Loan Fund Companies Act 1976 (NSW)

Loan Fund Companies Act 1976 No 94 An Act to prohibit persons, other than exempted persons and companies declared under this Act to be loan fund companies, from operating loan fund schemes; and to regulate the affairs and activities of companies so declared. Part 1 Preliminary 1 Name of Act This Act may be cited as the Loan Fund Companies Act 1976. 2 Commencement (1) This section and section 1 shall commence on the date of assent to this Act. (2) Except as provided in subsection (1), the several provisions of this Act shall commence on such day or days as may be appointed by the Governor in respect thereof and as may be notified by proclamation published in the Gazette. 3 (Repealed) 4 Definitions (1) In this Act, except in so far as the context or subject-matter otherwise indicates or requires: actuary means: (a) a Fellow of the Institute of Actuaries incorporated by Royal Charter on 29 July 1884, (b) a Fellow of the Faculty of Actuaries in Scotland, or (c) the holder of a prescribed qualification as an actuary, who has practised as an actuary for a continuous period of not less than 5 years. advertisement means an advertisement in any form or medium, and includes an advertisement in or in the form of a circular, poster, handbill, brochure or other document or in a newspaper, magazine or other periodical publication or in the form of a statement or announcement on radio or television or in the form of a gramophone or tape recording or a cinematographic or videotape film. Advisory Committee means the Loan Fund Companies Advisory Committee constituted under this Act. banker's books means: (a) books of a bank, building society or credit union, (b) cheques, orders for the payment of money, bills of exchange and promissory notes in the possession or under the control of a bank, building society or credit union, and (c) securities or documents of title to securities in the possession or under the control of a bank, building society or credit union whether by way of pledge or otherwise. Court means the Supreme Court of New South Wales. Deputy Supervisor means the Deputy Supervisor of Loan Fund Companies under this Act. executive officer, in relation to a loan fund company, means any person, by whatever name called and whether or not the person is a director of a company, who is concerned, or takes part, in the management of the company. fee, in relation to any option to acquire loan entitlement shares in a loan fund company or to any qualifying shares, loan entitlement shares or other shares in a loan fund company, includes any brokerage or commission, or any application fee, payable in connection with the granting of that option or, as the case may be, those shares and includes any management fee or service fee payable in connection with the holding of that option or those shares. foreign company has the meaning ascribed to that expression by section 5 (1) of the Companies (New South Wales) Code. inspector means an inspector appointed, or deemed to have been appointed, under this Act. issue, in relation to an advertisement, includes disseminate, circulate and distribute. loan entitlement shares means shares, whether ordinary shares, redeemable preference shares or shares of any other description, which confer on the holder of the shares at the time of allotment a contingent right to receive a loan. loan fund company means a company in respect of which an order made under section 14 is in force. loan fund scheme means a scheme which, in substance and irrespective of its form, involves the contribution or subscription of money, directly or indirectly, by persons to a fund and confers on each of those contributors or subscribers or on each of a substantial proportion of them an entitlement to receive out of the fund at some date, whether ascertainable or not, a loan the amount of which is determined by reference to the amount of money that each contributor or subscriber has contributed or subscribed or agreed to contribute or subscribe to the fund. member, in relation to a loan fund company, means a person who is the holder of shares in the company. officer, in relation to a loan fund company, includes: (a) a director, secretary, executive officer or employee of the company, (b) a receiver and manager of the property or any part of the property of the company appointed under a power contained in an instrument, (c) an official manager or deputy official manager of the company, (d) a liquidator of the company appointed in a voluntary winding up of the company, and (e) a trustee or other person administering a compromise or arrangement made between the company and another person or other persons, but does not include: (f) a receiver who is not also a manager, (g) a receiver and manager appointed by a court, (h) a liquidator appointed by a court, or (i) an administrator appointed in respect of the company under section 60. option nomination, in relation to loan entitlement shares, means the right of the person who holds the option nomination, subject to the fulfilment of the terms and conditions on which the option nomination was granted, to acquire those loan entitlement shares, whether allotted or to be allotted, by virtue of an agreement between that person and another person who is the holder of an option to acquire those shares. option to acquire, in relation to loan entitlement shares, means an option conferring on its holder a right, subject to the fulfilment of the terms and conditions on which it was granted, to acquire those shares. penalty, in relation to a penalty imposed by a loan fund company, includes a fine. promote includes advertise. prospectus has the meaning ascribed to that expression by section 5 (1) of the Companies (New South Wales) Code. public company has the meaning ascribed to that expression by section 5 (1) of the Companies (New South Wales) Code. qualifying shares means shares, whether ordinary shares, redeemable preference shares or shares of any other description, which confer on the holder of the shares a right, subject to the fulfilment of the terms and conditions on which they were allotted, to apply for and receive an allotment of loan entitlement shares. recognised company has the meaning ascribed to the expression "recognized company" by section 5 (1) of the Companies (New South Wales) Code. recognised foreign company has the meaning ascribed to the expression "recognized foreign company" by section 5 (1) of the Companies (New South Wales) Code. records includes books, accounts, minutes, registers, deeds, writings or documents and any other sources of information compiled, recorded or stored in written form or on microfilm, or by electronic process, or in any other manner or by any other means. regulations means regulations made under this Act. Supervisor means the Supervisor of Loan Fund Companies under this Act and includes the Deputy Supervisor when performing or exercising the duties, powers and authorities of the Supervisor. vested loan entitlement, in relation to loan entitlement shares in a loan fund company, means a right vested in the holder of those shares to obtain from the company a loan of an amount which, having regard to the memorandum and articles of association of the company or the prospectus under which those shares were allotted, is appropriate to those shares. (2) For the purposes of this Act: (a) the holder of loan entitlement shares in a loan fund company is deemed to have a vested right to receive a loan from the company when: (i) the company has offered the holder such a loan, being an offer which is attributable to the holding of those shares, and (ii) the holder has accepted the offer and the conditions (if any) subject to which the offer was made, (b) a reference to an offer of a loan includes a reference to an invitation to apply for a loan, and (c) a reference to the acceptance of an offer of a loan includes a reference to the making of an application for a loan in response to an invitation to make such an application. Part 2 Administration 5 Supervisor (1) The Supervisor is the person employed in the Public Service as the Supervisor of Loan Fund Companies. (2) (Repealed) (3) All documents lodged by a loan fund company under this Act with the Supervisor shall be kept in the office of the Supervisor. (4) The Supervisor shall have an official seal and shall have such duties, powers and authorities as are prescribed. 6 Deputy Supervisor (1) The duties, powers and authorities of the Supervisor may be performed and exercised by the person employed in the Public Service as the Deputy Supervisor of Loan Fund Companies. (2) The Deputy Supervisor shall exercise the Deputy Supervisor's office subject to such conditions and restrictions, if any, as the Supervisor may impose: (a) generally, (b) in relation to any specified matter or class of matters, or (c) in relation to all matters other than any specified matter or class of matters. (3) No person shall be concerned to see or inquire whether, in the case of any dealing or transaction with the Deputy Supervisor, any condition or restriction has been imposed on the exercise of the powers of the Deputy Supervisor or to inquire as to the Deputy Supervisor's authority. (4) All acts or things done or omitted by the Deputy Supervisor in the administration of this Act shall be as valid and effectual, and shall have the same consequences, as if the acts or things had been done or omitted by the Supervisor. 7 Inspectors (1) The Minister may appoint inspectors for the purposes of this Act. (2) A person appointed as an inspector under section 492 of the Co-operatives National Law (NSW) is deemed by virtue of that appointment to be an inspector appointed under subsection (1). (3) An inspector shall be provided by the Supervisor with a certificate of the inspector's authority as an inspector. (4) An inspector, on exercising in any place a power conferred on the inspector by or under this Act, shall, if so requested by a person apparently in charge of that place or of any work being performed there, produce the certificate of the inspector's authority as an inspector. (5) Notwithstanding any other provision of this Act, neither the Supervisor nor an inspector has authority under this Act to enter a dwelling-house or other residential premises without the consent of the occupier thereof unless the business of a loan fund company or an activity connected with the operation, management, control or promotion of a loan fund scheme is carried on in that house or in those premises, as the case may be. 8 Delegation (1) The Supervisor may, by instrument in writing, delegate such of the Supervisor's duties, powers (other than this power of delegation) and authorities as may be specified in the instrument of delegation to any officer or employee employed in the Supervisor's office and may, by a similar instrument revoke any such delegation either wholly or in part. (2) A delegation under subsection (1) may be made subject to such conditions or such limitations as to the performance or exercise of any of the duties, powers or authorities that have been delegated, or as to time or circumstance, as may be specified in the instrument of delegation. (3) A duty, power or authority, the performance or exercise of which has been delegated under subsection (1) may, while the delegation remains unrevoked, be performed or exercised by the delegate from time to time in accordance with the terms of the delegation. (4) Notwithstanding the making of any delegation under subsection (1), the Supervisor may continue to perform or exercise all or any of the duties, powers or authorities that have been delegated. (5) Any act, omission or thing done, omitted or undergone by a delegate while acting pursuant to a delegation made under subsection (1) shall have the same force and effect as if the act, omission or thing had been done, omitted or undergone by the Supervisor. 9–11 (Repealed) Part 3 Conduct of loan fund schemes 12 Operation etc of loan fund schemes prohibited except by certain persons (1) After the expiration of 3 months from the commencement of this section, a person shall not operate, or manage, control or promote the operation of, a loan fund scheme, or invite, either by the issue of advertisements or other means of communication, persons to contribute or subscribe to or participate in, whether by the allotment of shares or the granting of options to acquire shares or otherwise, a loan fund scheme, unless that person is: (a) a loan fund company, or (b) a person for the time being declared by the Minister by order published in the Gazette to be a person exempt from the application of this subsection or a person belonging to a class of persons so declared. Maximum penalty: 20 penalty units and, in the case of a continuing offence, a further penalty not exceeding 2 penalty units for each day during which the offence continues. (2) The Minister may, by order published in the Gazette, declare any person or class of persons to be exempt from the application of subsection (1). Editorial note— For declaration under this subsection, see Gazette No 11 of 4.2.1977, p 424. From April 2021, PCO is no longer updating notes in provisions of in force titles about related gazette notices. To search for related gazette notices, please use the Gazette Search functionality. (3) A person does not contravene subsection (1) by reason of doing any act referred to in that subsection if, at the time of doing that act, the person is acting in the capacity of officer or employee of a person mentioned in subsection (1) (a) or (b). 13 Restrictions on use of certain descriptions A person other than a person mentioned in section 12 (1) (a) or (b) shall not: (a) in the name, title or description under which that person is carrying on business, take or use or by reference adopt any words indicating or implying that that person is operating a loan fund scheme, or (b) take or use, or have attached to or exhibited at any place, a name, title or description implying or tending to lead to the belief that that person is operating a loan fund scheme. Maximum penalty: 10 penalty units and, in the case of a continuing offence, a further penalty not exceeding 1 penalty unit for each day during which the offence continues. Part 4 Management and operation of loan fund companies Division 1 Power to declare public companies etc to be loan fund companies 14 Power of Minister to declare public company etc to be a loan fund company subject to this Act (1) The Minister may, by order published in the Gazette, declare to be a loan fund company subject to the provisions of this Act: (a) any public company having a share capital, or (b) any recognised company or foreign company having a share capital which would, if it were incorporated in New South Wales, be a public company, if that public company, recognised company or foreign company is operating or promoting the operation of, or proposes to operate or promote the operation of, a loan fund scheme. (2) Every order made under subsection (1) shall take effect from the date of its publication in the Gazette or from such later date as may be specified in the order. (3) Where: (a) a loan fund company, being a company within the meaning of the Companies (New South Wales) Code has been wound up under Part XII of that Code or the registration of that company has been cancelled under section 459 of that Code, (b) a loan fund company, being a recognised company: (i) lodges with the National Companies and Securities Commission a notice under the provisions of the law of the State or Territory where it is incorporated that correspond with section 503 of that Code, to the effect that it has ceased to have a place of business or to carry on business in New South Wales, or (ii) is dissolved in the State or Territory where it is incorporated, (c) a loan fund company, being a recognised foreign company: (i) lodges with the National Companies and Securities Commission a notice under the provisions of the law of the State or Territory where it is incorporated that correspond with section 503 of that Code, to the effect that it has ceased to have a place of business or to carry on business in New South Wales, (ii) is dissolved in the place where it is incorporated, or (iii) has its registration as a foreign company in a State or Territory cancelled under the provisions of the law of the State or Territory that correspond with Division 5 of Part XIII of that Code, or (d) a loan fund company, being a foreign company (other than a recognised foreign company): (i) lodges with the National Companies and Securities Commission a notice under section 518 of that Code to the effect that it has ceased to have a place of business or to carry on business in New South Wales, (ii) is dissolved in the place where it is incorporated, or (iii) has its name removed from or struck off the register, pursuant to section 518 of that Code, the order made under subsection (1) with respect to that company shall thereupon be deemed to be revoked. Division 2 Obligations etc of loan fund companies 15 Certain persons prohibited from managing etc affairs or activities of loan fund company (1) Subject to this section, a loan fund company shall not enter into any contract, agreement, arrangement or understanding with a person by virtue of which the affairs and activities, or any of the affairs or activities, of the company are managed, controlled or promoted by a corporation or by a person who is not employed by the company as an officer under a contract of service. (2) Any contract, agreement, arrangement or understanding entered into in contravention of subsection (1) shall be void. (3) Subject to this section, where at the time at which a company becomes a loan fund company any contract, agreement, arrangement or understanding exists between the company and another person which would, if the contract, agreement, arrangement or understanding had been entered into after that date, have been entered into in contravention of subsection (1), that contract, agreement, arrangement or understanding shall, notwithstanding any of its provisions to the contrary, be deemed to be terminated from that time. (4) Where after a company becomes a loan fund company the affairs and activities, or any of the affairs or activities, of the company are managed, controlled or promoted by a corporation or by a person who is not employed by the company as an officer under a contract of service, the company and that corporation or person are each guilty of an offence and are each liable on conviction to a penalty not exceeding 10 penalty units, and, in the case of a continuing offence, to a further penalty not exceeding 1 penalty unit for each day during which the offence continues. (5) An offence against subsection (4) is not committed by reason only that a corporation or a person not employed by a loan fund company as an officer under a contract of service undertakes or performs any activity on behalf of the company in the capacity of banker, accountant, auditor, legal adviser, actuary, underwriter or advertising agent or in any other prescribed capacity. (6) Where under any contract, agreement, arrangement or understanding referred to in subsection (3) any money has become due and payable by or to a loan fund company before the contract, agreement, arrangement or understanding is deemed to have been terminated by that subsection, that money may, to the extent that it might have been recoverable apart from that termination, be recovered in proceedings brought in a court of competent jurisdiction. (7) Where, immediately before a company becomes a loan fund company there is in existence any contract, agreement, arrangement or understanding between the company and a person whereby the affairs and activities, or any of the affairs or activities, of the company are managed, controlled or promoted by that person and, by virtue of that contract, agreement, arrangement or understanding, that person is holding loan entitlement shares in the company or options over loan entitlement shares in the company, whether allotted or to be allotted, and has granted to any other person an option to acquire any of those loan entitlement shares or, as the case may be, an option nomination in respect of that option, the following provisions shall, on the contract, agreement, arrangement or understanding being deemed to have been terminated, apply with respect to the option or option nomination so granted: (a) the option or option nomination, as the case may be, shall be deemed to have been granted by the company on the date on which it was granted by the first mentioned person and shall be exercisable against the company subject to and in accordance with the same terms and conditions as those subject to and in accordance with which the option or option nomination was granted by, and would, but for this subsection, be exercisable against, that first mentioned person, (b) the company shall be deemed to be subrogated to all the rights and remedies of that first mentioned person in the person's capacity as grantor of the option or option nomination, (c) in the case of an option to acquire loan entitlement shares held by that first mentioned person, those shares shall be disposable only by or at the direction of the company, and (d) in the case of an option nomination, the option nomination shall be deemed for the purposes of this Act to be an option to acquire the loan entitlement shares to which the option nomination relates. (8) Where any contract, agreement, arrangement or understanding between a loan fund company and a person is deemed to be terminated by virtue of subsection (3), all records held by that person which relate to any of the affairs or activities of the company and of the holder of any option to acquire loan entitlement shares in the company or of any option nomination in respect of any such option shall be deemed to belong to the company, and that person shall, within 14 days after that termination, take all practicable steps necessary to transfer those records to the control of the company. Maximum penalty: 10 penalty units. (9) A person required to transfer any record to a loan fund company in accordance with subsection (8) shall not: (a) conceal, destroy, mutilate or alter any such record, or (b) send, attempt to send or conspire with another person to send such a record out of New South Wales. Maximum penalty: 20 penalty units or imprisonment for a term of 6 months. (10) It is a defence to a prosecution under subsection (9) to prove that the person charged did not act with intent to defeat the purposes of this section. 16 Loan fund company not to discriminate against or in favour of persons Subject to sections 17 and 19, a loan fund company shall not: (a) discriminate against or in favour of a person: (i) by granting to the person an option to acquire loan entitlement shares in the company, (ii) by allotting to the person qualifying shares in the company, or (iii) by allotting to the person loan entitlement shares in the company, on terms and conditions that are less favourable or, as the case may be, more favourable than those on which the company grants any such options, or allots any such qualifying shares or loan entitlement shares, to other persons, or (b) in making or offering a loan to the holder of loan entitlement shares in the company: (i) discriminate against the holder by making or offering the loan on terms and conditions less favourable, or (ii) discriminate in the holder's favour by making or offering the loan on terms and conditions more favourable, than those on which loans are made or offered to other holders of loan entitlement shares in the company. Maximum penalty: 10 penalty units. 17 Allocation of loan priority numbers (1) A loan fund company shall: (a) on granting an option to acquire loan entitlement shares in the company, (b) on allotting qualifying shares in the company, or (c) on allotting loan entitlement shares in the company without there having previously been granted any such option, or there having previously been allotted any such qualifying shares, with respect to those loan entitlement shares, allocate in respect of that option or those qualifying shares or loan entitlement shares, as the case may be, a loan priority number in accordance with subsection (3). (2) Where immediately after the time at which a company becomes a loan fund company there is or are in existence: (a) any option to acquire loan entitlement shares in the company, (b) any qualifying shares in the company, or (c) any loan entitlement shares in the company with respect to which the company has not made an offer of a loan, not later than 14 days after the date on which the company becomes a loan fund company, the company shall, except as provided in subsection (6), allocate in respect of that option or those qualifying shares or loan entitlement shares, as the case may be, a loan priority number in accordance with subsection (3). (3) All loan priority numbers allocated by a loan fund company under subsections (1) and (2) shall, whether they are allocated in respect of options to acquire loan entitlement shares or qualifying shares or loan entitlement shares, be consecutive cardinal numbers commencing with the number "1" and each such number: (a) shall be allocated successively in chronological order by reference: (i) in the case of an option referred to in subsection (1) (a) or (2) (a), to the time at which the application for the granting of that option was made, (ii) in the case of qualifying shares referred to in subsection (1) (b) or (2) (b) or loan entitlement shares referred to in subsection (1) (c), to the time at which the application for the allotment of those shares was made, or (iii) in the case of loan entitlement shares referred to in subsection (2) (c), to the time at which the application for the allotment of those shares was made or, if those shares were acquired pursuant to the exercise of a right conferred by an option granted by the company or by a person referred to in subsection (2) (a) or pursuant to the exercise of a right conferred by qualifying shares in the company, to the time at which the application for the granting of that option or for the allotment of those qualifying shares was made, and (b) shall, subject to this Act and to the terms and conditions of the memorandum and articles of association of the company and, in the case of a loan priority number allocated or deemed to be allocated in respect of any such option or qualifying shares, subject to the acquisition of the relevant loan entitlement shares pursuant to the right conferred by that option or those qualifying shares, determine the order of priority in which the company is required to offer loans to holders of loan entitlement shares in the company. (4) Where a person acquires loan entitlement shares in a loan fund company pursuant to the exercise of an option granted, or deemed to have been granted, by the company or pursuant to the exercise of a right conferred by qualifying shares in the company, the loan priority number allocated in respect of that option or, as the case may be, those qualifying shares shall be deemed to have been allocated in respect of the loan entitlement shares so acquired. (5) Where: (a) the holder of an option to acquire loan entitlement shares in a loan fund company is subsequently granted a further option by the company to acquire any such shares, (b) the holder of qualifying shares in a loan fund company is subsequently allotted further qualifying shares in the company, or (c) the holder of loan entitlement shares in a loan fund company is subsequently allotted further loan entitlement shares in the company, the company shall not: (d) allocate in respect of that further option, or those further qualifying shares or loan entitlement shares, the same loan priority number as that allocated in respect of the option, qualifying shares or loan entitlement shares, as the case may be, already held by the holder, or (e) tack that further option or those further qualifying shares or loan entitlement shares to the option, qualifying shares or loan entitlement shares, as the case may be, already held by the holder so that that further option has or those further qualifying shares or loan entitlement shares have the same loan priority number as that allocated in respect of the option, qualifying shares or loan entitlement shares already held by the holder. (6) A loan fund company shall not be required to comply with subsection (2) in respect of any option, qualifying shares or loan entitlement shares referred to in that subsection if, before it became a loan fund company, a loan priority number had been allocated in respect of that option or those qualifying shares or loan entitlement shares, as the case may be, and that allocation would have satisfied the requirements of subsection (3) if that subsection had, at the time of the allocation, been in force in respect of the company, and a loan priority number so allocated shall be deemed to have been allocated by the company under subsection (2). (7) A loan fund company which: (a) fails to comply with subsection (1) or (2), or (b) contravenes subsection (5), is guilty of an offence and is liable on conviction to a penalty not exceeding 5 penalty units. 18 Register of loan priority numbers (1) A loan fund company: (a) shall: (i) if it is a company within the meaning of the Companies (New South Wales) Code, keep at the place at which the register of members is kept, (ii) if it is a recognised company or a foreign company and keeps a branch register in New South Wales of members who are resident in New South Wales, keep at the place where that branch register is kept, or (iii) if it is a recognised company or a foreign company to which subparagraph (ii) does not apply, keep at its principal or registered office in New South Wales, a register of loan priority numbers, and (b) shall enter in that register in the prescribed manner and in order of allocation: (i) not later than 21 days after the date on which the company becomes a loan fund company, all loan priority numbers deemed by section 17 (6) to be allocated by the company under section 17 (2), other than those numbers that have previously been entered in a register referred to in subsection (2), and (ii) not later that 7 days after allocation, all loan priority numbers allocated by the company under section 17 (1) and (2), together with such particulars with respect to the options to acquire loan entitlement shares or to the qualifying shares or loan entitlement shares to which those numbers relate as are prescribed. (2) A loan fund company shall not be required to comply with subsection (1) in respect of the entry in the register required to be kept under that subsection