House of Representatives

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)

Chapter 4 Registering a business name

Outline of chapter

4.1 Chapter 3 of this explanatory memorandum outlines:

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the requirement of ASIC to establish and maintain a Business Names Register

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the processes by which an entity may apply for and obtain the registration of a business name

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that an entity will only be eligible to have a business name if they are eligible for an Australian Business Number (ABN)

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the categories of people and entities who are disqualified from having a business name registered to them.

Detailed explanation of new law

4.2 Section 22 provides that the Australian Securities and Investments Commission (ASIC) must establish and maintain a Business Names Register. Maintaining the Register would include updating the register based on information that is provided to ASIC by an entity that holds the business name. The Bill gives a number of additional powers to ASIC to maintain the Register (for example, see section 37 discussed below). These powers are in addition to those granted by this section and should not be read as impliedly limiting the actions that ASIC may take to maintain the Register pursuant to this section. The purpose of establishing the Business Names Register is set out in subsection 22(2). Subsection 22(3) provides that ASIC may keep the Register in any form it sees fit. Subsection 22(4) provides that the Register is not a legislative instrument within the meaning of the Legislative Instruments Act 2003. The statement in subsection 22(4) has been included for the sake of clarity only, to assist the reader, and does not amount to a declaration under the Legislative Instruments Act 2003.

4.3 Subsection 23(1) provides that an entity that has the intention of carrying on a business can lodge an application for a business name to be registered to the entity.

4.4 Subsection 23(2) sets out what must be included in the application. These details include details sufficient to identify the entity (such as the name of the entity), various contact details and the period for which registration is sought.

4.5 Of particular note is that an application must include an ABN for the entity or details of a pending ABN application. A business name will only be available to a business that is eligible for an ABN. The ABN of the entity is a mandatory field in relation to the record in the Register in respect of a business name. The purpose of mandating the ABN is to improve the ability of persons to identify the holder of a business name. Currently the Australian Business Register (the register of ABNs maintained by the Commonwealth) includes the 'trading name' for the ABN holder.

4.6 Subsection 23(3) provides that the application must be in the prescribed form and lodged in the prescribed manner. Note should be made of sections 68 and 69 of the Bill in relation to making this application (and all other kinds of application under the Bill). In the absence of prescription by regulation, ASIC is empowered to approve the form of application and the manner in which the application must be lodged. Further detail is provided below in relation to those sections.

4.7 Subsection 23(4) provides that the applicant must pay a registration fee before a name will be registered to the applicant. This is subject to ASIC's power in the circumstances set out in section 72 of the Bill to waive and refund fees. The fees under this Bill are set by regulations made pursuant to the Business Names Registration (Fees) Bill 2011.

4.8 Subsection 23(6) provides that an applicant must provide details of a person's date and place of birth for the purposes set out in that subsection. The mechanisms for providing access to the Business Names Register are set out in Part 8 of the Bill. Section 60 provides a regulation making power to restrict public access to certain information on the Register.

4.9 The Privacy Act 1988 allows government agencies to collect personal information only where it is for a purpose directly related to a function or activity of the collector. For example, identifying an entity behind a business name or determining whether an entity is disqualified. The Registration Bill does not provide for the collection of personal information for data verification purposes.

4.10 Subsection 24(1) provides that ASIC must register the business name to the entity if ASIC is satisfied that the entity has an ABN; it has paid its registration fee; the name is available to an entity and the entity is not disqualified. Subsection 24(2) provides ASIC with a power to request that an applicant provide information or a further document within a specified time frame, if this is necessary to enable ASIC to be satisfied of the matters set out in subsection 24(1).

4.11 Part 7 of the Bill sets out the review processes for this and seventeen other kinds of decision that ASIC (or the Minister) may make under the Bill. Further detail is provided in the commentary for that Part.

4.12 Subsection 25(1) provides that a business name is available to an entity if the name is not identical or, in some cases, nearly identical to a name that is in one of the categories set out in paragraphs 25 (a)(i) to (vii) or (b). These categories include references to the names of existing business names and the names of Corporations Act companies; a name that is registered to an entity on a notified State or Territory register (for example, a cooperative or an incorporated association); and a notified State, Territory or Commonwealth government body. Names are also assessed against certain business names held pursuant to section 54 of the Bill (i.e. during the review period for a cancellation decision) or pursuant to a provision of the Business Names Registration (Transitional) Bill 2011.

4.13 Further, a name is available if: no other entity has priority over a name that is identical or nearly identical and that name is not undesirable (see section 29 for priority of applications for business names); it does not consist of a restricted word or expression; and it does not contain a word or expression that is only available if a condition is satisfied and the business has not satisfied that condition.

4.14 Sections 26, 27 and 28 provide that the Minister may make rules by legislative instrument for determining whether a name is identical or nearly identical to another name or determine by legislative instrument whether a name is undesirable or words and expressions are restricted.

4.15 Subsection 27(2) permits the Minister to allow, in a particular case, an otherwise undesirable name to be registered (note that under subsection 27(4) the Minister may revoke such a decision). Subsection 28(2) permits the Minister to determine that a particular word or expression is restricted in relation to a specified entity or specified business unless any specified conditions are met. Subsections 27(3) and 28(3) provide that determinations by the Minister under subsections 27(2) or 28(2) are not legislative instruments within the meaning of the Legislative Instruments Act 2003. These statements have been included for the sake of clarity only, to assist the reader, and do not amount to declarations under the Legislative Instruments Act 2003. Certain decisions under sections 27 and 28 are reviewable under Part 7 of the Bill. Further detail is provided in the commentary for that Part.

4.16 Section 29 provides that two or more applications for the registration of business names that are identical or nearly identical take priority in the order in which they are lodged. This does not apply to consent applications (these are explained in the commentary for section 31). Further, section 29 also provides that priority is not affected by the fact that an ABN application is pending or, where an application for registration is refused, during a review period in relation to that decision the entity's application for registration of a business name. The review period for an application to refuse registration is a period of at least 28 days, at the discretion of ASIC. A determination by ASIC of a longer review period is not a legislative instrument within the meaning of the Legislative Instruments Act 2003. The statement in subsection 29(5) has been included for the sake of clarity only, to assist the reader, and does not amount to a declaration under the Legislative Instruments Act 2003. In the event that there is the same priority for two or more applications for names that are identical or nearly identical, ASIC may refuse these applications.

4.17 Decisions under this section are reviewable under Part 7 of the Bill. Further detail is provided in the commentary for that Part.

4.18 Section 30 provides that an application for registration of a business name is taken to be refused if the registration fee is not paid within the fee payment period set out in subsection 30(3). This period begins at the time when the application is lodged and ends immediately before that time ten business days after the day of lodgement. ASIC's powers in relation to fees are also set out in sections 71 and 72.

4.19 Section 31 provides that an entity to whom a business name is registered may consent to the registration of that business name to another entity. This provision sets out how business names are transferred from one entity to another. In brief, the former holder must consent to the transfer of the name to the new holder. The process is designed to facilitate (but not mandate) streamlined and electronic conveyancing of business names.

4.20 The consent of the former holder must be in the prescribed form and lodged in the prescribed manner. If an application is made under section 23 and the notices listed in subsection 31(3) are lodged, the name is to be taken to be available to the proposed business name holder. A potential applicant, who has received consent from the entity to whom the business name is registered, can carry on business for three months without committing an offence.

4.21 Section 32 sets out the categories of entity disqualified from holding a business name. The purpose is to prevent certain persons who are carrying on a business from concealing their identity from the customers, suppliers and other persons transacting with the business.

4.22 Entities are disqualified if they have been disqualified from managing a company under the Corporations Act due to having been convicted of certain offences or if they have been convicted of specified classes of criminal offence. Entities that are managed by disqualified persons are also disqualified.

4.23 Subsection 32(2) lists the length of time for which the persons or entities are disqualified. Generally, they are disqualified whilst they are not eligible to manage a company under the Corporations Act due to the relevant convictions; or for a period of 5 years following the convictions set out in subsection 32(1).

4.24 The Minister has the power to determine that an entity or a person is not disqualified, despite otherwise being disqualified due to subsection 32(2). A determination by the Minister is not a legislative instrument within the meaning of the Legislative Instruments Act 2003. The statement in subsection 32(4) has been included for the sake of clarity only, to assist the reader, and does not amount to a declaration under the Legislative Instruments Act 2003.

4.25 Decisions under this section are reviewable under Part 7 of the Bill. Further detail is provided in the commentary for that Part.

4.26 Section 33 provides that ASIC registers a business name by entering in the Business Names Register the details set out in subsection 33(1). Depending on which fee is paid, the registration is to be for one or three years, unless an alternative registration period is determined by ASIC.

4.27 ASIC may determine an alternative registration period, the duration of which is limited by subsection 33(5), in the circumstances set out in subsections 33(3) and 33(4). Such determinations are not legislative instruments within the meaning of the Legislative Instruments Act 2003. The statement in subsection 33(6) has been included for the sake of clarity only, to assist the reader, and does not amount to a declaration under the Legislative Instruments Act 2003. The purpose of this mechanism is to allow ASIC to align business name or company renewal dates. This will facilitate efforts by ASIC to reduce the compliance burden imposed upon businesses in completing and lodging multiple renewals at different times. ASIC may only do this at the request of the business name applicant. ASIC cannot impose alternative renewal dates upon an applicant without their consent.

4.28 Decisions under this section are reviewable under Part 7 of the Bill. Further detail is provided in the commentary for that Part.

4.29 Subsection 33(7) provides that in addition to the details stated in the Business Names legislation, the Register may only include details that are prescribed and nothing else.

4.30 Subsection 33(8) provides that upon registration of a business name, ASIC must provide the entity with notice in writing of the details of their registration.

4.31 Section 34 sets out that ASIC, when it refuses an application for registration, must advise the applicant in writing of the reasons for the refusal and refund any registration fee that has been paid. If no decision has been made within 28 days of lodgement, an applicant may lodge notice that they wish to treat the application as having been withdrawn. The intention of this provision is to give the applicant the capacity to access the appeal and review mechanisms under the legislation.

4.32 Decisions under this section are reviewable under Part 7 of the Bill. Further detail is provided in the commentary for that Part.

Application and transitional provisions

4.33 All provisions in Part 3 will commence on a single day to be fixed by proclamation. The date of proclamation will depend on when the final State or Territory passes its referral legislation or adopts the Commonwealth legislation.

4.34 Transitional provisions are contained in the Business Names Registration (Transitional and Consequential Provisions) Bill 2011.

Consequential amendments

4.35 Consequential provisions are contained in the Business Names Registration (Transitional and Consequential Provisions) Bill 2011.