Explanatory Memorandum
(circulated by authority of the Minister for Families, Community Services and Indigenous Affairs, the Honourable Mal Brough, MP)4. Notes on clauses-overview
Introduction
1.1. The overall approach of the proposed consequential amendments to the Corporations Act has three elements:
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- confirming application of the Corporations Act to CATSI corporations
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- removing duplication between the Corporations Act and the CATSI Bill
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- removing any regulatory gaps that could be created by the CATSI Bill.
1.2. This overview of the clauses covers the following topics:
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- section 57A of the Corporations Act: meaning of 'corporation'
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- winding-up and receivers
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- duties of officers and employees
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- disqualification of a person from managing corporations
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- transfers from the Corporations Act to the CATSI Bill
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- courts, proceedings and offences.
Section 57A of the Corporations Act: meaning of corporation
1.3. Section 57A of the Corporations Act provides that the term corporation includes any body corporate. This means that provisions in the Corporations Act that apply to a corporation currently apply to a body corporate incorporated under the ACA Act. The interaction between the Corporations Act and the ACA Act creates uncertainty where ACA Act provisions are inconsistent with the Corporations Act.
1.4. Amendment 3 [1] makes it clear that a CATSI corporation is a corporation for the purpose of the Corporations Act. This removes any uncertainty that may have otherwise been created by the commencement of the CATSI Bill. Without this amendment it may have been argued that the CATSI Bill, being a more recent Commonwealth enactment than the Corporations Act, would displace section 57A.
Winding-up and receivers
1.5. Amendment 2 specifically excludes CATSI corporations from the definition of a Part 5.7 body in subsection 9(1) of the Corporations Act. Part 5.7 of the Corporations Act provides for the winding-up of bodies other than companies. Part 11-5 of the CATSI Bill provides for the winding-up of CATSI corporations and aligns with the Corporations Act approach to winding-up companies. Without amendment 2 the conflicting provisions of Part 5.7 would also apply to CATSI corporations.
1.6. Similarly, amendments 24 and 25 ensure that Part 5.2 of the Corporations Act dealing with receivers and other controllers does not apply of its own force to CATSI corporations. It only applies as modified by section 516-1 of the CATSI Bill.
Duties of officers and employees
1.7. Division 265 of the CATSI Bill specifically deals with the duties of officers and employees. The duties generally mirror those set out in Division 1 of Part 2D.1 of the Corporations Act. Amendment 4 makes it clear that this division of the Corporations Act does not apply to CATSI corporations. Without this amendment there would be duplicate legislative schemes and dual regulators responsible for enforcing compliance with the duties.
1.8. The duties in the CATSI Bill also differ from those in the Corporations Act in one important respect regarding the interaction with the Native Title Act. In some circumstances requirements under the Native Title Act could be in conflict with the general duties of officers and employees. The CATSI Bill deals with this potential conflict, and the amendment preserves the CATSI Bill's specific handling of the interaction between the CATSI Bill and Native Title Act obligations.
Disqualification of a person from managing corporations
1.9. Subsection 279-5(5) of the CATSI Bill sets up one side of a mutual recognition scheme where persons disqualified from managing corporations under the Corporations Act are automatically disqualified under the CATSI Bill. Amendments 6 to 23 complete the scheme so that disqualification under the CATSI Bill results in automatic disqualification under the Corporations Act.
1.10. A number of the amendments are also necessary to ensure that the introduction of the CATSI Bill disqualification provisions do not create any regulatory gaps. This is particularly necessary to apply consistent governance standards across groups of corporations which may include corporations under both the CATSI Bill and Corporations Act regimes. For one example of how a regulatory gap is avoided, see amendments 10 to 15 in relation to disqualifying a person from managing corporations on the basis of their involvement in two failed corporations.
Companies transferring from the Corporations Act to the CATSI Bill
1.11. Amendments 26 to 30 enable the transfer of companies from the Corporations Act to the CATSI Bill. No consequential amendments are necessary to enable the transfer of a CATSI corporation into the Corporations Act. One of the policy aims of the CATSI Bill is to provide an incorporation framework which is appropriate for the special risks and requirements of the Aboriginal and Torres Strait Islander corporate sector. Companies controlled by Aboriginal people or Torres Strait Islanders may wish to transfer their registration to the CATSI Bill to take advantage of the support and special measures provided.
Courts, proceedings and offences
1.12. Amendments 31 to 35 avoid duplication in a number of miscellaneous provisions in Chapter 9 of the Corporations Act. These provisions are mirrored in the CATSI Bill. The specific provisions to be amended are:
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- the offence in section 1309 for giving false or misleading information
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- the power of a court to grant relief under section 1318
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- appeals from decision of receivers or managers in subsection 1321(b)
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- the direction a court can make in relation to costs under section 1335.
Legislative matters
1.13. The amending items of the Bill commence at the same time as the CATSI Bill-1 July 2007. This date takes account of reporting provisions and record keeping requirements in the CATSI Bill which are tied to the financial year. It also accommodates an awareness raising campaign for corporations and other stakeholders.
1.14. The Bill does not contain any amendments affecting the review of decisions by the Registrar or ASIC.
1.15. The Bill does not contain any amendments affecting the delegation of functions by the Registrar or ASIC.
1.16. The Bill does not contain any strict liability offences. However, amendment 6 does mean that a person who is disqualified from managing CATSI corporations is automatically disqualified from managing Corporations Act corporations. If a disqualified person manages a Corporations Act corporation the person commits an offence under section 206A of the Corporations Act and strict liability applies to the circumstance that the person is disqualified. The amendments do not expose any more people to the strict liability offence in section 206A(1) of the Corporations Act. Before the CATSI Bill begins such a person would have been disqualified from managing a Corporations Act corporation by virtue of section 57A of the Corporations Act. One minor difference is that prior to enactment of the CATSI Bill the only regulator with the power to disqualify a person from managing corporations was ASIC. The Registrar's power in the CATSI Bill to disqualify a person from managing CATSI corporations mirrors the grounds on which ASIC may disqualify a person from managing corporations-so while the regulator may be different the grounds are identical.
1.17. The Bill does not contain any provisions which introduce new regulatory powers. The existing regulatory powers in the Corporations Act apply. The Bill avoids potential duplication of regulatory powers in the CATSI Bill and the Corporations Act.
1.18. No exceptions have been sought from the operation of the Legislative Instruments Act 2003 .
1.19. The Bill does not contain any provisions which allow regulations to modify provisions of the Bill itself, the CATSI Bill or the Corporations Act.
1.20. The Bill does not contain any provisions which reverse the onus of proof.