Explanatory Memorandum
(Circulated by the authority of the Minister for Small Business, Minister Assisting on Deregulation and Public Sector Superannuation, Minister Assisting the Minister for Tourism, Senator the Hon Nick Sherry)General outline and financial impact
Outline
On 3 July 2008, the Council of Australian Governments (COAG) agreed to the development of a single national system for registering and regulating business names. The proposal was one of 27 areas of regulatory reform, and an Inter-Governmental Agreement (Agreement) with the States and Territories was signed on 2 July 2009.
The Agreement covered arrangements for the constitutional referral of powers by the States and the subsequent management of those powers, including requirements for consultation and approval by the States and Territories.
This Project is part of COAG's reform agenda aimed at driving productivity growth and forms part of the COAG National Partnership Agreement (NPA) to deliver a Seamless National Economy.
The Project will deliver a national business name registration system which includes a seamless, online registration for both Australian Business Numbers (ABNs) and business names.
The Business Names Registration Bill 2011 forms part of the National Business Names Registration Package which also includes the Business Names Registration (Transitional and Consequential Provisions) Bill 2011 and the Business Names Registration (Fees) Bill 2011; and other legislative instruments including the Business Names (Availability of Name) Determination 2011.
Section 16 sets out the objects of the Registration Bill.
The primary purpose of the national registration scheme is to ensure that any business that does not operate under its own entity name, registers its name and details on a national register to enable those who engage or propose to engage with that particular business to determine the identity of the entity behind the business name and its contact details.
In addition, the creation of a national Register will remove the inconvenience and compliance cost caused by the registration of business names across the various States and Territories.
Currently, each State and Territory operates its own business names registration regime. The national business names registration scheme will allow businesses to register once, regardless of how many jurisdictions they operate in. The scheme will be operated by the Australian Securities and Investments Commission (ASIC).
To assist with identification of the business entities, the Register will prevent identical business names in the States and Territories being registered in the future and also prevent the registration of otherwise undesirable names such as names that are misleading to consumers or offensive. This is achieved through both the Registration Bill and the proposed Business Names (Availability of Name) Determination 2011. A similar outcome is also achieved under corporations law.
To assist with identification of the entity behind a business name, the National Business Names Registration System will mandate an ABN for any new business name registration. Currently all State and Territory business name registers allocate a business name number to each business. The ABN will relate to the entity behind a business name and so will allow businesses to be identified through both their name and number.
The national Register will also provide national rules to apply in relation to the use of business names when a person is disqualified from carrying on business.
The necessity to register a business name under this legislation does not give rise to any proprietary rights over that name, consistent with trade mark law. The new online system will provide links to IP Australia and information to ensure businesses are aware of this issue.
The new law will replace the Business Names Act 1962 (WA); Business Names Act 1963 (ACT); Business Names Act 2007 (NT); Business Names Act 1962 (QLD); Business Names Act 2002 (NSW); Business Names Act 1996 (SA); Business Names Act 1962 (TAS); and Business Names Act 1962 (VIC) and their supporting regulations and instruments.
Summary of New Law
For the overwhelming majority of entities, the move to a national Register will have minimal practical impact on their trading. The obligations imposed upon entities largely reflect their obligations under existing State and Territory legislation. To trade under a business name, an entity will be required to register it and include the business name in written communications relating to the commercial dealings of the business. This includes communications to consumers and to a person who supplies goods and services. For new registrants, the ABN will also need to be displayed on a smaller number of documents, largely consistent with the requirements to display an Australian Company Number (ACN) for incorporated entities under the Corporations Act 2001 (Corporations Act). An entity will also be obliged to display their business name prominently at any place of business open to the public.
If their business name is currently registered on a State or Territory Register, once transferred to the national system, the entity's registered name remains the same. These are referred to as grandfathered registrations. For duplicate names, ASIC may apply a geographical identifier to the registration on the Register only. This identifier will not need to be displayed publicly on stationery or signage. The registration renewal date will also be the same but the new renewal fees will apply.
The Bill establishes a National Business Names Registration System. This involves the States either referring powers to regulate business names to the Commonwealth or adopting the Commonwealth law, to the extent that the Commonwealth does not have legislative power. The law will apply in the Territories. A national Register will be formed by the electronic transfer of existing registers to ASIC. The Registration Bill and the Transitional Bill are not intended to exclude the concurrent operation of most State or Territory laws. Subject to displacement provisions, the law does not apply to provisions that are capable of concurrent operation.
The objects of the Bill are to ensure that entities behind businesses can be identified, that the inconvenience and compliance cost of multiple registrations is avoided and that the registration of names that are undesirable, including names that are offensive or misleading, is prevented.
The Bill contains a number of offences including: carrying on business under an unregistered business name (30 penalty units); failure to include a business name in written communications (5 penalty units); failure to display a business name at a place of business open to the public (5 penalty units); carrying on business while disqualified (30 penalty units); and failure to comply with a request from ASIC to provide information (5 penalty units). A penalty unit is currently $110.
These offences are all strict liability offences. However ASIC is able to issue formal warnings when there is a reasonable belief that an entity has contravened a provision of the Registration Bill.
The Bill provides that a business name will be available to an entity if it is not identical or nearly identical to another business name, a company name, or a name on a notified State or Territory register. A business name will not be available if it is undesirable or it contains words or expressions that are restricted. The Business Names Registration (Availability of Names) Determination 2011 will specify what is considered to be identical, nearly identical, undesirable or restricted.
Unless ASIC otherwise determines an alternative period of registration, registrations will be for one or three years.
While the Bill does not mandate any particular service delivery channel, it is drafted to facilitate a high degree of online service delivery. It is intended that ASIC will provide extensive online services in respect of the Register to maximise convenience, reduce complexity and minimise cost to businesses and consumers.
The Bill allows registration of business names to entities as defined in the Bill. An entity includes common business forms including a person, a company and a partnership, but also includes superannuation funds and trusts. Generally, if those involved in the management of an entity have been convicted of certain offences, the entity may be disqualified from operating under a registered business name.
ASIC has the power to request information for the purposes of establishing and maintaining the Register. Entities are obliged to provide information to ASIC and can be subject to a 5 penalty unit sanction if they do not comply with this obligation or the Federal Court may order that the entity provide the information to ASIC.
Entities aggrieved by a decision of ASIC have the right to seek review of ASIC's decision. The entity can initially ask for an internal review by ASIC. If this does not provide a desirable outcome, the entity can apply to the Administrative Appeals Tribunal.
A person can request that ASIC provide them with extracts of entries on the Register. Before providing an extract of the Register to a person, ASIC must excise specified personal details (as prescribed in the regulations) from any extract.
Much of the information on the Register will be available for free. Further details will be available from the Register for a fee.
ASIC's powers and functions are as given to it by the Registration Bill and the Transitional Bill. The Minister may provide ASIC with a written direction about which policies it should pursue or priorities it should follow in carrying out its functions and powers.
The Bill permits ASIC to engage with the Registrar of the Australian Business Register (ABR) for the purposes of identifying business names registered to an entity, and for the purposes of ensuring consistency between the ABR and the Business Names Register.
ASIC, as a Commonwealth agency, is obliged to handle personal information in accordance with the Privacy Act 1988. Additionally, the Bill contains strict penalties for the misuse of information obtained in the course of performing functions or exercising powers under the Registration Bill or the Transitional Bill.
Date of effect: The Registration Bill will commence as detailed in section 3 of the Registration Bill.
Proposal announced: The proposal to transfer responsibility for business name registration to the Commonwealth was announced by COAG on 3 July 2008.
Financial impact: The 2010-11 Budget allocated $125.2m over four years to implement the Registration System. These funds were distributed between the Department of Innovation, Industry, Science and Research (DIISR), the Australian Securities and Investment Commission (ASIC) and the Australian Taxation Office (ATO). This amount is being fully offset in unspent funding.
The National Partnership Agreement to deliver a Seamless National Economy committed the Commonwealth and the States and Territories to delivering on agreed implementation milestones and deadlines, which are tied to reward payments under the National Partnership Agreement.
Compliance cost impact: There is no net increase in compliance costs. The replacement of the existing State and Territory business names regimes with a single new Commonwealth business regime will result in a net reduction in compliance costs for businesses and those transacting with businesses.