Bills Digest no. 2 2016-17
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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
5 September 2016
This Bills Digest replaces an earlier
version dated 13 April 2016.
Contents
History of the Bill
Purpose of the Bill
Background
The Bill and the Legislative
Instruments Act
Approval of the auditing competency
standard
Attempted correction
Committee consideration
Selection of Bills Committee
Senate Standing Committee for the
Scrutiny of Bills
Policy position of non-government
parties/independents
Position of major interest groups
Statement of Compatibility with Human
Rights
Parliamentary Joint Committee on
Human Rights
Key issues and provisions
Approvals are legislative instruments
Validation of approval
Compensation for acquisition
Date introduced: 1
September 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 September 2016.
History of the Bill
The Corporations Amendment (Auditor Registration) Bill
2016 (the first Bill) was introduced into the House of Representatives on 16
March 2016.[1]
The first Bill lapsed when the Parliament was prorogued on 15 April 2016.
The Corporations Amendment (Auditor Registration) Bill
2016 (this Bill) which was introduced into the House of Representatives on 1
September 2016, is in equivalent terms to the first Bill. A Bills Digest was
prepared in respect of the first Bill.[2]
The material in this Bills Digest has been sourced from that earlier Bills
Digest.
Purpose of the Bill
The purpose of this 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 this 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.[3]
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’.[4]
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[5] 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.[6]
According to the Explanatory Memorandum for
this Bill, ‘it is likely that the relevant approval is a legislative
instrument’.[7]
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’.[8]
The effect of the class order was to reinstate the Auditing Competency
Standard for Registered Company Auditors[9]
‘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’.[10]
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’.[11]
Committee consideration
Selection of Bills
Committee
On 1 September 2016, the Selection of Bills Committee determined
that this Bill would not be referred to Committee for inquiry and report.[12]
Senate Standing
Committee for the Scrutiny of Bills
In its report of 5 May 2016, the Senate Standing Committee
for the Scrutiny of Bills (Scrutiny of Bills Committee) noted, in respect of
the first Bill that it would retrospectively validate a legislative instrument
that may otherwise be invalid as it was not lodged and registered as required
by section 32 of the Legislation Act 2003.
The Scrutiny of Bills Committee noted that the Explanatory
Memorandum acknowledged the retrospective operation of this amendment and accepted
the explanation provided.[13]
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.[14]
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.[15]
Parliamentary Joint
Committee on Human Rights
The Parliamentary Joint Committee on Human Rights determined
that the first Bill did not raise human rights concerns.[16]
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.[17]
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).[18]
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.
[1]. Parliament
of Australia, ‘Corporations
Amendment (Auditor Registration) Bill 2016 homepage’, Australian Parliament
website.
[2]. P
Pyburne, Corporations
Amendment (Auditor Registration) Bill 2016, Bills digest, 108, 2015–16,
Parliamentary Library, Canberra, 2016.
[3]. M
Coombs, Legislative
Instruments Bill 2003, Bills digest, 26, 2003–04, Parliamentary
Library, Canberra, 2003, p. 1.
[4]. Explanatory
Memorandum, Acts and Instruments (Framework Reform) Bill 2014, p. 10.
[5]. For
information about the originating Bill, agreed amendments and explanatory
memoranda see Parliament of Australia, ‘Corporate Law Economic Reform Program (Audit Reform and Corporate
Disclosure) Bill 2004 homepage’, Australian
Parliament website.
[6]. Australian
Securities and Investments Commission, ASIC
approves CPA-ICAA auditor competency standard, media release, 24
November 2004; CPA Australia, ‘Audit
competency standard’, CPA Australia website.
[7]. Explanatory
Memorandum, Corporations Amendment (Auditor Registration) Bill 2016, p. 3.
[8]. Explanatory
Statement, ASIC Class Order [CO 14/784], paragraph 2.
[9]. CPA
Australia, Auditing
Competency Standard for Registered Company Auditors, 24 November 2004.
[10]. Explanatory
Statement, ASIC Class Order [CO 14/784], paragraph 3.
[11]. Explanatory
Memorandum, Corporations Amendment (Auditor Registration) Bill 2016, p. 6.
[12]. Senate
Standing Committee for Selection of Bills,
Report, 5, 2016, The Senate, Canberra, 1 September 2016.
[13]. Senate
Standing Committee on the Scrutiny of Bills, Alert
Digest, 5, 2016, The Senate, 3 May 2016, p.1.
[14]. Explanatory
Memorandum, Corporations Amendment (Auditor Registration) Bill 2016, p. 3.
[15]. The
Statement of Compatibility with Human Rights can be found at page 9 of the Explanatory
Memorandum to the Bill.
[16]. Parliamentary
Joint Committee on Human Rights, Thirty-seventh
report of the 44th Parliament, 2 May 2016, p. 1.
[17]. Legislation
Act, section
42.
[18]. Note
that item 217 of Part 2 of Schedule 2 of the
Insolvency Law Reform Act 2016 amends the heading of Part 9.2 of the Corporations
Act so that it will cease to apply to liquidators upon commencement. The
provision will commence on the earlier of a single day to be fixed by
Proclamation or 29 February 2017.
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