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Securities Commission policy in respect of section 6(1) of the Securities Amendment Act 1988. Discussion paper [2002] NZSecCom 3 (11 March 2002)

Last Updated: 7 November 2014

Securities Commission Policy in Respect of
Section 6(1) of the Securities Amendment Act 1988

A DISCUSSION PAPER
SECURITIES COMMISSION

The Securities Commission is an independent statutory body. One of the Commission's functions, as provided by section 6(1) of the Securities Amendment Act 1988, is to designate a person or class of persons, as being a person whose relevant interest in a voting security should be disregarded in certain circumstances. The Commission has decided to review aspects of its policy in performing this function. This discussion paper has been prepared to assist in this review.

We invite comment on the matters raised in this paper. Any comments or submissions received are subject to the Official Information Act 1982. It is the practice of the Commission to make submissions available on request and where appropriate to draw attention to them in any further paper.

If you would like us to withhold information included in comments on this paper would you please let us know. Any request to withhold information will be considered in accordance with the Official Information Act 1982.

Securities Commission
12th Floor, Reserve Bank Building
2 The Terrace
PO Box 1179
WELLINGTON

Ph (04) 472 9830
Fax (04) 472 8076
E mail seccom@seccom.govt.nz
Web site www.seccom.govt.nz

11 March 2002

TABLE OF CONTENTS

PART I INTRODUCTION

Invitation to Comment

PART II COMMISSION'S POWER OF DESIGNATION

Part II of the Securities Amendment Act 1988
Section 6(1) of the Securities Amendment Act 1988
Other Legislation
Discussion Questions

PART III COMMISSION'S CRITERIA AND PROCEDURES FOR DESIGNATING PERSONS

Nominee Companies
Undertakings
Discussion Questions

PART IV CLASS DESIGNATION FOR REGISTERED BANKS

Discussion Questions

PART V NEED FOR AN ONGOING REGULATORY ROLE

Discussion Questions

APPENDIX 1 DISCUSSION QUESTIONS

APPENDIX 2 LEGISLATION

Section 5 Securities Amendment Act 1988
Section 6 Securities Amendment Act 1988
Section 147 Companies Act 1993
Section 609 Australian Corporations Law

APPENDIX 3 PERSONS CURRENTLY DESIGNATED BY 23 THE COMMISSION

PART I
INTRODUCTION

1. The Commission is reviewing aspects of its policy and procedures in relation to its power, pursuant to sections 6(1)(a), (b) and (e) of the Securities Amendment Act 1988 ("the Amendment Act") , to designate a person as being a person whose relevant interest in a voting security should be disregarded for the purposes of Part II of the Amendment Act.
2. This paper seeks comment as to what criteria and procedures should be applied by the Commission in determining whether to designate persons pursuant to section 6(1).
3. In broad terms, we have examined the following policy questions:
   1. Is there a need for a power of designation in New Zealand's securities regulatory system? Are there alternatives, without the need for the Commission's involvement, to ensure that the relevant interests of appropriate persons are disregarded where appropriate in accordance with the present general policy of the law?
   2. Why should the Commission be empowered to designate persons?
   100. Assuming the Commission is to continue its role of designating persons, what criteria and procedures should be applied by the Commission in determining whether to designate persons?
   4. Is there a need for the Commission to have an ongoing regulatory role in respect of designated persons?

and as a particular question:

5. Should the Commission designate all registered banks within the meaning of section 2 of the Reserve Bank of New Zealand Act 1989 on a class basis?

Invitation to Comment

4. We invite general comment on the role that the Commission has played to date in administering its discretion under section 6 of the Amendment Act and on any suggestions for change. A number of discussion questions are set out at the end of each Part and for convenience these are repeated in Appendix 1. We would be pleased to receive any views, observations or comments that you may wish to make to us about this paper generally, including submissions in respect of the discussion questions.
5. This paper may be downloaded from the Commission's web site (www.seccom.govt.nz). Comments on this discussion paper should be sent to the Commission by Friday 31 May 2002. They can be e-mailed to tim.dolan@seccom.govt.nz or sent in hard copy to:

Tim Dolan
Solicitor
Securities Commission
Facsimile: (04) 472 8076
PO Box 1179
WELLINGTON

PART II
COMMISSION'S POWER OF DESIGNATION

6. Section 6(1) of the Amendment Act allows the Commission to designate a person as being a person whose relevant interest in a voting security should be disregarded for the purposes of Part II of the Amendment Act.
   
   Part II of the Securities Amendment Act 1988
7. When introducing the Amendment Act the Right Honourable Geoffrey Palmer (as the then Minister of Justice) discussed the significance of Part II. He noted that ((21 July 1988) 490 NZPD 5282-5283):

Part II implements the 1982 report of the Securities Commission on nominee shareholdings in public companies. In that report the commission recommended the implementation of legislation requiring persons holding, through a nominee, 5 percent or more of the shares in a listed public company to disclose their interest to the company and to the stock exchange. The Securities Commission believes that such legislation would promote an informed market and open dealings. Participants in the public market should have equal access to price-sensitive information, including information about the identity of persons who are entitled to exercise, or control the exercise of, significant voting rights in a public company. A disclosure regime is necessary to ensure that the public market remains what it is intended to be - a market to which members of the public have access, not as participants and observers. In its insider trading report the commission points out that there is little point in providing remedies against insider trading if the transactions themselves are concealed. A nominee shareholding disclosure law will not only complement remedies against insider trading, but will in itself go a very long way to inhibit that kind of trading.

8. In Brook Investments Ltd (in vol liq) v Paladin Ltd ((21 October 1989) High Court Auckland M 1581/89) Sinclair J commented on the purpose of Part II. He stated that it was designed to (at page 18):

ensure that a public issuer, its members, the Stock Exchange and the investing public at large are kept informed as to the ownership of voting securities in a public issuer and as to the identity of those who are, or may be, in a position to control the company. In particular it is aimed at restricting secret dealing in shares for a takeover advantage.

9. Sections 20 to 36 form Part II of the Amendment Act. These sections relate to disclosure of the identity and holdings of substantial security holders in public issuers. A substantial security holder is a person who has a relevant interest in five percent or more of the voting securities of a public issuer or body. Section 5 of the Amendment Act contains detailed provisions relating to the meaning of relevant interest. We have reproduced section 5 in Appendix 2 for convenience. In broad terms section 5 provides that a person has a relevant interest in a voting security regardless of whether that person is the registered holder of the security, if that person is a beneficial owner of the voting security or has the power to exercise, or control the exercise of, any right to vote attached to the security.
10. Section 20 provides that every person who is a substantial security holder in a public issuer shall give notice that the person is a substantial security holder to the public issuer and any stock exchange on which the securities are listed. Section 21 states that substantial security holders shall also notify the public issuer, and any stock exchange on which the securities are listed, of changes of one percent or more of the total number of issued voting securities of the public issuer. Substantial security holders are also required to notify changes in the nature of relevant interests held pursuant to section 22. Sections 23(2) and (3) provide exceptions from these provisions in certain circumstances where another person complies with the sections on behalf of the holder of the relevant interest.
11. Part II also provides for a wide range of court orders. Under section 30 the Court has jurisdiction to make certain orders where it has reasonable grounds to suspect that a substantial security holder has not complied with Part II. Section 32 details the orders that the Court can make. These include directions requiring compliance with Part II, prohibiting the exercise of voting rights, suspending registration of share transfers, or ordering the forfeiture of any voting securities of the public issuer.

Section 6(1) of the Securities Amendment Act 1988

12. Section 6(1) of the Amendment Act provides that relevant interests should be disregarded in certain circumstances. We have reproduced section 6 in Appendix 2 for convenience. The section recognises that where certain persons do not have or do not wish to exercise all the rights of beneficial ownership attached to such securities, it may not be necessary for them to comply with Part II.
13. Designation does not entitle the designated person to have all its relevant interests disregarded. The designation applies only where a relevant interest is held in the ordinary course of the designated person's business as a lender of money for the provision of financial services, a sharebroker, trustee corporation or nominee company.
14. Section 6(1)(a) empowers the Commission to designate persons whose ordinary business consists of, or includes, the lending of money or the provision of financial services and who hold shares as security in the ordinary course of business. The designated person does not have to be a registered bank.
15. In the Australian case of Haughton Properties Pty Ltd (rec and mgr appointed) v Sandridge City Development Company Pty Ltd ((1995) [1995] FCA 1469; 13 ACLC 1), the Supreme Court of Victoria held that the Australian equivalent of section 6(1)(a) (then section 38, now section 609(1) of the Corporations Law) is to be interpreted liberally to include not only financiers but also receivers appointed by financiers in respect of a company. The principal reason in the Australian context for finding that a receiver appointed in respect of company A, which held shares in company B, did not acquire a relevant interest in the shares of company B was that holding otherwise would mean that a receiver could never be appointed to a company that held more than 20 percent of the voting shares of another company as this would result in the receiver acquiring more than the prescribed percentage of shares permitted by the Corporations Law without a formal takeover bid. The Court noted (at page 6) that such an interpretation would also lead to the conclusion that a receiver in such an instance would be bound to give a substantial shareholder notice pursuant to the Australian law.
16. Section 6(1)(b) provides that no account shall be taken of a relevant interest where a person has that relevant interest only by reason of acting for another person to acquire or dispose of that security in the ordinary course of their broking business and the person is a member of a stock exchange. In addition the section empowers the Commission to designate persons who are not members of a stock exchange, but who are buying or selling securities on behalf of clients in the ordinary course of their business as a sharebroker. As noted in Appendix 3, only one person has been designated by the Commission pursuant to section 6(1)(b).
17. Section 6(1)(c) provides for a relevant interest to be disregarded where a person holds the relevant interest by reason only of that person being authorised to act as the representative of a body corporate at a particular meeting of members of a public issuer. The section requires a copy of the resolution appointing the person as the body corporate's representatives at the meeting to be deposited with the public issuer at least 48 hours before the meeting. Section 6(1)(c) does not provide for the Commission to have designated such a person. Such a requirement would appear to be impractical and difficult to administer.
18. Section 6(1)(d) provides that a relevant interest should be disregarded where the relevant interest is held solely by reason of the person being appointed as proxy to vote at a particular meeting of members of a public issuer. A copy of the instrument of appointment must be deposited with the public issuer at least 48 hours before the meeting. As with section 6(1)(c) this section does not provide for the Commission to have designated such a person. Such a requirement would again appear to be impractical and difficult to administer.
19. Section 6(1)(e) empowers the Commission to designate a person who is either a trustee corporation or a nominee company and who has a relevant interest by reason only of acting for another person in the ordinary course of business as a trustee corporation or nominee company.
20. Section 6(1)(f) provides that a relevant interest should be disregarded where it is held by reason only that the person is a bare trustee of a trust to which the voting security is subject. This section, as with section 6(1)(c) and (d), does not provide for the Commission to have designated such a person. Such a requirement would appear to be unnecessary.
21. By empowering the Commission to designate persons as coming within either section 6(1)(a), (b) or (e) of the Amendment Act the legislature has allowed the Commission discretion when considering whether to designate persons. As discussed in Part III of this paper, the Commission uses its discretion when administering this function.

Other Legislation

22. Both the Companies Act 1993 and the Australian Corporations Law provide that the relevant interests of certain persons should be disregarded in certain cases. Both provisions allow for interests similar to those described in section 6(1)(a),(b) and (e) of the Amendment Act to be disregarded. Neither provision requires that another body or organisation must first designate such persons. Is it necessary for the Commission to continue to designate such persons for the purposes of the Amendment Act?
23. Section 147(1) of the Companies Act 1993 provides that for the purpose of disclosure of shareholdings by directors, no account shall be taken of a relevant interest in certain circumstances. We have reproduced section 147 in Appendix 2 for convenience.
24. Section 147(1)(a), (b) and (d) of the Companies Act 1993 are similar to sections 6(1)(a), (b) and (e) of the Amendment Act. There is no provision in section 147 for any body or organisation to designate a person as being a person to whom the provision applies. Section 147(1)(a) applies to persons whose ordinary business consists of or includes the lending of money or the provision of financial services, or both, where that person has the relevant interest only as security given for the purposes of a transaction entered into in the ordinary course of the business of that person. Section 147(1)(b) applies to persons who have a relevant interest by reason only of acting for another person to acquire or dispose of that share on behalf of the other person in the ordinary course of business as a sharebroker where that person is a member of the stock exchange. Section 147(1)(d) applies to persons who are either a trustee corporation or a nominee company and who have a relevant interest by reason only of acting for another person in the ordinary course of business of that trustee corporation or nominee company. A similar provision was included in section 199B of the Companies Act 1955, now revoked.
25. Section 609 of the Australian Corporations Law also prescribes a number of situations which do not give rise to relevant interests for the purposes of the Corporations Law. We have reproduced section 609 in Appendix 2 for convenience. Section 609(1) is somewhat similar to section 6(1)(a) of the Amendment Act. There is however, no provision in section 609 empowering the Australian Securities and Investments Commission or any other body or organisation, to designate persons as being persons to whom the provision applies. The section applies to persons who have an interest in securities taken for the purpose of a transaction entered into by the person in the ordinary course of their business of providing financial services. The financial services must be provided on ordinary commercial terms and the person whose property is subject to the security must not be an associate of the person taking the security. Section 609(3) is somewhat similar to section 6(1)(b) of the Amendment Act. The section excludes securities dealers who have a relevant interest in securities merely because they hold securities on behalf of someone else in the ordinary course of their securities business. There is no direct equivalent of section 6(1)(e) of the Amendment Act in the Corporations Law.

Discussion Questions

1. Are statutory provisions providing for certain relevant interests to be disregarded for the purpose of Part II of the Amendment Act desirable?
2. If yes, in respect of question I, are the types of relevant interest to be disregarded by virtue of section 6(1) appropriate?
3. Is there a need for persons to be designated as persons in respect of whom sections 6(1)(a), (b) or (e) apply? If so, what does the power of designation in respect of such persons add?
4. If yes, in respect of question III, is the Commission the appropriate body to designate persons pursuant to section 6(1)?

PART III
COMMISSION'S CRITERIA AND PROCEDURES
FOR DESIGNATING PERSONS

26. The Commission currently requires all persons applying to be designated to provide the following information about themselves:
    1. shareholders;
    2. directors;
    100. Chief Executive Officer, senior management team and secretary (if applicable);
    4. registered office;
    5. issued capital;
    6. their most recent annual report;
    7. a description of their complete business; and
    8. a statement of their reasons for seeking designation and the advantages to the applicant of obtaining designation.

27. The Commission has, aside from a class designation for wholly owned subsidiaries of registered banks within the meaning of section 2 of the Reserve Bank of New Zealand Act 1989 who are themselves designated under section 6(1)(a), only designated individual persons. In the past, the Commission has not designated subsidiaries of companies on a class basis. We have considered it appropriate for the Commission to assess whether persons should be designated on an individual basis.
28. There is no provision in section 6(1) of the Amendment Act for the Commission to set terms and conditions of designation. As discussed in paragraphs 30 to 34 of this paper however, the Commission has required some of the persons designated pursuant to section 6(1)(e) to provide the Commission with certain undertakings, others it has not.

Nominee Companies

29. Where the applicant is a nominee company, we wish to receive information about its directors and key personnel including curriculum vitae disclosing their relevant qualifications and experience. We also think that they should disclose to us whether they have been convicted of a crime involving dishonesty, if they have been prevented from acting as a director pursuant to the Companies Act 1993, or if they have been a bankrupt during the last five years. We consider that it may be necessary for the Commission to meet with representatives of nominee companies to assess whether they should be designated. We consider that banks, broking firms and trustee corporations often have more effective means of demonstrating quality control.

Undertakings

30. The Commission has since July 1990 required applicants for designation under section 6(1)(e), who are nominee companies, to provide certain undertakings.
31. Before granting a designation for a nominee company pursuant to section 6(1)(e) the Commission currently requires undertakings:
    1. that the nominee company will keep under continuing review the transactions of all persons who hold, in the name of the nominee company, securities listed on the New Zealand Stock Exchange ("NZSE"), and will inform the public issuer of the securities and the NZSE if any such person has become or has ceased to be a holder of a relevant interest in 5% or more of the voting securities of the public issuer;
    2. that the nominee company will inform the NZSE if it exercises, or proposes to exercise, in its own right any voting rights in respect of 5% or more of the voting securities of a public issuer; and
    100. that the nominee company will produce documentation relating to any shareholding in a public issuer registered in its name immediately on request by the public issuer or the Commission.

32. We consider that the section 6(1)(e) undertakings are necessary in respect of nominee companies. They reduce the potential for nominee holdings to be used to hide substantial interests in a company. They help to ensure that the NZSE and the market generally are informed if a nominee decides to exercise its rights as a substantial security holder. They provide a degree of assurance, especially in respect of overseas nominees, who may be beyond the reach of the Commission's powers.
33. The majority of persons designated pursuant to section 6(1)(e) were designated prior to July 1990. The undertakings required from applicants have since July 1990 been further amended. We wish to ensure that all persons designated pursuant to section 6(1)(e) be subject to the same undertakings.
34. We do not require undertakings from persons applying for designation pursuant to section 6(1)(a) or (b). It may be possible however for a person who is designated pursuant to section 6(1)(a) or (b) to avoid the general policy of the Amendment Act while acting as a lender of money or sharebroker and technically complying with the terms of section 6(1)(a) or (b). It may be desirable for all designated persons to be subject to the same requirement to give undertakings.

Discussion Questions

5. Are the Commission's current requirements and procedures for designating persons adequate?
6. Should the Commission designate subsidiaries of applicants on an individual basis?
7. Should directors of nominee companies applying for designation be required to provide additional information about their directors and key personnel?
8. Should representatives of nominee companies applying for designation be required to meet with the Commission in relation to their application?
9. Are the undertakings for persons seeking designation pursuant to section 6(1)(e) satisfactory?
10. Should persons seeking designation pursuant to section 6(1)(a) or (b) be required to provide undertakings to the Commission?
11. If yes, in respect of question X, should the undertakings be similar to those required from applicants for designation pursuant to section 6(1)(e)?

PART IV
CLASS DESIGNATION FOR REGISTERED BANKS

35. On 28 July 1989 the Commission, pursuant to section 6(1)(a) of the Amendment Act, designated on a class basis, all wholly owned subsidiaries of registered banks within the meaning of section 2 of the Reserve Bank of New Zealand Act 1989, provided that the registered bank has itself been designated under section 6(1)(a).
36. We propose a further wider class designation, to include all registered banks themselves, within the meaning of section 2 of the Reserve Bank of New Zealand Act 1989. It appears that the reporting and financial requirements imposed on registered banks are such that application to the Commission for designation and the provision of undertakings to the Commission should not be necessary. Such a designation would enable newly registered banks to be automatically designated. At the same time it would ensure that banks which cease to be registered are no longer able to take advantage of section 6(1)(a).
37. If such a class designation is created, we propose revoking the individual designations in respect of registered banks and banks which have ceased to exist.

Discussion Questions

12. Should the Commission designate on a class basis, all registered banks within the meaning of section 2 of the Reserve Bank of New Zealand Act 1989?

PART V
NEED FOR AN ONGOING REGULATORY ROLE

38. We consider that there is a need for the Commission to have an ongoing regulatory role in respect of designated persons. Given that designations do not have an expiry date, a designated person may change its principal officers and its geographical location, possibly also its corporate purpose, to the point where the matters which the Commission took into account in deciding to approve a designation may no longer apply. This is what appears to have happened over the last decade.
39. We consider that the applicant should be required to provide an undertaking that it will advise the Commission on an ongoing basis if any of the information provided to the Commission has changed in a material respect. The applicant should, we consider, also be required to provide the Commission with an annual statement on 1 March every year noting whether there has been a change in the information provided to the Commission.
40. The Commission would hold a meeting to consider revoking a person's designation in circumstances including, but not limited to those:
    1. where that person had not provided an annual statement to the Commission;
    2. where the Commission had received a complaint in respect of any of its actions as a designated person;
    100. where the designated person's purpose and nature had changed substantially since the granting of the designation.
    4. where the directors, control or ownership had changed in a fundamental respect (in particular, by 50% or more).

Discussion Questions

13. Is there a need for ongoing oversight of designated persons?
14. If yes, in respect of question XIII, is the Commission the appropriate body to conduct this role?
15. If yes, in respect of question XIV, should the designated person be required to provide an undertaking to report to the Commission on the occurrence of any change in matters material to the Commission's designation of that person and in any event, on an annual basis?
16. If yes, in respect of question XV, should such an annual report be made available to investors on request?

APPENDIX 1
DISCUSSION QUESTIONS

We would be pleased to receive any views, observations or comments that you may wish to express to us about this paper and would be grateful to have our attention drawn to any important considerations that we may have overlooked. We would also appreciate it if responses were to include views in respect of the questions set out in the paper (repeated below). We ask that responses reach the Commission by Friday 31 May 2002.

Part II

1. Are statutory provisions providing for certain relevant interests to be disregarded for the purpose of Part II of the Amendment Act desirable?
2. If yes, in respect of question I, are the types of relevant interest to be disregarded by virtue of section 6(1) appropriate?
3. Is there a need for persons to be designated as persons in respect of whom sections 6(1)(a), (b) or (e) apply? If so, what does the power of designation in respect of such persons add?
4. If yes, in respect of question III, is the Commission the appropriate body to designate persons pursuant to section 6(1)?

Part III

5. Are the Commission's current requirements and procedures for designating persons adequate?
6. Should the Commission designate subsidiaries of applicants on an individual basis?
7. Should directors of nominee companies applying for designation be required to provide additional information about their directors and key personnel?
8. Should representatives of nominee companies applying for designation be required to meet with the Commission in relation to their application?
9. Are the undertakings for persons seeking designation pursuant to section 6(1)(e) satisfactory?
10. Should persons seeking designation pursuant to section 6(1)(a) or (b) be required to provide undertakings to the Commission?
11. If yes, in respect of question X, should the undertakings be similar to those required from applicants for designation pursuant to section 6(1)(e)?

Part IV

12. Should the Commission designate on a class basis, all registered banks within the meaning of section 2 of the Reserve Bank of New Zealand Act 1989?

Part V

13. Is there a need for ongoing oversight of designated persons?
14. If yes, in respect of question XIII, is the Commission the appropriate body to conduct this role?
15. If yes, in respect of question XIV, should the designated person be required to provide an undertaking to report to the Commission on the occurrence of any change in matters material to the Commission's designation of that person and in any event, on an annual basis?
16. If yes, in respect of question XV, should such an annual report be made available to investors on request?

APPENDIX 2
LEGISLATION

Section 5 Securities Amendment Act 1988
Meaning of "relevant interest"-

1. For the purposes of this Act a person has a relevant interest in a voting security (whether or not that person is the registered holder of it) if that person-
   1. Is a beneficial owner of the voting security; or
   2. Has the power to exercise any right to vote attached to the voting security; or
   100. Has the power to control the exercise of any right to vote attached to the voting security; or
   4. Has the power to acquire or dispose of the voting security; or
   5. Has the power to control the acquisition or disposition of the voting security by another person; or
   6. Under, or by virtue of, any trust, agreement, arrangement, or understanding relating to the voting security (whether or not that person is a party to it)-
      1. May at any time have the power to exercise any right to vote attached to the voting security; or
      2. May at any time have the power to control the exercise of any right to vote attached to the voting security; or
      3. May at any time have the power to acquire or dispose of, the voting security; or
      4. May at any time have the power to control the acquisition or disposition of the voting security by another person.
2. Where a person has a relevant interest in a voting security by virtue of subsection (1) of this section and-
   1. That person or its directors are accustomed or under an obligation, whether legally enforceable or not, to act in accordance with the directions, instructions, or wishes of any other person in relation to-
      1. The exercise of the right to vote attached to the voting security; or
      2. The control of the exercise of any right to vote attached to the voting security; or
      3. The acquisition or disposition of the voting security; or
      4. The exercise of the power to control the acquisition or disposition of the voting security by another person; or
   2. Another person has the power to exercise the right to vote attached to 20 percent or more of the voting securities of that person; or
   100. Another person has the power to control the exercise of the right to vote attached to 20 percent or more of the voting securities of that person; or
   4. Another person has the power to acquire or dispose of 20 percent or more of the voting securities of that person; or
   5. Another person has the power to control the acquisition or disposition of 20 percent or more of the voting securities of that person-

that other person also has a relevant interest in the voting security.

3. A body corporate or other body has a relevant interest in a voting security in which another body corporate that is related to that body corporate or other body has a relevant interest.
4. A person who has, or may have, a power referred to in any of paragraphs (b) to (f) of subsection (1) of this section, has a relevant interest in a voting security regardless of whether the power-
   1. Is expressed or implied:
   2. Is direct or indirect:
   100. Is legally enforceable or not:
   4. Is related to a particular voting security or not:
   5. Is subject to restraint or restriction or is capable of being made subject to restraint or restriction:
   6. Is exercisable presently or in the future:
   7. Is exercisable only on the fulfilment of a condition:
   8. Is exercisable alone or jointly with another person or persons.
5. A power referred to in subsection (1) of this section exercisable jointly with another person or persons is deemed to be exercisable by either or any of those persons.
6. A reference to a power includes a reference to a power that arises from, or is capable of being exercised as the result of, a breach of any trust, agreement, arrangement, or understanding, or any of them, whether or not it is legally enforceable.
7. For the purposes of this Act, a body corporate is related to another body corporate if-
   1. The other body corporate is its holding company or subsidiary within the meaning of-
      1. Sections 158 and 158A of the Companies Act 1955, in relation to any company registered under that Act; or
      2. Sections 5 and 6 of the Companies Act 1993, in relation to any other body corporate; or
   2. More than half-
      1. In nominal value of its equity share capital (as defined in section 158(5) of the Companies Act 1955) in relation to any company registered under that Act; or
      2. Of its issued shares (other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital) in relation to any other body corporate,- is held by the other body corporate and bodies corporate related to that other body corporate (whether directly or indirectly, but other than in a fiduciary capacity); or
   100. More than half-
        1. In nominal value of the equity share capital (as defined in section 158(5) of the Companies Act 1955), in relation to any company registered under that Act; or
        2. Of the issued shares (other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital), in relation to any other body corporate,- of each of them is held by members of the other (whether directly or indirectly, but other than in a fiduciary capacity); or
   4. The businesses of the bodies corporate have been so carried on that the separate business of each body corporate, or a substantial part thereof, is not readily identifiable; or
   5. There is another body corporate to which both bodies corporate are related.

Section 6 Securities Amendment Act 1988

Relevant interests to be disregarded in certain cases-

1. For the purposes of Part II of this Act, notwithstanding section 5 of this Act, no account shall be taken of a relevant interest of a person in a voting security if-
   1. The ordinary business of the person who has the relevant interest consists of, or includes, the lending of money or the provision of financial services, or both, and that person-
      1. Has the relevant interest only as security given for the purposes of a transaction entered into in the ordinary course of the business of that person; and
      2. Has been designated by the Commission, by notice in the Gazette, as a person to whom this paragraph applies or is a member of a class of persons designated by the Commission, by notice in the Gazette, as a class of persons to which this paragraph applies, as the case may be, and that designation has not been revoked by the Commission; or
   2. That person has the relevant interest by reason only of acting for another person to acquire or dispose of that security on behalf of the other person in the ordinary course of business of a sharebroker and that person-
      1. Is a member of a stock exchange; or
      2. Has been designated by the Commission, by notice in the Gazette, as a person to whom this paragraph applies and that designation has not been revoked by the Commission; or
   100. That person has the relevant interest by reason only that he or she has been authorised by resolution of the directors or other governing body of a body corporate to act as its representative at a particular meeting of members, or class of members, of a public issuer, and a copy of the resolution is deposited with the public issuer not less than 48 hours before the meeting; or
   4. That person has the relevant interest solely by reason of being appointed as a proxy to vote at a particular meeting of members, or of a class of members, of the public issuer and the instrument of that person's appointment is deposited with the public issuer not less than 48 hours before the meeting; or
   5. That person-
      1. Is a trustee corporation or a nominee company; and
      2. Has the relevant interest by reason only of acting for another person in the ordinary course of business of that trustee corporation or nominee company; and
      3. Has been designated by the Commission, by notice in the Gazette, as a person to whom this paragraph applies and that designation has not been revoked by the Commission; or
   6. The person has the relevant interest by reason only that the person is a bare trustee of a trust to which the voting security is subject.
2. For the purposes of subsection (1)(f) of this section, a trustee may be a bare trustee notwithstanding that he or she is entitled as a trustee to be remunerated out of the income or property of the trust.

Section 147 Companies Act 1993

Relevant interests to be disregarded in certain cases-

1. For the purposes of section 148 of this Act, no account shall be taken of a relevant interest of a person in a share if-
   1. The ordinary business of the person who has the relevant interest consists of, or includes, the lending of money or the provision of financial services, or both, and that person has the relevant interest only as security given for the purposes of a transaction entered into in the ordinary course of the business of that person; or
   2. That person has the relevant interest by reason only of acting for another person to acquire or dispose of that share on behalf of the other person in the ordinary course of business of a sharebroker and that person is a member of a stock exchange; or
   100. That person has the relevant interest solely by reason of being appointed as a proxy to vote at a particular meeting of members, or of a class of members, of the company and the instrument of that person's appointment is produced before the start of the meeting in accordance with clause 6(4) of the First Schedule to this Act or by a time specified in the company's constitution, as the case may be; or
   4. That person-
      1. Is a trustee corporation or a nominee company; and
      2. Has the relevant interest by reason only of acting for another person in the ordinary course of business of that trustee corporation or nominee company; or
   5. The person has the relevant interest by reason only that the person is a bare trustee of a trust to which the share is subject.
2. For the purposes of subsection (1)(e) of this section, a trustee may be a bare trustee notwithstanding that he or she is entitled as a trustee to be remunerated out of the income or property of the trust.

Section 609 Australian Corporations Law

Situations Not Giving Rise to Relevant Interests

609(1) Money lending and financial accommodation. A person does not have a relevant interest in securities merely because of a mortgage, charge or other security taken for the purpose of a transaction entered into by the person if:

1. the mortgage, charge or security is taken or acquired in the ordinary course of the person's business of providing financial services and on ordinary commercial terms; and
2. the person whose property is subject to the mortgage, charge or security is not an associate of the person.

609(2) Nominees and other trustees. A person who would otherwise have a relevant interest in securities as a bare trustee does not have a relevant interest in the securities if a beneficiary under the trust has a relevant interest in the securities because of a presently enforceable and unconditional right of the kind referred to in subsection 608(8).

609(3) Holding of securities by securities dealer. A securities dealer does not have a relevant interest in securities merely because they hold securities on behalf of someone else in the ordinary course of their securities business.

609(4) Shares covered by buy-backs. A person does not have a relevant interest in a company's shares if the relevant interest would arise merely because the company has entered into an agreement to buy back the shares.

609(5) Proxies. A person does not have a relevant interest in securities merely because the person has been appointed to vote as a proxy or representative at a meeting of members, or of a class of members, of the company, body or managed investment scheme if:

1. the appointment is for one meting only; and
2. neither the person nor any associate gives valuable consideration for the appointment.

609(6) Exchange traded options and futures contracts. A person does not have a relevant interest in securities merely because of:

1. an exchange traded option over the securities; or
2. a right to acquire the securities given by a futures contract.

This subsection stops applying to the relevant interest when the obligation to make or take delivery of the securities arises.

609(7) Conditional agreements. A person does not have a relevant interest in securities merely because of an agreement if the agreement:

1. is conditional on:
   1. a resolution under item 7 in the table in section 611 being passed; or
   2. ASIC exempting the acquisition under the agreement from the provisions of this Chapter under section 655A; and
2. does not confer any control over, or power to substantially influence, the exercise of a voting right attached to the securities; and

100. does not restrict disposal of the securities for more than 3 months from the date when the agreement is entered into.

The person acquires a relevant interest in the securities when the condition referred to in paragraph (a) is satisfied.

609(8) Pre-emptive rights. A member of a company, body or managed investment scheme does not have a relevant interest in securities of the company, body or scheme merely because the company's, body's or scheme's constitution gives members pre-emptive rights on the transfer of the securities if all members have pre-emptive rights on the same terms.

609(9) Director of body corporate holding securities. A person does not have a relevant interest in securities merely because:

1. the person is a director of a body corporate; and
2. the body corporate has a relevant interest in those securities.

609(10) Prescribed exclusions. A person does not have a relevant interest in securities in the circumstances specified in the regulations. The regulations may provide that interests in securities are not relevant interests subject to specified conditions.

APPENDIX 3
PERSONS CURRENTLY DESIGNATED BY THE COMMISSION