Document ID: chunk:federal_register_of_legislation:F2023L00684:body:0:p34
Version: federal_register_of_legislation:F2023L00684
Segment Type: other
Provision Reference: 
Character Range: 85432–88305

for transactions that change the number of shares on issue without involving an exchange of value and which have no impact on capital;[42]
         3. adjustments must exclude transactions involving cash payments or other compensation to, or by, holder of the ordinary shares or the issuer of the capital instrument; and
         4. the method of calculation of adjustments must be fixed in issue documentation and adjustments must be capable of being ascertained immediately and objectively; and
     1. 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.
15. For mutually owned regulated institutions, where a Tier 2 Capital instrument provides for conversion into mutual equity interests, the issue documentation must:
(a) specify the number of mutual equity interests to be received upon conversion, or specify the conversion formula for determining the number of mutual equity interests received;
(b) provide for the number of mutual equity interests to be received under the formula specified in (a) of this paragraph to be capable of being ascertained immediately, objectively, and without further steps; and
(c) set the maximum number of mutual equity interests received such that the aggregate nominal value of the interests received cannot exceed, at the date of conversion, the nominal value of the Tier 2 Capital instrument converted.
 1. Conversion must generate an unequivocal addition to Common Equity Tier 1 Capital of the regulated institution under Australian Accounting Standards.
 2. In issuing Tier 2 Capital instruments, a regulated institution may, within the category of Tier 2 capital:
     1. differentiate between instruments as to whether an instrument is required to convert or be written-off in the first instance;
     2. provide for a ranking under which Tier 2 Capital instruments will be converted or written off; and
     3. where conversion or write-off of capital instruments is required at Level 2, the Level 2 insurance group may provide for a ranking under which Tier 2 Capital instruments issued by individual members of the group may need to be converted or written off. This would be subject to any requirements for conversion or write-off of Tier 2 Capital instruments required to be undertaken on a Level 1 basis.
 3. Where a Tier 2 Capital instrument provides for a write-off mechanism, this mechanism