Bills Digest no. 170 2006–07
Corporations (NZ Closer Economic Relations) and Other
Legislation Amendment Bill 2007
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Financial implications
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Corporations (NZ
Closer Economic Relations) and Other Legislation Amendment Bill
2007
Date introduced:
29 March 2007
House: House of Representatives
Portfolio: Treasury
Commencement: The substantive
parts of Schedules 1 & 2 commence on a date to be fixed by
Proclamation, or 6 months after the day the Act receives Royal
Assent, whichever is the sooner. Schedule 3 commences on the
28th day after the Act receives Royal Assent.
The purpose of
the Bill is to give effect to Australia s obligations under the
Agreement between the Government of Australia and the
Government of New Zealand in relation to the Mutual Recognition of
Securities Offerings, and to amend the Trade Practices Act
1974 to include a scheme for the disclosure of information
gathered by the Australian Competition and Consumer Commission
(ACCC).
In October 2001, the Australian Minister for
Financial Services and Regulation wrote to his counterpart in New
Zealand suggesting that the two countries consider formal processes
for mutual recognition in financial services
regulation.(1) This led to the Agreement between the
Government of Australia and the Government of New Zealand in
relation to the Mutual Recognition of Securities Offerings.
This Bill essentially gives effect to Australia s obligations under
that agreement, to implement a mutual recognition scheme in
relation to securities offerings. It should be noted that, although
initially applying only to relations with New Zealand, the scheme
of the Bill is such that it can be extended to offers originating
in other foreign jurisdictions if a similar agreement is reached
with them.(2) In deciding upon an appropriate option for
the implementation of a mutual recognition regime, the Government
has considered three options: disapplication of foreign law,
incorporation of foreign law and compliance with substantive
requirements of domestic law. The third of those options compliance
with substantive requirements of domestic law is the option
favoured by the Government, and the option implemented by this
Bill. The same option was favoured by the Government of New
Zealand.(3) Details of this option are outlined in the
main provisions section. Details of the other options can be found
in the Explanatory Memorandum to the Bill.
Schedule 3 is titled Protection of information
obtained by the ACCC . It is, however, as much about disclosure of
information as it is about protecting it. The schedule comes about
due to a recommendation of the Productivity Commission in its 2004
Research Report
Australian and New Zealand Competition and Consumer Protection
Regimes . That report included:
RECOMMENDATION 6.4
The Trade Practices Act 1974 (Cwlth) and the
Commerce Act 1986 (NZ) should be amended to allow the Australian
Competition and Consumer Commission and the New Zealand Commerce
Commission to exchange information that has been obtained through
their information gathering powers.(4)
The Bill implements new provisions in the
Trade Practices Act that will allow the ACCC to disclose
information collected by it to a wide range of agencies including
any foreign government body. The new provision will give the ACCC
powers similar to those given to ASIC under section 127 of the
Australian Securities and Investments Commission Act
2001.
The Bill was referred to the Senate Standing
Committee on Economics. The Committee, comprising representatives
from the Liberal, National, Labor and Democrat parties,
recommended, without dissent, that the Bill be
passed.(5) The Bill subsequently passed the House of
Representatives on 10 May without opposition. The ALP position on
the Bill was described this way during debate:
Labor supports initiatives to enhance economic
relationships between Australian and New Zealand. This bill
achieves this objective by allowing for the mutual recognition of
the issue of securities offerings and companies to reduce costs
associated with doing business. Labor also believes that provisions
amending the role of the ACCC in terms of disclosure and protection
of certain information are important in terms of building the
capacity to cooperate across the Tasman.(6)
The issue of consultation was raised during
the Senate Committee s inquiry, the Law Council of Australia having
expressed concern at what it saw as the short time available in
which to make submissions on the Bill. Treasury representatives
explained that:
We had six weeks public consultation. Furthermore,
in 2004 this scheme had a two-month public consultation period
about the principles of the scheme.(7)
There were only two
submissions to the Senate Committee s inquiry into the Bill.
One from the Law Council, the other from the Security &
Derivatives Industry Association (SDIA). Apart from its complaint
about the time allowed for submissions, the Law Council generally
supported the Bill, but emphasised the need for symmetry between
regulatory regimes in the two jurisdictions, in order to avoid
forum shopping by prospective offerors. The SDIA submission was
broadly supportive of the provisions in the Bill.
Items 6, 8 & 9 of Schedule
1 amend the definition of ED securities in various
sections of the Corporations Act. The effect is that foreign
offerors will be subject to the continuous disclosure provisions in
Chapter 6CA of the Corporations Act where 100 or more people hold
securities, or interests in managed investment schemes, from the
time of issue.
Item 18 of Schedule
1 inserts into the Corporations Act proposed
Chapter 8, relating to the mutual recognition of
securities offers. Part 8.1 provides definitions
of various terms used throughout the chapter. Part
8.2 regulates foreign offers that are to be recognised in
the Australian jurisdiction. Proposed section
1200B provides that an offer becomes a recognised
offer on the first day it is made, provided that it meets the
conditions specified in section 1200C. The
conditions include:
- that the person making the offer must be either a natural
person resident in the recognised jurisdiction or an incorporated
entity under the law of the recognised jurisdiction
- the person has not been banned by ASIC from making offers,
and
- various formal requirements including the lodging of the
documents described in proposed section proposed
1200D.
Proposed section
1200F provides for the effect of a recognised
offer s status as such. The section includes a table listing
various provisions of the Corporations Act that do not apply to
recognised offers. Recognised offers will, instead, be required to
comply with proposed Division 3, which contains the requirement for
compliance with the laws of the foreign jurisdiction (s1200G)
Proposed section
1200G provides for further conditions with which
an offeror must comply including that the offer must comply with
the law of the recognised jurisdiction.
Proposed section
1200H requires a foreign offeror to lodge with
ASIC details of an address for service within this jurisdiction
(Australia).
Proposed section
1200J provides that a foreign offeror, in respect
of a managed investment scheme, must have a dispute resolution
scheme that complies with subsection 1017G(2) of the Corporations
Act, unless exempted by ASIC.
Proposed Division
5 of Chapter 8 provides for ASIC s powers in relation to
recognised offers. Proposed section 1200N provides
a table that describes various circumstances and the orders that
ASIC is entitled to make in response. Proposed
section 1200P empowers ASIC to declare
that a person be banned for up to 5 years from making a recognised
offer, where that person has committed wrongdoing in relation to a
recognised offer. Proposed section
1200P includes a process that allows for a person
to make submissions to ASIC before such a declaration is made. The
person may be legally represented.
Proposed section
1200S requires that, where a body proposes to make
an offer in a recognised foreign jurisdiction, and the offer is,
under the mutual recognition scheme, to be regulated by the law of
Australia, the body must lodge written notice of the fact with
ASIC.
Proposed section
1200U empowers ASIC to order that offers not be
advertised in a recognised jurisdiction where there is a breach of
Corporations Act provisions relating to product disclosure
statements.
Item 1 inserts proposed section
601CDA into the Corporations Act. This section exempts
companies from lodging, with ASIC, information or documents where
the company has lodged similar documents with a foreign regulator.
Foreign companies will still be required to register as such with
ASIC before they operate in Australia.
Item 1 inserts into the Trade Practices Act
proposed new section 155AAA. The
section provides for a regime of disclosure and protection of
information obtained by the ACCC in the exercise of its functions.
The ACCC may, in specified circumstances, release information to
the Minister, the Secretary of the relevant Department, a Royal
Commission, and a host of regulatory bodies listed under subsection
(12), including a foreign government body.
Financial implications
The Financial Impact Statement notes that:
Schedule 1 and 2 of the Bill will require
Commonwealth expenditure.
There will be minor implementation costs for
the regulator, ASIC, from the measures in the Bill.
This Bill is directed at improving regulatory
co-operation and integration between Australia and New Zealand (and
possibly between Australia and other jurisdictions) in relation to
securities offerings. The Bill has generally been supported by
stakeholders and has met with bipartisan support in the Senate
Standing Committee on Economics, as well as in the House of
Representatives.
- Joint Standing Committee on Treaties, Report
75: Review of Treaties tabled on 11 October 2005 (2), 28 February
and 28 March 2006 (2) , par. 8.5.
- Explanatory Memorandum, Corporations
(NZ Closer Economic Relations) and Other Legislation Amendment Bill
2007, p. 41.
- ibid., p. 25.
- Productivity Commission, Research Report,
December 2004, p. xxvii.
- Senate Standing Committee on Economics,
Corporations (NZ Closer Relations) and Other Legislation Amendment
Bill 2007 [Provisions] , Canberra, May 2007.
- Catherine King MP, Second reading speech:
Corporations (NZ Closer Economic Relations) and Other Legislation
Amendment Bill 2007 , House of Representatives, Debates,
10 May 2007, p. 43.
- Ms Cherie Rebecca Parker, Senior Analyst,
Market Integrity Unit, Corporations and Financial Services
Division, Markets Group, Treasury, Senate Standing Committee on
Economics, Transcript, 23 April 2007, p. E2.
Jerome Davidson
7 June 2007
Law and Bills Digest Section
Parliamentary Library
© Commonwealth of Australia
This work is copyright. Except to the extent of uses permitted
by the Copyright Act 1968, no person may reproduce or transmit any
part of this work by any process without the prior written consent
of the Parliamentary Librarian. This requirement does not apply to
members of the Parliament of Australia acting in the course of
their official duties.
This work has been prepared to support the work of the Australian
Parliament using information available at the time of production.
The views expressed do not reflect an official position of the
Parliamentary Library, nor do they constitute professional legal
opinion.
Feedback is welcome and may be provided to: web.library@aph.gov.au. Any
concerns or complaints should be directed to the Parliamentary
Librarian. Parliamentary Library staff are available to discuss the
contents of publications with Senators and Members and their staff.
To access this service, clients may contact the author or the
Library’s Central Entry Point for referral.
Back to top