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Gaming machine entitlement allocation process questions and answers

1. Do Incumbent Venue Operators need to use the Expression of Interest (EOI) process to request additional entitlements?

An incumbent venue operator will be required to nominate the number of new entitlements they wish to acquire when responding to the Minister's offer. It is anticipated that the Minister's offer will be issued to venue operators in mid-December 2017 and a response required by the end of February 2018.

As previously communicated, you are guaranteed to be offered up to the number of entitlements you held on 7 July 2017. You may nominate to purchase the same, less or more than this number, but there is no guarantee that any additional entitlements will be allocated.

If requesting additional entitlements to be used in an approved venue as at 7 July 2017, this should be done via the response to the Minister’s offer and not the EOI process. You should only submit an EOI form if you are planning to operate new entitlements in a proposed new venue that was not operational on 7 July 2017.

2. If multiple clubs (or hotels) apply for additional entitlements within a capped area, how will the entitlements be distributed?

As previously communicated, venue operators are guaranteed to be offered up to the number of entitlements held on 7 July 2017. Allocation of any additional entitlements over and above this number is not guaranteed and is subject to availability, taking into account regional caps and municipal limits and the priority of allocation detailed on the Department’s website.

If demand exceeds supply for additional entitlements, the Minister will endeavour to allocate entitlements equally amongst eligible venue operators to the extent possible. Where this is not possible, the Minister will allocate in a way that maximises the monetary value to the State. The rules for allocating in these circumstances will be detailed in future Minister’s allocation rules.

3. Do New Entrants require a Venue Operator’s Licence (VOL)?

New entrants do not have to hold a valid Venue Operator's Licence (VOL) in order to participate in the initial stages of the allocation process. The only requirement for participation is that new entrants lodge an expression of interest in accordance with the process communicated by government. If a new entrant has lodged a valid EOI form by 3 November 2017, they will be eligible to receive the Minister's pre-offer letter and subsequently the Minister's formal offer in relation to new entitlements.

However, a new entrant must have a valid VOL in place in order to be able to respond to the Minister's offer and execute the Deed Poll. It is currently intended that a response to the Minister's offer will be required by the end of February 2018. Under the Gambling Regulation Act 2003, entitlements cannot be allocated to an entity that does not have a VOL.

All parties that do not currently hold a VOL but intend to participate in the allocation process are strongly encouraged to commence the VOL application process in order to ensure that the VOL is in place prior to February 2018. Relevant information can be found on the Victorian Commission for Gambling and Liquor Regulation (VCGLR) website: https://www.vcglr.vic.gov.au/gambling/gaming-venue-operator/apply-new-licence-permit-or-registration/application-process-and-requirements (external link)

4. Do New Entrants have to have an approved venue by the Minister’s Offer date to be able to purchase new entitlements?

No, a New Entrant does not have to have an approved venue by the date of the Minister’s Offer to be eligible to participate in the process.

5. If a venue has not been approved, does the New Entrant still have to pay for the entitlements? Or, can they transfer to an alternative Local Government Area (LGA)?

If you accept the Minister’s offer by signing the Deed Poll you are legally bound to purchase the nominated number of entitlements if allocated, regardless of whether you have an approved venue to operate these entitlements.

Once you are allocated the new entitlements you may apply to change the geographic conditions on the entitlements as per the current process.

If, once you start operating gaming machines under new entitlements, the characteristics of your venue are significantly different to those indicated in your EOI form, the price of your new entitlements may be adjusted.

6. Will the ‘use it or lose it’ rule still apply?

Yes, the relevant clauses in the Gambling Regulation Act 2003 will continue to apply (whereby the entitlements are forfeited to the State if not operated within 6 months of allocation or a period extended under section 3.4A.25 of the Act).

7. If an entity has applied for a VOL and has not had a response from the VCGLR by the date required to respond to the Minister’s Offer, how will this be managed?

The timelines described in response to Question 3 are considered sufficient to secure a VOL. The Gaming Machine Allocation Project team are working closely with the VCGLR and will monitor the applications that have been submitted and their progress.

You are strongly encouraged to commence the VOL application process now (if you have not already done so), as an entity cannot accept the Minister's offer and will not be allocated entitlements without a VOL.

8. How much will the deposit be for new entitlements and when is it payable?

You will be required to pay a deposit for every entitlement you nominate when accepting the Minister’s offer (estimated end of February 2018). This includes any additional entitlements you nominate over the number of entitlements held on 7 July 2017. However, if you are not allocated the additional entitlements, the deposit paid for these entitlements will be refunded to you.

For example, if you held 30 club entitlements on 7 July 2017 and nominate to purchase 30 entitlements, you will have to pay 2.5% of 30*(price per entitlement). If, for example, you nominate to purchase 40 entitlements you will need to pay 2.5% of 40*(price per entitlement). However, if you are only allocated 30 entitlements (as you are only guaranteed 30), you will be refunded the deposit paid for the extra 10 entitlements.

The amount of deposit payable is as follows:

  • clubs – 2.5 per cent of the entitlement price, payable in February 2018
  • hotels – 5 per cent of the entitlement price, payable in February 2018

Following the deposit, one further instalment will be due prior to August 2022 as follows:

  • clubs – 2.5 per cent payable in February 2019
  • hotels – 5 per cent payable in February 2019.

Hardship arrangements for payment of deposit will be available upon application (using current hardship process and criteria).

9. Is the Minister’s Offer transferable?

No, the Minister’s offer is not transferable.

10. Can venue operators choose to pay for their entitlements in less than the 5 or 7 year deferred payments?

The payment terms for new entitlements will be detailed in the Entitlement Related Agreement for Payment that venue operators will be required to execute if allocated new entitlements.

Venue operators will be able to opt for a deferred payment arrangement, as described on the Department’s website. It is anticipated that venue operators will be able to pay off the entitlements earlier than the maximum allowable deferred payment period if they so choose.

11. If a venue operator is transferred entitlements from a different venue operator, do the same payment arrangements apply to them?

Yes, the same rules that currently apply regarding a venue operator’s responsibility to take on the same payment terms the previous venue operator had will apply for post-2022 entitlements.

12. Do the recent changes applied by the Minister in relation to regional / municipal caps apply to the allocation for post-2022 entitlements?

Yes, the State will allocate entitlements subject to the regional caps and municipal limits determined by the Minister prior to allocation. 

13. What will happen to available entitlements that have not been taken up by Club venue operators?

If there are remaining club entitlements it is at the discretion of the Minister to decide to allocate them to the hotel sector, leave them unallocated, offer them for sale on the open market or extinguish them completely.

14. When and how can I transfer new entitlements?

As per the Transfer Rules published on 21 November 2017, venue operators are prohibited from transferring new entitlements once allocated and until six months prior to the commencement of the new entitlements on 16 August 2022 (16 February 2022). This prohibition does not apply to the transfer of new entitlements where the transfer occurs as part of a sale of a gaming venue.

Once the prohibition is lifted (in February 2022) and up to 18 months after the new entitlement commencement, the transfers of new entitlements will be subject to payment of 100% difference between the price paid at allocation and the transfer price for the seller, and payment of 100% of the difference between the price that would have been paid by the buyer if purchased at allocation and the transfer price, subject to passage of legislation to amend the Gambling Regulation Act 2003 currently before Parliament. Some transfers may be exempted from this payment upon application to the Treasurer.

15. If the range of entitlements requested in the EOI for a new venue is not accepted by the Minister, can the Minister offer a number of entitlements for a lesser amount? Or would another EOI with a lower range need to have been submitted?

If the Minister is unable to allocate the minimum number in the range of gaming machine entitlements requested in an Expression of Interest then the Minister will not allocate gaming machine entitlements to that entity.

If a new venue is willing to accept a number of gaming machine entitlements within a range greater than 20 then they will need to place multiple expressions of interest covering the total range, i.e. should their range be 20 to 60, two expressions of interest would need to be lodged, one covering the range 20 to 40 and one covering the range 40 to 60.

16. Are the Expression of Interest forms confidential? 

The responses to the Expression of Interest, the Minister's offer and acceptance of those offers is confidential.

Furthermore, all correspondence unique to individual venue operators is confidential.

17. I have acquired entitlements after 7 July 2017. Will I be offered matching new entitlements for use post-August 2022?

Only the venue operators who held entitlements on 7 July 2017 will be guaranteed the opportunity to purchase the equivalent new entitlements (except where club entitlements are held by a hotel – see Question 20). Consequently, if you acquired entitlements after 7 July 2017, and assuming the seller held these entitlements on 7 July 2017, it is the seller of the entitlements who will be offered equivalent new entitlements, not you.

The only exemption to this is where you acquire entitlements as part of the purchase of an approved venue after 7 July 2017 and before pre-offer date – see Question 18.

This does not impact on the ability of venue operators to enter into commercial arrangements to transfer new entitlements.

18. I have acquired a venue after 7 July 2017. Will I be offered the new entitlements?

If you acquired an approved venue (and are recorded on the VCGLR Register as the venue operator conducting gaming at that venue) after 7 July 2017 and before pre-offer date (estimated early to mid-November 2017), you qualify as a 'successor venue operator' and will receive all communications in relation to that venue, including the pre-offer letter from the Minister and the Minister’s offer.

If you acquire a venue after the pre-offer date, the vendor of the venue will receive the Minister’s offer in relation to new entitlements at that venue.

19. I am an incumbent venue operator that held entitlements on 7 July 2017 but may need to move to a different venue, possibly in a different LGA, post August 2022. Does this impact on the entitlements I am guaranteed in this allocation process?

If, prior to August 2022, the venue operator who has been allocated new entitlements is no longer operating the venue they were operating at 7 July 2017, this will have no impact on the new entitlements they were allocated and they will continue to hold these entitlements.

If a venue operator wants to operate the new entitlements in a different venue post August 2022, they would need to go through the same processes as they would now to ensure they can operate these entitlements in the new venue. For example, if the venue is in a different LGA, the venue operator would need to apply to change the geographic condition on the new entitlements.

20. Will the Minister allocate club gaming machine entitlements to Hotel venue operators that held club gaming machine entitlements as at 7 July 2017?

No, section 3.4A.5(2)(b) of the Gambling Regulation Act 2003 states – The Minister must not allocate a club gaming machine entitlement to a venue operator who does not hold a club venue operator’s licence. Club entitlements currently held by hotels will go into the unallocated pool.

 

 


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Author: Department of Justice and Regulation
Publisher: Department of Justice and Regulation
Date of Publication: 2017
Copyright: State of Victoria, 2017.

 

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