Explanatory Memorandum
(Circulated by authority of the Minister for Financial Services and Regulation, the Hon Joe Hockey, MP)SCHEDULE 2 - Amendment of the Corporations Law
The Corporate Law Economic Reform Program Act 1999 (CLERP Act) revised the location and format of the criminal consequences for contraventions of civil penalty provisions by omitting them from Part 9.4B and then making amendments to individual civil penalty provisions.
The following amendments relate to civil penalty provisions that had both civil and criminal consequences attached to their contravention prior to the commencement of the CLERP Act. The amendments make provision for the criminal consequences of contraventions of civil penalty provisions in Chapter 5C (Managed Investment Schemes) by specifying appropriate fault elements and penalties that were not contained in the CLERP Act. These amendments restore as closely as possible the position prior to commencement of the CLERP Act while meeting the requirements of the Criminal Code Act 1995 (the Criminal Code).
An additional amendment in item 1 remedies a difficulty with the provisions requiring registration of managed investment schemes that arose because of changes made by the CLERP Act.
This item substitutes subsection 601ED(2). The new subsection 601ED(2) restores the effect of this provision prior to its amendment by the CLERP Act .
Currently, this subsection provides that a managed investment scheme does not have to be registered if all the issues of interests in the scheme that have been made did not need disclosure to investors under Part 6D.2. However, as Part 6D.2 only applies to securities and the definition of securities for Chapter 6D in subsection 92(3) does not include interests in an unregistered managed investment scheme, the current subsection 601ED(2) would always apply to all the interests in an unregistered scheme.
The new subsection 601ED(2) overcomes this difficulty by treating the interests in the unregistered scheme as interests in a registered scheme for the purpose of determining whether their issue was exempt under Part 6D.2. As interests in a registered scheme are within the definition of security for Chapter 6D, the amendment ensures that schemes are only exempt from registration where all the issues of interests were within the specific exemptions from disclosure contained in Part 6D.2.
Item 2 - Subsection 601FC(1)(note)
This item repeals the note to subsection 601FC(1) which refers to Part 9.4B as providing for the criminal consequences of contraventions of civil penalty provisions and section 1317DA. This reference is no longer relevant following the CLERP Act which omitted section 1317DA and repealed and substituted Part 9.4B which now no longer provides for the criminal consequences of contraventions of civil penalty provisions.
This item omits the reference in subsection 601FC(3) to section 232 which is no longer relevant following the CLERP Act and substitutes references to sections 180, 181, 182, 183 and 184. Prior to the CLERP Act section 232 dealt with duties and liabilities of officers of corporations. Sections 180, 181, 182 and 183 now deal with the civil obligations of directors and officers. Section 184 now provides for criminal offences related to directors and officers. Subsection 601FC(3) was not amended by the CLERP Act to take account of these changes.
As paragraph 601FC(1)(c) provides that where there is a conflict between the interests of members of a scheme and the interests of a responsible entity, the responsible entity must give priority to the members interests, it is necessary to exempt the officers and employees of the responsible entity from sections 180, 181, 182, 183 or 184 in these circumstances.
Item 4 - New subsections 601FC(5), (6), (7) and (8)
This item inserts subsections 601FC(5), (6), (7) and (8). The new subsection (5) provides that a responsible entity that contravenes subsection (1) or any person involved in a responsible entitys contravention of subsection (1), contravenes subsection (5). It inserts a note referring to the definition of involved in section 79 and indicating that the subsection is a civil penalty provision. Item 16 (below) gives effect to this subsection by inserting it in the list of civil penalty provisions in subsection 1317E(1).
The new subsection (6), together with the insertion by item 18 of a relevant penalty in Schedule 3, makes it an offence for a person to be intentionally or recklessly involved in a responsible entitys contravention of subsection (1). Due to the definition of involved in section 79, it is not an offence for the responsible entity to breach subsection (1). Rather, the offence attaches to people, such as officers and employees of the responsible entity, who are involved in the contravention.
Subsections (7) and (8) modify the application of the definition of the fault element of recklessness contained in the Criminal Codeso that it applies to physical elements of conduct which involve omissions. It extends recklessness to omissions where the person is aware of a substantial risk that an omission exists, or will exist, and that, having regard to the circumstances known to him or her, it is unjustifiable for the person to take that risk. Although the modification is a variation from the general principle of criminal responsibility in Chapter 2 of the Criminal Code, such a modification is acceptable within existing individual provisions of this nature for the purposes of ensuring compliance with the Criminal Code.
Item 5 - Subsection 601FD(1)(note)
This item amends subsection 601FD(1) in the same manner as item 2 amends subsection 601FC(1).
This item amends subsection 601FD(2) in the same manner as item 3 amends subsection 601FC(3).
Item 7 - New subsections 601FD(3), (4), (5) and (6)
This item inserts subsections 601FD(3), (4), (5) and (6). The new subsection (3) provides that a person who contravenes or is involved in a contravention of subsection (1) contravenes subsection (3). It inserts a note referring to the definition of involved in section 79 and indicating that the subsection is a civil penalty provision. Item 16 (below) gives effect to this subsection by inserting it in the list of civil penalty provisions in subsection 1317E(1).
The new subsection (4), together with the insertion by item 18 of a relevant penalty in Schedule 3, makes it an offence for a person to intentionally or recklessly contravene, or be involved in a contravention, of subsection (1).
Subsections (5) and (6) modify the application of the definition of the fault element of recklessness contained in the Criminal Codeso that it applies to physical elements of conduct which involve omissions. It extends recklessness to omissions where the person is aware of a substantial risk that an omission exists, or will exist, and that, having regard to the circumstances known to him or her, it is unjustifiable for the person to take that risk. Although the modification is a variation from the general principle of criminal responsibility in Chapter 2 of the Criminal Code, such a modification is acceptable within existing individual provisions of this nature for the purposes of ensuring compliance with the Criminal Code.
Item 8 - Subsection 601FE(1)(note)
This amends subsection 601FE(1) in the same manner that item 2 amends subsection 601FC(1).
This item amends subsection 601FE(2) in the same manner as item 3 amends subsection 601FC(3).
Item 10 - New subsections 601FE(3) and (4)
This item inserts subsections 601FE(3) and (4). The new subsection (3) provides that a person who contravenes or is involved in a contravention of subsection (1) contravenes subsection (3). It inserts a note referring to the definition of involved in section 79 and indicating that the subsection is a civil penalty provision. Item 16 (below) gives effect to this subsection by inserting it in the list of civil penalty provisions in subsection 1317E(1).
The new subsection (4), together with the insertion by item 18 of a relevant penalty in Schedule 3, makes it an offence for a person to intentionally contravene or be involved in a contravention of subsection (1).
Items 11 and 12 - Subsection 601FG(1)(notes 1 and 2)
These items repeal the second note to subsection 601FG(1) for the same reasons that item 2 amends subsection 601FC(1).
Item 13 - New subsections 601FG(2) and (3)
This item inserts subsections 601FG(2) and (3). The new subsection (2) provides that a responsible entity that contravenes subsection (1) or any person involved in a responsible entitys contravention of subsection (1), contravenes subsection (2). It inserts a note referring to the definition of involved in section 79 and indicating that the subsection is a civil penalty provision. Item 16 (below) gives effect to this subsection by inserting it in the list of civil penalty provisions in subsection 1317E(1). Due to the definition of involved in section 79, it is not an offence for the responsible entity to contravene subsection (1). Rather the offence attaches to people, such as officers and employees of the responsible entity, who are involved in the contravention.
The new subsection (3), together with the insertion by item 19 of a relevant penalty in Schedule 3, makes it an offence for a person to intentionally be involved in a responsible entitys contravention of subsection 601FG(1).
Item 14 - Subsection 601JD(1)(note)
This item amends subsection 601JD(1) in the same manner that item 2 amends subsection 601FC(1).
Item 15 - New subsections 601JD(3), (4), (5) and (6)
This item inserts subsections 601JD(3), (4), (5) and (6). The new subsection (3) provides that a person who contravenes or is involved in a contravention of subsection (1) contravenes subsection (3). It inserts a note referring to the definition of involved in section 79 and indicating that the subsection is a civil penalty provision. Item 16 (below) gives effect to this subsection by inserting it in the list of civil penalty provisions in subsection 1317E(1).
The new subsection (4), together with the insertion by item 19 of a relevant penalty in Schedule 3, makes it an offence for a person to intentionally or recklessly contravene or be involved in a contravention of subsection (1).
Subsections (5) and (6) modify the application of the definition of the fault element of recklessness contained in the Criminal Codeso that it applies to physical elements of conduct which involve omissions. It extends recklessness to omissions where the person is aware of a substantial risk that an omission exists, or will exist, and that, having regard to the circumstances known to him or her, it is unjustifiable for the person to take that risk. Although the modification is a variation from the general principle of criminal responsibility in Chapter 2 of the Criminal Code, such a modification is acceptable within existing individual provisions of this nature for the purposes of ensuring compliance with the Criminal Code.
Item 16 - Paragraphs 1317E(1)(f) to (j)(inclusive)
This item substitutes paragraphs 1317E(1)(f) to (j) (inclusive). Inserting references to subsections 601FC(5), 601FD(3), 601FE(3), 601FG(2) and 601JD(3) into subsection 1317E(1) has the effect of creating them as civil penalty provisions so that contraventions of them are subject to Part 9.4B.
This item substitutes the item in Schedule 3 relating to section 184. Currently the number of penalty units as inserted by the CLERP Act for section 184 is 200, this number should be 2000, consistent with the penalty for contraventions of former section 232 (the corresponding pre-CLERP Act provision).
These items insert references to subsections 601FC(6), 601FD(4), 601FE(4), 601FG(3) and 601JD(4) into Schedule 3. They provide for the penalties for criminal offences in relation to these subsections. The penalty of 2000 penalty units or imprisonment for 5 years, or both is the same as that which formerly applied under section 1317FA(1).
This item omits the reference to subsection 1317FA(1) from Schedule 3. Subsection 1317FA(1) was omitted by the CLERP Act but a consequential amendment to Schedule 3 was not made.