In this first-blog series, we examine the obligation of AFSL
holders to determine whether there has been a change of control in
their entity, and subsequently report any changes to ASIC.
ASIC has recently been clamping down on AFSL holders who become
aware of any changes in control over their entity but have failed
to notify ASIC of this change.
You may be aware that companies have to notify ASIC when their
shareholders or officeholders change, which could denote a change
of control. However, these notifications do not constitute a
notification to ASIC to satisfy the obligations under your AFSL. If
the change also results in a change of the licensee's ultimate
holding company, a single transaction could result in three
separate notifications to ASIC!
We also note that the Government is concerned about the
prevalence of secondary trading in AFSLs, and has just announced an
intention to grant ASIC the power to approve changes of control for
AFSL holders, so the procedures for notification will likely change
Has a change of control occurred?
Regulation 7.6.04(2) of the Corporations Regulations
2001 provides details on how you can determine if a change of
control has taken place.
A 'change in control' includes a transaction, or a
series of transactions, in a 12-month period that results in a
person having control of the financial services licensee (either
alone or together with associates of the person).
Under the regulations, 'control' means:
Having the capacity to cast, or control the casting of, more
than one half of the maximum number of votes that might be cast at
a general meeting of the financial services licensee; or
Directly or indirectly holding more than one half of the issued
share capital of the financial services licensee (not including any
part of the issued share capital that carries no right to
participate beyond a specified amount in a distribution of either
profits or capital); or
The capacity to control the composition of the financial
services licensee's board or governing body; or
The capacity to determine the outcome of decisions about the
licensee's financial and operating policies, taking into
the practical influences the person can exert (rather than the
rights it can enforce)
any practice or pattern of behaviour affecting the financial
services licensee's financial or operating policies to be taken
into account (whether or not it involves a breach of an agreement
or a breach of trust)
It is important to note that there can be (and often are)
several parties that have control under one or more of the tests,
and a change in any of these tests triggers the requirements to
For example, you may have a majority shareholder that controls
the casting of votes at a general meeting, but there may be a
related entity that controls the composition of the licensee's
board as well as a powerful CEO that can practically influence the
outcome of decisions about the licensee's policies. A change in
a majority shareholding;
the power to compose the board; or
the identity of the CEO would, in this case, trigger the need
to notify ASIC under the AFSL.
There may also be a case where there is a technical, but not
substantive, change of control. For example, imagine a licensee
that is a wholly owned subsidiary of
Company B, where Company B is wholly owned by Company X. Company
X owns a range of businesses, and would prefer that the licensee is
instead owned by Company C. In this case there is no change of
ultimate control, but the entity with the capacity to cast votes at
a general meeting is no longer Company B, but now Company C.
Therefore, this is a change of control under the first limb of the
definition, and would generally trigger the need to notify
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
This newsletter includes links to recent documents relating to superannuation, funds management & financial services.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).