Treasury Laws Amendment (Mutual Reforms) Act 2019 (37 of 2019)

Schedule 2   Mutual capital instruments (MCIs)

Part 1   Amendment of the Corporations Act 2001

Corporations Act 2001

4   At the end of Chapter 2B

Add:

Part 2B.8 - Mutual capital instruments (MCIs)

Division 1 - Preliminary

167AB Simplified outline of this Part

This Part provides for mutual capital instruments (MCIs).

An MCI is a share in a mutual entity that meets requirements relating to voting rights and other matters. Certain kinds of mutual entities may issue MCIs and become MCI mutual entities.

Division 3 sets out a special procedure for amending the constitution of a mutual entity that proposes to issue MCIs.

Division 2 - MCI mutual entities and MCIs

167AC Meaning of MCI mutual entity

A mutual entity is an MCI mutual entity if:

(a) the entity is a public company; and

(b) the entity does not have voting shares (other than MCIs) quoted on a prescribed financial market; and

(c) the entity is not a registered entity within the meaning of the Australian Charities and Not-for-profits Commission Act 2012; and

(d) the entity's constitution states that the entity is intended to be an MCI mutual entity for the purposes of this Act; and

(e) the entity has issued one or more MCIs.

167AD Meaning of MCI

(1) A share in a mutual entity is an MCI (short for mutual capital instrument) if:

(a) paragraphs 167AC(a), (b), (c) and (d) apply to the entity; and

(b) the share meets the requirements in sections 167AE and 167AF.

(2) To avoid doubt, if a share that is an MCI ceases to meet one or more of those requirements, the share ceases to be an MCI.

(3) Nothing in this Division requires an MCI mutual entity to treat the holders of MCIs in the same way as members of the entity who do not hold MCIs.

Note: For example, this Division does not require an MCI mutual entity that provides services to a class of members to provide those services to holders of MCIs.

167AE MCI requirements - class rights

A share in a mutual entity meets the requirement in this section if the rights attached to the share can be varied or cancelled only by special resolution of the company and either:

(a) by special resolution passed at a meeting of the class of members holding shares in the same class; or

(b) with the written consent of members with at least 75% of the votes in the class.

167AF MCI requirements - other requirements

A share in a mutual entity meets the requirements in this section if the entity's constitution:

(a) provides that the share can only be issued as a fully paid share; and

(b) provides that dividends in respect of the share are non-cumulative; and

(c) sets out the rights attached to the share with respect to participation in surplus assets and profits.

167AG MCIs must be cancelled before MCI mutual entity demutualises

A resolution of an MCI mutual entity that would result in the entity ceasing to be an MCI mutual entity can only take effect if:

(a) there are no MCIs in the entity; or

(b) the resolution provides for each MCI to be cancelled at or before the time the entity ceases to be an MCI mutual entity (whether or not the holders of the MCIs to be cancelled are to receive other securities in respect of those MCIs).

Division 3 - Special procedure for amending constitution of mutual entity that proposes to issue MCIs

167AH Purpose and application of this Division

(1) This Division sets out a special procedure for the constitution of a mutual entity to be amended to provide for the entity to issue MCIs.

(2) This Division applies to a mutual entity that:

(a) is a public company; and

(b) does not have voting shares quoted on a prescribed financial market; and

(c) is not a registered entity within the meaning of the Australian Charities and Not-for-profits Commission Act 2012.

167AI MCI amendment resolution

(1) An MCI amendment resolution is a resolution of the mutual entity to amend the entity's constitution for one or more of the following purposes, and for no other purpose:

(a) to include a statement that the entity is intended to be an MCI mutual entity for the purposes of this Act;

(b) to provide for the entity to issue MCIs;

(c) to provide for the rights and obligations attached to MCIs;

(d) to make changes that are incidental or ancillary to the purpose in paragraph (a), (b) or (c).

(2) An MCI amendment resolution must not result in the mutual entity ceasing to be a mutual entity.

167AJ Procedure for MCI amendment resolution

(1) This section applies to a meeting of the mutual entity's members if:

(a) notice of an MCI amendment resolution to be proposed at the meeting is given in accordance with paragraph 249L(1)(c); and

(b) the meeting is held during the period of 36 months beginning on the day this section commences; and

(c) no more than 2 MCI amendment resolutions have been considered at previous meetings of the mutual entity's members.

(2) The MCI amendment resolution:

(a) must be passed at the meeting by at least 75% of the votes cast by or on behalf of members who are present at the meeting (including members who have appointed proxies who are present at the meeting) and entitled to vote on the resolution; and

(b) if so passed - has effect as a special resolution despite subsections 136(3) and (4) and anything in the mutual entity's constitution.

(3) Despite section 135 and anything in the mutual entity's constitution, section 249T (quorum) applies to the meeting to the extent that the meeting is considering or voting on the MCI amendment resolution.