Explanatory Statement

Issued by the Authority of the Parliamentary Secretary to the Treasurer

EXPLANATORY STATEMENT - Statutory Rules 2004 No. 399

Corporations Act 2001

Corporations Amendment Regulations 2004 (No. 9)

Subsection 1364(1) of the Corporations Act 2001 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed by regulations or necessary or convenient to be prescribed by such regulations for carrying out or giving effect to the Act. Subsection 1364(2) provides in part that without limiting subsection (1) the regulations may make provision for prescribing forms for the purposes of the Act and the method of verifying any information required by or in those forms.

The purpose of the Regulations is to streamline reporting requirements for insolvency practitioners by allowing the Australian Securities and Investments Commission (ASIC) to approve particular forms and to prescribe certain forms in order to facilitate the operations of the Financial Reporting Panel, as well as to prescribe additional auditing standards.

Schedule 1 - Insolvency Forms

Schedule 1 to the Regulations removes a number of forms from Schedule 2 to the Corporations Regulations 2001 (the Principal Regulations) with a view to permitting ASIC to replace the forms, as necessary, with ASIC 'approved forms' pursuant to section 350 of the Act.

Section 350 of the Act provides that if a document under the Act must be lodged in a prescribed form and the regulations prescribe a form for that document, the prescribed form will be required. If a form is not prescribed in the regulations and ASIC has approved a form for the document, ASIC's approved form will be required.

The forms that the Regulations remove from Schedule 2 primarily relate to Chapter 5 of the Act (External Administration). The removal of the forms facilitates the design of the forms, electronic lodgement of forms by insolvency practitioners and the specification of information, statements, explanations and other matters required by the forms.

Details of the Regulations regarding the insolvency forms are set out in the Attachment.

Schedule 1 to the Regulations commences on the date of gazettal.

Schedule 2 - Financial Reporting Panel and Auditing Standards

The purpose of Schedule 2 to the Regulations is to prescribe the notification form where ASIC proposes to refer a matter to the Financial Reporting Panel. The Financial Reporting Panel is established under the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (the CLERP Act), which received Royal Assent on 30 June 2004. The CLERP Act provides that the Financial Reporting Panel provisions commence on 1 January 2005. The Regulations also prescribe referral forms where ASIC or a lodging entity refers a matter to the Financial Reporting Panel.

Under section 323ED of the Act, ASIC must notify the lodging entity of a referral to the Panel. Sections 323EF and 323EI of the Act provide that referrals to the Financial Reporting Panel must be made in the prescribed form. The Schedule 2 prescribes the necessary forms.

The purpose of Schedule 2 is also to prescribe two additional auditing standards that are to have interim force of law under the transitional arrangements provided for in the CLERP Act.

Details of the Regulations regarding the Financial Reporting Panel and the auditing standards are set out in the Attachment.

Schedule 2 of the Regulations commences on 1 January 2005, which is the date that the Financial Reporting Panel provisions commence.

Attachment - Details of the Corporations Amendment Regulations 2004 (No. 9)

Regulation 1 provides that the name of the Regulations is the Corporations Amendment Regulations 2004 (No. 9).

Regulation 2 provides that Regulations 1 to 3 and Schedule 1 commence on the date of gazettal. The Regulations in Schedule 2 commence on 1 January 2005, which is the date that the Financial Reporting Panel provisions commence.

Regulation 3 provides that Schedules 1 and 2 to the Regulations amend the Corporations Regulations 2001 (the Principal Regulations).

Schedule 1 - Amendments

Item 1 - Regulation 1.0.03, heading

Item 1 substitutes a new heading for regulation 1.0.03, Prescribed forms (Act s 350).

Item 2 - Subregulation 1.0.03(1), at the foot

Item 2 inserts a note after subregulation 1.0.03(1) referring to section 350 of the Corporations Act 2001 (the Act). The note clarifies that the Australian Securities and Investments Commission (ASIC) may approve a form for a document that must be lodged in a prescribed form under the Act, if the form is not prescribed in the Corporations Regulations.

Item 3 - After regulation 1.0.03

Item 3 inserts new regulations 1.0.03A, 1.0.03B and 1.0.03C to require certain documents to be in the prescribed form, to require certain documents to be lodged with ASIC, and to require certain documents to be in a form approved by ASIC.

Regulation 1.0.03A sets out a table of documents that are mentioned in specified provisions of the Act. It provides that the documents mentioned in the table must be in the prescribed form.

Some provisions of the Act require a document to be lodged with ASIC in the prescribed form (eg subsection 427(2) of the Act). For these provisions the prescribed form can be deleted and ASIC can approve a form for the document under section 350 of the Act. The wording of these provisions reflects the wording of subsection 350(1) of the Act. Some provisions of the Act require a document to be lodged with ASIC but do not mention the form of the document (eg paragraph 427(1)(a) of the Act). For these provisions, simply removing the form from the regulations will not allow ASIC to approve a form under section 350 of the Act. Since under section 9 of the Act the words 'this Act' include the regulations, the regulations can require the document to be in the prescribed form. As such the document will be a document for which ASIC can approve a form under section 350. Regulation 1.0.03A permits the form for the documents mentioned in the table to be approved by ASIC under section 350.

Regulation 1.0.03B sets out a table of documents that are mentioned in specified provisions of the Act. It provides that the documents mentioned in the table must be lodged with ASIC. It also clarifies who must lodge the documents and when they must be lodged under section 430.

Some provisions of the Act require a document to be in a prescribed form but do not require the document to be lodged with ASIC. For such provisions removing the form from the regulations will not allow ASIC to approve a form under section 350 of the Act as the wording does not fully reflect the wording of subsection 350(1) of the Act. Since under section 9 of the Act the words 'this Act' includes the regulations, the regulations can require the document to be lodged with ASIC. The document will then be a document for which ASIC can approve a form under section 350. Regulation 1.0.03B permits the forms for the documents mentioned in the table to be approved by ASIC under section 350.

Regulation 1.0.03C sets out a table of documents that are mentioned in specified provisions of the Act. It provides that the documents mentioned in the table must be in a form approved by ASIC.

Some provisions of the Act do not require a document to be in a prescribed form and do not require the document to be lodged with ASIC (the documents under subsection 438B(2) and paragraphs 439A(4)(a) and 450D(b) of the Act). For these provisions, removing the form from the regulations will not allow ASIC to approve a form under section 350 of the Act as the wording does not reflect the wording of subsection 350(1) of the Act. Section 350 is aimed at documents that must be lodged with ASIC. The above documents are not documents to which section 350 applies. To allow ASIC to approve a form for these documents Regulation 1.0.03C provides that these documents must be in a form approved by ASIC (if a form has been approved), relying on the general regulation-making power in section 1364 of the Act.

Item 4 - Regulation 5.3A.03

Item 4 inserts "in the prescribed form" after "of the appointment". The insertion of these words has the effect of bringing the provision within the terms of section 350. As the note inserted by item 5 makes clear, this permits ASIC to approve a form for the purpose of regulation 5.3A.03 under section 350.

Item 5 - Regulation 5.3A.03, at the foot

Item 5 inserts a note after regulation 5.3A.03 clarifying that a form for the document will not be prescribed in the regulations and consequently may be approved by ASIC pursuant to section 350.

Item 6 - Regulation 5.3A.04

Item 6 inserts "in the prescribed form" after "lodge notice". The insertion of these words has the effect of bringing the provision within the terms of section 350. As the note inserted by item 7 makes clear, this permits ASIC to approve a form for the purpose of regulation 5.3A.04 under section 350.

Item 7 - Regulation 5.3A.04, at the foot

Item 7 inserts a note after regulation 5.3A.04 clarifying that a form for the document will not be prescribed in the regulations and consequently may be approved by ASIC pursuant to section 350.

Item 8 - Paragraph 5.3A.07(5)(a)

Item 8 inserts "in the prescribed form" after "a written notice". The insertion of these words has the effect of bringing the provision within the terms of section 350. As the note inserted by item 9 makes clear, this permits ASIC to approve a form for the purpose of subregulation 5.3A.07(5)(a) under section 350.

Item 9 - Subregulation 5.3A.07(5), at the foot

Item 9 inserts a note after subregulation 5.3A.07(5) clarifying that a form for the document will not be prescribed in the regulations and consequently may be approved by ASIC pursuant to section 350.

Item 10 - Subregulation 5.6.59(2)

Item 10 inserts "in the prescribed form" after "in accordance with Form 540". The insertion of these words has the effect of bringing the provision within the terms of section 350. As the note inserted by item 11 makes clear, this permits ASIC to approve a form for the purpose of subregulation 5.6.59(2) under section 350.

Item 11 - Subregulation 5.6.59(2), at the foot

Item 11 inserts a note after subregulation 5.6.59(2) clarifying that a form for the document will not be prescribed in the regulations and consequently may be approved by ASIC pursuant to section 350.

Item 12 - Subregulation 5.6.62(5)

Item 12 inserts "in the prescribed form" after "in accordance with Form 545". The insertion of these words has the effect of bringing the provision within the terms of section 350. As the note inserted by item 13 makes clear, this permits ASIC to approve a form for the purpose of subregulation 5.6.62(5) under section 350.

Item 13 - Subregulation 5.6.62(5), at the foot

Item 13 inserts a note after subregulation 5.6.62(5) clarifying that a form for the document will not be prescribed in the regulations and consequently may be approved by ASIC pursuant to section 350.

Item 14 - Schedule 1, items 45 to 51, 51D, 51F, 51G, 60, 63 to 66, 82, 87, 151 and 154

Item 14 omits items 45 to 51, 51D, 51F, 51G, 60, 63 to 66, 82, 87, 151 and 154 from the list of forms in Schedule 1. It removes from the list of forms in Schedule 1 references to the forms that are omitted from Schedule 2 by item 15.

Item 15 - Schedule 2, forms 504 to 509, 509D, 509F, 509G, 519, 522 to 525, 540, 545, 905A and 908

Item 15 omits forms 504 to 509, 509D, 509F, 509G, 519, 522 to 525, 540, 545, 905A and 908 from Schedule 2. The particular forms omitted are forms lodged with ASIC by insolvency practitioners. Item 15 omits these forms from Schedule 2 because they can more conveniently be approved, as necessary, by ASIC.

Schedule 2 - Amendments

Item 1

Item 1 inserts Division 9 after Division 1 in Chapter 2M. Regulation 2M.3.30 prescribes Form 2M01 where ASIC gives a lodging entity written notice of a referral to the Financial Reporting Panel in line with paragraph 323ED(2)(d) of the CLERP Act.

Regulation 2M.3.31 prescribes Form 2M02 where ASIC refers a matter to the Financial Reporting Panel under section 323EF of the CLERP Act.

Regulation 2M.3.32 prescribes Form 2M03 where a lodging entity refers a matter to the Financial Reporting Panel in line with section 323EI of the CLERP Act.

Items 2 to 7

Items 2 to 7 amend subregulation 10.5.01(1) by specifying two additional auditing standards which were issued by the accounting profession's Auditing and Assurance Standards Board during June 2004. The standards are:

(a)

AUS 206 Quality Control for Audits of Historical Financial Information, which applies to financial reporting periods beginning on or after 15 June 2005; and

(b)

AUS 210 The Auditor's Responsibility to Consider Fraud and Error in an Audit of a Financial Report, which applies to financial reporting periods beginning on or after 15 December 2004.

Both standards are expressed to replace earlier standards having the same identification numbers.

To facilitate the transition from the existing auditing standards regime, which is based on the use of auditing standards made by, or on behalf of, the accounting profession, to the new regime using standards made by a statutory body known as the Auditing and Assurance Standards Board, section 1455 of the Act provides a transitional arrangement under which the professional standards are to be treated as if they had been made by the Auditing and Assurance Standards Board under section 336. Subsection 1455(4) of the Act specifies when such standards cease to have effect.

Under subsection 1455(1), the regulations may provide that a standard specified in the regulations is to have effect, for the purposes of the Act, as if it had been made by the Auditing and Assurance Standards Board under section 336 on the day specified in the regulations. Subsection 1455(3) further provides that the standard is to have effect as if it specified that it applies to periods ending, or starting, on or after a date specified in the standard.

Part 10.5 of the Principal Regulations (inserted by SR 2004 No. 208) specifies the professional standards that have effect as if they had been made by the Auditing and Assurance Standards Board under section 336 of the Act. The regulations also provide that the standards are to be taken to have been made by the Auditing and Assurance Standards Board on 1 July 2004.

Items 2 and 3 amend subregulation 10.5.01(1) by inserting a paragraph (d) which provides that auditing standards listed in Part 3 of the table to the subregulation apply in respect of financial reporting periods beginning on or after 15 June 2005.

Items 4 and 5 amend Part 1 of the table in subregulation 10.5.01(1) by inserting the month and year in which the accounting profession's Auditing and Assurance Standards Board issued the standards (also known as AUS 206 and AUS 210) that will be replaced when the standards being specified in these regulations are operative.

Item 6 amends Part 2 of the table in subregulation 10.5.01(1) by including AUS 210 The Auditor's Responsibility to Consider Fraud and Error in an Audit of a Financial Report in the list of standards specified in that part of the table.

Item 7 includes Part 3 in the table and lists one standard: AUS 206 Quality Control for Audits of Historical Financial Information issued in June 2004.

Item 8

Item 8 inserts the heading, "Chapter 2M Financial reports and audit" after item 4 in Schedule 1. It sets out the list of forms which correspond to Regulations 2M.3.30, 2M.3.31 and 2M.3.32 regarding the reference of a financial report to the Financial Reporting Panel.

Item 9

Item 9 provides the actual forms which are prescribed in referring a financial report to the Financial Reporting Panel (Forms 2M01, 2M02 and 2M03).