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 6 Cancelling the registration of a business name

Outline of chapter

6.1 Chapter 5 of this explanatory memorandum outlines:

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the circumstances in which a business name may be cancelled and the processes by which any cancellation must occur

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the steps ASIC must take before it can cancel the registration of a business name.

Detailed explanation of new law

6.2 Section 42 provides that ASIC must cancel the registration of a business name to an entity if the entity lodges notice in the prescribed manner and form. Before cancelling the registration, ASIC must give the entity at least 28 days notice in writing of their intention to cancel the registration. This is the provision under which an entity may voluntarily surrender a business name. The notice requirement is imposed as a protective measure against unauthorised attempts to surrender a business name.

6.3 Section 43 allows ASIC to cancel the registration of a business name to an entity if ASIC becomes aware of a matter and would not have registered a business name if it was aware of that matter at the time of registration. If ASIC is satisfied that there are exceptional circumstances, it may decide to continue the registration. ASIC must provide the entity 28 days notice in writing before cancelling the registration and inform the entity that it will cancel the registration unless ASIC is satisfied that there are exceptional circumstances justifying the continued registration of the business name.

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

6.5 Section 44 provides that ASIC must cancel the registration of a business name to an entity, after giving the entity at least 28 days notice in writing of the proposed cancellation, once ASIC becomes aware that the entity is disqualified.

6.6 Section 45 provides that ASIC must cancel the registration of a business name to an entity if a Ministerial determination in relation to the availability of a business name (allowing an otherwise undesirable name) is revoked. ASIC must give the entity at least 28 days notice in writing of the proposed cancellation.

6.7 Section 46 provides that ASIC must cancel the registration of a business name, if the business name contains a word or expression that is only available when a condition is satisfied and the entity no longer satisfies that condition. ASIC must provide the entity with at least 28 days notice that it has formed the view that the entity no longer satisfies the condition and that it intends to cancel the registration.

6.8 Section 47 provides that ASIC may cancel the registration of a business name to an entity if ASIC is satisfied that the entity is not carrying on business under the business name and that the entity, in the immediately preceding three months, has not carried on business under the business name. This does not apply to government bodies. ASIC may decide not to cancel the registration of a business name if it satisfied that there were exceptional circumstances for the failure to carry on a business under the business name during the three month period. ASIC must give a least 28 days notice in writing to the entity that it intends to cancel the registration and give the entity the opportunity to provide ASIC with evidence of the matters set out in paragraph 47(2)(b)(ii). One purpose of this provision is to enable ASIC to take action in circumstances where ASIC is satisfied that an entity has registered a business name that it is not intending to use for itself.

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

6.10 Under section 48, if ASIC has made a request under either of the sections mentioned in subsection 48(1) of the Bill, the entity has failed to respond and ASIC is satisfied that this failure affects the integrity of the Register and there are no exceptional circumstances, ASIC may cancel the registration. The business name holder is to be notified of ASIC's intention in writing at least 28 days prior to cancellation and is given an opportunity to put their case to ASIC prior to this taking place.

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

6.12 Subsection 49(1) provides that ASIC must give notice to an entity at least 28 days before the registration period for its business name expires and remind the entity in writing of the time and day on which the registration period will expire. Failure to give a reminder in accordance with subsection 49(1) does not affect ASIC's power to cancel a registration if not renewed.

6.13 Separate to this 'early warning' requirement, if the registration period then expires, ASIC may give notice in writing to the entity that it will cancel the registration unless it is renewed. Cancellation may take effect either after 3 months from the date of expiry or 6 weeks after notice of the intention to cancel is given, whichever is the later. A business name continues to be registered to an entity after the expiry of the registration period for the registration unless the registration is cancelled. A business name will never automatically expire. Cancellation requires a decision by ASIC, the regulator.

6.14 Section 50 provides that ASIC must cancel the registration of a business name if it is reasonably satisfied that the entity no longer exists. This does not apply to natural persons. For example, ASIC may cancel a business name registration if the holder of the name is a company that has been deregistered.

6.15 Section 51 permits a court in an action for an infringement of a registered trademark to make an order that the registration of a business name to an entity be cancelled. ASIC must cancel the registration if a copy of the court's order is lodged with ASIC, subject to a number of rules to account for possible stays and appeals against the order. This section is not intended to limit any orders that a court may otherwise make in relation to the registration of a business name, or ASIC's obligations under such orders.

6.16 Section 52 provides that ASIC must give written notice to an entity of ASIC's decision to cancel the registration of a business name and its reasons.

6.17 Section 53 sets out requirements for giving notice to particular types of entities and joint ventures. It provides that ASIC must give notice in accordance with this section.

6.18 Section 54 provides that if a registration of a business name is cancelled, and the entity makes an application for review of the cancellation, the business name is held during the review period in relation to ASIC's decision and the entity does not commit an offence by continuing to trade during the review period. The review period is set out in subsection 54(2) as four months (from the date the entity is notified of a decision under section 52) or such longer period as ASIC provides. ASIC may determine a longer review period and must provide a copy of the determination to the entity. Such a determination is not a legislative instrument within the meaning of the Legislative Instruments Act 2003. The statement in subsection 54(3) 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.

6.19 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

6.20 All provisions in Part 5 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.

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

Consequential amendments

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