Share Lending Agreement Template for Australia

A Share Lending Agreement is a sophisticated legal contract that governs the temporary transfer of securities between parties in the Australian financial markets. When you enter into securities lending transactions, this agreement provides the essential legal framework that protects both lenders and borrowers while ensuring compliance with Australian regulatory requirements.

When do you need this document?

You need a Share Lending Agreement when establishing ongoing securities financing relationships in Australia. This includes situations where you're a fund manager seeking to generate additional revenue from your securities holdings, an investment bank requiring shares for short selling activities, or a broker needing to cover settlement failures. The agreement is particularly crucial for institutional investors, hedge funds, and prime brokers who regularly engage in securities lending to enhance portfolio returns or facilitate trading strategies. Market makers and clearing participants also rely on these agreements to maintain adequate securities inventory for their operations.

Key legal considerations

Your Share Lending Agreement must address several critical legal elements to ensure enforceability and regulatory compliance. The collateral provisions are fundamental, requiring you to specify acceptable collateral types, valuation methods, and marking-to-market procedures. You must clearly define the treatment of corporate actions, including dividend payments, rights issues, and voting arrangements, as these directly impact the economic benefits of securities ownership. Default and termination clauses require careful drafting to protect your interests while providing clear exit mechanisms. The agreement should also address netting arrangements, which allow you to offset mutual obligations and reduce credit exposure. Documentation of securities delivery and return procedures is essential to prevent disputes and ensure smooth operations.

Legal requirements in Australia

In Australia, your Share Lending Agreement must comply with the Corporations Act 2001, which governs securities ownership, transfer rules, and disclosure obligations. The ASIC Market Integrity Rules impose specific requirements for share lending transactions, including record-keeping obligations and reporting standards. You must ensure compliance with the Income Tax Assessment Act 1997 regarding the tax treatment of securities lending arrangements, particularly concerning dividend payments and capital gains implications. The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 requires you to implement appropriate customer due diligence procedures and transaction reporting. Industry participants typically follow the Securities Lending Convention of Australia, which provides standardised terms and operational procedures. Your agreement should incorporate these regulatory requirements while addressing specific operational needs and risk management considerations relevant to your securities lending activities.