205Financial accommodation to directors and associates

205 Financial accommodation to directors and associates

205 Financial accommodation to directors and associates

(1) A co-operative must not provide financial accommodation to a director, or to a person the co-operative knows or should reasonably know is an associate of a director, unless—

(a) the accommodation is—

(i) approved under subsection (2); or

(ii) given under a scheme approved under subsection (2); or

(iii) provided on terms no more favourable to the director or associate than the terms on which it is reasonable to expect the co-operative would give if dealing with the director or associate at arm’s length in the same circumstances; and

(b) the directors have approved the accommodation, at a meeting of the board at which a quorum was present, by a majority of at least two-thirds of the directors present and voting on the matter.

Maximum penalty—$50,000.

(2) For the purposes of subsection (1) (a) (i) and (ii), financial accommodation or a scheme is approved if—

(a) it is approved by a resolution passed at a general meeting; and

(b) the full details of the accommodation or scheme were made available to members at least 21 days before the meeting.

(3) A director or an associate of a director must not obtain financial accommodation given in contravention of subsection (1).

Maximum penalty—$24,000 or imprisonment for 2 years, or both.

(4) For the purposes of this section, a concessional rate of interest for a borrower from a co-operative is a normal term only if the borrower is entitled to the concession by being a member of a class of borrowers from the co-operative specified in its rules as being entitled to the concession.

(5) If a director of a co-operative or an associate of a director accepts, in payment of a debt owed by a member of the co-operative to the director or associate, any proceeds of financial accommodation provided to the member by the co-operative, this section has effect as if the financial accommodation has been provided to the director or associate.

(6) In this section, a reference to—

(a) the provision of financial accommodation to a director or an associate of a director; or