AICD victory on Corporations Law AICD Review

The struggle to fix the Corporations Law following the doubts cast by court cases (Wakim/Hughes) on whether the States or the Federal Government had the ultimate power to enforce the Corporations Law has at last been resolved. 

 The issue became the focus of sustained and successful lobbying by the AICD and other organisations (see CEO column). Tom Bostock, a member of the Corporations Law Committee details changes in the new rules. Federal Parliament has now enacted the Corporations Act 2001 (the CA), which has been proclaimed to come into operation on 15 July 2001, together with the Australian Securities and Investments Commission Act 2001. The two Acts, along with applicable rules of Federal and State Courts are referred to in the new legislation as the "Corporations legislation". The CA amounts in all to 1834 pages. It does not include the changes to Chapters 7 and 8 to be made by the Financial Services Reform Bill 2001 when it is enacted. The CA replaces the Corporations Law and applies as an enactment of the Commonwealth in each internal Territory and in each State (a referring State) that has referred to the Parliament of the Commonwealth:

• the matters that are necessary to enable the Parliament of the Commonwealth to enact the Bill and the concomitant ASIC Bill; and

• the matters of the formation of corporations, corporate regulation and the regulation of financial products and services, to the extent of making laws in respect to those matters by express amendments to the Bills as enacted and as amended from time to time.

All States have enacted the requisite referral legislation. The CA will replace the former Corporations Law scheme. For the first time, Australia's legislation relating generally to companies, securities and securities markets is enacted by the Commonwealth and applying of its own force in each referring State and in each internal Territory. The move to Commonwealth legislation stems from two recent decisions of the High Court of Australia:

• in Wakim, which rendered the cross-vesting of judiciary arrangements to be invalid to the extent that they purported to confer State jurisdiction on Federal Courts; and

• in Hughes, that the Commonwealth cannot authorise its authorities or officers to undertake a function under State law involving the performance of a duty (particularly a function having the potential to effect adversely the rights of individuals) unless the function has a sufficient nexus with one of the heads of Commonwealth legislative power conferred by the Constitution.

In general, the CA is a transcription of the present Corporations Law. There do not appear any amendments reflecting a change of corporate law policy. Nevertheless, the CA contains numerous amendments to the Corporations Law, arising principally out of:

• the changed nature of the legislation as Commonwealth Legislation applying generally throughout Australia;

• the need to correct manifest drafting anomalies and errors in provisions inserted into the Corporations Law by the Company Law Review Act 1998 and the Corporate Law Economic Reform Program Act 1999 ("CLERP Act"); and

• changes in Commonwealth drafting style. The principal changes to the Corporations Law are set out in the accompanying table.

Section Change 91

Cross-references corrected 109X

Cross-reference corrected and reference to new s 5H added 141

The table of replaceable rules has been corrected 208(1)

The cross-reference to the note to the definition of "control" has been corrected from s 55A to s 50A 249CA

Amended to delete the superfluous 249HA(2)requirement that the relevant 300A(2) "company" be incorporated in 323DA(2)

Australia 251A

Amended to provide that minutes both must be kept within this jurisdiction ie within a Territory or a referring State 252L

Sub-section (1A) first occurring re-numbered to 1B) 261(4)

Amended to State that for the purposes of Chapter 2K Charges, a document must be received by ASIC in a Territory or a referring State.

Chapter 2L

Sections re-numbered 283AA to 283I

Debentures (both inclusive) 344

Amended to eliminate the mistaken amendment in item 239 of Schedule 3 to the CLERP Act 348

Cross-reference in the note corrected from s 242 to s 205B 601ED(5)

Amended to provide that the prohibition applies only in a referring State or Territory Section

Change 601FC(3)

Amended to provide that the duties of a 601FE(2) responsible entity under ss 601FC(1) and (2) and 601FE(1) over-ride any conflicting duty of an officer or employer under Part 2D.1 601HH(4)(a)

Amended to extend auditor's qualified privilege to proceedings in any court 654B"2 days" amended to "2 business days" 658D

Now refers to a declaration as well as to an exemption: cf s 655A 659B(1)

Amended to provide that a Minister of a referring State or Territory may commence court proceedings in relation to a takeover bid 661C(4)

The reference to "shares" changed to "securities" 670B(3) "Chapter" substituted for "Part" 708(11)

Para(f) which included a terminating building society as a professional investor has been deleted because, as the EM says (para 6.28), the definition of terminating building society has been removed from the Financial Corporations Act 1974.

Also deleted is the para (g), covering a friendly society within the meaning of the Life Assurance Act 1995, on the ground that a friendly society is covered by para 708(11)(c) 854

Paras (ba) and (b) re-lettered (b) and (c) 920

Definition of "previous Board" deleted as redundant 1274AA(1)

Cross-reference to Part 9.1 corrected to Part 2D.6 1317S(2)(a)

Para (a) secondly appearing re-lettered para (b)

Disclaimer

The purpose of this database is to provide a full-text record of all articles that have appeared in the CDJ since February 1997. It is aimed to assist in the research and reference process. The database has a full-text index and will enable articles to be easily retrieved.It should be noted that information contained in this database is in pre-publication format only - IT IS NOT THE FINAL PRINTED VERSION OF THE CDJ - therefore there might be slight discrepancies between the contents of this database and the printed CDJ.