Document ID: chunk:federal_register_of_legislation:F2024L00884:body:0:p44
Version: federal_register_of_legislation:F2024L00884
Segment Type: other
Provision Reference: 
Character Range: 113257–116181

for all member shares, have been repaid in liquidation and;
(i)            the holder's claim ranks equally and proportionately with all other mutual equity interests directly issued or created on conversion of Additional Tier 1 Capital or Tier 2 Capital instruments in accordance with Attachment E to this Prudential Standard; and
(ii)         the holder's claim cannot exceed the principal amount of the mutual equity interest, that amount being measured as:
(A)        if the mutual equity interest was issued directly, the paid-up amount of the mutual equity interest; or
(B)        if the mutual equity interest was created on conversion of Additional Tier 1 Capital and Tier 2 Capital instruments, the nominal dollar value of the Additional Tier 1 Capital or Tier 2 Capital instrument prior to conversion into the mutual equity interest;
(e)          distributions on the mutual equity interest are paid out of distributable items (including retained earnings) of the issuer, and there are no features that require the issuer to make payments in kind. The level of distributions must not be tied or linked to the credit standing of the issuer. Distributions on all mutual equity interests on issue cannot, in aggregate, exceed 50 per cent of the issuer's net profit after tax in the financial year to which the distributions relate.[51] All distributions on mutual equity interests must be treated as dividends for the purposes of LPS 110 and the issuer is subject to the restrictions applied to the payment of distributions in accordance with LPS 110;
(g)          distributions are paid only after all legal and contractual obligations have been met and payments on more senior capital instruments have been made;
(h)          each mutual equity interest absorbs losses on a going concern basis proportionately, and pari passu, with all other mutual equity interests.
2.             Issue documentation and marketing material for mutual equity interests must clearly and prominently state that:
(a)          the principal amount of the mutual equity interest is perpetual and never repaid outside liquidation (other than discretionary repurchases subject to APRA's approval);
(b)          the holder of the mutual equity interest may only be entitled to a claim on the issuing life company's residual assets after more senior claims (including Additional Tier 1 Capital and Tier 2 Capital instruments) have been paid;
(c)          neither the issuer nor the holder of the mutual equity interest is allowed to exercise any contractual rights of set-off in relation to the mutual equity interest; and
(d)          the life company has full discretion over the timing and amount of any distributions paid on the mutual equity interest, including not paying a distribution.
3.             A life company must obtain APRA's approval prior to issuing mutual equity interests, or Additional Tier 1 Capital or Tier 2 Capital