Treasury has released an exposure draft and draft explanatory memorandum of proposed amendments relating to shareholdings in financial sector companies, amongst other things.
The Financial Sector (Shareholdings) Act 1998 (FSSA) regulates the acquisition of shares in financial sector companies, which include banks, building societies, credit unions and insurers.
Under the FSSA a person must not acquire a “stake” in 15% or more of the voting shares in a financial sector company or, having such an interest, increase it. The person can be ordered to divest the stake.
The Treasurer (or APRA as the Treasurer’s delegate) may grant approval to allow a person’s interest to exceed the 15% shareholding limit if it is in the national interest to do so.
“Stake” means the aggregate of a person’s direct control interests and the direct control interests of their associate.
Associates is defined in the FSSA to include a person’s relatives, partners, related companies and other parties.
When a person acquires a direct control interest (ie voting power) in a financial sector company of more than 15 per cent, the associate of the person is also required to also obtain approval to exceed the 15 per cent shareholding limit.
This can be despite the associate holding no direct control interest in the financial sector company. This imposes a burden for associates to reasonably comply with the law, particularly where associates are not aware of the requirement to seek the Treasurer’s approval.
The draft amendments to the FSSA would have the effect that associates who do not hold a direct control interest in a financial sector company will be deemed to have no stake in that financial sector company and are no longer required to aggregate their interest with the person who does have a direct control interest and, if necessary, obtain the Treasurer’s consent.