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VICTORIA PUBLIC HOLIDAY FRIDAY 23 OCTOBER: Friday 23 October is a public holiday in Victoria. Our Victorian branches will be closed but our Contact Centre and branches in other states will remain open. If you need anything, please give us a call on 132 888 between 8am and 8pm AEDT. Stay safe and have a lovely weekend. View details

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Join us at the 2020 AGM

As a Bank Australia customer and owner you have voting rights and a say in how we go about our business. Now is the time to have that say and vote on matters at this year's Annual General Meeting.

Notice is hereby given that the 63rd Annual General Meeting of Bank Australia Limited will be conducted online and there will be no physical venue to attend. Members can join the Meeting virtually via the online platform detailed below:

Attendance

To RSVP your attendance please call 132 888 or email [email protected]

If you cannot join us online at this time, highlights from the meeting will be recorded and posted on our website.

Agenda

  1. Opening and apologies – Chair
  2. To note the Minutes of the 62nd Annual General Meeting of Bank Australia Limited held on 19 November 2019
  3. Presentation – Chair
  4. Presentation – Managing Director
  5. To receive and consider the Financial Report, the Directors’ Report and the  Independent Auditors’ Report for the financial year ended 30 June 2020
  6. To re-appoint Judith Downes as Director
  7. To consider and if thought fit, approve the following special resolution to amend the Bank Constitution: “That, in accordance with section 136(2) of the Corporations Act, Bank Australia’s Constitution be modified by making the amendments, other than the amendments noted in Item 8, contained in the document tabled at the Annual General Meeting and signed by the Chair for the purposes of identification.” Further information about the proposed amendments to Bank Australia’s Constitution is set out in the Explanatory Notes below.

  8. To consider and if thought fit, approve the following special resolution to amend the Bank Constitution: “That Bank Australia’s Constitution be modified to allow Bank Australia to issue mutual capital instruments (MCIs) in accordance with the Corporations Act, by making the amendments marked as “Mutual capital instruments amendments”, contained in the document tabled at the Annual General Meeting and signed by the Chair for the purposes of identification”.

  9. Close of official Annual General Meeting proceedings

Refer to explanatory notes for agenda items 5 – 7.

Directors are not seeking a remuneration increase in 2020 due to COVID-19.

Explanatory Notes to Resolution

Annual General Meeting Agenda Item 5 – Financial Reports

The Corporations Act 2001 requires the Financial Report, the Directors’ Report and the Independent Auditors’ Report of the Bank to be laid before the Annual General Meeting.

Shareholders will be provided with an opportunity at the Annual General Meeting to ask questions in relation to these reports via the online platform.

Annual General Meeting Agenda Item 6 – Re-appointment of Director

The Board recommends the following ordinary resolution:

“That Judith Downes be re-appointed as a Director of Bank Australia Limited.”

Directors of Bank Australia serve on a three year rotational basis. Retiring Directors may stand for re-election if they are eligible for election. Directors Judith Downes and Michelle Somerville both retire by rotation this year. Ms Downes, being eligible, has declared she would stand for re-election.

Although, also eligible, Ms Somerville has advised she will not be standing for re-election and her term of office will conclude at the end of the 2020 AGM. The Board has determined the position held by Ms Somerville will be filled by Board appointment, maintaining the majority

of Board positions being held by member-elected Directors as required by Bank Australia’s Constitution.

In accordance with rule A3-7 (1) of the Company’s Constitution:

  • as the number of candidates equals the number of positions to be filled, the election process was discontinued
  • the general meeting is required to vote on the appointment of the candidate by passing a separate ordinary resolution at the Annual General Meeting.

Report of the Nominations Committee

The Nominations Committee is established by the Bank Australia Board in accordance with Appendix 3 Section A3-4(1) of the Company’s Constitution.

The Committee’s purpose is to assess the fitness and proprietary of potential candidates for the office of Director of the Company, in accordance with the Fit and Proper Policy and the Constitution.

The Chair of the Nominations Committee has provided the following report:

“The Committee resolved that Judith Downes was found to be a fit and proper candidate for the office of Director of Bank Australia in accordance with the Fit and Proper Policy and Constitution.”

Mark Bengtsson

Chair, Nominations Committee

Annual General Meeting Agenda Item 7 – General amendments to Bank Australia’s Constitution

The Board recommends the following special resolution:

“That, in accordance with section 136(2) of the Corporations Act, Bank Australia’s Constitution be modified by making the amendments, other than the amendments noted in Item 8, contained in the document tabled at the Annual General Meeting and signed by the Chair for the purposes of identification.”

Background

1)  In addition to the proposed amendments noted in Item 8 to permit the issuance of MCIs, Bank Australia proposes to make certain additional amendments to the Constitution to reflect updates to market practice and the governance practices of Bank Australia

2)  Under section 136 of the Corporations Act, these amendments to the Constitution may only be made by a special resolution of Members.

Overview of proposed amendments to the Constitution

3) An overview of the key changes proposed to be made to the Constitution (other than in respect of the amendments noted in Item 8 are summarised in the table below. Capitalised terms in the summary below have the meanings given in the Constitution, unless otherwise defined.

4) A copy of the Constitution showing the proposed changes to it is available

Other information

The Chair of the Meeting intends to vote all available proxies in favour of this resolution.

Directors’ recommendation

The Board unanimously recommends that members vote in favour of the resolution.

Annual General Meeting Agenda Item 8 – Amendment to Bank Australia’s Constitution to permit issuance of mutual capital instruments (MCIs)

The Board recommends the following special resolution:

That Bank Australia’s Constitution be modified to allow Bank Australia to issue mutual capital instruments (MCIs) in accordance with the Corporations Act, by making the amendments marked as “Mutual capital instruments amendments” contained in the document tabled at the Annual General Meeting and signed by the Chair for the purposes of identification.

Background

1. On 2 March 2015, the Senate Economics References Committee was asked to review and report on the role, importance and operations of cooperative and mutual entities in the Australian economy. The Committee tabled its report (Senate Report) on 17 March 2016.

2. On 24 March 2017, the then Treasurer appointed Mr Greg Hammond OAM to conduct further consultation on the recommendations of the Senate Report and assist in developing a Government response. Mr Hammond provided his Report on Reforms for Cooperatives, Mutuals and Member-owned Firms on 31 July 2017 (Hammond Report).

3. On 8 November 2017, the Federal Government tabled its response to the Senate Report and accepted all 11 recommendations of the Hammond Report. The recommendations were aimed at improving access to capital for mutuals and reducing barriers to enable cooperatives and mutuals to invest, innovate, grow and compete.

4. On 6 April 2019, the Treasury Laws Amendment (Mutual Reforms) Act 2019 (Cth) (Mutual Reforms) commenced. The Mutual Reforms gave effect to recommendations 5, 8 and 9 of the Hammond Review by amending the Corporations Act to, among other things:

(a)   introduce the concept of a “mutual entity” into the Corporations Act (being a company in which each member has no more than one vote for each capacity in which the person is a member);

(b)   expressly permit mutual entities registered as public companies under the Corporations Act to issue equity capital without risking their mutual structure or status; and

(c)    provide a standard process to allow eligible mutual entities to amend their constitutions to take advantage of the reforms (the Special Procedure).

5. The Mutual Reforms enable eligible mutual entities to raise equity capital through the issuance of MCIs, a bespoke new capital instrument for mutual entities, which allows for capital to be raised through the issuance of shares, while retaining the organisation’s status as a mutual entity.

6. The ability to raise equity capital removes a significant barrier to investment, innovation, growth and competition in the sector and provides mutual entities, such as Bank Australia, with access to a broader range of capital raising and investment options to advance the interests of Bank Australia’s members and the other mutual objectives of Bank Australia.

7. Please refer to the outline of proposed amendments below and to the attached Fact Sheet, which explains what the key features of an MCI will be, and the impact that an issuance of MCIs may have on members of Bank Australia

Proposed Amendments

8) Bank Australia is a “mutual entity” for the purposes of the Corporations Act, which means that it is able to issue mutual capital instruments (MCIs), if it amends its Constitution. An MCI is a new type of share in a mutual entity (provided for under the Corporations Act), which must have certain characteristics (described in the attached Fact Sheet).

9) Bank Australia is a public company limited by shares. The proposed amendments will introduce a new class of shares called “MCIs” and enable Bank Australia to issue MCIs in future if it is necessary or desirable to do so, while protecting Bank Australia’s mutual status. If Bank Australia decides to issue MCIs, Bank Australia will remain a mutual, because holders of MCIs will have limited rights and if holders of MCIs are given voting rights, they would be limited to one vote at general meetings, regardless of the number of MCIs they hold.

10) Recent amendments to the Corporations Act allow Bank Australia to update its Constitution using the Special Procedure which involves members passing an “MCI amendment resolution” before 6 April 2022. The Special Procedure allows Bank Australia to update its Constitution to introduce MCIs as a new class of share. The Special Procedure overrides anything which may be to the contrary in Bank Australia’s Constitution and certain provisions of the Corporations Act regarding constitutional amendments. This provides a straightforward amendment procedure for Bank Australia to follow as well as legal certainty on the effectiveness of the resolution.

11) The “MCI amendment resolution” being proposed to Bank Australia members at the 2020 Annual General Meeting is a special resolution (i.e. a resolution which must be passed by 75% of members (or proxies) who are present at the meeting and eligible to vote) to amend Bank Australia’s Constitution for the following purposes:

(a) to include a statement that Bank Australia is intended to be an “MCI mutual entity” for the purposes of the Corporations Act; 

(b) to provide for Bank Australia to issue MCIs (which would be subject to any necessary regulatory approvals and board approval);

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

(d) to make changes that are incidental or ancillary to the purposes specified above (for example, to include references to MCIs in some of the provisions in the Constitution which relate to shares, where relevant).

12)  A copy of the Constitution showing the proposed changes to it is available along with FAQs.

Other information

The Chair of the Meeting intends to vote all available proxies in favour of this resolution.

Directors’ recommendation

The Board unanimously recommends that members vote in favour of the resolution.

Summary of proposed amendments

Admission to Membership (Rule 3.1)

To reflect Bank Australia’s current business practices, it is proposed that the Constitution be amended to provide that a person may be admitted as a Member of the Company if the person agrees to become a Member in such form or manner as required by the Company.

General Meetings (Rule 8.3(1), 8.4 and various)

A number of amendments are proposed to be made to facilitate the holding of General Meetings by Bank Australia, including as set out below.

  • The Constitution will be amended to specifically provide that a General Meeting (including an adjourned meeting) may be held at 2 or more venues using any technology that gives Members as a whole a reasonable opportunity to participate in the meeting and to ensure that persons participating using technology are counted for the purposes of determining a quorum and are entitled to exercise

all rights as if they were attending the meeting in person.

Provisions will also be included to deal with the scenario whereby technical difficulties occur – including to allow the chair of the meeting to adjourn the meeting to allow the technical difficulty to be rectified.

These amendments are intended to enable greater participation by, and engagement with, Members.

To provide that the quorum for a General Meeting will include persons present or by proxy, attorney or representative and to provide clarity in relation to the counting of those persons towards the quorum.

Direct Voting (Rule 9.8 and various)

It is proposed that the Constitution be amended to:

  • clarify that a Direct Vote includes a vote delivered to Bank Australia by post, fax or other electronic means as approved by the Board;
  • authorise the Board to prescribe rules to govern direct voting (including, for instance, the treatment of Direct Votes) and, accordingly, to remove a number of the provisions from Rule 9.8 of the Constitution to provide greater flexibility for the Board to prescribe rules in relation to those matters;
  • clarify that a Member placing a Direct Vote will not be taken into account in determining whether a quorum is present at a General Meeting;
  • clarify that each holder of Member Shares who has duly lodged a Direct Vote in respect of the relevant resolution has one vote; and

reflect various consequential amendments in order to give effect to the amendments summarised above (including to clarify that the Board may determine that Direct Votes may be lodged in respect of a resolution put before a meeting of a class of Members or any MCI holders (defined below) required by the Corporations Act or the Constitution).

Directors’ tenure (Division 10)

It is proposed that the Constitution be amended to clarify that, irrespective of the method of appointment, the term of office for all Directors of Bank Australia must not exceed 12 years (whether consecutive or not).

If a Director has been a director of Bank Australia for a total period of 12 years from the initial appointment or election date (whether continuous or not), the Director’s office will automatically become vacant and the Director will not be permitted to be re-appointed, elected or re-elected to the Board.

A number of additional minor amendments are also proposed to Division 10 of the Constitution which are consequential, and to remove a legacy provision which ceased to operate in 2015.

Directors’ powers (Division 11)

It is proposed that the Constitution be amended to clarify that the business of Bank Australia is to be managed by or under the direction of the Board and the board may exercise all of the powers and do all things within Bank Australia’s powers that are not expressly required by the Corporations Act or the Constitution to be exercised by Bank Australia in a general meeting.

Frequently asked questions

What is a mutual entity?

A mutual entity is an organisation based on the principle of mutuality: people organising together to meet their shared needs. The members of a mutual are its customers. The mutual sector is very diverse with mutual entities operating in almost every sector of the Australian economy. At Bank Australia, we are a customer-owned, responsible bank, in the business to create mutual prosperity — for customers, the communities they live in and the planet we all live on.

Until recently, there was no legal definition of “mutual entity”.  But as of last year, the Corporations Act now includes a definition of “mutual entity” for the first time in Australia’s history. Essentially, a “mutual entity” is a company where no member has more than one vote in a general meeting.

It’s great to have official recognition at last, and this definition of “mutual entity” is also important because only mutual entities can issue mutual capital instruments (MCIs) (see below for further details).

What are the benefits of being a member of a mutual entity?

We do things a little differently to other banks. We are owned by our customers.

When you join us as a customer, you are agreeing to become a “member” of the company. As a member, you have a “member share”. Provided you’re over 18, your member share gives you voting rights, including in general meetings, in director elections, or in a vote to restructure or wind up the company.

In this way, as a member, you have a real say in how the bank is run, including a vote on our directors’ salaries and a say in where we invest our profits. Our profits are returned to customers through better rates and fees, and our investments are used to create positive social and environmental change.

What are mutual capital instruments (MCIs)?

Mutual capital instruments, or MCIs, are a new type of share, which can be issued only by mutual entities. An MCI can be issued by a mutual entity to raise capital, while remaining a mutual entity.

This new type of share was created as part of the Treasury Laws Amendment (Mutual Reforms) Act 2019(Mutual Reforms) introduced in April 2019. The legislation implemented a number of recommendations from the Hammond Review, which was an inquiry into the barriers that co-operatives, mutuals and member-owned businesses faced in being able to compete. The review examined challenges faced by mutuals in raising capital, including that they do not have access to the sources of capital that larger listed banks or other companies can access by issuing ordinary shares. This has meant mutuals, like Bank Australia, have relied primarily on retained earnings from profits, and on debt, to grow their business.

These are major wins for the mutual sector and for banking sector competition, and herald a new era for mutual entities in Australia.

Why is Bank Australia proposing changes to its Constitution?

The changes to Bank Australia’s Constitution will mean Bank Australia can take advantage of the Mutual Reforms. Access to this new type of capital can assist Bank Australia in future to continue to invest, innovate, grow and compete, ensuring sustainability for future generations of members, while maintaining our mutuality.

The first step is to ensure our Constitution provides for Bank Australia to issue MCIs and limits each member or MCI holder to no more than one vote regardless of the value of their investment in MCIs (ie one member = no more than one vote).  Making this change now means we can make use of the “special procedure” to amend our Constitution included in the Mutual Reforms, before it expires.

Importantly, the proposed changes do not affect Bank Australia’s status as a mutual. This is absolutely not a move towards a demutualisation.

Is Bank Australia planning to issue MCIs?

Bank Australia has no current plans to issue MCIs but the Board and Bank Australia’s management consider it important to take advantage of the Mutual Reforms now to update Bank Australia’s Constitution.  This will help future-proof Bank Australia, giving us the flexibility to issue MCIs if necessary or desirable to do so at a later stage — either to raise regulatory capital or to seize on business opportunities.

Any decision to issue MCIs would need to be approved by the Board of Bank Australia, who would need to determine that this decision was in the best interests of members as a whole. The issue of MCIs would also be subject to Bank Australia obtaining the necessary regulatory approvals. 

Why is Bank Australia proposing to amend the Constitution now?

The Mutual Reforms permit mutual entities to amend their constitutions by complying with the requirements of the “special procedure” in the legislation. The Special Procedure overrides anything which may be to the contrary in Bank Australia’s Constitution and certain provisions of the Corporations Act regarding constitutional amendments. This provides a straightforward amendment procedure for Bank Australia to follow as well as legal certainty on the effectiveness of the amendments.

We are proposing these amendments to members at our 2020 Annual General Meeting because the special procedure is only available until 6 April 2022.

Will holders of MCIs be members of Bank Australia?

Each MCI holder will be a member of Bank Australia under the Corporations Act, but they will not hold a member share like a Bank Australia customer.  This means that they will not be entitled to the same benefits that holders of member shares are entitled to (unless they happen to also hold a member share as a Bank Australia customer).

Will holders of MCIs have voting rights?

The terms of issue for any MCIs will be decided by the Board when MCIs are issued, and the terms will spell out any voting rights.  The Board may choose to issue MCIs which do, or do not, carry up to one vote in a general meeting,  in an election of directors or in a vote for approval of a restructure. In either case, MCI holders will not count towards quorum at a general meeting, and no MCI holder will have more than one vote in respect of their MCIs, no matter how many MCIs they hold.

If a person is a Member and an MCI holder, does that mean they get two votes?

No. MCIs may carry voting rights, but the proposed amendments ensure a person who is both a voting MCI holder and a Member is only entitled to vote once on an issue requiring determination by Members and voting MCI holders.

Would all MCIs be issued on the same terms?

The Board will have discretion to set the terms of issue of each MCI, which may be different from previous issues, depending on the Bank Australia’s capital needs, regulatory requirements and other relevant considerations at the time of issue.

What returns would an MCI holder be entitled to receive?

An MCI is a fully paid share with non-cumulative dividends. This means Bank Australia’s Board will have discretion to decide what return on investment or ‘dividends’ (if any) will be paid to MCI holders. If Bank Australia decides not to pay any dividends in any given year, no dividends will accumulate or carry over to the following year. Bank Australia would not carry a liability on its balance sheet, as MCI holders can’t claim unpaid dividends in subsequent years.

The Board will also have discretion to set the rights and obligations which attach to MCIs. This gives Bank Australia the flexibility to issue MCIs which meet the requirements of Australian Prudential Regulation Authority (APRA) for regulatory capital, if it is necessary or desirable to do so, without needing to update the Constitution again in the future.

Can an MCI holder stand for election as a Director?

Only Members may be elected as Directors or nominate others to be elected as Directors. A voting MCI holder may vote in an election of Directors, in the same way as a Member may do so under the Constitution, if the Board provide for this in the terms of issue of the MCIs.

Do the proposed changes mean Bank Australia is demutualising?

No, Bank Australia is committed to our future as a mutual and the proposed changes will clearly maintain Bank Australia’s status as a mutual now and into the future. Nothing in the proposed amendments or issuing of MCIs will mean that Bank Australia ceases to be a “mutual entity” and the Mutual Reforms specifically provides for mutuals to issue MCIs as a new type of capital without losing their mutual status.

Would MCI holders get the same vote as members if a demutualisation of Bank Australia is proposed in future?

Following the Mutual Reforms, “demutualisation” could mean two things: it would be either a “restructure” under Appendix 5 of Bank Australia’s Constitution or a constitutional amendment which results in Bank Australia ceasing to be a “mutual entity” as defined in the Mutual Reforms Act. 

In general, the terms of issue for any MCIs would be decided by the Board when MCIs are issued, and the terms would spell out any voting rights.  The Board may choose to issue MCIs which do, or do not, carry a vote on a “restructure” under Appendix 5 of Bank Australia’s Constitution or carry a vote in a general meeting.  However, no MCI holder may have more than one vote, no matter how many MCIs they hold.

Would MCI holders have priority over Members in a winding up of the bank?

In the unlikely event that Bank Australia is wound up, MCI holders would rank below all senior claims (including our depositors).

After all senior creditors in a winding-up are paid, MCI holders would be entitled to a claim on surplus assets and profits. However, MCI holders can’t receive any more than the amount that was initially paid to Bank Australia for the MCIs.  After MCI holders have been paid their capped amount, any remaining surplus would be shared between Bank Australia members.

If you paid a subscription price for your member share, you would be a ‘senior creditor’ in relation to the payment of that subscription price. This wording follows the current requirements of the Australian Prudential Regulation Authority for MCIs to be eligible as regulatory capital.  However, following the introduction of a nil subscription price for membership in 2015, all current members either did not pay a subscription price for their member share or they already have been repaid the subscription price for their member share.  This means that no repayments will be due to members in relation to the payment of the subscription price of a member share (unless the membership fee is changed in future, which is not currently contemplated).

Will MCIs be listed on a securities exchange?

Although there are no plans to list MCIs on a securities exchange, the proposed constitutional amendments give the Board some flexibility to consider this option if in the future this is considered to be advantageous to Bank Australia.

Who can I speak to for more information about the proposed changes?

If you have any questions or comments on the changes, we are happy to discuss these with you. If you have any questions or comments about the changes or attending or voting at the AGM, please contact us on 132 888 or email [email protected]

Invitation and notice of 2020 Annual General Meeting

Invitation and notice