House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

1. Outline and financial impact

1.1 The Company Law Review Bill 1997 rewrites the provisions in the Corporations Law on:

(a)

forming companies

(b)

meetings

(c)

share capital

(d)

financial statements and audit

(e)

annual returns

(f)

deregistering and reinstating defunct companies

(g)

names.

1.2 In each area, the Bill will significantly improve the substance and the drafting of the current rules, eliminating unnecessary or redundant regulation and making the Law more readily understandable.

1.3 The Bill comprises 3 clauses dealing with formal matters and 5 schedules containing the amendments proposed to be made by the Bill.

1.4 Schedule 1 of the Bill substitutes new provisions for Chapters 2 (Constitution of Companies), 3 (Internal Administration) and 4 (Various Corporations) of the Law, apart from the provisions concerning:

(a)

company registers;

(b)

officers, financial benefits to related parties of public companies and oppression; and

(c)

charges and auditors.

1.5 Schedule 1 of the Bill also:

(a)

substitutes an up-to-date small business guide at Part 1.5 of the Corporations Law which takes account of changes to the Law made by the Bill

(b)

simplifies the rules for deregistering and reinstating defunct companies

(c)

includes the transitional provisions for the Bill.

1.6 Schedule 2 of the Bill makes consequential amendments to the provisions not being re-written in Schedule 1.

1.7 Schedule 3 of the Bill makes structural amendments to the Corporations Law. These are outlined in Chapter 4 of the Explanatory Memorandum.

1.8 Schedule 4 of the Bill makes consequential amendments to other Commonwealth legislation.

1.9 Schedule 5 of the Bill will amend the Corporations Law to abolish par value for shares and court confirmation for capital reductions. The Taxation Laws Amendment (Company Law Review) Bill 1998 will make amendments to the taxation laws consequential upon these amendments. The amendments made by Schedule 5 will therefore commence at the same time as the Taxation Laws Amendment (Company Law Review) Bill 1998 . Schedule 5 of the Bill will also amend other Commonwealth legislation affected by the abolition of par value or court confirmation for capital reductions.

Financial impact statement

1.10 The Bill will not have any impact on Government expenditure.

1.11 The Bill will reduce compliance costs for business by removing unnecessary regulation, reducing the complexity of the rules and simplifying their expression.