Federal Register of Legislation - Australian Government

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PR No. 37 Rules/Other as made
This Rule applies only to friendly societies and provides for the termination of one or more of the statutory funds of life companies.
Administered by: Treasury
Registered 05 Feb 2009
Gazetted 30 Jun 1999
Date of repeal 01 Jul 2011
Repealed by Life Insurance (prudential standard) determination No. 12 of 2010 - Prudential Standard LPS 700 Friendly Society Benefit Funds

 

 

Life Insurance Act 1995

 

PRUDENTIAL RULES No 37

 

 

 

 

TERMINATION OF STATUTORY FUNDS    (S 53(1) & (2))

 

 

 

I, Graeme John Thompson, a delegate of the Australian Prudential Regulation Authority (“APRA”), under subsection 252(1) of the Life Insurance Act 1995 (the “Act”) MAKE the following Prudential Rules for the purposes of subsections 53(1) and (2) of the Act:

 

 

 

Application of these Prudential Rules

 

1.   These Prudential Rules apply to friendly societies.

 

Definitions

 

2.   In these Prudential Rules:

 

(a)       a reference to a ‘member’ in relation to a friendly society or an approved benefit fund means a person who has an interest in a benefit from an approved benefit fund in accordance with its approved benefit fund rules; and

 

(b)       in accordance with section 16G of the Act, a reference to a ‘statutory fund’ includes a reference to an ‘approved benefit fund’.

 

Application

 

3.   A friendly society may apply to APRA to terminate a statutory fund (that is, an approved benefit fund) of the friendly society.

 

4.   An application for the termination of an approved benefit fund must:

(a)       be in writing; and

(b)       state the name of the approved benefit fund that is proposed to be terminated; and

 

(c)       state the date from which the termination is proposed to have effect; and

 

(d)       except in so far as APRA otherwise determines in writing, be accompanied by the documents mentioned in Part 1 of the Schedule in relation to an application made under rule 3; and

 

(e)       be lodged with APRA at least 90 days, or such other period as APRA determines in writing, before the proposed date the termination is expected to take effect; and

 

(f)        be signed by:


 (i)        the principal executive officer of the company; or

 

(ii)        an officer of the company who has been authorised for the purposes of this rule by the principal executive officer, if the principal executive officer has notified APRA in writing of the authorisation.

 

5.   The applicant must, on request by APRA and within the time specified, produce to APRA a document of the kind set out in Part 2 of the Schedule.

 

Termination of an approved benefit fund of a friendly society

 

6.   Subject to these Prudential Rules, APRA may approve an application by a friendly society under rule 3 for a termination of any of its approved benefit funds.

 

7.   If APRA approves an application by a friendly society under rule 6, the friendly society must obtain consent for the termination, by either:

 

(a)       a special resolution, in accordance with the definition of ‘special resolution’ in section 9 of the Corporations Law as in force from time to time, (to be read as if references to ‘company’ used for the purposes of that definition are references to ‘approved benefit fund’) by the members of the approved benefit fund that is proposed to be terminated; or

 

(b)       if APRA so determines in its approval given under rule 6, a resolution of the board of directors of the friendly society.

 

8.   A friendly society must, at least 21 days before a meeting of members to provide consent to a termination under subrule 7(a), give personally or by post to each member of the approved benefit fund:

 

(a)       a copy of the documents mentioned in items 1, 2 and 6 of Part 1 of the Schedule, or a summary of those documents, that have been approved by APRA in writing; and

 

(b)       a notice of the meeting and the proposed special resolution in accordance with subrule 7(a).

 

9.   If a proposed termination is consented to in accordance with rule 7, the friendly society must:

 

(a)       cease to accept new members and any contributions from existing members in respect of the approved benefit fund; and

 

(b)       distribute the assets of the approved benefit fund, within 12 months of that consent, in accordance with rule 10.

 

Distributions of Assets of an Approved Benefit Fund

 

10. The assets of an approved benefit fund must be applied in the following order: (a)   first:

(i)         to pay benefits to any person entitled to a benefit from the approved benefit fund; or

(ii)        as otherwise permitted by the Act or by the approved benefit fund rules; and


 

(b)      second:

(i)         where the approved benefit fund rules of the approved benefit fund being terminated provide for the application of assets on the termination of the fund, in accordance with those approved benefit fund rules; or

(ii)        in any other case, in satisfaction of any entitlements of members of the approved benefit fund as determined in writing by the appointed actuary; and

 

(c)       third, if any assets remain after the application of subrules (a) and (b), by way of transfer to the management fund of the friendly society.

 

11. For the purposes of a determination under paragraph 10(b)(ii), the appointed actuary must take into account all the circumstances of the approved benefit fund, including:

 

(a)       the requirements of the Act; and

 

(b)       the applicable approved benefit fund rules; and

 

(c)       the history, performance and financial position of the fund during its existence, whether before or after it became an approved benefit fund under the Act.

 

Notification of members

 

12. A friendly society must, not later than the date of distribution of the assets of an approved benefit fund under rule 10, give written notice of the termination of the approved benefit fund to each member of the approved benefit fund.

 

13. A notice under rule 12 must include:

 

(a)       the name of the approved benefit fund;

 

(b)       the reasons for the termination of the approved benefit fund;

(c)       details of the termination of the approved benefit fund;

(d)       a summary of how the termination affects the interests of members of the fund; and

 

(e)       details of the proposed amendment of the approved benefit fund rules and, if applicable, the constitution of the friendly society, to recognise the termination of the approved benefit fund.

 

14. APRA may grant an exemption, subject to any conditions it thinks fit, from any of the requirements of rules 12 or 13, if it considers that full notification in accordance with those rules is not necessary.

 

Amendment of rules and constitution

 

15. If a friendly society has distributed assets in accordance with rule 10, the board of directors of the friendly society must within 30 days of that distribution:

 

(a)       resolve to amend the approved benefit fund rules and, if applicable, the constitution of the friendly society, in the manner set out in the document required to be given to APRA under item 4 of Part 1 of the Schedule, to give effect to the proposed termination of the approved benefit fund; and


 

(b)       provide APRA with a copy of the resolutions made under rule 7 and this rule; and

 

(c)       apply to APRA for approval of a proposed amendment of its approved benefit fund rules in accordance with section 16Q of the Act; and

 

(d)       if applicable, apply to APRA for approval of any proposed amendment of its constitution in accordance with section 16U of the Act.

 

NOTE:                  Prudential Rules No 41 details the requirements for friendly societies to amend their approved benefit fund rules and Prudential Rules No 43 details requirements for the amendment of the constitution of a friendly society.

 

Information to be provided to APRA following the termination

 

16. A friendly society must lodge with APRA, within 3 months or such other period as APRA determines, after the termination of an approved benefit fund takes effect:

 

(a)       audited accounts, or accounts in a form approved by APRA, for the terminated fund up to the date on which the termination takes effect; and

 

(b)       such other information as APRA may require in writing.

 

17. The accounts referred to in rule 16 must include, if applicable:

 

(a)       a statement of the distribution of the assets of the approved benefit fund; and

 

(b)       details of any bonuses paid by the friendly society from the approved benefit fund during the period to which the accounts relate.

 

When termination has effect

 

18. A termination of an approved benefit fund of a friendly society has effect from when amendments to the approved benefit fund rules to give effect to the termination come into force under section 16T of the Act.

 

 

 

This instrument commences on the transfer date (as defined in section 2 of the Financial

Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999).

 

 

 

 

Dated 24 June 1999

 

 

 [Signed]

 

 

G J Thompson

Chief Executive Officer

Australian Prudential Regulation Authority


 

SCHEDULE

 

Part 1 - Specified documents to be lodged with an application under rule 4

 

1.   A statement of the nature of the proposed termination and the terms and conditions on which the termination is to take place.  Unless otherwise advised by APRA in writing, the statement must include the following information:

 

(a)       the name of the approved benefit fund that is proposed to be terminated; and

 

(b)       the date from which the termination is proposed to have effect; and

 

(c)       the reasons for the proposed termination; and

 

(d)       the manner in which the friendly society intends to distribute the assets of the approved benefit fund that is to be terminated; and

 

(e)       the effect of the proposed termination on the interests of the members of the approved benefit fund; and

 

(f)        any interest that any officer of the friendly society has in the proposed termination; and

 

(g)       any compensation or other consideration proposed to be paid, or any other incentive proposed to be given, to any officer or member of the friendly society in relation to the proposed termination; and

 

(h)       whether there has been any material change to the financial position of the approved benefit fund since the date at which the profit and loss statement or balance sheet were prepared under item 2; and

 

(i)        such other information as APRA requires in writing.

 

2.   Unless APRA determines in writing that they are not required, the most recent audited:

 

(a)        profit and loss statement; and

 

(b)       balance sheet

 

prepared in accordance with Prudential Rules No 47 for each fund that is to be involved in the restructure, provided that they were prepared at a date no earlier than 6 months before the date of the application under rule 4.

 

3.   A certificate signed by the appointed actuary certifying that, having regard to all matters relevant to the proposed termination, the actuary considers that the termination would be in the interests of the members of the approved benefit fund.

 

4.   A copy of:

 

(a)        proposed amendments to the approved benefit fund rules; and

 

(b)       any proposed consequential amendments to the constitution of the friendly society.

 

in order to recognise the termination of the approved benefit fund.

 

5.   A copy of the notice proposed to be issued by the friendly society to notify members of the approved benefit fund of the proposed termination of the approved benefit fund, as required by rule 12.

 

6.   A certificate signed by the directors certifying that, having regard to all matters relevant to the proposed termination, the directors consider that the termination would be in the interests of the members of the approved benefit fund.


 

Part 2 - Documents to be produced on request under rule 5

 

1.   A report by an independent actuary (being an actuary, other than the appointed actuary, who is approved by APRA in writing to perform duties as required by APRA and paid for by the friendly society for the purposes of these Prudential Rules) including statements on the same matters as those required of the appointed actuary.