WOOL INTERNATIONAL PRIVATISATION BILL 1999 Explanatory Memorandum

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

HOUSE OF REPRESENTATIVES

WOOL INTERNATIONAL PRIVATISATION BILL 1999

EXPLANATORY MEMORANDUM

(Circulated by authority of the Minister for Agriculture, Fisheries and Forestry,
the Hon Mark Vaile MP)

GENERAL OUTLINE

1.1 The Wool International Privatisation Bill 1999 provides for the registration of WoolStock Australia Limited, currently the statutory authority known as Wool International, as a company under the Corporations Law.
1.2 The Bill achieves the Government’s objectives of returning control of the wool stockpile to the registered equity holders of Wool International .
1.3 In summary the Bill provides for:

• the corporatisation and privatisation of Wool International and the change of its name to WoolStock Australia Limited. WoolStock Australia Limited will be a public company with freely transferable equity and a private sector board;

• the preservation of units of entitlement of registered equity holders;

• the removal of the Government from the management of the wool stockpile and the corresponding lifting of restrictions on the manner and timing of sales of stockpile wool; and

• the issue of shares to Wool International registered equity holders, with each registered equity holder receiving one share in WoolStock Australia Limited for each unit held by them.

1.4 It is intended that if the passage of the Bill and the receipt of Royal Assent allow, Schedule 2 will be proclaimed to commence on 1 July 1999 and that Wool International will convert to a company on 1 July 1999, the same day. This is consistent with the current freeze on stockpile sales which expires on 30 June 1999.

1.5 The Bill provides for the privatisation of Wool International without any change in the legal identity of Wool International. This means there will be no requirement for assets, liabilities, agreements, contracts, etc to be transferred from Wool International to WoolStock Australia Limited. Consequential amendments are made by the Bill to the Wool International Act 1993, which are necessary to accommodate the privatised structure of WoolStock Australia Limited and the preservation of the statutory basis of units of equity.

1.6 The right of the registered equity holders of Wool International to share in the surplus money from the sale of stockpile wool has been protected through the retention of those parts of the Wool International Act 1993 which provide that right. This includes the preservation of the taxation treatment of distributions to registered equity holders who are the original wool growers to whom the units were issued (which retain their status as primary production income) and the sale of units by registered equity holders (which can still qualify for small businesses capital gains tax relief).

1.7 WoolStock Australia Limited will be exempt from income tax on any amounts received from sales of stockpile wool and incidental activities in connection with selling the stockpile wool and distribution of the proceeds.

1.8 Wool International will be required to establish a trust company, referred to in the Bill as TrusteeCo, which will hold the units of persons and shares of members who cannot, for a number of reasons, have their units and/or shares transferred to them. These include:

• putative unit holders (wool tax payers entitled to receive units who died, or companies that were wound up, before 1 September 1997, and whose estates and creditors have not yet been fully administered or established);

• wrong named unit holders (unit holders whose name on the register is not on its face, the correct name of a legal entity); and

• untraceable unit holders (unit holders whose whereabouts are, at this time, unknown).

1.9 TrusteeCo will transfer units and shares to the unit holders, beneficiaries or creditors once their identity or legal status has been established.

1.10 Some registered equity holders have used their units in Wool International as security for loans taken out through lending institutions. These charges will be extended to the corresponding shares which will be issued in respect of each charged unit and to any dividends declared on those shares if the charge on the unit extends to distributions on the unit. The intention of this is to preserve the value of the security which has been taken by chargees over units.

1.11 Wool International will be required to apply to the Australian Securities and Investments Commission to be registered as a public company limited by shares. The application must be accompanied by the company’s proposed constitution. The constitution must be in a form approved by the Minister. The main features of the proposed constitution are that:

• WoolStock Australia Limited’s principal activities will be disposing of the stockpile, discharging its liabilities and distributing any surplus money to registered equity holders. In addition, it will be able to apply up to $3 million to investigate and sponsor new business activities; and

• WoolStock Australia Limited will be the sole shareholder in the trust company which will hold shares on trust for certain classes of unit holders.

1.12 The constitution requires the Minister to appoint the initial Chairman of the Board of WoolStock Australia Limited and an additional 2 directors. Further directors will be appointed by the Board following consultation with the wool industry. The constitution will provide for that first meeting to be held within three months of the conversion of Wool International to WoolStock Australia Limited.

1.13 The Commonwealth does not seek to exempt any transaction effected by the Bill from Commonwealth, State and Territory stamp duties and other taxes. It is estimated that up to $120,000 may be levied on the various transactions effected by the legislation. These will be part of the expenses of the privatisation to be borne by Wool International under section 22ZG of the Wool International Act 1993 (as amended by the Bill).
1.14 The Bill does not involve any other additional expenditure by the Commonwealth or additional revenue to the Commonwealth.

3.2 The Bill (apart from schedule 2) will commence on the day on which it receives the Royal Assent.

3.3 Schedule 2 will commence on a date to be proclaimed or on the date six months after the Bill receives the Royal Assent (if this is earlier). The effect of this is that consequential amendments to other acts (primarily the Wool International Act) will not take effect until the date on which Wool International becomes WoolStock Australia Limited.

3.4 Clause 3 effects the consequential amendments to other Commonwealth legislation set out in schedule 2. These consequential amendments will not take effect until the date of Wool International's conversion into WoolStock Australia Limited.

3.5 Clause 4 binds each of the Crown in right of the Commonwealth, each of the States, the ACT and Northern Territory and Norfolk Island.

3.6 Clause 5 provides for the Bill to extend to all Australian external Territories.

3.7 Clause 6 provides for the Bill to also have effect outside of Australia as well as within it.

3.9 It is not necessary to recite most of the definitions used in the Bill here. However, an important term in the overall scheme of the legislation is "conversion time". This means the date on which Schedule 2 commences. This is the date on which Wool International will become WoolStock Australia Limited.

3.10 Terms which are already defined in the Wool International Act have not been defined again in the Bill because the effect of section 15 of the Acts Interpretation Act 1901 is that those definitions will be incorporated into the Bill.

Clause 8 - Application for registration under Part 5B.1 of the Corporations Law

3.11 This clause requires Wool International to apply to register itself as a Corporations Law company as soon as possible after the commencement of this clause, which will be on Royal Assent.

3.12 Wool International is also required to lodge its proposed constitution at the ASIC. The constitution must first have been approved by the Minister. This allows the Minister to ensure that the constitution is in a form acceptable to the Commonwealth.

3.13 Subclause 5 gives exemptions to Wool International from certain formalities which must normally be complied with in registering a company. These exemptions are:

• Wool International does not have to supply details of every member (shareholder) of the company with the application;

• the application made by Wool International does not need to be in the form prescribed by ASIC;

• Wool International does not have to lodge any other documents with its application other than its proposed constitution; and

• Wool International does not have to gain the consent of its members to effect the registration or prove that it is the body specified in its application.

These are the requirements of the Corporations Law which are inapplicable to Wool International, because of its current character as a statutory authority.

Clause 9 - Nomination of TrusteeCo to hold shares, units etc. on behalf of other persons

3.14 This clause provides for the establishment of a trust company referred to in the Bill as TrusteeCo, prior to the date on which Wool International becomes WoolStock Australia Limited. TrusteeCo is to be wholly owned by Wool International. A company will be nominated by the Minister to be TrusteeCo for the purposes of the Bill. Under the Bill the role of TrusteeCo is to:

• replace the Chief Executive (an office which will cease to exist at the conversion time) as holder of units on behalf of putative equity holders;

• hold title to units for which the current holder is untraceable and shown as such on the register of equity holders;

• hold shares issued in respect of units where the units are registered in the name of TrusteeCo on behalf of putative equity holders;

• hold shares issued in respect of units where the units are registered in a name which is not the correct name of a legal entity; and

• hold shares issued in respect of units for which the current holder is untraceable.

3.15 This clause provides that all units currently registered in the name of the Chief Executive (those belonging to putative equity holders) transfer to TrusteeCo immediately prior to the time of Wool International's conversion into WoolStock Australia Limited.

3.16 A putative equity holder is the estate of a deceased individual whose estate was wound up prior to the date of the original creation of the register of equity holders maintained by Wool International since 1 September 1997 and who would have been a registered equity holder if he or she had not died, or a company that had been wound up by that date and which would have been a registered equity holder had it not been wound up.

3.17 Wool International is also to record the relevant changes in the register of equity holders operated by it to reflect this transfer of units from the Chief Executive to TrusteeCo.

3.18 Subclause (2) also provides that any other property held by the Chief Executive at the time of creation of WoolStock Australia Limited will also transfer to TrusteeCo.

3.19 TrusteeCo will hold all such units on trust in accordance with the requirements of the Wool International Act as amended by Schedule 2 of the Bill.

3.20 There are a large number of entries on the register of equity holders which have some doubt as to the accuracy of contact details for registered equity holders. However, in the majority of cases these represent a very small number of units.

3.21 The intention of subclause (3) is to vest in TrusteeCo, before the issue of shares in WoolStock Australia Limited, all units owned by registered equity holders with whom Wool International has never been able to make contact (these are currently recorded in the register of equity holders maintained by Wool International as unclaimed entitlements). The effect of this is to avoid having to issue shares to persons who cannot be contacted. It also has the advantage that those persons will be able to claim their entitlement to such shares from TrusteeCo if they can prove their entitlement. In the meantime, TrusteeCo will hold the shares on trust for them.

3.22 The purpose of this clause is to make it clear that no more units of equity in the stockpile wool may be issued and to validate all entries on the register as at the conversion date.

3.23 This clause clarifies that certificates which have been issued to registered equity holders in respect of their unit holdings continue to have effect after the conversion of Wool International into WoolStock Australia Limited. This is consistent with the units continuing to exist notwithstanding the conversion of Wool International to a Corporations Law company.

3.24 This makes it clear that the shares which registered equity holders will become entitled to at the conversion time are entitlements in addition to the units already held by them. The shares do not replace those units.

3.25 This clause gives Wool International a share capital of $349,403.18 which will be divided into 349,403,180 shares immediately before the conversion time.

3.26 The number of shares to be issued matches exactly the number of units which will be in existence at the time of the conversion of Wool International into WoolStock Australia Limited.

3.27 A very small amount of capital is therefore allotted to each share (0.1 cent per share).

3.28 This clause requires the ASIC to register WoolStock Australia Limited under the provisions of the Corporations Law dealing with registration of existing bodies corporate as companies.

3.30 Subclause (2) obliges ASIC to issue a certificate of incorporation and an ACN to WoolStock Australia Limited.

3.31 The registration of WoolStock Australia Limited is to take effect at the time of the conversion of Wool International into WoolStock Australia Limited.

3.32 This clause provides that following the conversion of Wool International into WoolStock Australia Limited, any change to the share capital, name, structure or constitution of WoolStock Australia Limited will be at the discretion of the members of WoolStock Australia Limited subject to its constitution, the general law and the Corporations Law in the same manner as any other company registered under the Corporations Law.

3.33 This clause deals with the issue of shares to registered equity holders. Every registered equity holder will receive one share in WoolStock Australia Limited (which is to be taken to be fully paid) for each unit that the relevant registered equity holder owns.

3.34 Shares are to be issued to different types of registered equity holders as follows:

- to that person. It will only be possible to issue shares to registered equity holders in this category if the name on the register of equity holders is the proper legal name of that person.

- where the name on the register of equity holders of the relevant registered equity holder is the name of a partnership then shares are to be issued jointly to all the partners that make up that partnership.

- units which are registered at the conversion time in the name of TrusteeCo in respect of putative equity holders will be issued to TrusteeCo.

- if units are registered in the name of TrusteeCo because the true owner is untraceable (see clause 14(3) of the Bill), then shares in respect of these units will also be issued to TrusteeCo and held by it on trust for the true owner.

- shares will be issued to TrusteeCo under this heading where the name of the registered equity holder on the register of equity holders is not, on the face of it, the name of a legal entity. This category will need to be used on the issue of shares in the numerous cases where, for instance, the name of the registered equity holder is a trading name, or appears to be the name of a corporate entity but that corporate entity is not registered under the Corporations Law.

- alternatively, this category may need to be used in the case of individuals where (for instance) the individual's name has changed, or is incorrect, but Wool International has not been informed of this.

3.35 Subclause (2) provides that any person who becomes a member of WoolStock Australia Limited by having shares issued to them under this clause (rather than having applied for them in the usual way) has the same rights, privileges and benefits, duties, liabilities and obligations as any member of any other company registered under the Corporations Law would.

3.36 Subclause (3) says that section 259C of the Corporations Law does not apply to the issue of shares in WoolStock Australia Limited to TrusteeCo. This provision is required to make it clear that TrusteeCo may hold the shares as trustee notwithstanding that it will be a wholly owned subsidiary of Woolstock Australia Limited. Because Woolstock Australia Limited, as holding company of TrusteeCo, has a contingent residual beneficial interest in the shares held on trust, Section 259C of the Corporations Law would preclude the issue and transfer of shares to TrusteeCo.

3.37 Subclause (4) makes it clear that there are no voting restrictions on those shares.

3.38 This clause extends any charges which are registered against units pre-existing at the conversion time to each share issued in respect of each charged unit and to any dividends declared on those shares. This preserves the value of the security which has been obtained by chargees over units.

3.39 Under subclause (5) chargees are also entitled to be paid sums by WoolStock Australia Limited in respect of dividends on those shares to the same extent that they are entitled to be paid sums by WoolStock Australia Limited in respect of distributions on the units that correspond to those shares. Chargees can only be paid sums under this subclause:

• only if the registered equity holder in question has authorised WoolStock Australia Limited (whether at that time called WoolStock Australia Limited or Wool International) under subsection 22R(4)(b) of the Wool International Act to make such payments in respect of units of equity.

3.40 Under section 22P of the Wool International Act, all units will, one month after the final distribution has been made, be cancelled. Therefore, the value of the security taken by chargees over units would be further reduced if that security were not transferred so as also to attach to the shares issued to the relevant shareholder.

3.41 For the avoidance of doubt, subclause (3) states that if there is more than one charge attaching to a unit then those charges, on transfer to the relevant shares, shall have the same priority amongst themselves as they had in relation to the charges on the units. This provision corresponds to section 22K of the Wool International Act which relates to charges on units.

3.42 Wool International already creates separate registrations for any units which are subject to a charge. WoolStock Australia Limited will, after the conversion date, be required to issue separate share certificates for shares that are subject to a charge and shares which are not subject to any charges. This is to enable separate certificates to be held by chargees where the shares are charged. Unlike the units, the charges on shares will not be recorded on the register of members.

Clause 18 - Dealings by TrusteeCo with shares held for putative equity holders

3.43 This clause requires TrusteeCo to deal with shares of putative equity holders in the same way it would deal with units of equity held on trust by TrusteeCo for putative equity holders under the revised sections 22H(2), 22U and 22V of the Wool International Act.

3.44 New clause 22H(2) requires TrusteeCo to transfer shares to the person properly entitled to them and new clause 22V states that, until the time of any such transfer, TrusteeCo holds the shares on trust.

Clause 19 - Dealings by TrusteeCo with shares held in respect of unclaimed units or wrong-name units

3.45 This clause sets out the terms of the trust of the shares that are held by TrusteeCo. It covers shares issued in respect of both unclaimed entitlements under clause 30(1)(d) and incorrectly named equity holders under clause 30(1)(e).

3.46 This clause provides that TrusteeCo is to hold on trust any dividends that it receives in respect of those shares that it holds for untraceable and incorrectly named equity holders. Further, TrusteeCo may invest those dividends in the same manner it can invest sums received by it pursuant to section 22(Y) of the Wool International Act. Any income accruing to TrusteeCo from that investment is to be paid to WoolStock Australia Limited.

3.47 Subclause (6) requires TrusteeCo to transfer the shares it holds on trust, and to pay any dividends it has received, to unit holders who have their details amended on the register to show the correct name. Amendments can be made to the register any time before the date one month after the final distribution. If, at that date, TrusteeCo still holds shares for unclaimed entitlements and incorrectly named equity holders (because it has not been required to transfer these shares to anyone) then it must pay to WoolStock Australia Limited the amount of any dividends that it has received in respect of those shares and those shares are then, by the effect of subclause (5), automatically cancelled.

3.48 Subclause (1) provides that certain events occurring by or under the Bill are not to be treated as being or giving rise to a CGT event for the purposes of the 1997 Tax Act. This is intended to ensure, for the avoidance of doubt, that the corporatisation and privatisation of Wool International (including the amendments to the Wool International Act, the issue of shares in WoolStock Australia Limited, the creation of charges over shares and the transfer of units and property to TrusteeCo under the Bill) does not give rise to a CGT event that could result in a capital gains tax liability for a registered equity holder.

3.49 The units in WoolStock Australia Limited will continue to have the same cost base as the units in Wool International and the shares in WoolStock Australia Limited will have a cost base of zero.

3.50 Subclause (2) provides that units issued in respect of wool tax paid by a person in the course of carrying on a business are assets of, and are inherently connected with, that business for the purposes of applying Divisions 17A and 17B of Part IIIA of the 1936 Tax Act after the conversion time.

3.51 Division 17A provides rollover relief, and Division 17B provides an exemption from capital gains tax, for certain disposals of small business assets (rollover assets). To be a rollover asset for this purpose (as defined in section 160ZZPL of the 1936 Tax Act) an asset must be an asset of a business and must be an active asset (as defined in section 160ZZPL) at the relevant times. An intangible asset which is inherently connected with a business carried on by the taxpayer is an active asset for this purpose. The subclause ensures that the units can qualify for relief under Divisions 17A and 17B, provided the other requirements of those Divisions are met.

3.52 This subclause only applies in the case of units held by the original wool grower who paid the relevant wool tax in the course of carrying on a wool growing business. It preserves the status quo in respect of units acquired in the course of carrying on a wool growing business.

3.53 This clause confirms that distributions to a person in respect of units issued in respect of wool tax paid by that person in the course of carrying on a business are treated for tax purposes as primary production income, ensuring that the person can qualify for benefits available in respect of such income, such as averaging and income equalisation and farm management deposits.

3.54 This clause only applies in the case of units held by the original wool grower who paid the relevant wool tax in the course of carrying on a business. It also preserves the status quo for distributions to such a person.

Clause 22 – Exemption[table of contents refers to Tax treatment of stockpile activities]

3.55 This clause provides an exemption for WoolStock Australia Limited from income tax in respect of amounts it derives from its activities in connection with the holding, managing and disposing of the stockpile wool and distributing the proceeds to registered equity holders and shareholders, including any activities incidental to those activities, such as temporary investment of the disposal proceeds pending distribution.

3.56 For the purpose of the exemption, the stockpile wool includes both wool owned by WoolStock Australia Limited at the conversion time and wool acquired by WoolStock Australia Limited after that time for the purpose of facilitating the disposal of wool owned by it at the conversion time.

3.57 The effect of the clause is to put WoolStock Australia Limited in essentially the same position in relation to disposal of the stockpile wool as it would have been in if it had remained a statutory authority.

3.58 This clause confirms that the creation of WoolStock Australia Limited's share capital under clause 16 of the Bill does not cause the share capital account to become tainted under section 160ARDM of the 1936 Tax Act (which would have adverse tax consequences).

Clause 24 - WoolStock Australia Limited not to be an agency of the Commonwealth etc.

3.59 Because WoolStock Australia Limited is the same legal entity as Wool International, WoolStock Australia Limited might for some purposes, but for this clause, be able to claim crown immunity. This clause provides that from the time of conversion of Wool International into WoolStock Australia Limited, WoolStock Australia Limited shall not be a Commonwealth authority or otherwise come under the shield of the Crown for the purposes of the Commonwealth, or a State or a Territory unless some express provision is made to the contrary by law of the Commonwealth, a State or a Territory.

3.60 The effect of subclause (2) is to remove WoolStock Australia Limited's liability for certain continuing compensation payments owing to former employees and to leave the primary liability for those payments under the Safety Rehabilitation and Compensation Act 1988 with Commonwealth.

3.61 This clause is a constitutional safety net providing an entitlement to compensation. It provides for compensation to be paid by the Commonwealth to a person from whom property is acquired as a result of the operation of the Bill otherwise than on just terms. If the Commonwealth and the person in question cannot agree on the amount of any such compensation to be paid, the Federal Court may, on application by the person from whom property was acquired, determine what is a reasonable amount of compensation for the acquisition of the property.

3.62 This clause is a transitional arrangement providing for a continuation of the Commonwealth guarantees in respect of amounts owing by WoolStock Australia Limited where:

• where the relevant obligation has not been varied after the conversion time, unless the consent of the relevant Ministeris obtained.

3.63 The circumstances in which the Commonwealth guarantee will continue are where amounts fell payable by Wool International before the conversion time and the repayment of such amounts would have been guaranteed under subsection 53(7) of the Wool International Act had it not been repealed by the Bill.

3.64 Subsection 53(7) of the Wool International Act provides for the guarantee of monies which become payable by Wool International to persons other than the Commonwealth where those sums are owing as a result of the performance by Wool International of its functions in relation to the stockpile wool, its accumulated debt or any currency hedging contracts entered into by Wool International for those purposes, provided that such hedging contracts were entered into in accordance with section 54 of the Wool International Act (also to be repealed by the Bill).

3.65 This clause provides for the continuation, in certain circumstances, of Wool International's duty to provide assistance to the Government in respect of the privatisation of Wool International.

3.66 Section 22ZG of the Wool International Act provides for assistance by Wool International in connection with its privatisation. The type of privatisation contemplated by the section (transfer of assets and liabilities to a new company) is not the means of privatisation effected by the Bill. This section is repealed and replaced with an obligation to assist with privatisation of the type now being implemented. However, the effect of clause 73 of the Bill is to preserve WoolStock Australia Limited's duties to provide assistance in respect of any directions and in relation to the payment of expenses given to Wool International by the relevant Minister before the conversion date and in relation to the payment of expenses.

3.67 The saving of section 22ZG(1)(c) of the Wool International Act could require WoolStock Australia Limited to pay monies to the Government in certain circumstances where the final expenses of the privatisation are not known at the conversion date.

3.68 This clause requires the accounts and records maintained by Wool International to be treated as accounts and records prepared or kept by WoolStock Australia Limited for the purposes of the Corporations Law.

• WoolStock Australia Limited is required to keep such accounts and records for a period of seven years after the transactions covered by the records are completed (see section 286(2) of the Corporations Law). WoolStock Australia Limited would not otherwise be required to keep those records for that time period (because the Commonwealth Authorities and Companies Act 1997 would not apply to WoolStock Australia Limited after the conversion date); and

• the directors of WoolStock Australia Limited will have rights of access to those accounts and records by virtue of section 290 of the Corporations Law. The directors of WoolStock Australia Limited would otherwise not have automatic right of access to the accounts and records of Wool International.

3.70 Subclause (b) states that annual reports and financial statements prepared by WoolStock Australia Limited under the Commonwealth Authorities and Companies Act 1997 or section 67 of the Wool International Act are to be treated as financial reports of WoolStock Australia Limited for the relevant year. The advantages for deeming such annual reports and financial statements to be financial reports for Corporations Law purposes is to allow ASIC to maintain a more complete and transparent historical record of the activities of WoolStock Australia Limited throughout the history of its continued existence as a single entity when it was called either Wool International, ARC or AWRC.

3.71 This clause provides the power for the Governor-General to make regulations under the Bill to prescribe matters for anything required or permitted to be prescribed by the Bill or which is necessary or convenient to give effect to the Bill. Particular mention is made of the fact that regulations can be made of a transitional or saving nature which may be required to assist in the restructuring of Wool International and its conversion into WoolStock Australia Limited.

The purpose of Schedule 1 to the Bill is to make changes to the Wool International Act which do not relate directly to its privatisation, and should be made at an earlier time.

4.1 This item changes the end date of the current freeze on sales of stockpile wool to correspond with the date Wool International becomes WoolStock Australia Limited.

4.2 This item re-aligns the obligations of Wool International to cooperate with the Government in the privatisation of Wool International to reflect the revised process which is being followed to effect the privatisation.

4.3 This item obliges Wool International to give contact data for wool-taxpayers to AWRAP. The purpose of this is to make available to AWRAP the name and address (but not other particulars) of wool tax-payers which were collected by Wool International and kept in the register of wool tax-payers maintained under section 66 of the Wool International Act. That section will then be repealed at the conversion time.

The main purpose of Schedule 2 to the Bill is make amendments to the Wool International Act which are required in order to properly give effect to the new legal structures put in place as part of the conversion, renaming and privatisation of WoolStock Australia Limited. The remaining provisions of the Wool International Act will be restricted to those setting out the continuing rights of registered equity holders who, after the conversion time, continue to hold units in WoolStock Australia Limited. Leaving these rights in the Wool International Act ensures that the units remain essentially the same as at present, and continue to have a statutory basis.

4.4 This item changes the full title of the Wool International Act so as to make it clear that the Wool International Act deals only with units of equity.

4.5 The Bill, not the Wool International Act, deals with all legislative rules governing the shares in WoolStock Australia Limited.

4.6 This item repeals the commencement section of the Wool International Act which is no longer needed as it refers to parts of that Act which are repealed by the Bill.

4.7 This item repeals section 3 and inserts a new section 3 of the Wool International Act to make it clear that it will, from the date of the conversion of Wool International into WoolStock Australia Limited, only deal with units of equity and will not govern shareholdings in WoolStock Australia Limited.

4.8 This item adds some further definitions to the Wool International Act which are needed because of other amendments made to that Act by this schedule. It is not necessary to recite those definitions here.

4.9 This item repeals Sections 5, 5A and 6 of the Wool International Act because, once that Act has been amended by the Bill, it will not be necessary to refer to wool-taxpayers and to the accumulated debt.

4.10 This item repeals Parts 2, 3 and 4 of the Wool International Act. Part 2 of the Wool International Act because the status, functions and powers of Wool International will no longer be relevant after the date of conversion of Wool International into WoolStock Australia Limited.

4.11 Part 3 of the Wool International Act is repealed because after the conversion of Wool International into WoolStock Australia Limited it will not be appropriate for Wool International to provide the Minister with a copy of its corporate plan.

4.12 Part 4 of the Wool International Act is repealed because the stockpile wool will not require disposal according to a schedule of disposal after Wool International's conversion into WoolStock Australia Limited.

4.13 These items change the references to Wool International to WoolStock Australia Limited in these sections of the Wool International Act.

4.14 This item repeals these sections of the Wool International Act because it will not be necessary to collate data on wool-tax-payers or to allocate further units of equity after the date of Wool International's conversion into WoolStock Australia Limited.

4.15 This item changes the references to Wool International to WoolStock Australia Limited in this section of the Wool International Act.

4.16 This item repeals section 22G of the Wool International Act and replaces it with a similar clause dealing with the calculation of the amount of each distribution. The denominator in the formula is the number of units which have been allotted and will be on issue at the conversion time.

4.17 These items change the references to Wool International to WoolStock Australia Limited in these sections of the Wool International Act.

4.18 This item adds a new subclause 22H(2A) which is required to oblige TrusteeCo to transfer unclaimed units held by it on behalf of an untraceable equity holder to the relevant equity holder if that person can properly identify their entitlement to the units in question.

4.19 These items change the references to Wool International to WoolStock Australia Limited in these sections of the Wool International Act.

4.20 These items change the references to Wool International to WoolStock Australia Limited in this section of the Wool International Act.

4.21 The reference to the Chief Executive is also amended in this section of the Wool International Act so as to refer to TrusteeCo established by the Bill. This is because, on the date of Wool International's conversion into WoolStock Australia Limited, all of the units of equity held by the Chief Executive will vest in the new TrusteeCo, to be held on the same trust terms.

4.22 These items change the references to Wool International to WoolStock Australia Limited in this section of the Wool International Act.

4.23 This item adds new clause 22KA to the Wool International Act to make it clear that a registered equity holder is not a member of WoolStock Australia Limited by reason of being a registered equity holder (they will be members of WoolStock Australia Limited by virtue only of their shareholdings in WoolStock Australia Limited).

4.24 This item also adds new clause 22KB to the Wool International Act to provide that the amount of a distribution to be made by WoolStock Australia Limited to registered equity holders, shall be a debt in incurred by WoolStock Australia Limited at the end of the operative day for that distribution (see new subclauses 22P(4) and (5)) and will be a provable debt if winding up proceedings are later started in respect of WoolStock Australia Limited.

4.25 New clause 22KB also states that the claims of registered equity holders to distributions shall have a priority lower than that of all other classes of unsecured creditors in any winding up of WoolStock Australia Limited.

4.26 This item changes the references to Wool International to WoolStock Australia Limited in this section of the Wool International Act.

4.27 This item changes the references to Wool International to WoolStock Australia Limited in this section of the Wool International Act.

4.28 This item allows WoolStock Australia Limited to dispose of units after 6 years where WoolStock Australia Limited has reason to believe that the registered address of the relevant registered equity holder is incorrect and WoolStock Australia Limited has been unable to communicate with the registered equity holder for at least 6 years.

4.29 In this event, WoolStock Australia Limited can transfer the units to the ASIC, in the same way that a company is able to dispose of securities where the company has similarly been unable to contact the owner of the securities.

4.30 This amendment is intended to supplement clause 36 of the Bill which effectively provides for WoolStock Australia Limited to cancel any shares still held by TrusteeCo at the date of the final distribution.

4.31 This item amends the heading of this part so that it is clear WoolStock Australia Limited is only to distribute surplus money to registered equity holders. Surplus money is defined in section 22P of the Wool International Act (as amended by this schedule to the Bill).

4.32 This item changes the references to Wool International to WoolStock Australia Limited in this section of the Wool International Act.

4.33 This item restates the provisions of the Wool International Act in respect of distributions by WoolStock Australia Limited to registered equity holders.

4.34 New clause 22P(2) is the equivalent to repealed subsection 22O(1) and paragraphs 22O(2)(b) and (c). The subclause obliges WoolStock Australia Limited to distribute its surplus money by way of one or more interim distributions and a final distribution to be made as soon as possible after the end of the financial year in which the last stockpile wool is disposed of.

4.35 New subclauses 22P(4) and (5) provide the mechanics by which WoolStock Australia Limited is to pay distributions.

4.36 New subclause 22P(7) provides that units of equity will be automatically cancelled after the final distribution has been made. This is because once the final distribution has been made there are no further rights that can attach to the units and therefore the units do not need to continue to exist.

4.37 Surplus money is defined in new subclause 22P(1) as money that WoolStock Australia Limited is not required to set aside for payment or application by it (other than for payment of distributions to equity holders). Moneys in this category will include any profits which are required to be set aside for payment as dividends to shareholders. Whether any profit is earned by WoolStock Australia Limited will depend on the application of accounting standards, particularly having regard to the opening value in the accounts of stockpile wool. Apart from this, the concept of surplus money is the same as the concept of money not required by Wool International for any other expenditure in the repealed subsection 22O(1).

4.38 New subclause 22P(3) provides that the amount of each distribution is to be determined by WoolStock Australia Limited. This is the equivalent of repealed subsection 22Q(1). New subclauses 22P(5) and (6) set out the mechanics to be followed for notifying distributions, namely publication of a notice in a newspaper, replacing the mechanics in repealed sections 22Q (namely publication of a notice in the Gazette), which would no longer be appropriate.

4.39 This item changes the references to Wool International to WoolStock Australia Limited in this section of the Wool International Act.

4.40 This item also repeals subsection (2) and inserts a new subsection (2) so that the cross reference in the subsection refers to the new clause 22P.

4.41 These items change the reference to Wool International to WoolStock Australia Limited in this section of the Wool International Act.

4.42 These items change the reference to Wool International to WoolStock Australia Limited in this section of the Wool International Act.

4.43 This item changes the heading to this part because the references in this part to the Chief Executive are to be amended to TrusteeCo.

4.44 These items changes references made to the Chief Executive in this section to TrusteeCo.

4.45 This item replaces the parts of the Wool International Act which gave the Chief Executive power to deal with units owned by putative equity holders. That power is now to be held by TrusteeCo which, in dealing with those units will no longer be subject to Ministerial direction (as this would be inappropriate within the new structures to be adopted for WoolStock Australia Limited and the wool stockpile).

4.46 TrusteeCo will continue to deal with the units of putative equity holders subject to the same criteria to which the Chief Executive was subject under the Wool International Act before amendments were made to that Act by the Bill. This means that:

- units can only be transferred to, first, their creditors and, secondly, the beneficiaries of their estate.

- units can only be transferred to, first, the company's creditors and, secondly, the former shareholders of the company.

4.47 Section 22V is repealed by this item as the section provides for the determination by the Minister of guidelines for the exercise of the Chief Executive's duties under subsection 22(2) before its amendment by the Bill. Such a power is no longer appropriate.

4.48 This item states that TrusteeCo holds the unclaimed units of untraceable equity holders on trust for them until it is able to transfer the units to the equity holder under subclause 22H(2A) once the relevant person has properly identified themselves.

4.49 This item changes the heading to this part is amended because the references in this part to the Chief Executive are to be amended to TrusteeCo.

4.50 These items change references made to the Chief Executive in these sections to TrusteeCo.

4.51 These items change references made to the Chief Executive in these sections to TrusteeCo.

4.52 These items also change references made to Wool International to WoolStock Australia Limited in these sections of the Wool International Act.

4.53 This item transfers the obligations of the Chief Executive to TrusteeCo. Where TrusteeCo receives monies from distributions in respect of units held for putative equity holders, then those monies must be paid to the same persons entitled to receive those units under the new clause 22H(2) of the Wool International Act.

4.54 This item says that any trust monies still held by TrusteeCo one month after the final distribution has been made shall be paid to WoolStock Australia Limited.

4.55 The effect of this is to allow TrusteeCo to dispose of any remaining monies still vested in it when it ceases to have a role to play when all units of equity have been cancelled under new clause 22P(7) of the Wool International Act.

4.56 This item repeals these parts of the Wool International Act because they deal with the internal procedures and corporate governance of Wool International. When WoolStock Australia Limited has been registered as a Corporations Law company, these provisions will no longer be required.

4.57 These items change the references to Wool International to WoolStock Australia Limited in these sections of the Wool International Act.

4.58 These items repeal these sections of the Wool International Act because they contain restrictions on the manner in which Wool International may act which it would be inappropriate to impose on a Corporations Law company.

4.59 This item allows the Commonwealth to deduct the expenses it incurs in collecting wool tax from the payment of that wool tax to WoolStock Australia Limited.

4.60 These sections of the Wool International Act are to be repealed because they contain restrictions on the manner in which Wool International may act which it would be inappropriate to impose on a Corporations Law company.

4.61 These items change the references to Wool International to WoolStock Australia Limited in this section of the Wool International Act.

4.62 Subsection 59(2) of the Wool International Act is to be repealed because it is unnecessary to restrict the power of WoolStock Australia Limited to delegate its powers under common seal only.

4.63 This item repeals these sections of the Wool International Act because they contain restrictions on the manner in which Wool International may act which it would be inappropriate to impose on a Corporations Law company.

4.64 These items repeal these sections of the Wool International Act because they refer to the winding-up of Wool International which would have been required had Wool International not been privatised in the manner now contemplated in the Bill. Because Wool International is to be converted into WoolStock Australia Limited, it is no longer necessary to provide for the winding up of Wool International as envisaged in the Wool International Act before its amendment by the Bill.

4.65 This item repeals this paragraph. This means that WoolStock Australia Limited will not have the information privileges that Wool International has at present under the Wool Tax (Administration) Act 1964. It would not be appropriate for a privately owned Corporations Law company to have such privileges.

Commonwealth of Australia Explanatory Memoranda