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 5 Obligations to give information to ASIC
Outline of chapter
5.1 Chapter 4 of the explanatory memorandum outlines:
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- how ASIC obtains information in order to maintain the Register
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- how ASIC may act upon that information
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- the obligations of business name holders to provide information to ASIC
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- the capacity of a debtor representative, such as a liquidator, to lodge a notice with ASIC of their appointment
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- what occurs when a business name is registered to an individual and they die.
Detailed explanation of new law
5.2 Section 35 imposes an obligation on entities to update ASIC about any changes to information previously provided to ASIC within 28 days of becoming aware of the change. This is to be done by the entity lodging with ASIC a notice in the prescribed form and manner.,
5.3 Section 36 imposes an obligation on an entity to advise ASIC if they become disqualified. The entity must lodge a notice in the prescribed manner and form.
5.4 Section 37 provides ASIC with a power to request that an entity (other than a government body) provide information relevant for the purposes of establishing or maintaining the Business Names Register. Pursuant to subsection 37(3), an entity must comply with ASIC's request and is subject to a penalty of 5 penalty units if they do not. This is a strict liability offence.
5.5 The appropriateness of applying strict liability for the offence in subsection 37(3) of the Registration Bill was considered in accordance with Report 6/2002 of the Scrutiny of Bills Committee.
5.6 First, the penalty imposed under section subsection 37(3) is 5 penalty units. Secondly, the punishment of offences not involving fault is likely to allow ASIC to establish a compliance program that will significantly enhance the enforcement of the regime in deterring offences.
5.7 The defence of reasonable mistake of fact as well as the other general defences in part 2.3 of the Commonwealth Criminal Code will continue to apply in relation to the strict liability offences under the Registration Bill.
5.8 Strict liability will also help ensure the integrity of the regulatory regime, by ensuring that the entity behind a business name can be identified. This is consistent with the justifications for strict liability indicated by Report 6/2002 of the Scrutiny of Bills Committee at 284:
"strict liability may be appropriate where it is necessary to ensure the integrity of a regulatory regime."
5.9 Strict liability will provide consistency with analogous offences under other Commonwealth legislation, in particular the Corporations Act and the Credit Act. Many of the existing corresponding offence provisions in State and Territory business name legislation contain strict liability offences. Therefore, applying strict liability will not impose an unduly onerous burden and entities will be provided with sufficient notice to guard against the possibility of inadvertently contravening the offence provisions.
5.10 Section 75 of the Registration Bill allows ASIC to issue formal warnings if it believes on reasonable grounds that an entity has contravened a provision of the Registration Bill and warn the entity of the action that may be taken by ASIC under the Act in response to the contravention. This provision is intended allow ASIC pursue its objective of compliance more effectively.
5.11 If there is no response from an entity and ASIC reasonably believes that the information on the Register is not correct, ASIC has the power under subsection 37(6) to delete, correct or annotate the Register. If ASIC takes such action, it must inform the entity as required by subsection 37(8).
5.12 Decisions under this section are reviewable under Part 7 of the Bill. Further detail is provided in the commentary for that Part.
5.13 Cancellation of a business name may result from failure to provide some kinds of information when requested. This is explained further in the commentary in relation to section 48.
5.14 Subsection 38(1) provides that a debtor representative of an entity must lodge a notice in accordance with subsection 38(2). The kinds of debtor representatives to which the section refers are listed in subsection 38(3).
5.15 This provision provides only for notification. Any authority for an insolvency representative to exercise rights under the Bill in respect of a business name will derive from the relevant insolvency or bankruptcy law or instrument.
5.16 Section 39 provides that if a business name is registered to an individual who dies, a legal personal representative (within the meaning of paragraph 39(1)(c)) must lodge notice of a grant of probate, letters of administration or other grant within 28 days. The notice must be lodged in the prescribed form and manner. ASIC must also register the business name to the estate of the deceased person and include the details of the legal personal representative on the Register.
5.17 Section 40 provides that if a business name is registered to an individual who dies an entity may lodge with ASIC (in the prescribed manner and form) notice of the fact that they have reasonable grounds to believe that they will inherit assets formerly used by the deceased in carrying on business under a business name. If notice is lodged, ASIC must register the business name to the estate of the deceased, enter the name of an entity as a notified successor in relation to a business name and enter any other details prescribed by the regulations. Under subsection 37(6) ASIC may refuse to enter the name of an entity as a notified successor, if ASIC is not satisfied on reasonable grounds that the entity will receive an inheritance from the deceased. ASIC must also remove the entry of a notified successor if it receives notice under section 39.
5.18 Decisions under this section are reviewable under Part 7 of the Bill. Further detail is provided in the commentary for that Part.
5.19 Section 41 provides that if an entity fails to comply with a legislative requirement to lodge information with ASIC, ASIC can give written notice requiring the entity to comply within 10 business days after the notice is given. If the entity does not comply, ASIC may apply to the Federal Court for an order directing the entity to provide information to it.
Application and transitional provisions
5.20 All provisions in Part 4 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.
5.21 Transitional provisions are contained in the Business Names Registration (Transitional and Consequential Provisions) Bill 2011.
Consequential amendments
5.22 Consequential provisions are contained in the Business Names Registration (Transitional and Consequential Provisions) Bill 2011.