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Bill 1997
Explanatory note
This explanatory note relates to this Bill as introduced into Parliament.
(a)
to provide a mechanism for the Australian Mutual Provident
Society (AMP) to be demutualised and reconstructed as a
company limited by shares, and
(b)
to limit entitlements to shares in AMP'S holding company.
2
AMP was originally established under legislation enacted in 1844, and
was constituted a body corporate by legislation in 1857. Its status as a
body corporate is preserved by the Australian Mutual Provident
Society's Act 1910. It is not a company, but provisions of the
Companies (New South Wales) Code are applied to it by the Australian
Mutual Provident Society Act 1988.
3
At present, AMP consists of its members, with membership being,
under the 1988 Act, determined in accordance with AMP's By-laws.
The By-laws provide that AMP policy holders are the members of
AMP. However, the members do not have rights in the nature of
shares.
4 The mechanism provided by the Bill for demutualising AMP involves:
*
changing the status of AMP to a company limited by shares,
which will be wholly owned by a holding company
*
changing the status of eligible existing members of AMP to that
of shareholders in AMP's holding company.
5
Initially, the company to which AMP is being converted is not a
"company" within the Corporations Law, though its holding company
will be such a "company". Hence the shares issued to policy holders
will be shares within the Corporations Law.
6
For a limited period after the conversion, there will be shareholding
limitations in AMP's holding company, so that no one person will
generally be able to hold more than 5% of the shares. This limitation
will operate from the date of the conversion until 12 months after the
shares in the holding company are first listed, but can be extended by
regulation.
7
The Bill provides that, after the creation of AMP as a
"non-Corporations Law" company, AMP is authorised to transfer to
being a "full" company within the Corporations Law, and is required
to do so if the member or members of AMP approve the transfer.
8
Provision is made for the repeal of special legislation applying to AMP
after it becomes a "full" company within the Corporations Law.
9
The change of AMP's status into a company limited by shares
necessarily involves the extinguishment of the rights of members. The
rights extinguished include those of the members who do not support
the resolution required to effect the change of status and thus may be
seen to involve an element of expropriation of vested rights (even
though it is contemplated that these will be replaced by new rights
arising from the issue of shares upon the change of status). An
expropriation will occur by virtue of proposed section 11 upon the
Explanatory note page 2
change of status taking effect. Expropriation occurs by virtue of
legislation and a statutory procedure, rather than simply by virtue of
the action of members in changing AMP'S constitution. Accordingly,
the principles set out in Gambotto and another v W.C.P Limited and
another [19941995] 182 CLR 432 have no application to this
mechanism. Further, the Bill does not remove or purport to remove the
right of members to take proceedings under the "oppression"
provisions of general company legislation.
Preliminary
Clause 1 sets out the name (also called the short title) of the proposed Act.
Clause 2 provides for the proposed Act to commence on a day to be
appointed by proclamation of the Governor.
Clause 3 contains various definitions used in the proposed Act.
Part 2
Demutualisation and reconstruction of AMP
Division 1
Conversion resolutions
Clause 4 defines a "conversion resolution'' for the purposes of the proposed
Act. Such a resolution is the starting point of the process leading to
demutualisation and reconstruction. It is a resolution that AMP be converted
to a company limited by shares, and has a number of features, including the
following:
*
the resolution has to be passed at a general meeting of AMP
*
written notice of the resolution has to be posted to AMP members,
giving details of the resolution and voting rights
*
an explanatory statement about the resolution has to be posted to AMP
members
*
an independent financial expert's report relating to the resolution to
convert has to be posted to AMP members
*
a voting paper has to be posted to AMP members
*
the resolution has to be passed by a majority of at least three-quarters
of the votes cast.
Explanatory note page 3
The clause also makes it clear that such a resolution, although called a
conversion resolution, is still a special resolution for legal and other
purposes.
Clause 5 cures certain irregularities that might occur in the conversion
resolution process referred to in clause 4.
Division 2
Conversion process
Clause 6 states that AMP may convert to a company limited by shares in
accordance with the Part.
Clause 7 provides for AMP to apply to the Attorney General to convert to a
company limited by shares. The clause lists the detailed matters that must be
included in the application.
Clause 8 provides that, if the Attorney General is satisfied that the
application complies with the requirements of clause 7 and that creditors will
not be materially prejudiced, the Attorney General is to publish a notice that
the Attorney General intends to issue a certificate of conversion for AMP.
After a month after the notice has been given, and if a court has not ordered
to the contrary, the Attorney General must issue a certificate of conversion.
Clause 9 provides that the issue of the certificate of conversion has the
effect of converting AMP to a company limited by shares.
Clause 10 provides that the company to which AMP is converted has the
general attributes that companies have (that is, a corporate nature, with the
liability of members being limited to any amount unpaid on their shares).
However, the company to which AMP is converted by the proposed Act is
not a "company" within the Corporations Law. This will facilitate the
ultimate registration of AMP as such a company. See paragraph (a) of the
definition of "non-company" in section 9 of the Corporations Law, which is
relevant for the registration of non-companies as companies under the
Corporations Law.
Clause l 1 states the effect of the conversion of AMP. In brief, AMP is
demutualised and reconstructed, and existing members of AMP cease to be
members unless they become shareholders.
Clause 12 requires AMP to change its name within one month after the
conversion, so that it includes "Limited" or "Ltd" at the end of its name.
Clause 13 provides that if all of AMP's shares are held by AMP's holding
company or holding companies, shares in the ultimate holding company must
be issued to former members of AMP.
Explanatory note page 4
Clause 14 authorises the Attorney General to be advised in connection with
the Attorney General's functions under the proposed Act by the Australian
Securities Commission under an agency agreement or arrangement. Section
67
of the Corporations (New South Wales) Act 1990 contemplates that the
Minister, or a person authorised in writing by the Minister, may enter into an
agreement or arrangement for the performance of functions or the exercise of
powers by the Commission as an agent of the State; a corresponding
provision is found in section 11 (8) of the Australian Securities Commission
Act 1989 of the Commonwealth. The agreement or arrangement
contemplated in clause 14 would be with the Commission as agent of the
Attorney General's Department of New South Wales, which is an emanation
of the State, and would reflect the understanding that Ministers receive
advice from their Departments (in this case, advice of the Commission as
agent of the Department).
Clause 15 empowers AMP directors to cut off membership rights as at 5 pm
on 11 December 1996. However, provision is made for special and
anomalous cases.
Clause 16 authorises the Supreme Court, on application made to it, to cure
various irregularities, subject to certain safeguards.
Part 3
Limitation on share entitlement
Clauses 17 and 18 contain various definitions and interpretative provisions
for the purposes of the Part. One definition is that of restriction period,
which is defined as the period from the date of issue of the certificate of
conversion to the end of one year after shares in the holding company are
first listed. The period can be extended by regulation for a maximum of one
year.
Clause 19 prevents a person from holding more than 5% of shares in the
holding company during the restriction period.
Clause 20 contains various exceptions to the rule in clause 19.
Clause 21 allows shares to be allotted during the restriction period to a
nominee where the rule in clause 19 would be breached, on condition that the
nominee disposes of them for the benefit of the person who would have been
entitled to them.
Clause 22 automatically suspends voting, dividend and winding up rights on
shares that breach the rule in clause 19.
Explanatory note page 5
Clause 23 empowers the directors of the holding company to require a
shareholder to dispose of excess shares that breach the rule in clause 19.
Clause 24 provides that a breach of the Part is not an offence, but the
Supreme Court can grant injunctions.
Part 4
Registration of AMP as a company
Clause 25 empowers AMP to be registered as a company under the
Corporations Law, if its members approve of the transfer of incorporation.
As mentioned above, the company to which AMP is converted under Part 2
of the proposed Act is not an entity under the Corporations Law, though it
has the attributes of one.
Clause 26 provides for the repeal of the two major Acts regulating AMP,
once it has been converted to a "full" company under the Corporations Law.
Part 5
Rights and remedies
Clause 27 provides that persons have, as nearly as possible, the same rights
and remedies in connection with the proposed Act as persons have in
connection with the Corporations Law.
Clause 28 provides that the Supreme Court has, as nearly as possible, the
same jurisdiction, powers and functions in connection with the proposed Act
as the Federal Court of Australia and the Administrative Appeals Tribunal of
the Commonwealth have in connection with the Corporations Law.
Clause 29 applies the provisions of certain Commonwealth Acts for the
purposes of the Part. Those provisions already apply in connection with the
Corporations Law.
Clause 30 makes it clear that the rights and remedies provided by the Part do
not override time limits and other restrictions imposed by other provisions of
the proposed Act.
Clause 31 authorises rules of court to be made for the Supreme Court for the
purposes of the Part.
Clause 32 makes it clear that the Part does not supplant other rights and
remedies.
Part 6
Miscellaneous
Clause 33 makes it clear that the proposed Act is to be construed as
operating to the full extent of the legislative power of the State and that, in
the event of a provision being held to be invalid, the remaining provisions of
the proposed Act are to continue to operate, thus negating an argument that
partial invalidity renders the whole Act invalid. These provisions reinforce
section 31 of the Interpretation Act 1987.
Explanatory note page 6
Clause 34 is a formal provision giving effect to the Schedule of amendments
to the Australian Mutual Provident Society Act 1988.
Clause 35 authorises regulations to be made for the purposes of the proposed
Act.
Schedule 1
Amendment of Australian Mutual Provident
Society Act 1988
The amendments ensure that the provisions and effect of the proposed Act
take precedence over the provisions of the 1988 Act.
Explanatory note page 7