sec.205Financial accommodation to directors and associates

sec.205 Financial accommodation to directors and associates

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— the accommodation is— approved under subsection (2) ; or given under a scheme approved under subsection (2) ; or 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 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. For the purposes of subsection (1) (a) (i) and (ii), financial accommodation or a scheme is approved if— it is approved by a resolution passed at a general meeting; and the full details of the accommodation or scheme were made available to members at least 21 days before the meeting. 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. 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. 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. In this section, a reference to— the provision of financial accommodation to a director or an associate of a director; or the obtaining of financial accommodation by a director or an associate of a director; or a debt owed to a director or an associate of a director; includes a reference to a provision of financial accommodation to, or an obtaining of financial accommodation by, the director or associate, or a debt owed to the director or associate, jointly with another person. In this section— associate of a director means— the director’s spouse or de facto partner; or a person when acting in the capacity of trustee of a trust under which— the director or director’s spouse or de facto partner has a beneficial interest; or a corporation referred to in paragraph (c) has a beneficial interest; or a corporation if— the director or director’s spouse or de facto partner has a material interest in shares in the corporation; and the nominal value of the shares is not less than 10% of the nominal value of the issued share capital of the corporation. For the purposes of this section, a person has a material interest in a share in a corporation if— the person has power to withdraw the share capital subscribed for the share or to exercise control over the withdrawal of the share capital; or the person has power to dispose of the share or to exercise control over the disposal of the share; or the person has power to exercise or to control the exercise of any right to vote conferred on the holder of the share. (sec.205-ssec.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— the accommodation is— approved under subsection (2) ; or given under a scheme approved under subsection (2) ; or 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 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. (sec.205-ssec.2) For the purposes of subsection (1) (a) (i) and (ii), financial accommodation or a scheme is approved if— it is approved by a resolution passed at a general meeting; and the full details of the accommodation or scheme were made available to members at least 21 days before the meeting. (sec.205-ssec.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. (sec.205-ssec.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. (sec.205-ssec.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. (sec.205-ssec.6) In this section, a reference to— the provision of financial accommodation to a director or an associate of a director; or the obtaining of financial accommodation by a director or an associate of a director; or a debt owed to a director or an associate of a director; includes a reference to a provision of financial accommodation to, or an obtaining of financial accommodation by, the director or associate, or a debt owed to the director or associate, jointly with another person. (sec.205-ssec.7) In this section— associate of a director means— the director’s spouse or de facto partner; or a person when acting in the capacity of trustee of a trust under which— the director or director’s spouse or de facto partner has a beneficial interest; or a corporation referred to in paragraph (c) has a beneficial interest; or a corporation if— the director or director’s spouse or de facto partner has a material interest in shares in the corporation; and the nominal value of the shares is not less than 10% of the nominal value of the issued share capital of the corporation. (sec.205-ssec.8) For the purposes of this section, a person has a material interest in a share in a corporation if— the person has power to withdraw the share capital subscribed for the share or to exercise control over the withdrawal of the share capital; or the person has power to dispose of the share or to exercise control over the disposal of the share; or the person has power to exercise or to control the exercise of any right to vote conferred on the holder of the share.