Amendments made to the change in control requirements for Australian Financial Services Licence (AFSL) and Australian Credit Licence (ACL) holders (“Licensees”) became effective on 18 February 2020. AFSL and ACL holders are required to notify the Australian Securities and Investments Commission (“ASIC”) within thirty (30) business days after an entity starts to control, or stops controlling, a Licensee. Failure to do so will result in a strict liability offence that carries a penalty of 300 penalty units for body corporates.
What are Licensees required to do?
If there has been a change in control of a Licensee:
- AFSL holders must lodge a Form FS20 Change of details for an Australian financial services licence through the AFS licensees portal to notify ASIC of this change.
- ACL holders can notify ASIC of a change in control in the form of a written letter outlining the relevant details. This letter must be sent to the following address:
PO Box 4000
Gippsland Mail Centre VIC 3841
Control of a body corporate means:
- having the capacity to make or control the
making of, more than 50% of the votes that might be cast at a general meeting
of the body corporate; or
- directly or indirectly holding more than 50% of the issued share capital of the body corporate (this excludes any part of the issued share capital that carries no rights to participate beyond a specified amount in a distribution of either profits or capital); or
- having the capacity to control the composition of the body corporate’s board or governing body; or
- having the capacity to determine the outcome of decisions about the body corporate’s financial and operating policies, taking into account:
- the practical influence that can be exerted; and
- any practice or pattern of behaviour affecting the body corporate’s financial or operating policies.
Previously, Licensees were required to notify ASIC within ten (10) days of a change in control. This notification was to be based on when the Licensee became aware of a change. Penalties were not imposed on Licensees who failed to notify ASIC within the required timeframe.
Recommendations made in the ASIC Enforcement Review Taskforce Report 2017 (“Taskforce Report”) led to the change requiring Licensees to notify ASIC when the change of control takes effect, rather than notifying ASIC when the Licensee has become aware of a change in control. This requirement applies to existing Licensees, where the change of control occurs on or after 18 February 2020.
The imposition of a strict liability offence is to ensure that Licensees are complying with the ‘fit and proper’ test, used to determine whether controllers of a Licensee are able to perform one or more functions as an officer of a body corporate. A strict liability offence will function as a method of deterrence for deliberate non-compliance. It is expected that Licensees will implement systems and procedures to ensure that they comply with this requirement in a timely manner.
- For AFSL holders: Section 912DA of the Corporations Act 2001 (Cth)
- For ACL holders: Section 53A of the National Consumer Credit Protection Act 2009 (Cth)
This change has been implemented to ensure the integrity of the financial regulatory regime. It has provided certainty as to when the notification time frame commences regarding a change in control for Licensees and aims to maintain ongoing compliance with Licensee obligations.
If you would like to speak to us about how this amendment could affect your licence, please contact us.