Document ID: chunk:federal_register_of_legislation:F2022L01562:body:0:p48
Version: federal_register_of_legislation:F2022L01562
Segment Type: other
Provision Reference: 
Character Range: 124684–127524

instrument will not constitute a tax or regulatory event for the purposes of this Attachment.
27.         APRA may require an ADI not to exercise a call where it relates to a tax or regulatory event if APRA forms the view that the ADI was in a position to anticipate the tax or regulatory event when the instrument was issued. In order for a call to be exercised the issuer must comply with the provisions in paragraph 7 of this Attachment.
28.         Where a Tier 2 Capital instrument provides for conversion into ordinary shares[49], the issue documentation must:
(a)          specify the number of ordinary shares to be received upon conversion, or specify the conversion formula for determining the number of ordinary shares received;
(b)          provide for the number of ordinary shares to be received under the conversion formula specified in (a) of this paragraph to be capable of being ascertained immediately and objectively; and
(c)          set the maximum number of ordinary shares received so as not to exceed the price of the Tier 2 Capital instrument at the time of its issue divided by 20 per cent of the ADI's[50] ordinary share price[51] at the same time. However, this cap does not apply if the only holder of the converting capital instrument is a listed parent entity which wholly-owns the issuer of the capital instruments. In calculating the ordinary share price at time of issue:
(i)            adjustments may be made for subsequent ordinary share splits, bonus issues and share consolidations;
(ii)         adjustments may only be made for transactions that change the number of shares on issue without involving an exchange of value and which have no impact on capital;[52]
(iii)       adjustments must exclude transactions involving cash payments or other compensation to, or by, holders of the ordinary shares or the issuer of the capital instrument; and
(iv)        the method of calculation of adjustments must be fixed in issue documentation and adjustments must be capable of being ascertained immediately and objectively; and
(d)          where the capital instrument is denominated in foreign currency, provide a clear method for determining: (i) the exchange rate to be used in calculating the number of ordinary shares to be issued upon conversion (e.g. the prevailing exchange rate); and (ii) the exchange rate to be used in calculating the maximum number of ordinary shares which could be issued on conversion (issue date exchange rate). Documentation must include how exchange rates would be determined, if at a time of conversion, foreign exchange markets were to be closed at the intended time of conversion.
29.         For mutually owned ADIs, where a Tier 2 Capital instrument provides for conversion into mutual equity interests, the issue documentation must:
(a)          specify the number