ASIC today released a consultation paper seeking feedback on its approach to considering requests from credit unions to switch off demutualisation approval procedure rules.
Demutualisation approval procedure rules are contained in some credit unions’ constitutions and apply when the credit union is seeking member approval of certain types of transactions that will affect the mutuality of the credit union.
Consultation Paper 210 Demutualisation approval procedure rules: Minimum member participation requirement (CP 210) seeks feedback on whether ASIC should change its current approach to requests by credit unions to cease the effect of the minimum member participation requirement in the demutualisation approval procedure rules.
ASIC is considering whether the current requirement for 25% of all members of a credit union to vote in a preliminary postal ballot on specified proposals is set at an appropriate level.
ASIC is also considering whether there are any circumstances in which it would be appropriate for ASIC to consider removing or changing the required percentage.
CP 210 seeks feedback from credit unions, their members and legal advisers, relevant industry associations and other interested parties.
Submissions to CP 210 are due by 5 July 2013.
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Background
The constitutions of about 40% of credit unions contain special ‘demutualisation approval procedure rules’ and are triggered by proposals for specified types of transactions such as certain types of corporate restructures.
The rules are designed to ensure that proposed transactions that have an impact on the company’s future direction are approved by a sufficient and appropriate number of members. The rules provide that certain transactions can only proceed if the proposed transaction is approved by a postal ballot before a general meeting is convened to vote on a special resolution. The rules include a minimum member participation requirement of 25% for the postal ballot.
For some credit unions, the demutualisation approval procedure rules give ASIC the ability to give a notice that effectively ‘switches off’ those rules or parts of those rules. The rules do not specify the circumstances in which ASIC may or should give a notice for this purpose.