Bills Digest no. 185 2009–10
Corporations Amendment (Corporate Reporting Reform) Bill
2010
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
Financial implications
Main provisions
Contact officer & copyright details
Passage history
Corporations Amendment (Corporate Reporting
Reform) Bill 2010
Date introduced: 26 May 2010
House: House
of Representatives
Portfolio: Financial Services, Superannuation and Corporate
Law
Commencement: Almost all of the provisions commence on Royal
Assent. However, Parts 2 and 3 of Schedule 1 do not commence
at all if the proposed Act receives Royal Assent before item 34 of
Schedule 1 to the Corporations Amendment (Financial Market
Supervision) Act 2010 commences.[1]
Links: The
links to the Bill, its Explanatory Memorandum and second
reading speech can be found on the Bills page, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
The Bill amends the
Corporations Act 2001 (Corporations Act) for a variety of
purposes, including:
- to reduce the regulatory burden on small companies limited by
guarantee[2] by
establishing a specific financial reporting regime (and requiring
such companies to provide a copy of their annual reports only to
members who request a copy)
- to prohibit companies limited by guarantee from paying
dividends to members
- to allow companies to disclose summary parent-entity financial
information on behalf of both the parent entity and its associated
consolidated group (instead of providing audited financial
statements for both the consolidated entity and the parent
entity)
- to modify the requirement that companies may only pay dividends
from profits, by replacing the current ‘profits test’
with a solvency-based test
- to allow companies to vary the length of a financial year in
certain circumstances[3]
- to require all listed entities to disclose a ‘review of
operations and financial condition’[4], and
- to clarify when a company can cancel its share capital.[5]
The Bill also amends the Australian
Securities and Investments Commission Act 2001 (ASIC Act):
- to remove obsolete provisions, and
- to improve the processes of the Companies Auditors and
Liquidators Disciplinary Board (CALDB).
In part, the Bill gives effect to recommendations made by the
Treasury following its recent inquiry into financial reporting by
unlisted public companies. On 6 June 2007, the Treasury
issued a discussion paper on the issue for public comment.[6] Primarily, it
wished to examine whether ‘some type of differential
reporting framework should be introduced for [unlisted public
companies] based on the existing differential requirements for
proprietary companies’.[7] On 21 September 2007, it made some 47
submissions available to the public, with most submissions
suggesting that for reporting purposes, companies limited by
guarantee could be differentiated on the basis of the size of their
operating revenue (rather than less straightforward criteria such
as amount of assets or number of employees).[8]
There are currently some 11 000 companies limited by
guarantee in Australia.[9] According to research by the University of
Melbourne, approximately 21 per cent of these companies are sports
and recreation-related organisations; 19 per cent are community
service organisations; 15 per cent are education-related
institutions; and 10 per cent are religious organisations.[10] The research
also shows that ‘almost all companies limited by guarantee
have a not-for-profit motive’.[11] According to the Treasury, the
not-for-profit focus of a company limited by guarantee is:
... likely to significantly impact upon the
demand for comprehensive financial reports by members. This is
because members generally invest only nominal amounts of capital
into the company. In addition, members do not receive direct
financial returns in the form of dividends or capital gains.
For example, in the case of a small sporting club, members receive
returns in the form of access to facilities and discounted goods
and services.[12]
The Bill recognises (among other things) that, by virtue of
their size, the smaller of these companies find it difficult to
comply with the current auditing and reporting requirements in the
Corporations Act. According to sample data provided by ASIC
on 3 November 2006, 47 per cent of companies limited by guarantee
have revenue of less than $250 000, but the average cost to a
company of preparing an auditing an annual report is estimated to
be $60 000.[13] Nonetheless, the Bill also recognises that some
requirements are necessary as an ‘important governance and
transparency mechanism’.[14] Thus, in place of the current regime, the
Bill introduces a three-tiered, differential reporting framework
for companies limited by guarantee, with the particular
requirements being determined by the amount of the company’s
annual consolidated revenue.[15]
In summary, the Bill exempts the first tier of small companies
limited by guarantee (being those with an annual revenue of less
than $250 000) from the reporting and auditing requirements
set out in Chapter 2M of the Corporations Act[16]—however, there are a
number of exceptions:
- where the company is a deductible gift recipient[17]
- where members with at least five per cent of the votes in the
company (or ASIC) direct the company to prepare a financial report
and directors’ report for a financial year[18]
- where the company is a Commonwealth company, a subsidiary of a
Commonwealth company (or a subsidiary of a Commonwealth
authority)[19],
and
- where the company is a transferring financial institution of a
State or Territory, or a company that is permitted to use the
expression ‘building society’,
‘credit society’ or ‘credit
union’ under section 66 of the Banking Act
1959.[20]
The Bill also streamlines assurance (or auditing) requirements
for companies in the second tier (being those with annual revenue
of between $250 000 and $1 million), by giving them the option
of having their annual reports subject to a review (rather than a
more expensive and time consuming audit).[21] In this regard, the Auditing
and Assurance Standards Board (AUASB) has issued an exposure draft
of a proposed Auditing Standard (titled ‘Proposed Auditing
Standard on Review Engagements ASRE 2415: Review of a Financial
Report—Company Limited by Guarantee’).[22] The proposed
Auditing Standard will apply in relation to companies limited by
guarantee following the passage of the Bill (and associated
regulations). It does not replace any existing Auditing
Standard but rather sets out the specific requirements that an
auditor must observe when conducting a review of a financial report
for a financial year ending on or after 30 June 2010 for a small
company limited by guarantee. It also sets out the form and
content of the review report.
Finally, in the context of amendments that modify the financial
reporting framework for small companies limited by guarantee, it is
noted that the Bill also:
- exempts companies in the second and third tiers of the proposed
three-tier differential framework from complying with the existing
directors’ report disclosure requirements, but requires them
to prepare a simplified directors’ report instead[23]
- revises the way companies limited by guarantee can distribute
annual reports to members[24], and
- prohibits all companies limited by guarantee from paying a
dividend to members.[25]
Currently, the Corporations Act requires each public company,
large proprietary company, registered scheme and ‘disclosing
entity’ to prepare an annual financial statement.[26] Where any of
these entities is a parent entity, it must also prepare financial
statements in relation to the consolidated entity if required to do
so by the accounting standards. Further, a disclosing entity
must also provide half-yearly statements.
In 2003, the Australian Accounting Standards Board (AASB)
investigated the relevance of presenting parent-entity financial
reports in addition to consolidated reports.[27] As part of a discussion paper,
it set out the requirements in a number of other jurisdictions
(namely France, Germany, Japan, New Zealand, Canada, United Kingdom
and the United States of America) before recommending (among other
things) that the Australian requirement for parent entity financial
reports to be published in the annual report should be
removed. It also recommended that the requirement for full
audited parent entity general purpose financial reports to be
lodged with ASIC should be retained, except for parent entities
that:
(a) do not conduct substantive operations,
including treasury operations;
(b) are not borrowing entities;
(c) are not single guarantors for the debt of
one or more subsidiaries.[28]
On 7 April 2006, the Treasury released a consultation paper
titled ‘Corporate and Financial Services Regulation
Review’.[29]
The paper covered a number of areas of financial services
regulation, company reporting obligations, auditor independence,
corporate governance, fundraising, takeovers, collective
investments and dealing with regulators. Specifically in
relation to parent entity financial statements, comments were
sought on whether only summary financial information should be
required in relation to the parent entity, and the type of
information that should be required to be disclosed.[30]
In November 2006, the Treasury announced that the Government
would not proceed with this proposal, saying:
The consultation paper raised whether to allow
lodgment of only summary financial information relating to the
parent entity when a corporate group lodges consolidated financial
statements.
The Government will not proceed with this
proposal because the consultation process did not identify that the
costs of preparing this information outweighed the existing
benefits to users.[31]
However, in August 2008, the Rudd Government undertook targeted
consultation with key stakeholders, including the Group of 100
(being an ‘association of senior finance executives from the
nation’s business enterprises’), professional
accounting bodies and a number of audit firms.[32] The
Explanatory Memorandum states that a number of these stakeholders
‘have called for the removal of the requirement to prepare
(and audit) separate parent entity financial statements to be
replaced by summarised information’.[33] It also
notes that the Group of 100, in supporting the proposed amendment,
said that ‘the replacement of full parent entity financial
statements with summary information would reduce the burden of
regulation on business, reduce business costs and remove
unnecessary disclosures from an entity’s annual
report’.[34] The Group of 100 estimates
that the ‘incremental [external] audit costs’ for
parent-entity financial statements are about $20 000 to
$25 000 for the top 100 ASX companies.[35]
Under the proposed law, an entity will be required to prepare
only one set of financial statements—either financial
statements solely in relation to the particular entity or (if the
accounting standards require the preparation of consolidated
financial statements) financial statements in relation to the
consolidated entity.[36] If the entity is
required to prepare consolidated financial statements, the
Corporations Regulations 2001 will specify supplementary
information about the parent entity that is to be included in a
note to the consolidated financial statements.[37]
Currently, a company may only pay a dividend to shareholders out
of company profits.[38] While this is commonly
known as the ‘profits test’, the Corporations Act does
not define the term ‘profits’ nor provide any
guidance about the operation of the test. Further, as the
Explanatory Memorandum notes, existing legal interpretations by the
courts (known as ‘precedents’) are ‘outdated and
complex’ and are out of step with changing accounting
principles.[39] Since the adoption of
International Financial Reporting Standards (IFRS), Australian
accounting standards are ‘increasingly linked to the fair
value (whether realised or unrealised) impacting on the
profitability of the company’.[40] This
means that accounting profits are neutralised by non-cash
expenses—even where companies otherwise have sufficient cash
resources to pay a dividend.
In December 2002, the Australian Accounting Research Foundation
released a discussion paper recommending that a solvency-based test
be adopted in place of the profits test.[41] The proposal received
widespread industry and legal support.[42] However, it was not until
August 2008 that the Treasury consulted with key stakeholders,
‘including representatives of industry, business,
professional accounting bodies and other interested parties’,
most of whom were ‘generally supportive of providing great
flexibility for paying dividends while maintaining appropriate
safeguards’.[43]
The Bill repeals the profits test and
replaces it with a more flexible, solvency-based test which allows
a company to pay a dividend where:
- the company’s assets exceed its liabilities immediately
before the dividend is declared
- the excess is sufficient to meet the payment of the
dividend
- the payment of the dividend is fair and reasonable to the
company’s shareholders as a whole, and
- the payment of the dividend does not ‘materially
prejudice’ the company’s ability to pay its
creditors.[44]
The company’s assets and liabilities
are to be calculated in accordance with accounting standards in
force at the relevant time.[45] If the company is not
required to prepare an audited financial report (for example, where
the company is a small proprietary company), its solvency can be
determined by reference to the accounting records it is required to
keep under section 286 of the Corporations Act.[46]
In part, the Bill also gives effect to a recommendation by the
Corporations and Markets Advisory Committee (CAMAC) in 2006.
CAMAC is an ongoing committee established in 1989 ‘to provide
a source of independent advice to the Australian Government on
issues that arise in corporations and financial markets law and
practice’.[47] In March 2005, the then
Parliamentary Secretary to the Treasurer, Chris Pearce MP,
requested CAMAC to inquire into ‘the extent to which the
duties of directors under the Corporations Act 2001 (the
Corporations Act) should include corporate social responsibilities
or explicit obligations to take account of the interests of certain
classes of stakeholders other than shareholders’.[48] In November
2005, CAMAC issued a discussion paper for public comment. It
received a ‘large’ number of submissions. Then on
1 December 2006, CAMAC published its report, focussing on
directors’ duties; corporate disclosure; and the promotion of
responsible corporate practices.[49]
Among other things, CAMAC recommended that section 299A of the
Corporations Act should be extended to apply not only to listed
public companies (as is the case at present) but to all listed
entities.[50]
Currently section 299A of the Corporations Act states that the
directors’ report for a financial year for a company (or
disclosing entity) that is a listed public company must also
contain information that members of the company would reasonably
require to make an informed assessment of the company’s:
- operations and financial position, and
- business strategies and prospects for future financial
years.
The directors’ report may omit material that would
otherwise relate to business strategies and prospects for future
financial years if it is likely to result in unreasonable prejudice
to the company (or disclosing entity) or a related consolidated
entity. However, if material is omitted, the report must say
so.
In recommending that section 299A be extended to apply to all
listed entities (and not just listed public companies as is the
case at present), CAMAC noted that non-corporate listed entities
(including listed managed investment funds) make up over 10 per
cent of all listed entities and suggested it is therefore
‘anomalous’ that these other listed entities are not
covered by section 299A.[51] However, CAMAC drew the line at extending section 299A
to cover all existing categories of entities or companies under the
Corporations Act, saying that it was ‘not persuaded that the
potential interest of other elements of the community in particular
aspects of the activities of some non-listed companies is
sufficient justification for a wholesale expansion of the category
of reporting entities’.[52]
Finally, by way of background to the Bill, it is noted that the
Ministerial Council for Corporations (MINCO) was apparently
consulted about the amendments to the laws in the national
corporate regulation scheme, and has approved them (as it is
required to do under the Corporations Agreement 2002 as
amended).[53]
On 13 May 2010, the Senate resolved to refer the provisions of
‘time-critical Bills’ to various legislative and
general purpose standing committees for inquiry and report by
15 June 2010.[54] On 1 June 2010, the Senate Economics
Legislation Committee reported that there are no substantive
matters that require examination in the current Bill.[55]
The Explanatory Memorandum contains no clear statement about the
financial impact of the Bill. However, the Regulation Impact
Statement (RIS) notes that:
- the costs of introducing a three-tired financial reporting
system for small companies limited by guarantee is expected to be
‘minimal and outweighed by the benefits to users and
companies limited by guarantee’[56]
- the costs to prepare and audit parent-entity summary data will
be ‘significantly lower’ than the costs to prepare and
audit separate parent-entity financial statements), but the extent
of the savings ‘will be dependent on the size and complexity
of the entity and the relativities around the size of the parent as
opposed to the consolidated entity’[57],
- the benefits of replacing the ‘profits test’ with a
more flexible, solvency-based test for the payment of dividends
‘are expected to outweigh the costs’[58], and
- the costs of requiring all listed entities to disclose a review
of operations and financial condition are difficult to quantify but
appear to be ‘minimal’—mainly because there are
only approximately 200 listed managed investment schemes which will
need to comply with the revised requirement (in addition to the
2200 or so listed public companies to which the requirement already
applies).[59]
Many of the main provisions of the Bill are discussed (or
highlighted) in the ‘Background’ section to this Digest
above. However, for completeness, some provisions are
discussed more fully below.
Item 4 of Schedule 1 inserts
proposed section 45B into the Corporations
Act. It defines the term ‘small company limited by
guarantee’ (in the context of a particular financial
year) to mean a company which:
- is a company limited by guarantee for the whole of the
year
- is not a deductible gift recipient at any time during the
year
- has revenue (or consolidated revenue) less than the $250 000
(or such other amount prescribed by the regulations as the relevant
threshold amount) for the relevant year[60]
- is not a company for the purposes of the Commonwealth
Authorities and Companies Act 1997 (CAC Act) or a subsidiary
of such a company (or a Commonwealth authority)[61]
- has not been a ‘transferring financial
institution’ of a State or Territory (as defined in
Schedule 4 to the Corporations Act),[62] and
- is not a company that is permitted to use the expression
‘building society’, ‘credit
society’ or ‘credit union’ under
section 66 of the Banking Act 1959.[63]
Item 6 inserts proposed section
254SA to prohibit a company limited by guarantee from
paying a dividend to its members. Although not stated in the
provision itself, proposed section 254SA is an
offence provision. It attracts a maximum penalty of 100
penalty units (that is, $11 000) or imprisonment for two
years, or both.[64] The fact the penalty may involve imprisonment
raises an interesting issue, because the language of the provision
refers to a ‘company limited by guarantee’ rather than
‘an officer’ of such a company (or indeed, even a
‘person’). It has long been established at common
law[65] that a
company has a separate legal personality, quite distinct from that
of its members or officers, including directors. In this
regard, for example, section 188 of the Corporations Act sets out
the responsibilities of secretaries and directors of a company if
the company contravenes certain named provisions of that
Act[66]—but
no provision in the Bill amends section 188 to include reference to
proposed section 254SA. It may therefore
need to be made clear on the face of the provision (even if only by
the insertion of a note):
- that it is an offence provision
- in what circumstances directors (or other officers of the
company) will be liable, and/or
- what defences (if any) may be available to such persons.
Item 7 repeals existing section 254T and
inserts proposed section 254T in its place.
It sets out the circumstances in which a company (other than a
company limited by guarantee) may pay a dividend. As noted in
the ‘Background’ section to this Digest, under the
revised provision, a company must not pay a dividend unless:
(a) the company’s
assets exceed its liabilities immediately before the dividend is
declared, and the excess is sufficient to meet the payment of the
dividend
(b) the payment of the
dividend is fair and reasonable to the company’s shareholders
as a whole, and
(c) the payment of the
dividend does not ‘materially prejudice’ the
company’s ability to pay its creditors.[67]
The company’s assets and liabilities are to be calculated
in accordance with accounting standards in force at the relevant
time.[68] A person commits an offence
under proposed section 254T if he or she is a
director of a company which pays a dividend in contravention of the
provision.[69]
Items 8–10 amend section 258F to make it
clear that while a company may reduce its share capital by
cancelling any paid-up capital that is lost or not represented by
available assets, it may not reduce its share capital:
- by cancelling shares, or
- where the cancellation of paid-up share capital is inconsistent
with the requirements of any accounting standard.[70]
Item 14 inserts proposed section
285A, which sets out an overview of the annual financial
reporting obligations for companies limited by guarantee. It
sets out, in tabular form, the three-tiered differential reporting
framework that is based on the relevant company’s annual
revenue.
Item 15 inserts proposed subsection
292(3), which states that a small company limited by
guarantee is only required to prepare the financial report and
directors’ report if directed to do so by members of the
company with at least five per cent of the votes (proposed
section 294A) or by ASIC (proposed section
294B).[71]
In the case of a member direction given under proposed
section 294A, the direction must be signed by the members
giving the direction and be made no later than 12 months after the
end of the relevant financial year.[72] It may specify:
- that the financial report does not have to comply with some or
all of the accounting standards
- that a directors’ report (or part thereof) does not need
to be prepared, and/or
- whether the financial report is to be audited or
reviewed.[73]
A company limited by guarantee which fails to comply with a
direction given by ASIC under proposed section
294B may be guilty of a strict liability offence that
carries a maximum of 10 penalty units or imprisonment for
three months or both.[74] The direction may be general or may specify the
particular requirements with which the company must comply.[75] It must specify
a ‘reasonable’ date for complying with the
direction.[76] It must also be made in writing; specify the
financial year concerned; and be made no later than six years after
the end of that financial year.[77] A direction given by ASIC under
proposed section 294B is not a legislative
instrument and therefore cannot be subject to parliamentary
scrutiny or disallowance.[78]
Item 17 repeals existing
subsection 295(2) of the Corporations Act and substitutes
proposed subsection 295(2) in its place. The
amendment replaces the current requirement for a parent entity to
produce not only audited financial statements for itself but also
any related consolidated entity, with a requirement to provide only
financial statements in relation to the consolidated entity (if
required to do so by the accounting standards).[79] If
the entity is required to prepare consolidated financial
statements, the Corporations Regulations 2001 will specify
supplementary information about the parent entity that is to be
included in a note to the consolidated financial
statements.[80] Item 31 makes a
similar amendment in relation to financial statements for the
half-year by repealing existing subsection 303(2) and substituting
proposed subsection 303(2) in its place.
Item 29 inserts proposed section
300B into the Corporations Act. It sets out the
matters which a company limited by guarantee must include in its
annual directors’ report, including:
- the short and long-term objectives of the company
- the company’s strategy for achieving those
objectives
- the company’s principal activities during the year
- how those activities assisted in achieving the company’s
objectives, and
- how the company measures its performance.[81]
If the company is a consolidated entity, it
is only required to report on the consolidated entity.[82] The
company’s directors’ report must also include:
- details of any person who has been a director at any time
during or since the relevant financial year
- his or her qualifications, experience and special
responsibilities
- the number of meetings of the board of directors during the
financial year (and each director’s attendance at those
meetings)
- the amount which a member of each class of membership is liable
to contribute if the company is wound up, and
- the total amount that members are liable to contribute if the
company is wound up.[83]
Item 30 inserts
proposed subsections 301(3) and (4) into the
Corporations Act. Proposed subsection 301(3)
states that a company limited by guarantee may have its financial
report for a financial year reviewed (rather than
audited) if the company is not a Commonwealth company (or
a subsidiary of a Commonwealth company or authority), and
either:
- the company is not required by the accounting standards
to be included in consolidated financial statements and the revenue
of the company for the financial year is less than $1 million,
or
- the company is required by the accounting standards to be
included in consolidated financial statements and the consolidated
revenue of the consolidated entity for the financial year is less
than $1 million.
Proposed subsection 301(4)
states that the financial report of a small company limited by
guarantee does not have to be audited or reviewed if:
- the report is prepared in response to a member direction under
proposed section 294A, and
- the direction does not ask for an audit or review.
Item 40 inserts
proposed section 316A into the Corporations
Act. Proposed subsection 316(1)
provides that a member of a company limited by guarantee may, by
written notice to the company, elect to receive a hard copy or an
electronic copy of the company’s financial reports,
directors’ reports or auditor’s reports.[84] An election
applies in the year in which it is made and then acts as a standing
election for later years (until the member changes the
election).[85] If the company prepares a financial report or a
directors’ report, or obtains an auditor’s report, it
must send a copy of the report to the member free of charge before
the earlier of (a) 21 days before the company’s next annual
general meeting (AGM) after the end of the financial year or (b)
four months after the end of the financial year.[86] However, if a member
direction is given under proposed section 294A,
the deadline for sending a copy of the reports is the later of (a)
two months after the date on which the direction was given, or (b)
four months after the end of the financial year.
A company limited by guarantee that fails
to comply with the requirement to provide a copy of relevant
reports to a member under proposed subsections 316A(3) or
(4) may be guilty of a strict liability offence that
carries a maximum of 10 penalty units or imprisonment for 3 months
or both.[87]
It is clear on the face of proposed subsection
316A(5) that any such offence is a strict liability
offence.
Items 43 and 44 amend
existing section 323D, which provides that a financial year is
12 months long (plus or minus seven days). Item
44 inserts proposed
subsection 323D(2A) which allows a financial year
subsequent to the first year to last for a period other than 12
months provided that:
- the subsequent financial year starts at the end of the previous
financial year
- there has not been a period during the previous five financial
years in which there was a financial year of less than 12 months in
reliance on this subsection, and
- the change to the financial year is made ‘in good faith
in the best interests of the company, registered scheme or
disclosing entity’.
Item 45 inserts
proposed section 324BE, which provides that an
individual is taken to be a registered company auditor for the
purposes of a review (as compared with an audit)
of a financial report of a company limited by guarantee if the
individual:
- is a member of a professional accounting body, and
- holds a practising certificate of the kind specified in the
Corporations Regulations 2001.
The Explanatory Memorandum notes that the
amendment will expand the category of individuals that are
permitted to undertake reviews, which ‘will provide greater
flexibility and reduce unnecessary burden on companies limited by
guarantee and their auditors, particularly during peak
periods’.[88]
The amendments made by Schedule
1 generally apply to financial years ending on or after 30
June 2010.[89] However, the amendments in items
24–28 (which extend the requirement in section 299A
to disclose a review of operations and financial condition to all
listed entities) only apply to financial years ending on or after
30 June 2011.[90]
In summary, Schedule 2
repeals a number of obsolete provisions in the ASIC Act and
modifies the operation of other provisions.
Items 3–5 amend
section 203 of the ASIC Act, which set out the conditions for
membership of the Companies Auditors and Liquidators Disciplinary
Board (CALDB). The CALDB is a disciplinary body which reviews
applications made to it by ASIC or the Australian Prudential
Regulation Authority (APRA) in relation to the conduct of
registered company auditors or liquidators.
Item 3 repeals existing
paragraphs 203(1)(c) and (d) and substitutes proposed
paragraph 203(1)(c) in their place. It provides
that the Minister may select six members who are eligible for
appointment as ‘accounting members’ of the
CALDB. Under the Bill, ‘accounting members’
are to be appointed to the CALDB in a way that is similar to the
way ‘business members’ are appointed to the Board under
existing paragraph 203(1)(e).
A person is eligible to be appointed as an
‘accounting member’ if the person is an
Australian resident and also a member of a professional accounting
body (or such other body as is prescribed by the regulations for
the purposes of the provision).[91] There are three professional accounting
bodies in Australia: the Institute of Chartered Accountants in
Australia (ICAA); CPA Australia (CPAA) and the National Institute
of Accountants (NIA). However, there are other professional
bodies, such as the Insolvency Practitioners Association of
Australia (IPAA), which are currently ineligible to nominate
members of the CALDB. Under the Bill, such bodies could be
prescribed for the purposes of proposed subparagraph
203(1B)(b)(ii), which would mean that a member of such a
body, who is also an Australian resident, would be eligible for the
Minister to select him or her as an ‘accounting member’
of the CALDB under proposed paragraph
203(1)(c).
Items 7 and 8 amend
existing section 221 of the ASIC Act to insert proposed
subsections 221(1A) and (2A). Existing section 221
confers immunity consistent with that of a Justice of the High
Court of Australia on panel members of the CALDB when exercising
powers in relation to a hearing. Witnesses, legal and other
representatives also receive a similar immunity. However, at
present, the immunity does not extend to cover pre-hearing
conferences convened by the Chairperson of the Board under section
1294A of the Corporations Act.[92] Item 7 extends the
immunity to the Chairperson of the Board in the performance of his
or her functions in relation to such a conference, and item
8 extends the immunity to any barrister, solicitor or
other person appearing on behalf of a person at a conference.
The amendments made by items 7 and 8 apply in
relation to all pre-hearing conferences convened by the Chairperson
of the Board, including conferences conducted before the
commencement of Schedule 2.[93]
Items 10 and 12 of
Schedule 2 repeal paragraphs 225(2)(i) and (j) and
paragraphs 225(2A)(i) and (j) of the ASIC Act. Those
provisions gave specific accounting and auditing standards
functions to the Financial Reporting Council, but are no longer
required following the enactment of the Governance Review
Implementation (AASB and AUASB) Act 2008.
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277 2795.
Morag Donaldson
21 June 2010
Bills Digest Service
Parliamentary Library
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