General policy statement
The Dairy Industry Restructuring Act 2001 places no legislative limit on the proportion of the Fonterra co-operative shares that can be sold by farmers into the new co-op fund. A limit would ensure that the dividends and proceeds of Fonterra remain largely in the hands of farmer shareholders not external investors.
Without such a protection the current proposal for 10–15% of co-operative shares to be sold into the new co-op fund for external investors could easily become the thin end of the wedge and the fund could expand, seeing farmers lose share dividends to foreign and domestic investors.
This Bill provides that Fonterra must ensure the new co-op fund does not constitute more than 20% of the total number of co-operative shares. If the 20% limit is reached, Fonterra must cease the sale of shares into the new co-op fund and take action to reduce the proportion of shares in the new co-op fund to below the 20% limit within 90 days.
Clause by clause analysis
Clause 1 is the Title clause.
Clause 2 is the commencement clause. The Bill comes into force on the day after the date on which it receives the Royal assent.
Clause 3 provides that the Bill amends the Dairy Industry Restructuring Act 2001 (the principal Act).
Clause 4 states the purpose of the Bill.
Clause 5 inserts new section 109JA, which sets out new co-op's obligation to limit the relevant interest of the new co-op fund in co-operative shares.