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TELSTRA CORPORATION (TRANSFER OF SHARES - STAMP DUTY) REGULATIONS 1997 NO.247
EXPLANATORY STATEMENTStatutory Rules 1997 No. 247
Issued by the authority of the Minister for Communications and the Arts
Telstra Corporation Act 1991
Telstra Corporation (Transfer of Shares - Stamp Duty) Regulations
Background
Section 42 of the Telstra Corporation Act 1991 (the "Act") allows the Governor-General to make regulations prescribing matters that are required or permitted by this Act to be prescribed, or that are necessary or convenient to be prescribed, for carrying out or giving effect to the Act.
The Telstra (Dilution of Public Ownership) Act 1996 amended the Act to provide for the sale by the Commonwealth of one-third of its equity interest in Telstra. Rules relating to how that sale is to be carried out were inserted by the Telstra (Dilution of Public Ownership) Act 1996 as Division 4 of Part 2 of the Act.
Subsection 8AK in Division 4 of Part 2 provides an exemption from stamp duty and other State and Territory taxes for various matters related to the sale by the Commonwealth of its shares in Telstra.
Subsection 8AK(2) provides that stamp duty or other tax is not payable under the law of a State or Territory in respect of:
* a "designated matter"; or
* "anything done (including a transaction entered into or an instrument or document made, executed, lodged or given) because of, or for a purpose connected with or arising out of, a designated matter".
Subsection 8AK(1) provides that any of the matters listed therein will be a "designated matter' where the matter relates to the entering into or carrying out of a "Telstra sale scheme".
The phrase "Telstra sale scheme" is defined in subsection 8AJ(2) as "a scheme the object of which is to achieve the transfer, or progressive transfer, of a part of the Commonwealth's equity in Telstra to other persons". Subsection 8AJ(5) provides that in determining whether a scheme is a "Telstra sale scheme", regard must be had to the economic and commercial substance of the scheme. Subsection 8AJ(4) lists examples of events which a Telstra sale scheme may involve.
In addition to transfers of Telstra shares or interests in Telstra shares by the Commonwealth and the sale scheme trustee, the matters listed in subsection 8AK(1) include, for example, the cancellation, redemption and issue of Telstra shares.
Subsection 8AK(1) also lists as a designated matter "any other matter that is specified in the regulations". The regulations effectively provide an exemption from State and Territory stamp duty for certain transactions which may be entered into in connection with the sale by the Commonwealth of its shares in Telstra, and which are not currently listed as "designated matters" in subsection 8AK(1) of the Act.
Sale Scheme
The sale by the Commonwealth of its shares in Telstra ("the Telstra Shares") may occur by way of two instalment payments. On payment by investors of the first instalment, legal title to the Telstra Shares would be transferred by the Commonwealth to Telstra Instalment Receipt Trustee Limited, the sale scheme trustee ("Trustee"). The Trustee would hold the Telstra Shares on trust for the benefit of.
(a) the Commonwealth, as security for the unpaid instalments; and
(b) the investors, in the remainder.
The investors would be issued with an Instalment Receipt ("IR") evidencing their interest in the Telstra share. The IR would be issued by the Trustee. IRs would be quoted and may be traded through the Australian Stock Exchange ("ASX"), the New Zealand Stock Exchange ("NZSE") and SEAQ International, London ("SEAQ"), during the instalment period.
The sale scheme would also provide that non-resident investors could hold IRs in the form of Interim American Depository, Shares (Interim ADSs"),with each Interim ADS representing 20 IRs. Investors would be issued with Interim American Depository Receipts (Interim ADRs"), which are evidence of ownership of Interim ADSs and are tradeable on the New York Stock Exchange ("NYSE"). The issue of Interim ADRs would be effected by a United States depository, who would appoint an Australian custodian as the registered holder of the relevant IRs.
The sale scheme may include an international offer structure with an over-allocation option. This would involve the international underwriters over-allocating shares at the close of the offer, under an over-allocation agreement with the Commonwealth. If the, IRs trade below the offer price in the aftermarket, the international underwriters would buy back IRs in the secondary market to cover the over-allocation, during a period of up to 30 days after completion of the offer. If the IRs trade at a premium in the after market, the Commonwealth as vendor, would be required (under the over-allocation agreement) to provide additional securities to the international underwriters to cover the over-allocation of IRs. The over-allocation arrangements may include the international underwriters entering into securities lending arrangements with the Commonwealth so that the stock can be delivered at settlement.
On payment of the final instalment, legal title in the underlying Telstra Shares would be transferred to IR holders. Legal title in the underlying Telstra Shares would be transferred to the custodian upon payment of the final instalment by investors who hold Interim ADSs evidenced by Interim ADRs. Such investors would then be issued with American Depository Receipts ("ADRs"), evidencing investment in American Depository Shares ("ADSs").
Telstra shares would be quoted on the ASX from the commencement of the sale scheme. However, no trading in Telstra Shares would occur until after payment of the final instalment. Interim ADRs and ADRs would be tradeable on the NYSE.
Regulations
Each Australian State and Territory has its own stamp duty law. Those laws are not uniform. Because Telstra is incorporated in the Australian Capital Territory. the regulations seek to rectify certain anomalous outcomes which would otherwise result from the Telstra sale scheme.
The Telstra Corporation (Transfer of Shares - Stamp Duty) Regulations provide that the following matters will be "designated matters" for the purpose of section 8AK of the Act and would therefore be exempt from stamp duty:
* a change in the beneficial ownership of a Telstra share that occurs as a result of a change in ownership of an IR (the dutiable change) which would, but for the regulations, be subject to stamp duty in addition to stamp duty on the dutiable change.
The regulations seek to ensure that a transfer of an IR is not effectively subject to "double duty" as a result of the application of section 49F of the Stamp Duties and Taxes Act 1987 of the Australian Capital Territory (ACT), consistent with the treatment of other Australian marketable securities.
* a change in ownership of an Interim ADS and any change in the beneficial ownership of a Telstra Share or an IR that occurs as a result of a change in ownership of an Interim ADS.
The regulations seek to ensure that changes in beneficial ownership of Telstra shares and IRs resulting from trading in Interim ADRs on the NYSE and off-market, and a change in ownership of Interim ADSs, would not be subject to Australian stamp duty, thereby ensuring consistent treatment in all Australian jurisdictions.
* a change in the beneficial ownership of a Telstra Share or an IR which occurs as a result of..
(a) a transaction on NZSE or SEAQ;
(b) the transfer of an IR into and out of the Interim ADS program;
(c) the transfer of an IR from a non- ' resident individual on death or bankruptcy; or
(d) the transfer of an IR from a non-resident corporation or other body because the non-resident corporation. or other body has ceased to exist.
The regulations seek to ensure that the specified transfers or transmission of an, IR to or from a non-resident would not result in the imposition of Australian stamp duty, thereby ensuring consistent treatment in all Australian jurisdictions.
* a transaction which results (directly or indirectly) in a person becoming registered as the initial holder of an IR or an Interim ADS or before 31 December 1997 the registered holder thereof upon transfer from the Telstra sale scheme underwriters or their nominees.
The regulations seek to ensure that Australian stamp duty would not apply:
- to transfers of the beneficial ownership of Telstra shares made prior to the establishment of the IR and Interim ADS registers, as part of the process of allocating securities purchased on behalf of investors who are to, be registered as the initial IR holder or the initial Interim ADS holder; or
- to transfers before 1 December 1997 as part of the process of holders acquiring IRs and Interim ADSs from the Telstra sale scheme underwriters or their nominees.
* a transaction provided for in an underwriting, securities lending or over-allocation agreement entered into by the Commonwealth in connection with a Telstra sale scheme.
The regulations seek to ensure that short-term arrangements put in place between the Commonwealth and the Telstra sale scheme underwriters for over-allocation, securities lending and related arrangements are not subject to stamp duty, to ensure consistent treatment in all Australian jurisdictions.
Details of the regulations appear in the Attachment.
The regulations commenced on notification in the Gazette.
ATTACHMENT
Clause 1 - Citation
Regulation 1 provides for citation of the regulations as the Telstra Corporation (Transfer of Shares - Stamp Duty) Regulations. The regulations commenced on Gazettal.
Clause 2 - Interpretation
Regulation 2 defines terms used in the regulations.
Clause 3 - Designated matters
Regulation 3 prescribes certain matters for inclusion in the definition of "designated matter" in subsection 8AK(1) of the Telstra Corporation Act 1991. Section 8AK provides an exemption from stamp duty and other State and Territory taxes for certain "designated matters" related to the carrying out of the Telstra sale scheme.
Regulation 3(a) prescribes as a "designated matter" a change in the beneficial ownership of a Telstra share that occurs as a result of a change in ownership of the IR (the dutiable change) which would, but for the regulations, be subject to stamp duty in addition to stamp duty on the dutiable change.
Regulation 3(b) prescribes as a "designated matter" a change in the beneficial ownership of a Telstra Share or an IR that occurs as a result of a change in ownership of an Interim American Depository Share.
Regulation 3(c) prescribes as a "designated matter' a change in the beneficial ownership of a Telstra. share or an IR that occurs as a result of a change in the ownership in circumstances where:
(i) a transaction occurs on the New Zealand Stock Exchange or SEAQ International, London;
(ii) ownership passes to or from a person in that person's capacity as a depository, custodian or nominee under the Interim American Depository Share program;
(iii) ownership passes from a non-resident individual on death or bankruptcy; or
(iv) ownership passes from a non-resident corporation or other body because the non-resident corporation or other body has ceased to exist.
Regulation 3(d) prescribes as a "designated matter" a transaction that results in a person becoming the initial registered holder of an IR or of an Interim American Depository Share or before 31 December 1997 the registered holder thereof upon registration of a transfer from the Telstra sale scheme underwriters or their nominees.
Regulation 3(e) prescribes as a "designated matter" a change in the ownership of an Interim American Depository Share.
Regulation 3(f) prescribes as a "designated matter" transactions provided for in underwriting, securities lending and over-allocation agreements entered into by the Commonwealth.