A Guide to the Law of Securitisation in Australia - Clayton Utz

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This is consistent with the non-resident withholding provisionswhich provide that the regulations will not apply to interest andother payments which are already subject to the currentwithholding tax rules.Furthermore, regulations may only be made where the Minister issatisfied that the payment could reasonably be related toassessable income of foreign residents.5.9.2 Section 128F ExtensionAs part of the Review of International Taxation in Australia, theAustralian Federal Government has proposed certainamendments to section 128F. If the proposed legislation isenacted in its present form, the section 128F interest withholdingexemption will extend to interest paid on both “debentures” andany “debt interests” (as defined under the Australian income taxlegislation) from the date of assent of the legislation, providedthe relevant conditions are met.The next section of this paper examines the impact of theConsumer Credit Code on Australian securitisation programs.41
6 The Consumer Credit Code andsecuritisation426.1 IntroductionThe Consumer Credit Code (the Code) commenced operation inall States and Territories of Australia (other than Tasmania) on 1November 1996. The Code commenced operation in Tasmania on1 March 1997.With few exceptions, the Code regulates all personal, domesticand household credit, including personal loans, housing loans,overdrafts, credit card facilities, credit and debt facilities (to theextent credit is provided), consumer leases, consumer hirepurchase and retail credit. As a result, it affects many Australiansecuritisations including mortgage-backed programs.6.2 The credit providerThe Code is directed primarily towards, and imposes obligationson, the actual provider of the regulated credit. In addition, but toa lesser extent, it also imposes obligations on and affects otherparties involved in the lending process (eg. agents of creditproviders, suppliers of goods and services purchased with creditand insurers).The Code defines a credit provider as a “person that providescredit and includes a prospective credit provider”. Section 4 ofthe Code defines credit in the following terms:“(1) For the purposes of this Code, credit is provided if under acontract:(a) payment of a debt owed by one person (the debtor) toanother (the credit provider) is deferred; or(b) one person (the debtor) incurs a deferred debt to another(the credit provider).”In securitisation programs using trusts or special purposevehicles, a loan may be originated in two ways:• conduit programs which involve an originator originating aloan with funds provided by a trustee or special purposevehicle. The trustee or special purpose vehicle is the lender(or mortgagee) and under this arrangement is the creditprovider for the purposes of the Code; or• assignment programs where a lender lends money to aborrower and equitably assigns the resulting debt to atrustee or special purpose vehicle. The original lender in thecredit provider. But does it remain the credit provider afterthe assignment or does the trustee or special purpose vehiclebecome the credit provider? This is answered by section 166of the Code which provides:“(1) If the rights of a credit provider under a credit contract,mortgage or guarantee are assigned or pass by law toanother person, this Code from then on applies to that otherperson and does not impose any further obligation on thecredit provider.(2) The debtor, mortgagor or guarantor has and may exercise thesame rights in respect of the credit contract, mortgage orguarantee against the assignee as the debtor, mortgagor orguarantor has against the credit provider.(3) Subsection (1) does not apply while the credit providercontinues to receive payments from the debtor, or wouldcontinue to do so if the debtor complied with the creditcontract.”Typically, the original lender remains the servicer of the assignedloans and the debtors are unaware of the assignment. As aresult, section 166(1) will not apply to make the trustee orspecial purpose vehicle the credit provider (see section 166(3)).Debtors are normally only be given notice of the assignment ifthe trustee or special purpose vehicle perfects its title to theloans (ie. it takes a legal assignment of the loans). If it does so,the trustee or special purpose vehicle will then become the creditprovider.6.3 Failure to comply with the CodeThe consequences to a credit provider for failing to comply withthe requirements of the Code can be divided into five categories:6.3.1 Criminal consequencesThe commission of an offence exposes the credit provider, certainofficers of a corporate credit provider and persons or corporateswho aided and abetted the commission of the offence tomonetary penalties. The maximum penalty currently provided forin the Code is $10,000.6.3.2 Part 6 – Civil consequencesKey requirements: Division 1 of Part 6 sets up a regime underwhich, if a key requirement is breached, civil consequences mayflow. Put simply, those civil consequences are that the debtor maynot be required to pay any interest under the credit contract orthe credit provider may be required to make a payment (of up to$500,000 per type of breach) to consolidated revenue or into astatutory trust fund.Other contraventions: Division 2 of Part 6 provides that a courtmay order the credit provider to make restitution or paycompensation to any person affected by a contravention, other thanone for which a civil effect is specifically provided for in the Code.
Page 6: 12.7.3 Euroentitlements............
Page 9 and 10: 1 General overview of the nature of
Page 12: An interest in a managed investment
Page 15 and 16: 142.3.4 Provision of a financial se
Page 17 and 18: 3 The disclosure and civil liabilit
Page 19 and 20: 18The statutory source for this ste
Page 21 and 22: The implication of this approach in
Page 23 and 24: Interestingly, the majority then we
Page 25 and 26: 4 Stamp duty and securitisation244.
Page 27 and 28: 264.8 Relief for mortgage-backed se
Page 29 and 30: 4.10 ConclusionStamp duty is a very
Page 31 and 32: Despite the absence of an express a
Page 33 and 34: 32share of the profits of the compa
Page 35 and 36: (d) before the issue:(i) the compan
Page 37 and 38: 365.4 Debt/equity rulesDivision 974
Page 39 and 40: Entities that make GST-free supplie
Page 41: • “ enterprise” is defined in
Page 45 and 46: 7 The regulation of the participati
Page 47 and 48: inclusion within the ELE depends on
Page 49 and 50: 8 Set-off and securitisation8.1 Int
Page 51 and 52: 50However, this result and the prin
Page 53 and 54: 9 Insolvency and securitisation529.
Page 55 and 56: 54• if the trustee has not limite
Page 57 and 58: Section 588FG provides a measure of
Page 59 and 60: 10 Issues relating to debt securiti
Page 61 and 62: 60indemnity existed) and had no han
Page 63 and 64: The effect of the decision has been
Page 65 and 66: the ASX has discretion to ask the e
Page 67 and 68: • Public Trustee Members - for pr
Page 69 and 70: When Austraclear receives notificat
Page 71 and 72: have been completed in relation to
Page 73 and 74: Some CMBS transactions allow the is
Page 75 and 76: 14.3 GamingIn the past, another con
Page 77 and 78: 16 Clayton UtzOur securitisation te

A Guide to the Law of Securitisation in Australia - Clayton Utz

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