Commonwealth Numbered Regulations - Explanatory Statements

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BANKS (SHAREHOLDINGS) REGULATIONS (AMENDMENT) 1995 NO. 4

STATUTORY RULES 1995 No. 4

Issued by the Authority of the Assistant Treasurer

Banks (Shareholdings) Act 1972

Banks (Shareholdings) Regulations (Amendment)

Subsection 10(1) of the Banks (Shareholdings) Act 1972 (the Act) generally limits the nominal amount of the voting shares of a bank in which a person (including a corporation) may have an interest to 10 per cent of the total nominal amount of the voting shares of a bank. Under subsection 10(2) of the Act the Treasurer may, on application in writing from a person, exempt that person from compliance with subsection 10(1) and allow that person to hold up to 15 per cent of the total nominal amount of the voting shares of a bank- Under subsection 10(2B), where an exemption has been given under subsection 10(2) in respect of the voting shares of a bank, the Treasurer may, on application by the corporation, exempt the persons who are from time to time relevant officers of the corporation from compliance with subsection 10(1) in respect of the voting shares of a bank.

On 11 May 1993, the then Treasurer granted in principle approval for the Lend Lease Corporation Limited Group (die LLCL Group), pursuant to subsection 10(2) of the Act, to hold up to 15 per cent of the voting shares in Westpac Banking Corporation (Westpac). The then Treasurer indicated that this in principle approval would be subject to certain terms and conditions based on established banking policies, and the satisfactory resolution of a number of issues related to the association provisions of the Act. The LLCL Group accepted the terms and conditions, and the Banks (Shareholdings) Regulations (Amendment) resolve the association issues that arose under the Act. The Reserve Bank of Australia, the Australian Securities Commission, and the Insurance and Superannuation Commission had no objections to the approval being given.

The LLCL Group is one of Australia's largest and most diversified corporations, providing financial, property and insurance services. The LLCL Group views the investment in Westpac as an integral part of their strategic position in the changing financial sector. Since the in principle approval, the LLCL Group has been, and intends to continue to be, a stable long term shareholder for Westpac. The LLCL Group also has two directors on Westpac's Board.

The Banks (Shareholdings) Regulations (Amendment) formally disregards certain LLCL interests under the association provisions of the Act. The Assistant Treasurer has recently provided written approval under subsection 10(2) of the Act to permit the LLCL Group to hold up to 15 per cent of Westpac's voting shares. Written approval, under subsection 10(2B) of the Act, also exempted persons who are from time to time relevant officers of the LLCL Group to allow them to hold up to 15 per cent of Westpac's voting shares.

Section 8 of the Act defines what may be considered an interest in shares for the purposes of the Act. Under section 9 of the Act, the associates (including officers, partners, subsidiaries and related companies) of the LLCL Group would also be deemed to have the same interest in Westpac as the LLCL Group. Paragraph 8(9)(d) provides that there shall be disregarded a prescribed interest in a share that is an interest of such a person, or of the persons included in such class of persons as is prescribed. Section 17 of the Act provides that the Governor-General may make regulations for the purposes of the Act.

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 amendments to the Regulations, for the purposes of the Act disregard certain associate relationships within the LLCL Group and with other persons that arise under the association provisions of the Act.

The regulations define certain terms for the purposes of the regulation - subregulation 9(1) - and disregards the following associate interests that arise under the Act for the purposes of paragraph 8(9)(d):

•       any LLCL Group company which does not hold Westpac shares directly but has an interest in Westpac shares because of a company's relationship with another LLCL Group company other than an LLCL exempted company - subregulation 9(2)(a);

•       an interest in a Westpac share being an interest held by an officer (other than that referring to a director) of an LLCL Group company if..

-       an undertaking has been provided by LLCL that decisions concerning any Westpac shares directly held by officers of LLCL Group companies and which have been purchased with the benefit of financial assistance provided by LLCL, will not be influenced by or taken in concert with LLCL or associates of LLCL - subregulation 9(2)(b)(i);

-        a cap of two per cent will be imposed on the aggregate personal shareholdings in Westpac of relevant officers - subregulation 9(2)(b)(ii)

•        interests held by a director of a LLCL Group company that is also a director of a non LLCL Group company that holds shares in Westpac, and the non LLCL Group company is taken to have an interest in Westpac shares because the non LLCL Group company has a LLCL Group company director - subregulation 9(2)(c); and

•        interests held by a director of a LLCL Group company that is also a director of a non LLCL Group company and where the director holds Westpac shares - subregulation 9(2)(d).