Telstra Corporation (Ownership - Interests in Shares) Amendment Regulations 1999 (No. 1) 1999 No. 160
EXPLANATORY STATEMENT
Statutory Rules 1999 No. 160
Issued by the authority of the Minister for Communications, Information Technology and the Arts
Telstra Corporation Act 1991
Telstra Corporation (Ownership - Interests in Shares) Amendment Regulations 1999 (No. 1)
Section 42 of the Telstra Corporation Act 1991 ("the Act") allows the Governor-General to make regulations under the Act.
The Act imposes limits on the ownership of Telstra Corporation Limited ("Telstra") shares by foreign persons. The ownership rules are set out in Part 2A of the Act and in the Schedule to the Act.
Section 8BG in Division 4 of Part 2A of the Act specifies that an unacceptable foreign ownership situation exists if.
* there is a group of foreign persons who hold in total a particular type of stake in Telstra of more than 35%; or
* there is or are one or more foreign persons each of whom holds a particular type of stake in Telstra of more than 5%,
in each case ignoring shares held by the Commonwealth.
Paragraph 9(1)(d) of the Schedule to the Act provides that, for purposes of the ownership provisions, an interest of a prescribed kind in a share, being an interest held by such persons as are prescribed, must be disregarded. Regulations can effectively provide for exemptions to be obtained from the ownership provisions of the Act by allowing for certain interests in shares, and the holders of those interests, to be prescribed for purposes of paragraph 9(1)(d).
The Telstra Corporation (Ownership - Interests in Shares) Regulations provide a number exemptions from the foreign ownership provisions.
The Telstra Corporation (Ownership - Interests in Shares) Amendment Regulations 1999 (the Accompanying Regulations) will provide for two amendments (apart from minor amendments to change the name of the Regulations, to correct a typographical error and to make minor stylistic/setting out changes) to the existing Regulations:
Avoidance of settlement anomalies
As noted above, the ownership limits are framed as percentages of Telstra shares "held" by persons other than the Commonwealth. Because of this, the order in which Telstra shares are transferred to an instalment receipt trustee for the benefit of foreign and domestic purchasers in any further sale of Telstra shares, on settlement of such a further sale, might, in the absence of the Accompanying Regulations, be important to avoid momentary breaches of the limits during the course of the settlement process. Breaches could occur, for example, if sales to foreigners were settled before sales to domestic applicants, even though the ownership limits would not be exceeded once all settlements had occurred on the settlement day.
The Accompanying Regulations will overcome this potential difficulty (which could otherwise complicate settlement mechanics) by disregarding all interests in shares transferred from the Commonwealth, on the first day on which instalment receipts are issued for a Telstra sale scheme, but only until 11.00 pm on that day.
Global coordinator
The Telstra Corporation (Ownership - Interests in Shares) Regulations already contain provisions, put in place for the initial public offering of Telstra shares in 1997, to ensure that the global coordinators' interests when they purchased Telstra shares (or related securities such as instalment receipts) for allocation to applicants in the public offer (in the normal manner for a US underwriting) were disregarded and to ensure that their interests in any shares (or related securities such as instalment receipts) that they purchased in the secondary market to satisfy over allocations made by them in connection with the offering (or obligations undertaken to satisfy over allocations) were also disregarded. The exemption ceased to apply 90 days (or longer if the Secretary allowed) after the relevant purchase.
The Accompanying Regulations will clarify these provisions to ensure that they will also apply to a further sale of Telstra shares (and cannot be construed as being limited to the 1997 initial public offering).
Details of the Accompanying Regulations are as follows:
Regulation 1 - Name of Regulations
Regulation 1 provides that the name of the Accompanying Regulations is the Telstra Corporation (Ownership - Interests in Shares) Amendment Regulations 1999 (No. 1).
Regulation 2 - Commencement
Regulation 2 provides that the Accompanying Regulations commence on gazettal.
Regulation 3 - Amendment of Telstra Corporation (Ownership - Interests in Shares) Regulations
Regulation 3 provides that Schedule 1 to the regulations amends the Telstra Corporation (Ownership - Interests in Shares) Regulations.
SCHEDULE 1 - Amendments
Item 1
Item 1 substitutes Telstra Corporation (Ownership - Interests in Shares) Regulations 1997 for the name of the existing regulations to reflect the current drafting practice for the naming of regulations.
Item 2
Item 2 substitutes "at the end" for "the end" where those words appeared in paragraph 5(2)(b) of the existing regulations. correcting a typographical error.
Item 3
Item 3 substitutes new regulations 6 and 6A for existing regulation 6.
New regulation 6 (which states that this Part of the regulations prescribes certain kinds of interests in shares that must be disregarded for the purposes of the ownership provisions) essentially repeats, with slight stylistic differences, existing subregulation 6(1).
New subregulation 6A(1) essentially repeats, with slight stylistic differences, existing subregulation 6(2).
New subregulation 6A(2) provides that an interest in a share in Telstra that is transferred from the Commonwealth before 11.00 pm on the first day on which instalment receipts are issued for a Telstra sale scheme is an interest of a prescribed kind, and that a person who holds such an interest in a share in Telstra is prescribed, in each case for regulation 6.
New subregulation 6A(3) provides that subregulation (2) ceases to have effect in relation to the interest in a share, or to the person, at 11.00 pm on the first day on which instalment receipts are issued for the Telstra sale scheme.
New subregulation 6A(4) provides that references to time in new subregulation 6A(2) and (3) are to Australian Capital Territory time.
Item 4
Item 4 adds the words "for a Telstra sale scheme" at the end of paragraph 9(1)(b) of the existing regulations, clarifying that regulation 9 of the existing regulations applies in relation to each Telstra sale scheme, and not only to the 1997 initial public offering of Telstra shares.
Item 5
Item 5 deletes Note 2 to existing regulation 9 which identified the global coordinators whose identities were known at the time of commencement of the existing regulations. It substitutes a note that essentially repeats, with a minor stylistic difference, existing Note 1 to regulation 9.