement included in your response to question 17:

(a)    the risk rating,

(b)    how each price and behavioural indicator was scored, and

(c)    which of the comparison options at paragraph 69 of PCG 2017/4 was used and the key terms of the debt (as set out in the table at question 17).

19.     The formation of any tax consolidated group (including any multiple entry consolidated group) and the entry consolidation cost setting treatment of The Colonial Mutual Life Assurance Society Limited and other members. In your response please indicate which AIA entity directly acquired the interests.

20.     Any related return of capital or dividends to be remitted to AIA Group in relation to amounts in excess of business requirements.

21.     The nature and proposed tax accounting treatment of the Distribution Agreement (DA), Brand Licencing Agreement (BLA), Transitional Services Agreement (TSA), Administration Services Agreement (ASA) and other ancillary agreements. If available, please provide copies of the finalised ancillary agreements.

22.     Key steps in the integration of the acquired businesses and any revision of the Australian corporate structure, including any intra-group transfers of entities or business transfers under Part 9 of the Life Insurance Act 1995.

Customer data accessibility conditions

1. The Applicant must use its best endeavours to ensure, and within its powers must ensure that all:
   1. customer data; and
   2. personal information within the meaning of the Privacy Act 1988 (Cth)

relating to or obtained in connection with CMLA’s operations remains stored only within Australia, is accessible only from within Australia and may not be taken outside of Australia except in the circumstances where:

1. it is required to be accessed in order to comply with any law of the Commonwealth of Australia, or of any of its States and Territories;
2. access to specific customer data is required by a person to allow them to undertake their duties in the administration of life insurance services by the Applicant or CMLA;
3. access to specific customer data is requested by an individual located outside Australia and the individual has requested access to their own customer data; or
4. a person acting on behalf of a customer requires access to customer data about a customer in order to provide life insurance services to that customer,

in which case the extent, form and manner of disclosure of such customer data must be restricted to the bare minimum necessary.

2.              The Applicant must use its best endeavours to ensure, and within its powers must ensure, that:

1. at least 50 per cent of the members of the board of directors of Australian AIA entities and subsidiaries are Australian citizens normally resident in Australia and, in the case of the Applicant and CMLA, of whom at least two are independent directors; and
2. the chair of the board of directors of Australian AIA entities and subsidiaries is an Australian citizen normally resident in Australia.

Note: the Applicant will not be in breach of condition 2.a, if, in the case of a casual vacancy on the board of directors of Australian AIA entities and subsidiaries, the vacancy is filled within two months of the casual vacancy first occurring.

Note: the requirement in condition 2.b does not apply to the current Chair of the board,

Theresa Elizabeth Gattung.

3.              The Applicant must provide a written report to the Department of the Treasury (Treasury) (firbcompliance@treasury.gov.au) on compliance with conditions 1 and 2 (the Audit Reports). The first Audit Report will be for the 24 month period beginning on the date that the Applicant takes the relevant action specified in this no objection notification. The Applicant will provide subsequent Audit Reports in respect of each subsequent 24 month period. Audit Reports will be prepared at the cost of the entity to which the Audit Report relates and must be provided within 3 months after the end of the period to which the Audit Report relates.

4.              The Applicant must ensure that Audit Reports prepared pursuant to condition 3 are prepared in accordance with Relevant Australian Standards[4] by one or more independent audit firms and/or other Relevant Experts[5].

5.              The Applicant must ensure that the identity of the independent audit firm(s) and/or Relevant Expert(s), the scope of work underlying the Audit Report, the level of assurance provided by the Audit Report, and the individuals from the independent audit firm(s) and/or Relevant Expert(s) that will undertake the work referred to in condition 3 are approved by the Commonwealth in advance of the audit work commencing, with approval to be sought no less than 60 days before the end of the relevant reporting period. The Commonwealth will be able to provide instruction directly to the audit firm in advance of the audit work commencing.

6.              The Applicant will use its best endeavours to ensure, and within its powers must ensure, that the Applicant authorises the independent audit firm(s) and/or Relevant Expert(s) to provide to the Treasury, on request, details of the enquiries made in order to make the Audit Report, and the data produced as a result of those enquiries.

7.              The Applicant must use its best endeavours to ensure, and within its powers must ensure, that the Applicant consent to any reasonable access by the Commonwealth to premises and/or systems, and will provide assistance to support the Commonwealth, for the purposes of the Commonwealth reviewing Audit Reports prepared pursuant to condition 3.

8.              Where an Audit Report prepared under condition 3 identifies non-compliance with any of conditions 1 and 2, the relevant Applicant(s) must prepare a work program that sets out in detail, including specific actions that will be taken by specified dates, how they will return to compliance (Program). The Program must be finalised and submitted to Treasury (firbcompliance@treasury.gov.au) for approval within three months of the relevant Audit Report being completed.

9.              If the Commonwealth does not approve the Program, the relevant Applicant will have a further three months to submit a revised Program to the Commonwealth for approval.

10.          Following the implementation of the Program, all subsequent audit reports should include details of any progress made under the Program in addressing non-compliance (to the extent still relevant).

[1] For the purposes of these conditions a termination event occurs:

(a)     when the Applicant ceases to hold all of the interests the acquisition of which was the subject of the no objection notification;

(b)    when the Applicant ceases to control, as defined in the Foreign Acquisitions and Takeovers Act 1975, the entity or business the control of which was the subject of the no objection notification;

(c)     when the Applicant ceases to carry on an Australian business the starting of which was the subject of the no objection notification.

[2] For the purposes of these conditions, the Applicant’s control group consists of entities:

(a)     that control the Applicant (a controller);

(b)    that a controller controls;

(c)     that the Applicant controls, which includes for the purposes of these conditions an entity that is the subject of the application;

For the purposes of determining a control group, control has the meaning in section 50AA of the Corporations Act 2001.

[3] This includes documents or information held, possessed or stored outside Australia.

[4] Relevant Australian Standards means relevant Australian audit standards issued by the Auditing and Assurance Standards Board, as in force or applicable from time to time.

[5] Relevant Expert means an independent professional advisory firm with appropriate technical skills that is able to prepare an Audit Report on an Applicant’s compliance with conditions 1 and 2 with that report being prepared in accordance with Relevant Australian Standards