Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

by leave—I present a supplementary explanatory memorandum and move government amendments (1) to (11):

(1)    Schedule 1, item 2, page 3 (line 10), omit “subsection 14(2)”, substitute “section 14”.

(2)    Schedule 1, item 8, page 4 (after line 26), after subsection 9(1A), insert:

      (1B)    For the purposes of paragraphs (1)(c) and (1A)(c), in determining the percentage of the interests in the issued shares in a corporation that a person holds at a particular time, if:

             (a)    the person has a right that, if exercised, might result in the person holding an interest in an issued share in the corporation; and

             (b)    it cannot be determined at that time (whether from the right itself or from the circumstances existing at that time) whether the exercise of the right would have that result;

assume that the right were exercised at that time.

      (1C)    For the purposes of paragraphs (1)(d) and (1A)(d), in determining the percentage of the interests in the issued shares in a corporation that a person would hold at a particular time if shares were issued as mentioned in those paragraphs, if:

             (a)    the person has a right that, if exercised, might result in the person holding an interest in an issued share in the corporation; and

             (b)    it cannot be determined at that time (whether from the right itself or from the circumstances existing at that time) whether the exercise of the right would have that result;

assume that the right were exercised at that time.

(3)    Schedule 1, page 4 (after line 33), after item 9, insert:

9A After subsection 11(5)

Insert:

     (5A)    For the purposes of a prescribed provision of this Act, disregard an interest in a share if the interest is of a kind prescribed in respect of that provision.

(4)    Schedule 1, page 4, after proposed item 9A, insert:

9B Subparagraph 12C(b)(i)

After “voting power”, insert “or potential voting power”.

9C Subparagraph 12C(b)(i)

Omit “issued shares”, substitute “shares”.

9D Paragraph 12C(c)

After “voting power”, insert “or potential voting power”.

9E Paragraph 12C(c)

Omit “issued shares”, substitute “shares”.

(5)    Schedule 1, item 12, page 5 (after line 16), after subsection 14(2), insert:

        (3)    In determining how much of the potential voting power in a corporation a person is in a position to control at a particular time, if:

             (a)    a right exists that, if exercised, might result in the person being in a position to control more of the potential voting power in the corporation than the person would be in a position to control if the right were not exercised; and

             (b)    it cannot be determined at that time (whether from the right itself or from the circumstances existing at that time) whether the exercise of the right would have that result;

assume that the right were exercised at that time.

(6)    Schedule 1, page 6 (after line 2), after item 15, insert:

15A Subsection 25(4)

Omit “an option”, substitute “a right (including a right under an option)”.

(7)    Schedule 1, page 7 (after line 11), at the end of the Schedule, add:

22 Section 28

Omit “an option”, substitute “a right (including a right under an option)”.

Note:                The heading to section 28 is altered by omitting “options” and substituting “rights”.

23 Section 28

Omit “that option”, substitute “that right”.

(8)    Schedule 2, item 1, page 8 (line 11), after “26(2)”, insert “or 26A(2)”.

(9)    Schedule 2, item 1, page 8 (line 15), after “26(2)”, insert “or 26A(2)”.

(10)  Schedule 2, item 2, page 9 (line 4), after “26(2)”, insert “or 26A(2)”.

(11)  Schedule 2, item 2, page 9 (line 8), after “26(2)”, insert “or 26A(2)”.

Since the introduction of the bill some issues were identified that require clarification. These technical amendments do not alter the policy intent of the bill. They are designed to improve the operation of the bill and reduce potential complexity. In relation to the expanded definition of ‘substantial interest’, the bill captures new forms of foreign investment transactions that configure future rights and interest to a foreign investor. Some rights are structured so the actual number of shares or potential voting power cannot be determined until these rights are exercised. For example, where a convertible note relates to shares equivalent to a specified monetary amount the number of shares and voting power attached to that instrument would normally depend on the value of the shares at the time of the conversion.

The amendments clarify that all rights over shares will be treated as having been exercised at a particular point in time—for example, when the agreement is entered into—or at the time a decision is made under the act. The act currently provides for regulations to be made to disregard certain prescribed types of interests in shares. We will shortly introduce regulations to ensure only currently held shares and voting power are counted when determining if an investor is a foreign person or foreign business and must notify under the act. This means investors can more easily monitor their foreign shareholdings to know when to notify their acquisitions under the act. Companies may not be able to determine the ownership, foreign or otherwise, of all rights to the future shares and potential voting power given the characteristics of derivative instruments and the way they may be traded off market.

The amendments ensure regulations may be made with respect to prescribed provisions of the act such as the compulsory notification provisions. The act provides tracing provisions to enable substantial interests to be traced through the ownership of structures of relevant entities. The amendments ensure these provisions are applied consistently. The act also requires acquisitions or options to be notified only once—that is, at the time of the acquisition. The amendments provide that this also applies to other types of rights over shares or assets to make clear that a second notification is not required at the time the rights are exercised. Since the bill applies retrospectively, from 12 February 2009, transitional provisions are included so that foreign persons will not have committed an offence for failing to notify acquisitions of substantial interests in Australian corporations which would have been subject to compulsory notification by virtue of the bill.

The amendments ensure that acquisitions of urban land will also be covered by the transitional arrangements. Full detail on the amendments is in the supplementary explanatory memorandum. The amendments do not change the national interest framework nor the screening arrangements of the Foreign Investment Review Board. I am confident the amendments help to modernise Australia’s foreign investment framework while providing certainty for prospective investors.

Question agreed to.

Bill, as amended, agreed to.