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.”
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
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.
The Chair of the Meeting intends to vote all available proxies in favour of this resolution.
The Board unanimously recommends that members vote in favour of the resolution.