Bills Digest no. 108 2015–16
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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.
Paula Pyburne
Law and Bills Digest Section
13 April 2016
Contents
Purpose
of the Bill
Background
Committee consideration
Policy position of non-government parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human Rights
Key issues and provisions
Date introduced: 16 March
2016
House: House of
Representatives
Portfolio: Treasury
Commencement: The day
after Royal Assent.
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the
Bill’s home page, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent, they
become Acts, which can be found at the Federal
Register of Legislation website.
All hyperlinks in this Bills Digest are correct as at
April 2016.
Purpose of
the Bill
The purpose of the Corporations Amendment (Auditor
Registration) Bill 2016 (the Bill) is to address the legal consequences of not
registering, contrary to the terms of the Legislation
Act 2003, the approval by the Australian Securities and Investments
Commission (ASIC) in November 2004 of an auditing competency standard. The
amendments in the Bill will ensure the validity of all decisions taken by
auditors, ASIC and businesses on the basis of the approval.
Background
The Bill and the Legislative
Instruments Act
The Legislative
Instruments Act 2003 (since renamed the Legislation Act) was
enacted:
to establish a regime to reform and manage procedures for the
making, scrutiny and publication of Commonwealth legislative instruments by:
- establishing a Federal Register of Legislative Instruments
- encouraging rule-makers to undertake appropriate consultation
- encouraging high standards in drafting legislative instruments to
promote their legal effectiveness, clarity and their intelligibility to users
- providing public access to legislative instruments
- establishing improved mechanisms for Parliamentary scrutiny of legislative
instruments and
- establishing ‘sunsetting’ mechanisms to ensure periodic review of
legislative instruments and if they no longer have a continuing purpose, to
repeal them.[1]
The Legislative Instruments Act was amended by the Acts and
Instruments (Framework Reform) Act 2015, the operative parts of which
commenced on 5 March 2016.
Section 5 of the Legislative Instruments Act defined
the term legislative instrument as an instrument of a legislative
character that is, or was, made under a delegation of power from Parliament. An
instrument has a legislative character if it determines or alters the content
of the law rather than applying the law in a particular case; and if it affects
a privilege or interest, imposes an obligation, or creates, varies or removes a
right. The amendments in the Acts and Instruments (Framework Reform) Act operate to more clearly define ‘legislative instruments and legislative
character’, but these concepts were not ‘substantially changed by the
amendments’.[2] Although the Legislative Instruments Act was enacted in 2003, its
operative provisions did not commence until 1 January 2005.
Subsection 29(1) of the Legislative
Instruments Act (as enacted) required all legislative instruments which
had been made in the five years prior to 1 January 2005 to be formally
registered on the Federal Register of Legislative Instruments by 1 December
2005.
Where a legislative instrument was not registered by 1
December 2005 subsection 32(2) of the Legislative Instruments Act (as
enacted) provided that it ceased to be enforceable by or against the
Commonwealth, or by or against any other person or body and was taken to have
been repealed by the Legislative Instruments Act.
Approval of the auditing competency
standard
Paragraph 1280(2)(a) of the Corporations Act
2001 (as enacted) provided for ASIC to register a person as an auditor if,
amongst other things, the person:
- was
a member of the Institute of Chartered Accountants in Australia, the Australian
Society of Certified Practising Accountants or any other prescribed body or
- held
certain specified educational qualifications or
- had
other qualifications and experience which in the opinion of ASIC were
equivalent to those above.
Paragraph 1280(2)(b) contained an
additional criterion that ASIC was satisfied that the applicant had the
prescribed practical experience in auditing.
However, the Corporate
Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004[3] amended the Corporations Act:
- first, to amend subsection 1280(2) to
require a person seeking registration as an auditor to not only meet
educational or experiential requirements, but to also meet an auditing
competency standard approved by ASIC and
- second, to insert section 1280A into
the Corporations Act to empower ASIC to approve an auditing competency
standard.
Those amendments took effect from 1 July 2004.
Accordingly, on 24 November 2004, ASIC announced that it
had approved the first auditing competency standard under
subsection 1280A(1) of the Corporations Act 2001. The competency
standard was produced by CPA
Australia and the Institute of Chartered Accountants in Australia.[4]
According to the Explanatory Memorandum for
this Bill, ‘it is likely that the relevant approval is a legislative instrument’.[5] If so, it was required
under the Legislative Instruments Act (as in force from 1 January 2005) to
be registered on the Federal Register of Legislative Instruments, but this did
not occur. That being the case, the approval may be taken to have been
repealed by the Legislative Instruments Act on 2 December
2005.
Attempted correction
On 7 August 2014, ASIC registered class order
[CO 14/784]. The purpose of the class order was to ensure that ASIC was able to ‘register auditors in
reliance on the CPA/ICAA standard from the date of registration of the class
order’.[6] The effect of the class order was to reinstate the Auditing Competency
Standard for Registered Company Auditors[7] ‘as criteria that may be applied by ASIC in deciding whether to register a
person as an auditor, if the approval in 2004 was repealed by the Legislative
Instruments Act’.[8] Whilst the class order provided the necessary power to ASIC to register
auditors in reliance on the relevant standard from 7 August 2014, it left some
uncertainty about the period between 2 December 2005 and that date.
The Bill operates to end that uncertainty by ‘amend[ing]
the Corporations Act so that auditors registered from 1 December
2005 on the basis of the CPA/ICAA competency standard…are validly registered
with effect from the date of their purposed registration’.[9]
Committee
consideration
Selection of Bills Committee
On 17 March 2016, the Selection of Bills Committee deferred
consideration of the Bill until its next meeting.[10]
Senate Standing Committee for the
Scrutiny of Bills
At the time of writing this Bills Digest, the Senate
Standing Committee for the Scrutiny of Bills had not commented on the Bill.
Policy
position of non-government parties/independents
At the time of writing this Bills Digest, no public comments
had been made about the Bill by non-government parties or independent members
of the Parliament.
Position of
major interest groups
At the time of writing this Bills Digest, no public comments
had been made about the Bill by interest groups.
Financial
implications
According to the Explanatory Memorandum for the Bill,
there is no compliance cost impact.[11]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human
Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s
compatibility with the human rights and freedoms recognised or declared in the
international instruments listed in section 3 of that Act. The Government
considers that the Bill does not engage any of the applicable rights or
freedoms and is, therefore, compatible.[12]
Parliamentary Joint Committee on
Human Rights
At the time of writing this Bills Digest, the Parliamentary
Joint Committee on Human Rights had not commented on the Bill.
Key issues
and provisions
Approvals are legislative
instruments
Item 1 of the Bill inserts proposed subsection
1280A(5) into the Corporations Act to put beyond doubt that an approval, an approval of a variation, and a
revocation of an approval, of an auditing competency standard are legislative
instruments. This removes any doubt as to the nature of these documents and
means that the requirement to register them on the Federal Register of
Legislation is clear. It also means that any future approval will be subject to
disallowance if either a Senator, or Member of the House of Representatives,
moves a motion of disallowance within 15 sitting days of the day that the
legislative instrument is tabled. The motion to disallow must be resolved or
withdrawn within a further 15 sitting days of the day that the notice of motion
is given.[13]
Validation of approval
Item 2 of the Bill inserts proposed sections
1298P and 1298Q into Part 9.2 of the Corporations Act (about
registration of auditors and liquidators).[14]
Proposed section 1298P of the Corporations Act applies to the auditing competency standard approved by ASIC on 24 November
2004 under section 1280A.
Proposed subsection 1298P(2) provides that the Legislation
Act has effect, and is taken always to have had effect, as if:
- the approval had been lodged for registration immediately after
the approval was given
- the approval had been registered immediately after it was lodged
for registration and
- any other requirement imposed by that Act in relation to the
approval had been met.
Compensation for acquisition
Proposed section 1298Q of the Corporations Act operates so that if proposed section 1298P would result in an acquisition of property from a person otherwise than on just
terms in accordance with section 51(xxxi) of the Constitution,
then the Commonwealth is liable to pay a reasonable amount of compensation to
the person.
Members, Senators and Parliamentary staff can obtain
further information from the Parliamentary Library on (02) 6277 2500.
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