House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Chapter 5 - Registration

Outline of chapter

5.1 This chapter explains:

•

how an entity may register as a VCLP or an AFOF;

•

the obligations of the entity whilst registered;

•

the circumstances in which the registration may be revoked by the PDF Board; and

•

how eligible venture capital investors may register their venture capital investments and their obligations once they are registered.

5.2 The legislation relating to registration is contained in the Venture Capital Bill 2002.

Context of amendments

5.3 The registration rules ensure that the Government can both monitor compliance with the tax concession and assess the impact of the tax concession.

Summary of new law

5.4 Partners in a VCLP or an AFOF and direct investors can only qualify for the tax exemption on profits and gains made on the disposal of venture capital investments if the partnership or the investor is registered with the PDF Board.

5.5 The general partner of a limited partnership may apply to the PDF Board for registration as a VCLP or an AFOF, as appropriate. A limited partnership cannot be registered as both a VCLP and an AFOF.

5.6 Once a limited partnership is registered as a VCLP or an AFOF, the general partner must give the PDF Board:

•

a quarterly return within 1 month of the end of a quarter;

•

an annual return within 3 months of the end of the financial year; and

•

any further information the PDF Board requires.

5.7 The PDF Board may revoke the registration of the limited partnership if it:

•

fails to satisfy registration requirements;

•

fails to provide an annual or quarterly return or other required information;

•

does not divest an ineligible investment;

•

makes an application for revocation of registration; or

•

makes more than one ineligible investment within 12 months.

5.8 Before it revokes registration the PDF Board will invite the general partner to make written submissions about the particular matter. In the case of a partnership not meeting a registration requirement, the PDF Board will allow the partnership a period to meet the requirement. The length of the period depends on whether the requirement not being met is an 'investment' or 'other' registration requirement. For an investment registration the PDF Board will determine a reasonable period which must not be longer than 6 months. The period allowed to meet an 'other' requirement will be 60 days which may be extended by no more than 60 days.

5.9 An eligible venture capital investor must register within 30 days of making its first venture capital investment to qualify for the tax exemption. The investor must provide an annual return on a similar basis as VCLPs and AFOFs. The registration may be revoked for failing to lodge an annual return or on application by the investor.

Detailed explanation of new law

Registration of VCLPs and AFOFs

5.10 A limited partnership seeking the venture capital tax concession must apply to the PDF Board for registration as a VCLP or an AFOF. An application by a general partner of a limited partnership for registration as a VCLP or an AFOF must include a statement by the general partner that the partnership meets the registration requirements of a VCLP or an AFOF as the case may be.

5.11 The general partner of the limited partnership seeking registration must make the application. This is because in a limited partnership it is the general partner that is responsible for the day to day operations of the partnership.

5.12 Different registration requirements apply to VCLPs and AFOFs because of their different roles in the venture capital concession. In each case a distinction is made between 'investment' registration requirements and 'other' registration requirements. This is because the time the PDF Board may allow a VCLP or AFOF to remedy a breach of an 'investment' requirement is longer than that allowed to remedy a breach of an 'other' requirement before revoking the registration (see below).

Registration requirements - VCLPs

5.13 The 'other' registration requirements of a VCLP are that:

•

the VCLP is established in Australia, Canada, France, Germany, Japan, United Kingdom and the United States of America, or other foreign country that may be prescribed in the regulations. No other countries are listed for prescription at this time;

•

the general partners are residents of one of the countries specified above. If there is more than one general partner, each must be a resident of the specified country;

•

the partnership agreement specifies that the partnership is to remain in existence for not less than 5 years and not more than 15 years; and

•

the partnership's committed capital is at least $20 million.

[Part 2, paragraphs 9-1(1)(a), (b), (c) and (e) of the VC Bill]

5.14 The investment registration requirements of a VCLP are that:

•

the partnership does not hold an investment that is not an 'eligible venture capital investment' or an investment that would be an eligible venture capital investment if the company had met the residency, location and size requirements (see Chapter 3);

•

the partnership will only carry on activities that are related to making venture capital investments that are eligible for the exemption or would be if they met the residency, location and size requirements; and

•

every debt interest (such as a loan) the partnership holds is a 'permitted loan' (see next paragraph).

[Part 2, paragraphs 9-1(1)(d), (f) and (g) and subsection 5-1(2) of the VC Bill]

Permitted loan

5.15 A permitted loan is a loan made by a VCLP or an AFOF to a venture capital investee company (see Chapter 3 for more information on venture capital investee companies). The conditions applying to the loan vary according to whether the VCLP or the AFOF holds an eligible venture capital investment in the company.

5.16 If the VCLP or AFOF does not hold an eligible venture capital investment in the company the loan must be repaid within 6 months of being made (unless the PDF Board extends the period). A general partner of a VCLP or AFOF may apply to the PDF Board in the approved form for a longer term. The PDF Board may allow a longer period if it is satisfied that there are exceptional circumstances and the extended period is no longer than is reasonably necessary. [Part 2, paragraphs 9-10(1)(b) and subsections 9-10(2) and (3) of the VC Bill]

5.17 However, there is no time limit on a loan to a company if the partnership holds equity interests, and specified debt interests, in that company, and those interests are at least 10% of the company's total equity interests, and specified debt interests. Only debt interests which can be converted to equity interests (e.g. convertible notes that confer a right to acquire shares in the company) are included in the specified debt interests. [Part 2, paragraph 9-10(1)(a) of the VC Bill]

Registration requirements - AFOFs

5.18 The 'other' registration requirements of an AFOF are that:

•

the AFOF is established under the law of a State or Territory;

•

all general partners (if more than one) are residents of Australia;

•

the partnership agreement specifies that the partnership is to remain in existence for not less than 5 years and not more than 20 years; and

•

the partnership will only carry on activities that are related to making venture capital investments that are eligible for the exemption, or that are related to investing in a VCLP.

[Part 2, paragraphs 9-5(1)(a) to (c) of the VC Bill]

5.19 The investment registration requirements of an AFOF are:

•

it may only make investments in VCLPs and direct investments in a company that a VCLP in which the AFOF is a partner has made an investment; and

•

it will only carry on activities that are related to making venture capital investments that are eligible for the exemption or would be if they met the residency, location and size requirements;

•

every debt interest (such as a loan) the partnership holds is a 'permitted loan' (see paragraph 5.15).

[Part 2, paragraphs 9-5(1)(d) to (f) and subsection 5-5(2) of the VC Bill]

Application for registration

5.20 A general partner of a limited partnership may apply for registration of the partnership as a VCLP or an AFOF, as the case may be, in the form approved by the PDF Board. This will allow the PDF Board to request the application to be in writing or to be lodged electronically if appropriate. [Part 2, subsection 11-1(1) of the VC Bill]

Information to be included in an application

5.21 An application by a general partner of a limited partnership must include the following information:

•

the name, residency status and relevant qualifications and experience of each general partner;

•

the name, address and residency status of each limited partner;

•

the address of the general partner's registered office;

•

the address of the registered office of the VCLP or AFOF;

•

the business address of the VCLP or AFOF;

•

a copy of the partnership agreement (see below for details of the information the agreement must contain);

•

the documents that were issued inviting investment in the partnership, for example, a private placement offer;

•

the amount of each partner's committed capital in the VCLP or AFOF;

•

if applicable, details of the facts that qualify any non-resident partner to be tax exempt in the partner's country of residence;

•

if the application is an application for registration as a VCLP, a statement by the general partner as to whether the partnership meets the registration requirements of a VCLP; and

•

if the application is an application for registration as an AFOF, a statement by the general partner as to whether the partnership meets the registration requirements of an AFOF.

[Part 2, subsection 11-1(2) of the VC Bill]

Partnership agreement

5.22 The partnership agreement must:

•

require the partners to contribute their committed capital as and when required under the agreement;

•

prohibit the addition of new partners to the partnership except as provided for in the agreement;

•

prohibit increases in the partnership's committed capital except as provided in the agreement;

•

confer on the general partner the right to require partners to contribute their committed capital to the partnership; and

•

include a plan which outlines the partnership's future intended investment activities.

[Part 2, paragraph 11-5(2)(f) of the VC Bill]

Further information requirements

5.23 If the PDF Board decides that specified information is to be provided in an application for registration as a VCLP or an AFOF it will make a resolution to that effect. The determination will be in writing and signed by the Chairman of the PDF Board. This will enable the PDF Board to require any information it considers necessary to decide whether to register a partnership as a VCLP or an AFOF. [Part 2, subsection 11-5(1) of the VC Bill]

5.24 Any determinations made will be disallowable instruments for the purposes of section 46A of the Acts Interpretation Act 1901. [Part 2, subsection 11-5(2) of the VC Bill]

5.25 If the PDF Board requires further information to decide a particular application for registration as a VCLP or an AFOF, the PDF Board may ask the general partner to provide the required information. [Part 2, section 11-10 of the VC Bill]

Period within which an application is to be decided

5.26 The PDF Board is required to make a decision within 60 days of the application being lodged. However, the PDF Board has a discretion to extend the period for deciding an application by up to 60 days but only if written notice is given to the general partner. The PDF Board must decide the application within the extended period. [Part 2, section 11-15 of the VC Bill]

Registration by the PDF Board

5.27 The PDF Board must register a partnership as a VCLP or an AFOF if an application was made and the application provides all the information required and any additional information required by the PDF Board. However the PDF Board will not register the partnership as a VCLP or an AFOF if it is satisfied that the applicant does not meet the registration requirements or the partnership has had a previous registration revoked. [Part 2, subsections 13-1(1) and (2) of the VC Bill]

5.28 The PDF Board is obliged to notify the general partner of the limited partnership as soon as practical once a decision has been made. [Part 2, subsection 13-1(3) of the VC Bill]

5.29 The PDF Board cannot register a limited partnership as both a VCLP and an AFOF. [Part 2, subsection 13-1(4) of the VC Bill]

Conditional registration

5.30 The PDF Board has a discretion to conditionally register a partnership as a VCLP or an AFOF if the application does not meet all the information requirements. However the PDF Board will not conditionally register the partnership as a VCLP or an AFOF if the PDF Board is satisfied that the applicant would not meet the registration requirements before the conditional registration period lapses or the partnership has had a previous registration revoked. [Part 2, subsections 13-5(1) and (2) of the VC Bill]

5.31 Conditional registration does not mean the partnership is registered as a VCLP or an AFOF but it will enable the general partner to issue a prospectus to attract investors prior to obtaining final registration. [Part 2, subsection 13-5(3) of the VC Bill]

5.32 It is important to note that conditional registration does not guarantee that the applicant will be ultimately approved as being a VCLP or an AFOF. [Part 2, subsection 13-5(4) of the VC Bill]

5.33 If a partnership is not registered as a VCLP or an AFOF within 24 months of being granted conditional registration, the conditional registration lapses. [Part 2, subsection 13-10(2) of the VC Bill]

Date of effect of registration

5.34 If conditional registration has not been granted, registration comes into effect on the day registration was granted. If conditional registration has been granted, registration comes into force on:

•

the day the partnership was established if the partnership has only carried on activities related to becoming registered as a VCLP or an AFOF; or

•

if this is not the case, the day conditional registration was granted.

5.35 Thus, if a VCLP or an AFOF has not carried on any unrelated activities before being granted conditional registration it will be treated as an ordinary partnership for tax purposes from its establishment. Registration continues to be in force until it is revoked by the PDF Board. [Part 2, section 13-10 of the VC Bill ]

Obligations while registered

Annual return

5.36 The PDF Board requires an annual return from the general partner of a VCLP or an AFOF within 3 months of the end of each financial year. If the annual return is not received within this time period, then it may be grounds for the PDF Board to revoke the registration of the VCLP. [Part 2, section 15-1 of the VC Bill]

5.37 The annual return must be in writing and contain the following information:

•

the name and address of each limited partner and its residency status, and if the residency status changed during the year, the details of the changes;

•

if a partner is claiming to be tax exempt in the country of residence, the details of the facts that qualify the partner to be tax exempt;

•

details of:

-

each partner's committed capital; and

-

any acquisition or disposal of a partner's equity interest in the partnership during the year, including any consideration given or received for the acquisition or disposal;

•

details of any variation made to the partnership agreement during the year;

•

details of:

-

investments the partnership made during that year;

-

investments the partnership holds at the end of the year; and

-

any investments disposed of during the year including any profits or losses made on the disposal; and

•

a statement from the general partner that the partnership met the registration requirements of a VCLP or an AFOF, as the case may be, throughout the financial year.

[Part 2, section 11-1 of the VC Bill]

Further information in returns

5.38 If the PDF Board decides that specified information is to be provided in an annual return it will make a resolution to that effect. The determination will be in writing and signed by the Chairman of the PDF Board. [Part 2, subsection 15-5(1) of the VC Bill]

5.39 Any determinations made will be disallowable instruments for the purposes of section 46A of the Acts Interpretation Act 1901 . [Part 2, subsection 15-5(2) of the VC Bill]

Quarterly returns

5.40 The general partner of a VCLP or an AFOF must give the PDF Board a return within 1 month of the end of each quarter (a quarter for these purposes is a 3 month period ending on 31 March, 30 June, 30 September or 31 December). The return must include details of all investments made and disposed of during the quarter and show the profit or loss on disposal and how it was calculated. [Part 2, section 15-10 of the VC Bill]

5.41 If the VCLP or AFOF fails to notify the PDF Board about these investments then registration may be revoked.

Revocation of registration

5.42 If the registration of a partnership as a VCLP or an AFOF is revoked the partnership ceases to be taxed as an ordinary partnership. From the time its registration is revoked the partnership will be taxed as a company and will not be able to be registered again as a VCLP or an AFOF. Eligible partners in a VCLP will not qualify for the tax exemption on any profits or gains made on the disposal of eligible venture capital investments.

5.43 Given the serious consequences for a limited partnership that loses its registration as a VCLP or an AFOF, the PDF Board will not revoke a partnership's registration until it has notified the general partner of the matters that may result in registration being revoked and given the partnership time to remedy the breaches and to make submissions on the matter. The PDF Board may allow longer period for remedying breaches of an investment requirement than for an 'other' requirement as more time may be required.

Revocation for not meeting investment registration requirements

5.44 The PDF Board has the power to revoke the registration of an eligible VCLP or AFOF if the PDF Board has reason to believe that the VCLP or AFOF does not meet the investment registration requirements (see paragraphs 5.14 and 5.19).

5.45 However before exercising this power, the PDF Board must give the general partner of the partnership notice that if the requirements are not satisfied at the end of a specified period, registration will be revoked. [Part 2, subsection 17-1(1) of the VC Bill]

5.46 The PDF Board must give the partnership a reasonable period of time (but not more than 6 months) to rectify the concerns the PDF Board may have concerning the investment registration requirements. [Part 2, subsection 17-1(2) of the VC Bill]

5.47 The notice given to the general partner referred to in paragraph 5.45 must:

•

state the matters the PDF Board considers may be grounds for revocation of registration;

•

state the period within which the investment registration requirements must be complied with; and

•

advise the general partner that it can make written submissions to the PDF Board about matters raised in the notice.

[Part 2, subsection 17-1(3) of the VC Bill]

5.48 The general partner may make submissions to the PDF Board about the matters in the notice. [Part 2, subsection 17-1(4) of the VC Bill]

5.49 The PDF Board will revoke the registration of the VCLP or the AFOF if they are satisfied that after a reasonable period of time, the partnership does not meet the investment registration requirements of a VCLP or an AFOF. [Part 2, subsection 17-1(5) of the VC Bill]

Revoking registration for not meeting other registration requirements

5.50 The PDF Board has the power to revoke the registration of an eligible VCLP or AFOF if the PDF Board has reason to believe that the VCLP or AFOF does not meet other registration requirements, that is registration requirements that are not investment registration requirements (see paragraphs 5.13 and 5.18). [Part 2, subsection 17-5(1) of the VC Bill]

5.51 Before exercising this power, the PDF Board must notify the general partner of the partnership that it will revoke registration if these requirements are not satisfied within 60 days. [Part 2, subsection 17-5(1) of the VC Bill]

5.52 The notice given to the general partner must:

•

state the grounds the PDF Board feels may be grounds for revocation of registration;

•

state that the general partner can apply for an extension of the 60 day period within which the requirements must be satisfied; and

•

advise the general partner that it can make written submissions to the PDF Board about matters raised in the notice within the 60 day period or the extended period.

[Part 2, subsection 17-5(2) of the VC Bill]

5.53 The general partner may apply for an extension of the 60 day period. [Part 2, subsection 17-5(3) of the VC Bill]

5.54 The PDF Board also may extend the 60 day period if it is satisfied the partnership is making reasonable progress towards meeting the requirements and that the requirements are likely to be met within the extended period. [Part 2, subsection 17-5(4) of the VC Bill]

5.55 The general partner can make submissions to the PDF Board about the matters of concern during the 60 day period or, if the PDF Board has extended the period, during the extended period. [Part 2, subsection 17-5(5) of the VC Bill]

5.56 The PDF Board will revoke the registration of the VCLP or the AFOF if, after considering any submissions, it is satisfied that at the end of the 60 day period or the extended period, the partnership does not meet the other registration requirements of a VCLP or an AFOF. [Part 2, subsection 17-5(5) of the VC Bill]

Revocation at the discretion of the PDF Board

5.57 A VCLP or AFOF may have its registration revoked if it:

•

failed to lodge an annual return;

•

failed to lodge a quarterly return;

•

failed to provide information the PDF Board has requested; or

•

received more than 1 notice from the PDF Board within a 12 month period for breaching the registration requirement that the partnership must only hold eligible venture capital investments (an AFOF may, of course, hold an investment in a VCLP without breaching this requirement).

[Part 2, subsection 17-10(1) of the VC Bill]

5.58 However, the PDF Board must not revoke the registration of a VCLP or an AFOF unless it has given the general partner 28 days to make submissions about the failure to provide the required return or notification and considered any submissions made. [Part 2, subsection 17-10(2) of the VC Bill]

Notice of revocation

5.59 If the PDF Board decides to revoke a partnership's registration it must notify the general partner and set out the reasons for deciding to revoke. [Part 2, subsection 17-15(1) of the VC Bill]

5.60 The revocation takes effect from the day the PDF Board decides to revoke registration. The partnership ceases to be a VCLP or an AFOF and will be taxed as a company from that day. [Part 2, subsection 17-15(2) of the VC Bill]

Revocation on application by a partnership

5.61 A partnership may apply to have its registration revoked by requesting the PDF Board in writing to revoke its registration. [Part 2, subsection 17-20(1) of the VC Bill]

5.62 On receiving the application for revocation by the partnership, the PDF Board must take steps to comply with the request as soon as practical. [Part 2, subsection 17-20(2) of the VC Bill]

5.63 The revocation takes effect on the day the notice is given to the general partner. [Part 2, subsection 17-20(3) of the VC Bill]

Registration of eligible venture capital investors

5.64 A direct investor entity will qualify for the tax exemption on profits and gains made on the disposal of venture capital investments if the investor is registered with the PDF Board as an eligible venture capital investor.

5.65 The entity may apply to the PDF Board for registration within 30 days after it makes its first eligible venture capital investment. [Part 3, subsections 21-5(1) and (2) of the VC Bill]

5.66 An application by an investor must be in writing and include the following information:

•

the residency status of the applicant;

•

details of the applicant's tax exempt status in its country of residence and details of the facts that qualify the applicant as a tax-exempt non-resident;

•

the address of the applicant's registered office;

•

the details of the first venture capital investee company in which the applicant has invested (or proposes to invest) and the industry in which it operates; and

•

the amount of the investment and the date on which it was or is to be made, and details of other investments that are not venture capital investments that the entity holds in the company.

[Part 3, subsection 21-5(3) of the VC Bill]

5.67 The PDF Board must register the applicant if it is satisfied that all information has been provided. [Part 3, subsection 21-5(4) of the VC Bill]

5.68 If the PDF Board registers the applicant, the PDF Board must notify the applicant within 60 days after the application was made. [Part 3, subsection 21-5(5) of the VC Bill]

Period within which the application is decided

5.69 The PDF Board is required to make a decision within 60 days of the application being lodged. However, the PDF Board has a discretion to extend the period (by up to 60 days) in which to decide the application but only if written notice is given to the applicant. The PDF Board must then decide the application within the extended period. [Part 3, section 21-10 of the VC Bill]

Date of effect of registration

5.70 If the PDF Board approves the registration of the investor as an eligible capital investor, the registration comes into effect on the day on which the first venture capital investment is made in the venture capital company. [Part 3, subsection 21-15(1) of the VC Bill]

5.71 The registration will be in force until it is revoked by the PDF Board. [Part 3, subsection 21-15(2) of the VC Bill]

Annual return

5.72 Each eligible investor must give the PDF Board an annual return within 3 months of the end of each financial year. If the annual return is not received within this time period, then it may be grounds for the PDF Board to revoke the registration of the eligible investor.

5.73 The annual return must contain the following information:

•

the investor's residency status as at the end of the financial year;

•

the address of the investor's registered office;

•

details of the facts that qualify the investor to be tax exempt in its country of residence;

•

details of eligible venture capital investments made during the year, disposed of during the year, held at the end of the year and any profits or losses incurred on the disposal of the investments; and

•

the industries to which these investments relate.

[Part 3, section 21-20 of the VC Bill)]

Revocation of registration

5.74 The PDF Board may revoke an eligible investor's registration if it fails to lodge an annual return. [Part 3, subsection 21-25(1) of the VC Bill]

5.75 As soon as the PDF Board has revoked the registration of an eligible investor it must give the investor a notice which advises of the revocation and sets out the PDF Board's reasons for deciding to revoke. [Part 3, subsection 21-25(2) of the VC Bill]

5.76 However, the PDF Board must not revoke the registration of an eligible investor unless it has given the investor 14 days to make written submissions to the PDF Board about the failure to provide the required return or notification, and considered any submissions made. [Part 2, subsection 21-25(3) of the VC Bill]

Revocation on application

5.77 An eligible investor may make a written request to the PDF Board to revoke its registration. [Part 2, subsection 21-25(3) of the VC Bill]

5.78 The PDF Board must take steps to comply with the request to revoke the registration as soon as practical. [Part 2, subsection 17-20(2) of the VC Bill]

5.79 The revocation takes effect on the day notice is given to the investor. [Part 2, subsection 21-25(3) of the VC Bill]

Determinations by the PDF Board - certain investments

5.80 A general partner may apply to the PDF Board to:

•

shorten the 12 month period an investee company is required to meet residency and location requirements; or

•

waive the requirement to comply with either or both the requirements relating to performance of services or the situating of assets in Australia (see paragraph 3.12).

Determination to shorten 12 month period

5.81 A venture capital investee company is required to be an Australian resident at the time a venture capital investment is made in the company and to continue to be an Australian resident for a period of 12 months. Further, if it is the first investment made in the company by the investor, the company must also:

•

have more than 50% of the persons engaged by the company at that time to perform services, actually performing those services primarily in Australia; and

•

have more than 50% of its assets (determined by value) situated in Australia,

for a period of at least 12 months from the date of the initial investment.

5.82 The general partner of a VCLP or an AFOF that holds an investment may apply to the PDF Board, in an approved form, for a determination reducing the 12 month period during which these requirements are to be satisfied. [Part 4, subsection 25-5(1) and (2) of the VC Bill]

5.83 The PDF Board may make principles it will apply in considering whether to make a determination. These principles will be a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901 . In making a determination the PDF Board will apply principles contained in that statement. [Part 4, subsections 25-5(3), (4) and (7) of the VC Bill]

5.84 If the PDF Board decides to determine a period shorter than 12 months the PDF Board will notify the VCLP or AFOF as soon as practicable after making that decision. [Part 4, subsection 25-5(5) of the VC Bill]

5.85 If the PDF Board refuses to make a determination to shorten the 12 month period, it must notify the general partner and set out the reasons for its refusal. [Part 4, subsection 25-5(6) of the VC Bill]

Determination that the location of assets and/or employees not apply

5.86 In relation to the requirement that the company:

•

have more than 50% of the persons engaged by the company at that time to perform services, actually performing those services primarily in Australia; and

•

have more than 50% of its assets (determined by value) situated in Australia,

the general partner of a VCLP or an AFOF that holds an investment may apply to the PDF Board, in an approved form, for a determination that either or both of these requirements not apply. [Part 4, subsections 25-10(1) and (2) of the VC Bill]

5.87 The PDF Board may make principles it will apply in considering whether to make a determination. These principles will be a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901 . In making a determination the PDF Board will apply principles contained in that statement. [Part 4, subsection 25-10(3), (4) and (7)) of the VC Bill]

5.88 If the PDF Board decides to waive either or both of these requirements, the PDF Board will notify the VCLP or an AFOF as soon as practicable after making that decision. [Part 4, subsection 25-10(5) of the VC Bill]

5.89 If the PDF Board refuses to make a determination that a requirement not apply, it must notify the general partner and set out the reasons for its refusal. [Part 4, subsection 25-10(6) of the VC Bill]

Consequential amendments

Amendments to the ITAA 1997

5.90 The Taxation Laws Amendment (Venture Capital) Bill 2002 inserts a definition of the terms form approved by the PDF Board and permitted loan into the ITAA 1997. Both these terms are defined to have the same meaning as in the Venture Capital Bill 2002. [Schedule 4, items 1 and 2 of the TLA(VC) Bill; subsection 995-1(1) of the ITAA 1997]

Amendment to the Pooled Development Funds Act 1992

5.91 An AFOF is defined to mean an Australian venture capital fund of funds and to have the same meaning as in subsection 118-410(3) of the ITAA 1997 (see paragraph 2.8). [Schedule 4, item 3 of the TLA(VC) Bill; subsection 4(1) of the PDF Act 1992]

5.92 The term limited partnership is defined to have the same meaning as in the ITAA 1997. [Schedule 4, item 4 of the TLA(VC) Bill; subsection 4(1) of the PDF Act 1992]

5.93 A VCLP is defined to mean an venture capital limited partnership and to have the same meaning as in subsection 118-405(2) of the ITAA 1997 (see paragraph 2.5). [Schedule 4, item 5 of the TLA(VC) Bill; subsection 4(1) of the PDF Act 1992]

5.94 The functions of the PDF Board are set out in section 6 of the PDF Act 1992. Section 6 is amended to add the following functions:

•

registering limited partnerships as VCLPs or AFOFs;

•

registering entities as eligible venture capital investors;

•

making determinations relating to the location requirements of a venture capital company (see paragraph 5.83 and 5.87); and

•

giving information it obtains relating to the registration of VCLPs, AFOFs and eligible venture capital investors to the Commissioner for the purpose of implementing and administering the taxation law.

[Schedule 4, item 6 of the TLA(VC) Bill; subsection 6(3) of the PDF Act 1992]

5.95 The secrecy provision is amended to allow members of the PDF Board and its staff and consultants to disclose information for the purposes of the Venture Capital Bill 2002. [Schedule 4, item 7 of the TLA(VC) Bill; paragraph 71(1)(d) of the PDF Act 1992]

5.96 The definition of tax law for the purposes of the secrecy provision in subsection 71(5) includes the Venture Capital Bill 2002. [Schedule 4, item 7 of the TLA(VC) Bill; subsection 71(5) of the PDF Act 1992]

5.97 The PDF Board cannot delegate to a member of the PDF Board its power to:

•

register limited partnerships as VCLPs or AFOFs or revoke their registration under Part 3 of the Venture Capital Bill 2002;

•

register entities as eligible venture capital investors or revoke registration under Part 3 of the Venture Capital Bill 2002;

•

make determinations under Part 4 of the Venture Capital Bill 2002.

[Schedule 4, item 9 of the TLA(VC) Bill; paragraphs 72(1)(c) to (e) of the PDF Act 1992]

5.98 The PDF Board cannot delegate to a committee of 2 or more of its members its power to:

•

register limited partnerships as VCLPs or AFOFs or revoke their registration under Part 3 of the Venture Capital Bill 2002;

•

register entities as eligible venture capital investors or revoke registration under Part 3 of the Venture Capital Bill 2002;

•

make determinations under Part 4 of the Venture Capital Bill 2002.

[Schedule 4, item 10 of the TLA(VC) Bill; paragraphs 73(1)(c) to (e) of the PDF Act 1992]

5.99 The PDF Board's power to:

•

register limited partnerships as VCLPs or AFOFs or revoke their registration under Part 3 of the Venture Capital Bill 2002;

•

register entities as eligible venture capital investors or revoke registration under Part 3 of the Venture Capital Bill 2002; or

•

make determinations under Part 4 of the Venture Capital Bill 2002,

cannot be performed by a member, or exercised in writing signed by a member, pursuant to a resolution of the PDF Board. [Schedule 4, item 11 of the TLA(VC) Bill; paragraphs 74(2)(c) to (e) of the PDF Act 1992]

Miscellaneous

Annual report

5.100 The PDF Board must prepare and give the Minister a report of its operations as soon as practical after the end of a financial year. [Part 6, subsection 33-1(1) of the VC Bill]

5.101 The report must include:

•

a list of partnerships that were registered as VCLPs or AFOFs at the end of the financial year;

•

a list of partnerships that became registered as VCLPs or AFOFs during the financial year; and

•

a list of partnerships whose registrations as VCLPs of AFOF were revoked during the year.

[Part 6, subsection 33-1(2) of the VC Bill]

5.102 The report must also include the following information relating to eligible venture capital investors:

•

a list of entities that were registered at the end of the financial year;

•

a list of entities whose registrations were revoked during the financial year; and

•

a list of entities whose registrations were revoked during the financial year.

[Part 6, subsection 33-1(3) of the VC Bill]

Form approved by the PDF Board

5.103 A notice or application is in the form approved by the PDF Board if it:

•

is in the form approved for the particular kind of application;

•

contains a declaration signed by the person required to sign the form;

•

contains the information the form requires and any further information, statement or document the PDF Board requires; and

•

is given in the form the PDF Board requires which may be electronically.

[Part 6, subsection 35-5(2) of the VC Bill]

5.104 The bill provides that the Governor-General may make regulations prescribing matters that are required or permitted to be prescribed or are necessary or convenient to be prescribed for carrying out or giving effect to the bill. [Part 6, subsection 33-10 of the VC Bill]