AUSTRALIA Law and Practice Contributed by: Alastair Gourlay, Lewis Grimm, Joanne Dwyer and Kathryn Sutherland-Smith, Jones Day
ASIC is the primary regulator of private credit funds, where the manager, promoter or trustee holds an AFSL. APRA has power to make rules and give direc - tions applicable to non-bank lenders, whether domestic or foreign, that are registered finan - cial corporations (see 2.4 Compliance and Reporting Requirements ). However, the power only applies if APRA considers that provision of finance by a non-bank lender, or a class of them, materially contributes to risk of instability in the Australian financial system. There are currently no applicable rules or directions. Private credit providers are subject to general business regulation for their activities in Australia (see 2.1 Licensing and Regulatory Approval ), and have reporting and compliance obligations (see 2.4 Compliance and Reporting Require- ments ). 2.3 Restrictions on Foreign Investments Australia’s Foreign Investment Review Board (FIRB) regulates the investment activities of “for - eign persons” in Australia under a foreign invest - ment review regime. The regime is complex, and applies broadly to the acquisition of interests in an Australian entity, business or land. Due to the tracing and association rules under the regime, a large proportion of private credit funds are classified as “foreign government investors” (FGI) and are therefore subject to more FIRB approval triggers, including nil mon - etary thresholds on acquisition. For a private credit fund classified as an FGI, typical actions by the FGI will likely be subject to FIRB approval, regardless of the value of the asset or the transaction, unless an exemption applies. One such exemption is the “money-
lending exemption”, which is applicable to cer - tain interests held solely by way of security for a “money-lending agreement”. Acquisitions where FIRB approval may be required include: • the granting of rights over shares in Austral - ian companies in connection with lending arrangements; and • security granted to secured warrants or other non-loan related instruments. 2.4 Compliance and Reporting Requirements APRA Reporting for Registered Financial Corporations Non-bank lenders may be “registrable corpora - tions” for the purposes of data collection under the Financial Sector (Collection of Data) Act 2001. A “registrable corporation” is a corpora - tion (domestic or foreign) that engages in the provision of finance in the course of carrying on business in Australia, unless an exclusion applies. Provision of finance includes, among other things: • lending money, with or without security; and • carrying out activities, whether directly or indirectly, that result in the funding or originat - ing of loans or other financing. Registration of a corporation is not required unless the corporation satisfies the following two-part test (“Threshold Test”): • the value of the corporation’s assets in Australia (consisting of debts due to the corporation resulting from financing transac - tions) exceeds AUD50 million as at the date of the most recent balance sheet (“Loan Value Threshold”); and
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