38Expenditure and application of statutory fund

#### 38 Expenditure and application of statutory fund (1) A life company must not apply, or deal with, assets of a statutory fund, whether directly or indirectly, except in accordance with this section. (2) The assets of a statutory fund may only be applied: (a) to meet liabilities (including policy liabilities) or expenses incurred for the purposes of the business of the fund; or (b) for the making of investments in accordance with section 43; or (c) for the purposes of a distribution under Division 6. (3) A life company must not mortgage or charge any of the assets of a statutory fund except: (a) to secure a bank overdraft; or (aa) in accordance with section 38A or 38B; or (b) in connection with the undertaking of a major development project and in accordance with section 40; or (c) for such other purposes, and subject to such other conditions, as are prescribed by the regulations. (4) A life company must not borrow money, for the purposes of the business of a statutory fund, by means of an unsecured borrowing if the result would be that the total amount of principal outstanding under unsecured borrowings for the purposes of the business of the fund would exceed an amount ascertained in accordance with the prudential standards. (5) In subsection (4): > unsecured borrowing does not include: (a) a borrowing of money by means of a bank overdraft; or (b) a borrowing of money by means of an arrangement of a prescribed kind. (6) The assets of a statutory fund are not available to meet a liability of a life company under a contract of guarantee unless: (a) the contract of guarantee was entered into by the company in connection with an investment by the company of assets of the fund; and (b) the investment was made in accordance with this Part. (7) Nothing in this section applies to the transfer of assets from one statutory fund to another in accordance with Division 3, 4 or 6.