2.1
The Corporations (Aboriginal and Torres Strait Islander) Amendment Bill 2021 (the bill) comprises one schedule which contains 20 parts. As noted previously, the bill amends the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (the CATSI Act). The bill also makes one amendment (Part 20) to the Native Title Act 1993.
2.2
As a package, it is proposed that amendments to the Act will reduce the regulatory burden on CATSI corporations – particularly smaller corporations. It is envisioned that both costs and savings will result from the proposed legislative changes. However, it is anticipated that the savings will ‘offset any costs by a large margin’.
2.3
It is argued that smaller CATSI corporations will likely seek assistance from the Office of the Registrar of Indigenous Corporations (ORIC) in developing new rule books, and will, therefore, incur minimal costs.
Schedule 1 – Amendments
Part 1 – Review of operation of the Act
2.4
Part 1 (Items 1 and 2) of the bill introduces a statutory requirement for the CATSI Act to be reviewed every seven years. As a special measure under the Racial Discrimination Act 1975, the Act should be periodically reviewed to establish whether it has achieved its objectives. It is proposed that when a special measure is found to have achieved its objective, it should be discontinued. This measure is designed to ensure that the legislation is regularly reviewed with respect to its ongoing need and scope to improve the regulatory environment.
2.5
Item 1 would add the new review provisions introduced in Part 1 to the simplified outline (in section 599-1) which describes the contents of the part.
2.6
Item 2 would insert a new Division 643 into the CATSI Act, and would introduce a requirement that the Act be periodically reviewed. As noted above, it is argued that this would allow the Parliament to determine whether the Act has achieved its objective as a special measure.
2.7
It is noted that if a review undertaken under Division 643 finds that there is a continued need for the CATSI Act as a special measure, it may also identify that the Act requires amendment to improve the legislative framework to better meet the needs and expectations of Aboriginal and Torres Strait Islander people. However, if a review finds that the CATSI Act has exhausted its objects as a special measure, the Parliament would have the opportunity to consider the future needs of CATSI corporations, for example, in a more mainstream environment.
2.8
In addition, Item 2 also:
sets out the review requirements;
provides that the review must consider the effectiveness of the Act as a special measure for the advancement and protection of Aboriginal and Torres Strait Islander people; and
provides that the reviewer must present the Minister with a written report of their review within 18 months (after the relevant anniversary date) and that the Minister must have the report tabled in both Houses of Parliament within 25 days of the relevant house after completion of the report.
Part 2 – Powers and functions of Registrar
2.9
Part 2 (Items 3–25) of the bill would provide the Registrar with a suite of regulatory powers that are similar to those of the Australian Securities and Investments Commission (ASIC). It would enable the Registrar to accept enforceable undertakings and issue infringement notices in connection with contravention of the CATSI Act. It would also expand the Registrar’s powers to require the production of rule books and broaden the threshold for exercising the Registrar’s investigative powers generally.
2.10
Item 3 would add the Registrar’s new power to accept an enforceable undertaking introduced in this Part (to the simplified outline in section 439-1) which describes the content of the Part.
2.11
Item 4 would empower the Registrar to accept enforceable undertakings and increase the range of mid-tier regulatory tools available to ensure compliance with the law.
2.12
It would allow the Registrar to accept written undertakings from a person about any matter that relates to enforceable undertakings (where there has been repeated non-compliance with the Act) and the terms of the undertaking would be directed at the type of non-compliance involved. If, for example, a CATSI corporation has not held general meetings when requested to do so by the prescribed number of members – despite being required to do so under the Act – the Registrar may consider accepting an enforceable undertaking (whereby the corporation might undertake to hold a general meeting within a specified period, or have directors undergo governance training). This Item also allows for a person who has given an undertaking to withdraw or vary the terms of that undertaking at any time – with the consent of the Registrar.
2.13
Under Item 4, it is proposed to empower the Registrar to apply to the Court if it is considered that a person who has given an undertaking has breached any of its terms. It is argued that this power provides the Registrar with an effective and more cost-efficient alternative to having to initiate criminal or civil action against a person for breaches of the Act.
2.14
Proposed subsection 439-25(4) provides that the Court may make any or all of the following orders in response to an application by the Registrar (subsection 439-25(3)):
directing the person to comply with the term of the undertaking that has been breached;
directing the person to pay the Commonwealth an amount that is reasonably attributable to the breach, up to the amount of any financial benefit that the person has gained by committing the breach;
directing the person to compensate any other person to compensate any other person who has suffered loss or damage as a result of the breach; or
any other order that the Court considers appropriate.
2.15
Item 5 proposes a consequential amendment by adding a new paragraph which would ensure that an authorised officer who examines the books of a CATSI corporation or a related body can, in a report to the Registrar, draw attention to suspected breaches of the terms of an enforceable undertaking (given under new section 439-25 in addition to matters currently listed in paragraphs 453-1(1)(a) to (e)).
2.16
Item 6 proposes to replace the Registrar’s existing power to require the production of books with broader powers similar to ASIC’s powers under section 30 of the Australian Securities and Investments Commission Act 2001 (ASIC Act). Amendments proposed under Item 6 would create an offence and a ‘reasonable excuse defence’ (similar to subsections 63(1) and (5) of the ASIC Act. Under this Item, it is also proposed that the Registrar would be:
authorised to issue a notice to a CATSI corporation (or a person acting in certain capacities) to produce specified books relating to the affairs of a CATSI corporation;
allowed to issue notices to produce books relating to the affairs of a CATSI corporation, a related body corporate or a connected entity;
empowered to require the production of books immediately where this is reasonable in all the circumstances. (This would allow the Registrar to act quickly in situations where there is a reasonable basis to be concerned about the possible destruction, concealment or falsification of books); and
empowered to require a person to identify property of a corporation and to explain how the corporation has kept account of that property.
2.17
Item 7 proposes a consequential amendment. The proposed amendment relates to the Registrar’s power to require the production of books and to the retention of the Registrar’s powers to issue a notice to give information or answer questions.
2.18
Item 8 proposes to align the exercise of the Registrar’s powers (to require the production of books) with ASIC’s powers under section 19 of the ASIC Act. The amendment would broaden the grounds upon which the Registrar can issue notices to relevant persons.
2.19
Items 9, 10 and 11 propose consequential amendments (in relation to the Registrar’s power to require the production of books).
2.20
Item 12 proposes an amendment to the current 14-day timeframe for responding to notices to provide information, produce documents or appear to answer questions. Under this amendment, a notice may specify that information is to be provided immediately (if that is reasonable in all the circumstances).
2.21
Items 13 and 14 propose consequential amendments (in relation to the Registrar’s power to require the production of books). Items 15 to 21 propose amendments which would accommodate situations where books are produced to the Registrar rather than to an authorised officer. Item 22 proposes consequential amendments which also relate to the production of books.
2.22
Items 23 and 24 propose a series of amendments in relation to infringement notices and the creation of an infringement notice scheme. The key amendments would:
establish an infringement notice scheme based on offences to be prescribed in the Corporations (Aboriginal and Torres Strait Islander) Regulations 2017 (CATSI Regulations);
provide the Registrar with powers to extend the payment period, or enter into an arrangement to pay by instalments;
require that an infringement notice be issued within 12 months after the day on which the offence was alleged to have been committed;
allow a person to seek an extension from the Registrar (in relation to payment of an infringement notice) during the payment period and allow the Registrar to vary an instalment arrangement; and
allow a person to request the Registrar withdraw an infringement notice within 28 days after the infringement notice is given (and impose a duty on the Registrar to either withdraw, or refuse to withdraw, an infringement notice and advise the applicant accordingly within 14 days of the request).
2.23
Item 25 would insert definitions for ‘payment period’ and ‘prescribed offence’ and Item 26 proposes that the Registrar would only be able to issue an infringement notice for new offences alleged to have been committed after the commencement of Part 2.
Part 3 – Membership applications, member contact details and electronic communication
2.24
Part 3 (Items 27–98) of the bill would allow CATSI corporations to collect additional contact details for members such as email addresses and other alternative contact details. It is noted that the CATSI Act does not currently require that membership applications be considered and determined within a specified timeframe, which, it is stated, can have financial and other consequences for new members. The amendments contained in Part 3 would make it easier for the Registrar and corporations to communicate with members, and would help to ensure that intended recipients of various communications would have access to relevant information in a timely manner.
2.25
The Part 3 amendments, which largely relate to the management of memberships, would also:
provide the process for making receiving and processing membership applications;
require corporations to consider membership applications within a 6-month timeframe;
empower the Registrar to extend or exempt corporations from this timeframe (for specific applications or for membership applications generally);
allow members and former members to request that their personal details be redacted from the register of members or register of former members;
include revised membership cancellation provisions (which are a replaceable rule except for registered native title bodies corporate);
allow CATSI corporations to adopt (membership) cancellation provisions that are specifically tailored to their circumstances; and
introduce a proper purpose test for people wanting to inspect or receive a copy of a register of members or register of former members.
Part 4 – Subsidiaries and joint ventures
2.26
Part 4 (Items 99–110) of the bill contains amendments that would provide greater flexibility in relation to the minimum membership requirements for CATSI corporations. Under Part 4, the minimum number of members would be 5 unless the Registrar determines a lesser number of members. It would also remove impediments to body corporates establishing wholly-owned or joint venture subsidiary corporations, and allow registration of two-member CATSI corporations when only one member is Indigenous – provided the Indigenous member has a casting vote.
2.27
Part 4 amendments propose CATSI corporations are given more flexibility in how they structure their affairs and promote the use of CATSI corporations as vehicles for economic and social development, supported by a suitable regulatory framework. The amendments would also allow a group of entities to be registered under one legislative framework, with the same regulator, which would allow for more streamlined compliance and reporting obligations.
Part 5 – Classification of Corporations
2.28
Part 5 (Items 111–114) of the bill proposes to amend the criteria in the CATSI Act for determining the size of a CATSI corporation. The EM notes that CATSI corporations are classified according to their size, which in turn determines their annual reporting obligations.
2.29
Under the current legislation, a CATSI corporation’s size is determined by a threefold test which is based on income, assets and number of employees. The amendments in Part 5 would provide for corporations to be registered as small, medium or large, based only on a simple, consolidated revenue test.
2.30
It is proposed that the introduction of the new size classification system would align with the CATSI Act – with the criterion for determining entity size under the Australian Charities and Not-for-profits Commission Act 2012 (ACNC Act). It is argued that this measure will assist approximately 30 per cent of CATSI corporations which are also registered under the ACNC Act.
Part 6 – Meetings and reports
2.31
Part 6 (Items 115–146) of the bill proposes a number of amendments to current requirements in relation to meetings and reports.
2.32
It is noted that some CATSI corporations may face circumstances which prevent them from holding their Annual General Meeting (AGM) as planned (or within the timeframe prescribed under the CATSI Act).
2.33
It is also noted that some corporations with geographically dispersed membership-bases can find it expensive to hold an AGM, and/or difficult to form a quorum when their members are unable to travel. In response to COVID-19 restrictions, the Registrar introduced special rules, which allowed CATSI corporations to hold meetings and pass resolutions virtually. It also allowed corporations to meet more frequently and have more people participate in the meetings.
2.34
Part 6 amendments would make these arrangements perpetually available to CATSI corporations. These amendments would also:
enable small corporations (that are not registered entities under the ACNC Act and have less than $1,000 in consolidated revenue in the previous financial year) to pass a special resolution not to hold the next one or two AGMs;
empower the Registrar to direct a corporation to call and hold an AGM if the Registrar is satisfied that there is a need to do so;
allow CATSI corporations to activate an automatic, one-off extension of 30 days to hold an AGM and lodge their reports;
allow directors to defer a meeting for up to 30 days after a notice has been issued (which would help corporations to accommodate unexpected circumstances that make it difficult to hold scheduled meetings;
provide the Registrar with the power to cancel general meetings and AGMs (called by the Registrar); and
require corporations to lay before an AGM any reports they are required to submit to the Registrar (which would provide greater transparency to members in relation to the operations of their corporations, including with respect the financial reports).
Part 7 – Constitutions
2.35
Part 7 (Items 147–150) of the bill proposes to change the way replaceable rules operate in relation to constitutions (also known as rule books).
2.36
These amendments would require that all relevant replaceable rules be referred to in a corporation’s constitution, whether or not the rules have been replaced or modified.
2.37
Part 7 of the bill would also provide a process for the Registrar to reject a constitutional change that is lodged after a special administrator has changed the constitution. (Unless the Registrar’s opinion is that the proposed change is consistent with the change made by the special administrator, or the corporation’s circumstances have changed such that the special administrator’s change is no longer appropriate).
Part 8 – Officers of corporations
2.38
Part 8 (Items 151–195) of the bill introduces two separate definitions for the ‘Chief Executive Officer function’ and the ‘Chief Financial Officer function’.
2.39
The amendments proposed in Part 8 would also make it a requirement for corporations to advise the Registrar if there has been a change in the person performing the Chief Executive Officer and Chief Financial Officer roles within 28 days of that change. This requirement is similar to the existing requirement for corporations to advise the Registrar of a change to their Secretary within 28 days. It is argued that this would ensure the Registrar has up-to-date information regarding the corporation’s key management personnel.
2.40
This part would also require remuneration information about key management personnel to be reported in a remuneration report to the Registrar. It is argued that this would increase transparency with respect to key management personnel employed by CATSI corporations.
Part 9 – Related party transactions
2.41
Part 9 (Items 196–203) of the bill proposes modifications to the requirements in relation to small corporations dealing with low-value related party transactions. It is argued that these amendments take account of the diversity and special circumstances of classes of CATSI corporations and administrative burden associated with transactions of this nature. It is also indicated that these changes are necessary because the current rules for related party transactions can make it difficult for corporations to do business, especially in small communities with extensive kinship ties and limited options for purchasing goods or services.
2.42
Part 9 also introduces a requirement that the Registrar – when considering making a determination to exempt a CATSI corporation from section 184-1 – must not make such a determination unless the Registrar is satisfied that the giving of the particular financial benefit will not cause detriment to the CATSI corporation.
Part 10 – Power to exempt corporation from employee-director requirement
2.43
Part 10 (Items 204 and 205) of the bill would empower the Registrar to exempt corporations from the provision preventing the majority of directors from working as employees, and would also enable the Registrar to issue a determination in relation to the directors of a specific corporation (or class of corporations).
2.44
It is argued that Part 10 represents an important reform because CATSI corporations are formed to support the members to realise economic and community development opportunities – such as sell artwork or deliver tourism activities – or to offer health and municipal services. It is suggested that members might also want to act as directors of the corporation and work as employees in these corporations. For example, they may wish to sell their artwork or undertake cultural heritage work, act as a tour guide, or deliver health services.
Part 11 – Independent directors
2.45
Part 11 (Items 206–212) of the bill proposes amendments which would promote the appointment of independent directors, who bring relevant knowledge, skills and experience which can be of benefit to CATSI corporations.
Part 12 – Modernising publication requirements
2.46
Part 12 (Items 213–254) of the bill proposes amendments which would enable the Registrar to publish notices on platforms that are more accessible. These amendments would also modernise the Registrar’s power to exempt corporations and their directors from exemptible provisions in the CATSI Act.
2.47
It is argued the amendments contained in Part 12 would allow the Registrar to act promptly in individual matters without having to make a legislative instrument, and that these powers would assist where the corporation or its directors are unwilling or unable to make an application. For example, in the event of a natural disaster.
Part 13 – Storage of information
2.48
Part 13 (Item 255) of the bill would allow corporations to store information on platforms such as cloud servers. It would also require corporations to provide a means by which the stored information is accessible at its place of inspection.
2.49
It is argued that this new provision would:
ensure that CATSI corporations are not constrained by artificial requirements with respect to storing records – that are required to be kept and made available for inspection –in accordance with the CATSI Act; and
help modernise the CATSI Act, and enable CATSI corporations to access different technology to assist in record-keeping and compliance.
Part 14 – Improving consistency with Corporations Act
2.50
Part 14 (Items 256–267) of the bill proposes to strengthen the CATSI Act by:
inserting a new definition of the word ‘dishonest’ to align with the Corporations Act;
applying and modifying whistle-blower provisions (in Part 9.4AAA of the Corporations Act) in a manner that reflects the operating context for CATSI corporations;
aligning penalties in the CATSI Act for making or authorising the making of statements that are materially false or misleading with the Corporations Act; and
providing an explanation of what comprises ‘reasonable steps’ in the context of offences for providing false or misleading information.
2.51
Part 14 of the bill also proposes the introduction of ‘qualified privilege’ for auditors of CATSI corporations.
Part 15 – Finalising processes
2.52
Part 15 (Items 268 and 269) of the bill proposes the introduction of two new notices that the Registrar can issue to provide certainty to CATSI corporations.
2.53
The first is issued by the Registrar when they are satisfied with action taken in response to a compliance notice. The second is issued by the Registrar when they are satisfied with the outcome of an examination. It is noted that under these amendments, corporations could present these notices to relevant stakeholders – such as members and funding bodies.
Part 16 – Dealing with unclaimed property
2.54
Part 16 (Items 270–279) of the bill proposes the creation of a new special account for the purposes of the Public Governance, Performance and Accountability Act 2013 (the PGPA Act). This account would be known as the Aboriginal and Torres Strait Islander Corporations Assets Protection Account (Assets Protection Account).
2.55
It is proposed that this new special account would hold funds transferred from the Aboriginal and Torres Strait Islander Corporations Unclaimed Money Account (Unclaimed Money Account) after a period of six years, and these funds would be used to meet the costs associated with managing property vested with the Registrar.
Part 17 – External administration and deregistration
2.56
Part 17 (Items 280–297) of the bill proposes to apply sections 451E to 451H of the Corporations Act to CATSI corporations placed under special administration. It is argued that these amendments would provide some financial certainty to corporations placed under special administration.
2.57
Part 17 also proposes to:
replace one of the grounds on which a CATSI corporation can be placed under special administration with a new ground: which is a serious irregularity in the financial affairs of the corporation;
remove the requirement for the Registrar to issue a show cause notice (when the majority of CATSI corporation’s directors have requested the appointment of a special administrator);
make deregistration – which is cheaper and less complex than voluntary winding up – a more feasible option for CATSI corporations in appropriate cases; and
introduce rebuttable presumptions under which a court may presume that a CATSI corporation is insolvent.
Part 18 – Minor technical amendments
2.58
Part 18 (Items 298–305) of the bill makes a number of technical amendments to the CATSI Act.
Part 19 – Review of financial reports
2.59
Part 19 (Items 306–380) of the bill proposes the introduction of financial reports as an alternative to audits under Chapter 7 of the CATSI Act.
2.60
Part 19 also provides for the making of regulations which would allow for the conduct of reviews and proposes an expansion to the category of practitioners qualified to undertake reviews. This is in contrast to the more restricted class of auditors.
Part 20 – Native Title Register
2.61
Part 20 (Item 381) of the bill proposes amendments to the Native Title Act 1993 (Native Title Act) which would expressly enable the Native Title Registrar to reflect a change to the name of a prescribed body corporate on the Native Title Register when it is revised on the Register of Aboriginal and Torres Strait Islander Corporations.