ASIC today issued a report concluding that our current policy for considering requests from individual credit unions to switch off the demutualisation approval procedure rules should remain unchanged.
Report 369 Response to submissions on CP 210 Demutualisation approval procedure rules: Minimum member participation requirement (REP 369) sets out the key issues that arose out of submissions to Consultation Paper 210 Demutualisation approval procedure rules: Minimum member participation requirement (CP 210).
REP 369 confirms that ASIC will issue a written notice to cease the effect of all, or any part of, the rules only where a credit union’s circumstances raise potential prudential concerns and the Australian Prudential Regulation Authority (APRA) considers it necessary for a proposed transaction to occur expeditiously.
ASIC will, however, consider allowing the rules to be switched off where the rules are only triggered because a party to a transaction is a former credit union that has been permitted by APRA to become a ‘mutual bank’ under the Banking Act 1959.
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Background
On 11 June 2013 ASIC released CP 210 seeking feedback on whether ASIC should change its current approach to requests by individual credit unions to cease the effect of the minimum member participation requirement for the postal ballot in the 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.
The rules are designed to ensure 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 these 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 publish a notice that effectively ‘switches off’ those rules or parts of those rules.
A mutual bank is an authorised deposit-taking institution that previously operated as a credit union and has subsequently sought and received APRA consent to operate as a bank. Since about 2011, APRA has permitted a number of credit unions and building societies to use the word ‘bank’, which has resulted in the existence of a number of ‘mutual banks’ today. If APRA agrees to allow a credit union to operate as a bank, that credit union will no longer be able to use the words 'credit union' in its name.
The demutualisation approval procedure rules may be triggered for a proposed restructure where the successor to the credit union’s business is not entitled to use the words ‘credit union’ in its name, and so may apply where the restructure involves a mutual bank.