(a) if the demutualisation is implemented in accordance with the direct method or the distributing trust method of demutualisation—on the day on which all the shares in the company that the entity became or becomes that were or are to be issued in connection with the demutualisation have been issued; or
(b) if the demutualisation is implemented in accordance with the holding company method of demutualisation—on the day on which all the shares in the holding company that were or are to be issued in connection with the demutualisation have been issued; or
(c) if the demutualisation is implemented in accordance with the combined direct and holding company method of demutualisation—on the later of the following days:
(i) the day on which all the shares in the company that the entity became or becomes that were or are to be issued in connection with the demutualisation have been issued;
(ii) the day on which all the shares in the holding company that were or are to be issued in connection with the demutualisation have been issued.
(3) If this Division applies to the demutualisation of a mutual entity as mentioned in subsection (1), Subdivisions 326‑C to 326‑N provide for modifications of this Act and the Income Tax Assessment Act 1997 as those Acts have effect in respect of the entity.
(4) For the purposes of this Division, the giving of consideration (other than the payment of an amount) for the acquisition of shares or an interest in shares is taken to constitute the payment of an amount equal to the value of the consideration.
326‑10 Mutual entity and demutualisation
(1) An entity is a mutual entity if, and only if, immediately before the demutualisation resolution day, it is a body corporate that:
(a) is not an insurance company within the meaning of subsection 121AB(2); and
(b) is not a mutual affiliate company within the meaning of section 121AC; and
(ba) is not an entity to which item 6.3 of the table in section 50‑30 of the Income Tax Assessment Act 1997 (about private health insurers) applies; and
(bb) is not an entity in relation to whose demutualisation Division 316 (Demutualisation of friendly society health or life insurers) of that Act applies; and
(c) is not carried on for the object of securing a profit or pecuniary gain for its members; and
(d) does not have capital divided into shares held by its members; and
(e) does not hold property in which any of its members has a disposable interest (whether directly or indirectly) except in the event of the winding up of the entity.
(1A) If the entity is a mutual entity (within the meaning of the Corporations Act 2001), then, for the purposes of subsection (1), disregard the following:
(a) any MCIs (within the meaning of that Act) issued by the entity;
(b) any dividends or profits paid or payable in respect of such MCIs;
(c) any members of the entity who are members by virtue of holding such MCIs.
(2) A mutual entity that has passed a demutualisation resolution is called a demutualising entity.
(3) A mutual entity is demutualised if it ceases to be a mutual entity otherwise than by ceasing to be a body corporate. Such an entity is called a demutualised entity.
(4) A reference to a demutualising entity includes a reference to a demutualised entity.
326‑15 Provisions relating to listing on a stock exchange
(1) A share is listed if it is listed for quotation in the official list of ASX Limited.
(2) The expression “listed public company” has the same meaning as in the Income Tax Assessment Act 1997.
(3) A listing resolution, in relation to the demutualisation of a mutual entity, is a resolution passed by the members of the entity requiring the entity, or a holding company of the entity, to become a listed public company.
(4) The day on which demutualisation shares are first listed is the demutualisation listing day.
326‑20 Demutualisation resolutions etc.
(1) The demutualisation resolution, in relation to the demutualisation of a mutual entity, is a resolution passed by the members of the entity to proceed with the demutualisation of the entity.
(2) The demutualisation resolution day, in relation to the demutualisation of a mutual entity, is the day on which the demutualisation resolution was or is passed.
(3) The limitation period, in relation to the demutualisation of a mutual entity, is the period of 2 years beginning on the demutualisation resolution day or such further period as the Commissioner allows.
326‑25 Demutualisation shares
The demutualisation shares, in relation to a demutualised entity, are:
(a) the ordinary shares in the entity that are issued as mentioned in paragraphs 326‑45(1)(c) and (d); and
(b) the ordinary shares in the holding company that are issued as mentioned in paragraphs 326‑50(1)(d) and (e); and
(ba) the ordinary shares in the entity that are issued as mentioned in paragraphs 326‑52(1)(c) and (e); and
(bb) the ordinary shares in the holding company that are issued as mentioned in paragraphs 326‑52(1)(f) and (g); and
(c) the ordinary shares in the entity that are issued as mentioned in paragraphs 326‑55(1)(f) and (g); and
(d) the special shares in the entity that are issued as mentioned in paragraph 326‑55(1)(c).
326‑30 Existing members and new members
(1) An existing member of a mutual entity that demutualises is:
(a) a person who was a member of the entity on the earlier of the following days:
(i) the demutualisation resolution day;
(ii) the share allocation cut‑off day; or
(b) a person who became entitled to an allocation of demutualisation shares because of the death of a person referred to in paragraph (a).
(2) If the members of a mutual entity that is being demutualised have passed or pass a resolution to the effect that any person who became or becomes a member after a specified day is not entitled to an allocation of demutualisation shares, that day is the share allocation cut‑off day in relation to the demutualisation of the entity.
(3) A new member of a mutual entity that demutualises is a person who is a member of the entity other than an existing member.
(4) A reference to a member of a mutual entity that demutualises is taken, unless the contrary intention appears, to be a reference to a person who is an existing member or a new member of the entity.
326‑35 Pre‑CGT members and post‑CGT members
(1) A person is a pre‑CGT member of a demutualising entity if:
(a) the person’s membership rights in the entity are a pre‑CGT asset within the meaning of the Income Tax Assessment Act 1997; or
(b) both of the following apply:
(i) the person acquired membership rights in the entity by disposing of membership rights in another mutual entity; and
(ii) the person acquired membership rights in the other entity before 20 September 1985.
(2) A person is a post‑CGT member of a demutualising entity if the person is not a pre‑CGT member.
Subdivision 326‑B—How demutualisation is to be effected
Table of sections
326‑40 Methods of demutualisation
326‑45 Direct method
326‑50 Holding company method
326‑52 Combined direct and holding company method
326‑55 Distributing trust method
326‑60 Continuity of beneficial interest test
326‑40 Methods of demutualisation
A demutualisation of a mutual entity is to be implemented in accordance with one of the methods set out in sections 326‑45, 326‑50, 326‑52 and 326‑55.
326‑45 Direct method
(1) The direct method of demutualisation is as follows:
(a) all membership rights in the entity are extinguished;
(b) the entity becomes a company with a share capital;
(c) shares (ordinary shares) of only one class in the entity are issued within the limitation period to existing members in exchange for the membership rights referred to in paragraph (a);
(d) shares (also ordinary shares) of the same class in the entity may be issued within the limitation period to new members;
(e) if a listing resolution was passed by the members of the entity—the ordinary shares are listed within the limitation period.
Note: Other things may happen in connection with the implementation of the demutualisation.
(2) The following diagram shows, where this demutualisation method is used, the issue of shares to members of the entity.
Diagram showing direct demutualisation of a mutual entity
326‑50 Holding company method
(1) The holding company method of demutualisation is as follows:
(a) all membership rights in the entity are extinguished;
(b) the entity becomes a company with a share capital;
(c) shares of only one class in the entity are issued to a company (the holding company) within the limitation period;
(d) shares (ordinary shares) of only one class in the holding company are issued within the limitation period to existing members in exchange for the membership rights referred to in paragraph (a);
(e) shares (also ordinary shares) in the holding company of the same class may be issued within the limitation period to new members;
(f) if a listing resolution was passed by the entity—the ordinary shares are listed within the limitation period.
Note: Other things may happen in connection with the implementation of the demutualisation.
(2) The following diagram shows the main events that occur where this demutualisation method is used.
Diagram showing a holding company method of demutualisation
326‑52 Combined direct and holding company method
(1) The combined direct and holding company method of demutualisation is as follows:
(a) all membership rights in the entity are extinguished;
(b) the entity becomes a company with a share capital;
(c) shares (ordinary shares) of only one class in the entity are issued within the limitation period to existing members in exchange for the membership rights referred to in paragraph (a);
(d) shares (also ordinary shares) of the same class in the entity are also issued to a company (the holding company) within the limitation period;
(e) shares (also ordinary shares) of the same class in the entity may be issued within the limitation period to new members;
(f) shares (also ordinary shares) of only one class in the holding company are issued within the limitation period to existing members as a result of the extinguishment of the membership rights referred to in paragraph (a);
(g) shares (also ordinary shares) of the same class in the holding company may be issued within the limitation period to new members;
(h) the total number of ordinary shares issued to members under paragraphs (f) and (g) is the same as the total number of ordinary shares issued to the holding company under paragraph (d);
(i) if a listing resolution was passed by the members of the entity—the ordinary shares in the entity are listed within the limitation period.
Note: Other things may happen in connection with the implementation of the demutualisation.
(2) The following diagram shows the main events that occur where this demutualisation method is used.
Diagram showing combined direct and holding company method of demutualisation
326‑55 Distributing trust method
(1) The distributing trust method of demutualisation is as follows:
(a) all membership rights in the mutual entity are extinguished;
(b) the entity becomes a company with a share capital;
(c) shares (special shares) carrying only voting rights in respect of the demutualised entity are issued within the limitation period to a trustee to hold for the benefit of the members;
(d) the issue takes place before the issue of the ordinary shares mentioned in paragraphs (f) and (g);
(e) after the issue of all the ordinary shares, the rights attaching to the special shares become the same as those attaching to the ordinary shares and the special shares are dealt with in accordance with paragraph (h) as if they were ordinary shares;
(f) shares (ordinary shares) of only one class in the entity are, within the limitation period, issued to the trustee to hold on behalf of existing members in exchange for the membership rights referred to in paragraph (a) and, in accordance with the choice of each existing member, to transfer to the member the shares held on behalf of the member or to dispose of those shares on behalf of the member;
(g) shares (also ordinary shares) of the same class in the entity may, within the limitation period, be issued to the trustee on behalf of new members and, in accordance with the choice of each new member, to transfer to the member the shares held on behalf of the member or to dispose of those shares on behalf of the member;
(h) within the limitation period the trustee:
(i) sells the ordinary shares issued to the trustee and distributes the proceeds to the member; or
(ii) transfers the ordinary shares to the member;
(i) if a listing resolution was passed by the entity—the ordinary shares are listed within the limitation period.
Note: Other things may happen in connection with the implementation of the demutualisation.
(2) The trustee must be the trustee of a trust established solely for the purposes of performing functions under subsection (1).
(3) The following diagram shows the main events that occur where this demutualisation method is used.
Diagram showing effect of distributing trust method of demutualisation
326‑60 Continuity of beneficial interest test
(1) This section sets out a test (the continuity of beneficial interest test) that must be satisfied before this Division applies to the demutualisation of a mutual entity.
(2) The continuity of beneficial interest test is satisfied if:
(a) an opportunity is given to each existing member of the mutual entity:
(i) to take up shares in the demutualised entity or in a holding company to which shares in the demutualised entity are issued; or
(ii) to have shares in the demutualised entity issued to a trustee on behalf of the member; and
(b) where the demutualisation is implemented by the method set out in section 326‑45, 326‑50 or 326‑55—of the ordinary shares in the demutualised entity or holding company that are issued in connection with the demutualisation (the issued shares), the total number that are issued to existing members or to a trustee on behalf of existing members constitutes at least 90% of the issued shares; and
(ba) where the demutualisation is implemented by the method set out in section 326‑52:
(i) of the ordinary shares in the demutualised entity that are issued to members other than the holding company in connection with the demutualisation (the issued entity shares), the total number that are issued to existing members constitutes at least 90% of the issued entity shares; and
(ii) of the ordinary shares in the holding company that are issued in connection with the demutualisation (the issued holding company shares), the total number that are issued to existing members constitutes at least 90% of the issued holding company shares; and
(c) the accumulated surplus of the mutual entity is allocated or distributed in the form of shares, or cash from the sale of shares, to existing members in proportions that broadly accord with any one or more of the following:
(i) the respective amounts contributed by the members to the entity;
(ii) the respective values of the membership rights of the members;
(iii) the respective rights of the members on the winding up of the entity.
(3) In this section:
accumulated surplus, in relation to a demutualised entity, means the net assets of the entity on the demutualisation resolution day.
Subdivision 326‑C—CGT consequences of extinguishment of membership rights in mutual entity
Table of sections
326‑65 Extinguishment of membership rights
326‑65 Extinguishment of membership rights
Application
(1) This section applies where membership rights are extinguished as mentioned in paragraph 326‑45(1)(a), 326‑50(1)(a), 326‑52(1)(a) or 326‑55(1)(a).
Modification
(2) A capital gain or capital loss arising from the extinguishment of the membership rights of a member is to be disregarded.
Subdivision 326‑D—CGT consequences of disposal of demutualisation shares or an interest in such shares by a member of a mutual entity where the entity or a holding company of the entity becomes a listed public company
Table of sections
326‑70 Application of Subdivision
326‑75 Capital losses made from certain disposals to be disregarded
326‑80 Disposal by pre‑CGT member of a demutualisation share (other than a demutualisation original share) or an interest in such a share before demutualisation listing day where member did not acquire membership rights by disposing of membership rights in another mutual entity
326‑85 Disposal by pre‑CGT member of a demutualisation share (other than a demutualisation original share) or an interest in such a share on or after demutualisation listing day where member did not acquire membership rights by disposing of membership rights in another mutual entity
326‑90 Disposal by pre‑CGT member of a demutualisation share (other than a demutualisation original share) or an interest in such a share where member acquired membership rights by disposing of membership rights in another mutual entity
326‑95 Disposal by post‑CGT member of a demutualisation share (other than a demutualisation original share) or an interest in such a share
326‑100 Disposal by pre‑CGT member of a demutualisation original share or a non‑demutualisation bonus share, or an interest in such a share, before demutualisation listing day where member did not acquire membership rights by disposing of membership rights in another mutual entity
326‑105 Disposal by pre‑CGT member of a demutualisation original share or a non‑demutualisation bonus share, or an interest in such a share, on or after demutualisation listing day where member did not acquire membership rights by disposing of membership rights in another mutual entity