New Authorisation Requirements For Foreign Insurers
On 8 April 2008, APRA and ASIC jointly reminded direct offshore foreign insurers (DOFIs) and local insurance brokers about the new authorisation requirements for foreign insurers that come into effect on 1 July 2008. Following the passage of the Financial Sector Legislation Amendment (Discretionary Mutual Funds and Direct Offshore Foreign Insurers) Act 2007 (Cth) on 13 September 2007, DOFIs desiring to operate in the Australian market must be authorised by APRA.
The purpose of the new requirements is to ensure that Australian policyholders have the security of Australia's prudential regime and are protected from dealing with unauthorised DOFIs that would not meet the standards of an APRA approved insurer.
The Assistant Treasurer, Chris Bowen, announced that some business will still be able to be placed with unauthorised DOFIs, as long as this business is placed in accordance with an exemption regime. The limited exemptions that have been developed are classified under three limbs. Firstly, high valued insureds, covering complex global risk; secondly, atypical risk areas such as war, terrorism and biological risk and; thirdly, customised (unique) risk.
Click here to access the media release and more information regarding the limited exemption regime.
Draft Prudential Framework For General Insurance Groups Released
On 15 April 2008, APRA released a package of its draft prudential framework for supervision of general insurance groups. The package consists of three draft prudential standards and a discussion paper that responds to submissions made following consultation rounds in 2006 and 2007. The package also responds to recommendations 38 and 39 of the HIH Royal Commission.
In designing the draft package, APRA approached the supervision of general insurance groups on the basis that the group as a whole should essentially meet the same minimum capital requirements as apply to individual general insurers. The application of prudential supervision at a group level would help maintain the standards of individual general insurers within the group.
In addition to governance, the draft prudential framework would require general insurance groups to satisfy APRA standards in relation to risk management, audit, actuarial reporting and valuation.
It is intended that the final prudential standards will be released in the third quarter of 2008 and will become effective on 1 January 2009.
Click here to access the media release, the package of draft standards and the discussion paper.
Hobie Cat Australasia Fined $168,000 For Resale Price Maintenance
The kayak and sailboat supplier, Hobie Cat Australasia Pty Ltd (Hobie), has been fined $168,000 by the Federal Court for engaging in resale price maintenance in contravention of section 48 of the Trade Practices Act 1974 (Cth).
Hobie admitted to the ACCC's allegations that it had engaged in resale price maintenance by including in its dealership agreements, terms which prohibited dealers from selling or advertising Hobie products below the recommended retail prices, or at prices no less than 10% below the recommended retail prices.
In addition to the penalty, Justice Finn made further consent orders, including that: Hobie establish a trade practices compliance program, and maintain that program for a period of three years; Hobie write to all of its dealers advising them that it had engaged in illegal conduct and that it cannot specify to retailers a minimum price below which goods are not to be sold; and Hobie pay the ACCC's costs.
Justice Finn noted that the penalty was substantial and significant for a company of Hobie's size but was proportionate to the seriousness of its contraventions.
Click here to view the media release.
Goldlink Income plus Limited Panel Declines To Commence Proceedings On 8 April 2008 the Takeovers Panel (Panel) declined to commence proceedings on an application from New Opportunity Limited (Applicant) regarding the affairs of GoldLink IncomePlus Limited (GoldLink). The Applicant is a GoldLink shareholder with voting power of 20%.
On 4 April 2008 a general meeting of GoldLink was held which was called to consider changes to the board proposed by Bell IXL Investments Limited, Cellante Securities Pty Limited and K Pagnin Pty Limited (together Bell Entities). The Bell Entities had voting power in GoldLink of 20%, holding 19,468,960 shares with a right to acquire 6 million GoldLink shares under a share purchase agreement (SPA).
The resolutions in the general meeting involved the removal of the existing board of directors and the appointment of various nominees, including Mr Anthony Lewis. It was alleged by the Applicant that entities associated with Mr Lewis, which had a voting power of approximately 1.9%, were associated with the Bell Entities as: in accepting the nomination as a director, Mr Lewis must have entered into an agreement with the Bell Entities concerning controlling or influencing the board; and Mr Lewis has admitted that he was acting in concert or was proposing to act in concert with the Bell Entities.
The Bell Entities denied being associated with Mr Lewis in the manner alleged.
In deciding not to commence proceedings the Panel was concerned whether there were any appropriate orders it could reasonably make, were it to commence proceedings. This was because the SPA was terminated on 28 March 2008 and a subsequent share purchase agreement was entered into in respect of 3.5 million shares (New SPA), 2.5 million shares less than the SPA. The New SPA gave the alleged associates a combined voting power of 19.94%.
The Panel was satisfied the New SPA was completed and that no proxies had been given in relation to the remaining 2.5 million shares which are no longer subject to the New SPA.
The Panel concluded there was no reasonable prospect of declaring unacceptable circumstances and as a result declined to commence proceedings.
Click here to access the Panel's reasons.
Equity Derivatives Guidance Note And Response Paper Released
On 11 April 2008 the Takeovers Panel (Panel) released Guidance Note 20: Equity Derivatives (Note). The Note details when the use of equity derivatives may constitute unacceptable circumstances and will assist market participants in understanding the Panel's approach to disclosure requirements.
In determining unacceptable circumstances the Panel is mostly concerned with transactions that affect, or is likely to affect, the control or potential control of a company or the acquisition or proposed acquisition of a substantial interest in a company. Consideration will be given to the type of equity derivative used, the parties involved and the relationship of the derivative transaction to the element of control.
For more information regarding disclosure requirements and more specific information regarding the Panel's opinion on unacceptable circumstances, please see the Note.
The Panel also released Equity Derivatives Public Consultation Response Statement (Response Statement), the Panel's response to the public consultation process regarding the drafting of the Note.
Click here to view the Note and the Response Statement in full.
Collateral Benefits Guidance Note Released
On 14 April 2008 the Takeovers Panel (Panel) released Guidance Note 21: Collateral Benefits (Note). The Note describes when collateral benefits may constitute unacceptable circumstances.
The Panel's Note is predicated on the basis that unacceptable circumstances will be likely to exist whenever a bidder provides a security holder something of value which it does not offer to other security holders.
In determining whether a collateral benefit has been offered, given or received, the Panel will have regard to all circumstances, but will be specifically concerned with whether the equality principle is offended; whether the efficient, competitive and informed market principle is offended; whether there is a contravention of section 623 of the Corporations Act 2001 (Cth); and whether it gives rise to unacceptable circumstances. In addition to these considerations, the Panel is concerned with whether the collateral benefit is connected to a control transaction, temporally or otherwise.
Click here to access the Note.
Revision Of Unacceptable Circumstances
On 18 April 2008, the Takeovers Panel (Panel) released a revised version of Guidance Note 1: Unacceptable Circumstances (Note). The Note discusses when the Panel may make a declaration of unacceptable circumstances under section 657A of the Corporations Act 2001 (Cth).
The revised Note updates some references and adds to examples, in paragraph 1.18, of circumstances when unacceptable circumstances may be declared. The revision is due to the continued evolution and monitoring of market practices. A draft form was not published because the amendments do not involve a change of policy.
Click here to access the revised Note.
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