Commonwealth Numbered Regulations - Explanatory Statements

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BANKS (SHAREHOLDINGS) REGULATIONS (AMENDMENT) 1996 NO. 147

EXPLANATORY STATEMENT

STATUTORY RULES 1996 No. 147

Issued by the Authority of the Assistant Treasurer

Banks (Shareholdings) Regulations (Amendment)

Section 10 of the Banks (Shareholdings) Act 1972 (the Act) limits the amount of the voting shares of a bank in which a person (including a corporation) may have an interest to 10 per cent, or 15 per cent with the approval of the Treasurer, of the total amount of the voting shares of the bank. Under subsection 10(4) of the Act the Governor-General may, after application made to the Treasurer by a person, if the Governor-General is satisfied that to do so is in the national interest, fix a higher percentage for that person by instrument published in the Gazette. Subsection 10(5A) provides that the Governor-General may, on the publication under subsection 10(4) of an instrument fixing a percentage applicable to a corporation in respect of a bank, declare by instrument in writing published in the Gazette that the percentage so fixed is also applicable to the persons who are from time to time relevant officers of the corporation in respect of the bank.

Section 17 of the Act provides that the Governor-General may make regulations for the purposes of the Act.

The Commonwealth Government currently holds 50.4 per cent of the Commonwealth Bank of Australia (CBA). On 5 June 1996, the Minister for Finance announced that this shareholding would be sold using a 'sale by instalment' (SBI) method. Under SBI, investors would pay for the shares in two instalments. After making the first instalment, investors would receive to the extent lawful and practical the full benefits of ownership of the underlying shams. They would not, however, receive title to the shares until the second instalment payment is met Instead, investors would receive Instalment Receipts matched to the underlying shares, with the shares themselves being hold in trust for the investors by a separate trustee company, called Commonwealth Instalment Receipt Trustee Limited, pending the payment of the second instalment. The effect of this arrangement is that, between the first and second instalments, Commonwealth Instalment Receipt Trustee Limited would hold title on trust to more than 10 per cent of the voting shares of the CBA.

An instrument under subsection 10(4) of the Act has been prepared, fixing a percentage of 50 for Commonwealth Instalment Receipt Trustee Limited in relation to its interest in CBA.

Under section 9 of the Act the associates (including officers, partners, subsidiaries and related companies) of Commonwealth Instalment Receipt Trustee Limited would also be deemed to have the same interest in CBA as that trust. In the case of officers of Commonwealth Instalment Receipt Trustee Limited, an instrument pursuant to subsection 10(5A) of the Act is proposed which would fix a percentage of 50 in relation to interests in CB A for those persons who are from time to time relevant officers of Commonwealth Instalment Receipt Trustee Limited.

Under the Act, it is not possible to make a 'class' instrument for the interests of the associates of Commonwealth Instalment Receipt Trustee Limited, other than its relevant officers. These other associates represent a large and ever-changing group of persons.

Rather than make an instrument pursuant to subsection 10(4) for every person within the meaning of section 9, it is convenient to prescribe these interests - that is, to have them disregarded for the purposes of section 10 of the Act - by regulation, as provided for by section 17 and paragraph 8(9)(d).

Paragraph 8(9)(d) of the Act Provides that a prescribed interest in a share, that is an interest of such a person or class of persons as is prescribed, shall be disregarded. The Banks (Shareholdings) Regulations (the Regulations) currently prescribe a class of persons in relation to their interests in the banks listed in the Schedule to the Regulations, where those interests are deemed to be held by virtue of an associate relationship. The effect of the proposed amendments to the Regulations would be to disregard, for the purposes of the Act, interests in CBA arising from associate relationships with Commonwealth Instalment Receipt Trustee Limited.

The details of the proposed Regulations are as follows:

The Schedule to the Banks (Shareholdings) Regulations is amended by adding the following corporation to column 2:

Commonwealth Bank of Australia;

and by adding the following trust to column 3;

Commonwealth Instalment Receipt Trustee Limited.