Pooled Development Funds Act 1992

Companies seeking to become PDFs: Must be eligible corporations with appropriate capital structures and investment plans, and must not have previously carried on business or raised capital other than for PDF purposes (section 14).

Registered PDFs: Subject to ongoing investment restrictions, capital structure requirements, annual reporting obligations, notification obligations, and the threat of registration revocation.

Shareholders in PDFs: Subject to the 30% shareholding cap in section 31. This affects anyone who acquires shares in a PDF (including through a takeover offer) because acquisitions beyond 30% require prior Board approval or risk triggering directions to dispose of excess shares and potential PDF revocation.

Investee companies: Companies in which PDFs invest under Part 4. The strict nature of eligible investments affects these companies' access to PDF capital.

Venture capital entities (Part 7A): Foreign superannuation funds and other qualifying entities that register to invest in Australian resident investment vehicles.

The Board (Industry Innovation and Science Australia): Administers the entire scheme, makes or refuses registration declarations, approves investment plans and variations, approves investments requiring approval, monitors compliance, issues directions, and revokes registrations.

Annual returns (section 41): A PDF must, within four months of the end of each financial year, give the Board a written return containing extensive information: details of relevant officers and investment managers, full particulars of all investments held and transactions during the year, investment plan, capital details, shareholder details, dividends paid, and any other information required by Board determination. This is an annual compliance check.

Notification obligations (section 42): Within 30 days of becoming aware of specified events, a PDF must notify the Board in writing. Events include changes in relevant officers, changes to investment manager arrangements, changes in share capital, changes to the registered office address, changes to the PDF constitution, and any material change affecting information previously given to the Board.

Information and document production (section 43): The Board may require a PDF, or a present or former officer or investment manager, to provide information or produce documents relating to the PDF or its investments by written notice specifying a reasonable period. Non-compliance is an offence under section 51(2) (up to 50 penalty units).

Compliance with all investment restrictions: PDFs must comply with Division 1 of Part 4 for all investments other than unregulated investments. Investments not permitted by the Act constitute a breach of registration conditions and can lead to revocation.

Compliance with shareholding cap (section 31): A person who holds shares in a PDF must not, without Board approval, hold more than 30% of the PDF's issued shares. This obligation falls on shareholders, not just the PDF itself.

Board registration (section 14): The Board must grant a registration declaration if all the criteria in section 14(1) are satisfied, including that the investment plan is appropriate, the capital-raising plan is appropriate, the constitution satisfies PDF requirements, and the company is reasonably likely to implement its plans. If not satisfied, the Board must refuse. Decision period is 60 days from receipt, extendable by up to 60 days (section 13).

Investment approval (sections 20-28A): The Board has various approval powers for investments. These include approving pre-owned share acquisitions (section 20(2)), approving share types other than ordinary shares (section 20(1)(b)), and approving transactions with related parties (section 29).

Shareholding approvals (section 31): The Board may approve acquisitions of more than 30% of a PDF's shares. Without approval, a person holding above 30% is in breach of the Act. The Board may, after following the show-cause procedure in section 31, direct that person to dispose of the excess shares (section 33) or take other remedial action.

Compliance directions (sections 33-38): The Board may give various directions: directing disposal of excess shares (section 33), directing that capital be raised (section 34), directing correction of investment plan compliance (section 35), directing compliance with capital structure requirements (section 36). Contravention of a direction under section 36(3) is an offence under section 51(1).

Revocation (sections 45-47): Registration is automatically revoked if the PDF ceases to be an eligible corporation (section 45). A PDF may voluntarily apply for revocation (section 46). The Board may revoke at its discretion if satisfied that the Act, the registration conditions, or the PDF constitution has been contravened (section 47(1)). Before discretionary revocation, the Board must give at least 14 days to make submissions (section 47(3)).

Internal review and ART review (sections 55-56): The person affected by a reviewable decision may request internal reconsideration within 21 days. The Board must reconsider within 60 days or the decision is taken to be confirmed. After internal review, the person may apply to the Administrative Review Tribunal for review of the confirmed or varied decision (section 56).

Section 51 offences:

• Contravention of section 36(3) (failure to comply with a direction): fine up to 50 penalty units.
• Contravention of section 43(4) (failure to comply with information or production requirement): fine up to 50 penalty units.
• A reasonable excuse defence is available in both cases, with the defendant bearing the evidential burden.

Directions as a consequence of non-compliance: The Board can issue directions under sections 33-36 requiring disposal of excess shareholdings, capital raising, investment plan corrections, and capital structure compliance. Failure to comply with directions can itself be an offence or lead to revocation.

Revocation of registration: The most significant consequence of non-compliance is registration revocation under section 47. Once revoked, the company loses PDF status and the associated tax benefits. The company must notify its shareholders and the revocation is published in the Gazette (sections 48-49).

Secrecy obligations (section 71): Board members, committee members, and staff who handle protected information or protected documents cannot disclose them except for the purposes of the Act or the Venture Capital Act 2002, or to the Commissioner of Taxation. The penalty is imprisonment for 2 years.

Criminal Code application (section 4B): Chapter 2 of the Criminal Code (Cth) applies to all offences under the Act.

Becoming a PDF:

1. Company prepares an application under section 11, including details of officers, investment managers, share capital, capital-raising plan, investment plan, shareholder details, and a copy of the constitution.
2. Application must not be made on or after the commencement day of Part 4 of Schedule 8 to the Tax Laws Amendment (2007 Measures No. 2) Act 2007 (section 11(4A)), which reflects the closure of the scheme to new registrations from that date.
3. Board has 60 days to decide, extendable by 60 days.
4. If the Board grants the application, it makes a registration declaration and publishes notice in the Gazette.

Annual reporting: Annual return within four months of financial year end. Changes must be notified within 30 days.

Investment approval: Before making certain investments, the PDF must obtain Board approval. The Board should be consulted about the applicable approval requirements in Part 4.

Internal review timeline: Request for reconsideration must be made within 21 days of receiving the decision notice. The Board must reconsider within 60 days. ART application available after internal review.

Revocation show-cause period: At least 14 days written notice must be given before discretionary revocation, allowing the PDF to make submissions.

Venture capital entity registration (Part 7A): Application must be made within 30 days of the first investment. Board must decide within 45 days, extendable by 45 days. Annual return within three months of each 30 June financial year end.

Income Tax Assessment Act 1997: The tax benefits that make PDF status attractive (concessions on income from PDF investments) are conferred by the ITAA 1997, not this Act. The definitions of VCLP, ESVCLP, AFOF, limited partnership, venture capital entity, resident investment vehicle, and venture capital equity in section 4 all cross-refer to provisions in the ITAA 1997.

Corporations Act 2001: The PDF's constitution requirements and share structure must satisfy both Corporations Act requirements and the additional PDF constitution requirements in section 4(3). Company, director, and share definitions also cross-refer to the Corporations Act.

Industry Research and Development Act 1986: The Board (Industry Innovation and Science Australia) is established under that Act. Staff, committees, and consultant arrangements for the Board are made under that Act.

Venture Capital Act 2002: The secrecy obligations in section 71 extend to information and documents relating to the Venture Capital Act 2002. The Board administers both Acts in relation to venture capital entities.

Financial Sector (Shareholdings) Act 1998 (FSSA): As noted in ASIC v Mariner [2015] FCA 589, the shareholding cap in section 31 of the PDFA can interact with the FSSA where a PDF target is also a financial sector company. These are separate statutory regimes operating concurrently.

Takeovers (Corporations Act 2001, Chapter 6): Because the Act caps shareholdings in a PDF at 30% without Board approval, a person making a takeover offer for a PDF faces the need to seek Board approval before completing the acquisition. This creates regulatory complexity in PDF takeovers, as the ASIC v Mariner case illustrates.

No new registrations since 2007: Section 11(4A) prohibits new registration applications from the commencement of Part 4 of Schedule 8 to the Tax Laws Amendment (2007 Measures No. 2) Act 2007. The PDF scheme is closed to new entrants; only existing PDFs continue to operate.

Tax benefits are in the ITAA 1997, not this Act: The Act creates the regulatory structure but not the tax concession. Practitioners advising on PDF matters need to consult the ITAA 1997 for the actual tax treatment. This Act can be registered in without securing any tax benefit if the ITAA provisions are not satisfied.

The 30% shareholding cap creates takeover complexity: A person who makes an off-market bid for all shares in a PDF will, if successful, acquire far more than 30% of the PDF's shares. Board approval is required before that acquisition. Failure to seek approval pre-completion risks directions to dispose of excess shares and potential PDF revocation. ASIC v Mariner illustrates how this played out in practice: the takeover bidder had months before completion to seek approval.

Investment restrictions are detailed and technical: Part 4 contains a complex web of limits: investment type restrictions, per-investment percentage caps (section 25: generally 30% of shareholders' funds per investment), loan-to-one-company caps (section 20B(2): 20% of shareholders' funds in loans to any one investee), and other Board approval requirements. A PDF that inadvertently breaches these restrictions is in breach of registration conditions and risks revocation.

Annual return is a substantive compliance document: Section 41's return requirements are extensive. The return contains full investment details, capital details, shareholder details, and officer information. The Board's annual compliance review is triggered by receipt of this return (section 40). Errors in the return can expose the PDF to revocation.

Automatic revocation (section 45): There is no discretion in section 45. If a PDF at any time ceases to be an eligible corporation (a trading or financial corporation within section 51(20) of the Constitution), its registration is automatically and immediately revoked. PDFs that change their business mix should be alert to whether they remain eligible corporations.

Establishing a PDF (historical): Before 2007, a fund manager seeking to access tax-advantaged capital for investments in Australian small-to-medium enterprises would incorporate a company, ensure the constitution satisfied the PDF requirements (no share classes, ordinary shares only, uniform rights), prepare an investment plan targeting eligible businesses, and apply to the Board with full details of officers and capital-raising plans. If approved, the company would become a PDF with the tax benefits in the ITAA 1997 attaching to qualifying distributions to shareholders.

Annual compliance: An existing PDF completes its 30 June financial year. Within four months (by 31 October), it must file its annual return covering all investments, disposals, loans, capital raised, dividends paid, and officer/manager details. If any investment now exceeds 30% of shareholders' funds, or if a loan to one investee exceeds 20% of shareholders' funds, the PDF may be in breach and should consider seeking Board approval or rectifying the position before the return is filed.

30% shareholding cap in a takeover: A listed company announces a bid for all shares in a PDF. Before the offer period closes, the bidder must seek Innovation Australia Board approval to hold more than 30% of the PDF's shares. If approval is not obtained in time, the bidder risks direction to dispose of excess shares and the target potentially losing PDF registration, reducing the target's tax benefits.

Revocation risk: A PDF director becomes aware that two material investments now each represent approximately 32% of shareholders' funds, exceeding the unapproved per-investment cap of 30% in section 25. The director should immediately notify the Board and seek retroactive approval or a direction as to how to bring the portfolio back into compliance. Failure to act risks the Board issuing directions and ultimately revoking registration, stripping the PDF of its tax status.