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Chapter 3
Key provisions of the bill
3.1
The bill
proposes amendments to various Acts including the Corporations Act 2001
and the Foreign Acquisitions and Takeovers Act 1975. This chapter
considered the key provisions.
Corporations Act 2001
3.2
Amendments to
the Corporations Act reform certain provisions that impose personal criminal
liability for corporate fault to align them with the COAG principles and
clarify the circumstances in which corporate officers can be held criminally
liable for corporate fault.
3.3
Section 188
of the Corporations Act makes company secretaries criminally liable for certain
breaches of the Corporations Act by a company as listed in section 188(1). Item
1 of the bill replaces the existing criminal offence of strict liability in
section 188 with a civil offence for a breach by a secretary of a company of a 'corporate
responsibility provision'.[1]
3.4
Proposed
subsection 188(2) extends the offence to each director of a proprietary company
where the proprietary company is in contravention of a 'corporate
responsibility provision' and at the time of that contravention, does not have
a secretary. Item 18 of the bill inserts a new paragraph 1317(1)(aa) to clarify
that subsections 188(1) and (2) are 'civil penalty provisions'. In accordance
with the COAG principles, subsection 188(3) provides a defence by clarifying
that a person does not contravene subsections 188(1) and (2) if that person can
demonstrate that they took 'reasonable steps to ensure that the company
complied with the provision'.
3.5
Schedule 3 to
the Corporations Act lists the penalties for offences under section 188. The
bill amends this section to bring the offences to which section 188 applies
into alignment with the Commonwealth Guide to Framing Commonwealth Offences,
Infringement Notices, and Enforcement Powers and by removing criminal
penalties in place of civil penalties in line with the COAG principles.
Concerns raised in evidence regarding the proposed new penalties are discussed
in the following chapter.
3.6
Under items
20, 23 and 25 of the bill, civil penalties are strengthened from five penalty
units to 60 penalty units in relation to a number of matters.[2]
Items 22 and 24 increase existing penalties to 60 penalty units or imprisonment
for one year or both in respect to section 205B (lodgement of notices with
ASIC), section 319 (lodgement of annual reports with ASIC) and section 320
(lodgement of half-year reports with ASIC).
3.7
Subsection
254Q(13) applies strict liability in relation to a company to offer forfeited
shares for sale by public auction or to advertise such a sale in accordance
with the subsection and extends the liability to any officer of a company
involved in the contravention. The bill removes the extension of liability to
any officer of the company involved in the contravention on the basis that it
breaches the COAG principles as the 'type of harm that this subsection aims to
prevent is not significant enough to warrant strict personal criminal liability
for corporate faulty'.[3]
3.8
Similarly,
the bill amends subsection 610FC(5) and 610FC(6) to provide for a civil penalty
provision. Section 601FC sets out the primary duties of a responsible entity of
a managed investment scheme and subsection 610FC(5)currently makes a breach of
those duties by the responsible entity a criminal penalty provision under Part
9.4B of the Corporations Act.
3.9
For other
sections of the Corporations Act whereby personal criminal liability is applied
in relation to the contravention of the section, annotations in the bill
clarify those offence provisions for which personal liability will apply.
Foreign Acquisition and
Takeovers Act 1975
3.10
The EM notes
that section 30 of the Foreign Acquisitions and Takeovers Act 1975 (FATA)
is 'potentially a blanket liability provision'.[4]
Section 30, in conjunction with section 31, creates personal liability for
breaches of a number of provisions in the FATA. Item 3 of the bill amends
subsection 31(1) to clarify the level of involvement by an officer required to
trigger personal liability. Under the bill, only an officer of the corporation
who authorised or permitted commission of an offence by the corporation will be
held personally liable for breach of the law. The EM states the following in
relation to subsection 31(1):
Under the
existing section 31 of the FATA, where an offence against the Act is committed
by a corporation, an officer of the corporation who is in default is guilty of
an offence. A reference to an officer who is in default is defined to include a
reference to an officer who authorises or permits the commission of the
offence.
The
current wording in section 31 is ambiguous, providing the penalty for an
officer who did not authorise or permit the commission of the offence to
nonetheless be liable in some situations. The Bill therefore amends Section 31
to clearly apply personal liability only to an officer who authorises or
permits the commission of the offence.[5]
3.11
Amendments in
items 5 to 11 of the FATA do not create new offences but insert notes
into each of the specified subsections to signpost that the existing provisions
relate to the criminal liability of an officer of a corporation if the
corporation contravenes or fails to comply with the order of the Treasurer (or
his delegate).
3.12
Items 12 to
17 add notes to existing subsections to signpost a reference to section 31 of
the Act in relation to the liability of an officer of a corporation.
Health Insurance Act
1973
3.13
The bill
amends the Health Insurance Act 1973 (HIA) to remove the personal
criminal liability for corporate fault on company officers in a range of
circumstances. Section 129AA makes it an offence for a practitioner or medical
entrepreneur to receive or obtain a bribe from a proprietor of a private
hospital in return for enabling a person to be admitted as a patient, and for
the proprietor of a private hospital to offer such a bribe. The bill repeals
subsections 129AA(2), 129AA(3) and 129AA(6) to prevent the extension of
personal criminal liability to officers of the corporation where those officers
were not directly involved in the conduct.
3.14
The bill
further amends section 23DZZIT by clarifying that executive officers may incur
personal liability where a company engages in conduct that is intended to
induce a person to request pathology or diagnostic imaging services from a
provider.
National Vocational
Education and Training Regulator Act 2011
3.15
The bill
amends the National Vocational Education and Training Regulator Act 2011
(NVETR Act) to limit the circumstances when directors and other executive
officers can be held personally liable for the offences of the company in the
circumstances listed in section 133A of the Act. Currently, section 133 applies
personal liability for executive officers to all offences under the Act. An
offence is committed by an executive officer if their organisation has
committed an offence and the officer knew the offence would be committed, could
prevent the conduct, and failed to take reasonable steps to do so.
3.16
The bill
amends section 133 by inserting a new section 133A to limit the offences where
directors can be personally liable for breaches by their corporation of those
offences contained within the new section. Criminal liability in relation to
the Act is retained under the bill on the basis that:
there are
compelling public policy grounds in the protection of vulnerable people, and
that corporate penalties alone are not likely to be effective in deterring the
prohibited practice.[6]
Therapeutic Goods Act
1989
3.17
The
amendments to the Therapeutic Goods Act 1989 (TGA) remove derivate
liability for 'relatively minor offences by removing the current blanket
application of derivative liability'.[7]
Currently, all executive officers can be personally liable for all offences
committed under the TGA.
3.18
Under the new
section 54BA of the bill, derivative liability will only apply to those
sections listed under subsection 54BA(1) of the TGA, and any regulations
prescribed for that purpose. The EM further explains that:
Section
54BA retains existing powers under the Act to prescribe offences in regulations
made under the TGA that will attract personal liability for executive officers,
and allows certain provisions under the Crimes Act 1914 and the Criminal
Code to continue to apply.[8]
Insurance Contracts Act
1984
3.19
Section 76A
of the Insurance Contracts Act 1984 (ICA) is a blanket liability
provision which applies to a number of offences, including offences in relation
to the provision of documents to ASIC and offences surrounding interactions
between insurers and insured parties.
3.20
The bill
repeals section 76A, thereby removing the blanket liability imposed for all
offences under the ICA and replaces it with a new section 11DA, which applies
personal liability in relation to subsections 11C (2), 11D (2) and 11D (3). The
EM emphasises that the amendment 'preserves personal liability in relation to
ASIC's ability to obtain documents, and the supplying of false or misleading
information to ASIC'.[9]
Taxation Administration
Act 1953
3.21
Section 8Y of
the Taxation Administration Act 1953 (TAA) reverses the onus of proof for
officers of corporations and others in relation to taxation offences. This is
retained under the bill. In an explanatory document released as part of the
third tranche of the proposed amendments on 14 August 2012, Treasury provided
the following reasoning for this approach:
The
Government has decided not to amend section 8Y. In reaching this conclusion the
Government has taken into account a range of factors outlined in the COAG
guidelines, including the magnitude of harm that the offending conduct would
likely cause, the effectiveness of corporate penalties in preventing this
conduct and the availability of evidence to the prosecution and the director.[10]
3.22
Concerns
raised by the Australian Institute of Company Directors and Chartered
Secretaries Australia in relation to the retention of this provision are
considered in chapter 4 of this report.[11]
Other Acts amended by
the bill
3.23
The bill
amends other Acts that provide personal criminal liability for corporate fault
including:
- Child
Support (Registration and Collection) Act 1988;
- Classification
(Publications, Films and Computer Games) Act 1995;
- Corporations
(Aboriginal and Torres Strait Islander) Act 2006;
- Income Tax
Assessment Act 1936;
- National
Measurement Act 1960;
- Pooled Development
Funds Act 1992;
- Superannuation
Guarantee (Administration) Act 1992;
and
- Veterans’
Entitlements Act 1986.
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