8.1 General
There are various statutory exemptions to the notifiable action, significant action and notifiable national security action concepts. These include:
- moneylending exemption (see paragraph 8.2);
- devolution by operation of law;
- acquisitions by foreign custodian corporations;
- compulsory acquisitions and buy-outs;
- acquisitions of interests in land entities below certain percentage thresholds;
- certain types of easements;
- rights issues and dividend reinvestment plans; and
- acquisitions of interests in an entity's securities where the acquirer's percentage interest in the entity does not increase.
However, many of these exemptions do not also operate as exemptions to the reviewable national security action concept.
8.2 Moneylending exemption
Overview
There is a fairly broad exemption for debt financiers – known as the ‘moneylending exemption’ from the notifiable action, significant action, notifiable national security action and reviewable national security action concepts.
The FATA does not apply to acquisitions of interests in entities and land for the purposes of:
- securing payment obligations under a moneylending agreement; and
- enforcement of that security, except in respect of national security land and national security businesses where the moneylending exemption only applies in an enforcement scenario to a receiver (but given it is exceptionally rare for a mortgagee to foreclose on mortgaged property (ie acquiring it directly) the moneylending exemption in large part will in practice apply to enforcement of security over national security land and national security businesses).
This exemption applies for moneylending agreements that are in good faith, on ordinary commercial terms, and in the course of carrying on a business of lending or providing financial accommodation. The moneylending agreement can be one that is entered into by a person which carries on such a business, or by an entity established by such a person for the purpose of lending money.
The moneylending exemption covers connected parties to reflect modern lending and debt trading practices, including any subsidiary or holding entity, a person who is in a position to determine the investments or policy of the lender, a security trustee or a receiver, or a receiver and manager appointed by a lender or another connected party. The exemption also applies to secondary debt trades provided the acquirer (or its holding entity or subsidiary) carries on a business of lending money or otherwise providing financial accommodation.
Foreign government investor lenders
No FIRB approval is required for simply taking and holding a security interest, and a foreign government investor which is an ADI or a subsidiary of an ADI may acquire an interest through enforcement (except in respect of national security land and national security businesses) and hold it for 12 months but also does not require approval after that time if it is making a genuine attempt to dispose of the interest. Foreign government investor lenders which are not ADIs have a shorter safe-harbour period. The exemption applies to non-ADI foreign government investor lenders which acquire an interest through enforcement (except in respect of national security land and national security businesses) where six months have not passed since the acquisition of the interest or it is making a genuine attempt to dispose of the interest. The process of deciding on the method of disposal or complying with requirements of law in relation to a disposal process constitute examples of genuinely attempting to dispose of an interest.
The exemption gives foreign lenders comfort that the moneylending exemption will allow an orderly enforcement of security without approval, but foreign lenders may still need to consider whether the requirement of making a genuine attempt to dispose of their interest aligns sufficiently with their enforcement strategy.
Lenders taking security over residential land
There are specific additional tests for a foreign lender which is not a foreign government investor (where the regime above applies) nor an ADI (or a subsidiary of an ADI) when taking security over residential land. If a non-ADI foreign lender, which is not a foreign government investor, wishes to take a security interest over residential land the moneylending exemption will only apply if the lender (or its holding entity) is otherwise licensed as a financial institution (whether or not in Australia) and either has at least 100 holders of its securities or has at least 100 members or is listed on a stock exchange (whether or not in Australia).
The following table summarises how the exemption protects lenders for taking and enforcing security over residential land:
| Lender type | Taking security | Enforcing security (assuming the residential land is not also national security land) |
|---|---|---|
| Foreign government lender | Exemption applies |
If ADI – 12 months to hold (plus extension for genuine attempt to dispose) Not ADI – 6 months to hold (plus extension for genuine attempt to dispose) |
| Other lenders |
Exemption applies:
|
Exemption applies:
|