232   Financial accommodation to directors and associates

(cf Vic Act s 231)

(1)  In this section:

associate of a director means:

(a)  the director’s spouse, or

(b)  a person when acting in the capacity of trustee of a trust under which:

(i)  the director or director’s spouse has a beneficial interest, or

(ii)  a body corporate mentioned in paragraph (c) has a beneficial interest, or

(c)  a body corporate if:

(i)  the director or director’s spouse has a material interest in shares in the body corporate, and

(ii)  the nominal value of the shares is not less than 10% of the nominal value of the issued share capital of the body corporate.

(2)  For the purposes of this section, a person has a material interest in a share in a body corporate if:

(a)  the person has power to withdraw the share capital subscribed for the share or to exercise control over the withdrawal of that share capital, or

(b)  the person has power to dispose of or to exercise control over the disposal of the share, or

(c)  the person has power to exercise or to control the exercise of any right to vote conferred on the holder of the share.

(3)  A co-operative must not provide financial accommodation to a director, or to a person the co-operative knows or should reasonably know is an associate of a director, unless:

(a)  the accommodation is:

(i)  approved under subsection (4), or

(ii)  given under a scheme approved under subsection (4), or

(iii)  provided on terms no more favourable to the director or associate than the terms on which it is reasonable to expect the co-operative would give if dealing with the director or associate at arm’s length in the same circumstances, and

(b)  the directors have approved the accommodation, at a meeting of the board at which a quorum was present, by a majority of at least two-thirds of the directors present and voting on the matter.

Maximum penalty: 500 penalty units.

(4)  For the purposes of subsection (3) (a) (i) and (ii), financial accommodation or a scheme is approved if:

(a)  it is approved by a resolution passed at a general meeting,

(b)  the full details of the accommodation or scheme were made available to members at least 21 days before the meeting.

(5)  A director or an associate of a director who obtains financial accommodation given in contravention of subsection (3) is guilty of an offence.

Maximum penalty: 240 penalty units or 2 years imprisonment, or both.

(6)  For the purposes of this section, a concessional rate of interest for a borrower from a co-operative is a normal term only if the borrower is entitled to the concession by being a member of a class of borrowers from the co-operative specified in its rules as being entitled to the concession.

(7)  If a director of a co-operative or an associate of a director accepts in payment of a debt owed by a member of the co-operative to the director or associate, any proceeds of financial accommodation provided to the member by the co-operative, this section has effect as if the financial accommodation has been provided to the director or associate.

(8)  In this section, a reference to:

(a)  the provision of financial accommodation to a director or an associate of a director, or

(b)  the obtaining of financial accommodation by a director or an associate of a director, or

(c)  a debt owed to a director or an associate of a director,

      includes a reference to a provision of financial accommodation to, or an obtaining of financial accommodation by, the director or associate, or a debt owed to the director or associate, jointly with another person.