Bills Digest no. 170 2006–07
Corporations (NZ Closer Economic Relations) and Other Legislation
Amendment Bill 2007
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
Main Provisions
Financial implications
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Corporations
(NZ Closer Economic Relations) and Other Legislation Amendment Bill 2007
Date introduced:
29 March 2007
House:
House of Representatives
Portfolio:
Treasury
Commencement:
The substantive parts of Schedules 1 & 2 commence on a date to be
fixed by Proclamation, or 6 months after the day the Act receives Royal
Assent, whichever is the sooner. Schedule 3 commences on the 28th
day after the Act receives Royal Assent.
The purpose of the Bill is to give
effect to Australia’s obligations under the Agreement between the Government
of Australia and the Government of New Zealand in relation to the Mutual
Recognition of Securities Offerings, and to amend the Trade Practices
Act 1974 to include a scheme for the disclosure of information gathered
by the Australian Competition and Consumer Commission (ACCC).
In October 2001, the Australian Minister for Financial
Services and Regulation wrote to his counterpart in New
Zealand suggesting that the two countries
consider formal processes for mutual recognition in financial services
regulation.(1) This led to the Agreement between the Government
of Australia and the Government of New Zealand in relation to the Mutual
Recognition of Securities Offerings. This Bill essentially gives effect
to Australia’s
obligations under that agreement, to implement a mutual recognition scheme
in relation to securities offerings. It should be noted that, although
initially applying only to relations with New
Zealand, the scheme of the Bill is such
that it can be extended to offers originating in other foreign jurisdictions
if a similar agreement is reached with them.(2) In deciding
upon an appropriate option for the implementation of a mutual recognition
regime, the Government has considered three options: disapplication of
foreign law, incorporation of foreign law and compliance with substantive
requirements of domestic law. The third of those options – compliance
with substantive requirements of domestic law – is the option favoured
by the Government, and the option implemented by this Bill. The same option
was favoured by the Government of New Zealand.(3) Details of
this option are outlined in the main provisions section. Details of the
other options can be found in the Explanatory Memorandum to the Bill.
Schedule 3 is titled ‘Protection of information obtained
by the ACCC’. It is, however, as much about disclosure of information
as it is about protecting it. The schedule comes about due to a recommendation
of the Productivity Commission in its 2004 Research Report ‘Australian
and New Zealand Competition and Consumer Protection Regimes’. That
report included:
RECOMMENDATION 6.4
The Trade Practices Act 1974 (Cwlth) and the Commerce
Act 1986 (NZ) should be amended to allow the Australian Competition
and Consumer Commission and the New Zealand Commerce Commission to exchange
information that has been obtained through their information gathering
powers.(4)
The Bill implements new provisions in the Trade Practices
Act that will allow the ACCC to disclose information collected by it to
a wide range of agencies including any foreign government body. The new
provision will give the ACCC powers similar to those given to ASIC under
section 127 of the Australian Securities and Investments Commission
Act 2001.
The Bill was referred to the Senate Standing Committee
on Economics. The Committee, comprising representatives from the Liberal,
National, Labor and Democrat parties, recommended, without dissent, that
the Bill be passed.(5) The Bill subsequently passed the House
of Representatives on 10 May without opposition. The ALP position on the
Bill was described this way during debate:
Labor supports initiatives to enhance economic relationships
between Australian and New Zealand.
This bill achieves this objective by allowing for the mutual recognition
of the issue of securities offerings and companies to reduce costs associated
with doing business. Labor also believes that provisions amending the
role of the ACCC in terms of disclosure and protection of certain information
are important in terms of building the capacity to cooperate across
the Tasman.(6)
The issue of consultation was raised during the Senate
Committee’s inquiry, the Law Council of Australia having expressed concern
at what it saw as the short time available in which to make submissions
on the Bill. Treasury representatives explained that:
We had six weeks public consultation. Furthermore, in
2004 this scheme had a two-month public consultation period about the
principles of the scheme.(7)
There
were only two submissions to the Senate Committee’s inquiry into the Bill.
One from the Law Council, the other from the Security & Derivatives
Industry Association (SDIA). Apart from its complaint about the time allowed
for submissions, the Law Council generally supported the Bill, but emphasised
the need for symmetry between regulatory regimes in the two jurisdictions,
in order to avoid forum shopping by prospective offerors. The SDIA submission
was broadly supportive of the provisions in the Bill.
Items 6, 8 & 9 of Schedule 1 amend the definition
of ‘ED securities’ in various sections of the Corporations Act. The effect
is that foreign offerors will be subject to the continuous disclosure
provisions in Chapter 6CA of the Corporations Act where 100 or more people
hold securities, or interests in managed investment schemes, from the
time of issue.
Item 18 of Schedule 1 inserts into the
Corporations Act proposed Chapter 8, relating to the mutual
recognition of securities offers. Part 8.1 provides definitions
of various terms used throughout the chapter. Part 8.2 regulates
foreign offers that are to be recognised in the Australian jurisdiction.
Proposed section 1200B provides that an offer becomes a
recognised offer on the first day it is made, provided that it meets the
conditions specified in section 1200C. The conditions include:
- that the person making the offer must be either a natural person
resident in the recognised jurisdiction or an incorporated entity under
the law of the recognised jurisdiction
- the person has not been banned by ASIC from making offers, and
- various formal requirements including the lodging of the documents
described in proposed section proposed 1200D.
Proposed section 1200F provides for the
effect of a recognised offer’s status as such. The section includes a
table listing various provisions of the Corporations Act that do not apply
to recognised offers. Recognised offers will, instead, be required to
comply with proposed Division 3, which contains the requirement for compliance
with the laws of the foreign jurisdiction (s1200G)
Proposed section 1200G provides for further
conditions with which an offeror must comply including that the offer
must comply with the law of the recognised jurisdiction.
Proposed section 1200H requires a foreign
offeror to lodge with ASIC details of an address for service within this
jurisdiction (Australia).
Proposed section 1200J provides that a
foreign offeror, in respect of a managed investment scheme, must have
a dispute resolution scheme that complies with subsection 1017G(2) of
the Corporations Act, unless exempted by ASIC.
Proposed Division 5 of Chapter 8 provides
for ASIC’s powers in relation to recognised offers. Proposed section 1200N
provides a table that describes various circumstances and the orders that
ASIC is entitled to make in response. Proposed section 1200P
empowers ASIC to declare that a person be banned for up to 5 years from
making a recognised offer, where that person has committed wrongdoing
in relation to a recognised offer. Proposed section 1200P
includes a process that allows for a person to make submissions to ASIC
before such a declaration is made. The person may be legally represented.
Proposed section 1200S requires that, where
a body proposes to make an offer in a recognised foreign jurisdiction,
and the offer is, under the mutual recognition scheme, to be regulated
by the law of Australia, the body must lodge written notice of the fact
with ASIC.
Proposed section 1200U empowers ASIC to
order that offers not be advertised in a recognised jurisdiction where
there is a breach of Corporations Act provisions relating to product disclosure
statements.
Item 1 inserts proposed section 601CDA into the
Corporations Act. This section exempts companies from lodging, with ASIC,
information or documents where the company has lodged similar documents
with a foreign regulator. Foreign companies will still be required to
register as such with ASIC before they operate in Australia.
Item 1 inserts into the Trade Practices Act proposed
new section 155AAA. The section provides for a regime of disclosure
and protection of information obtained by the ACCC in the exercise of
its functions. The ACCC may, in specified circumstances, release information
to the Minister, the Secretary of the relevant Department, a Royal Commission,
and a host of regulatory bodies listed under subsection (12), including
a foreign government body.
Financial implications
The Financial Impact Statement notes that:
Schedule 1 and 2 of the Bill will require Commonwealth
expenditure.
There will be minor implementation costs for the
regulator, ASIC, from the measures in the Bill.
This Bill is directed at improving regulatory co-operation
and integration between Australia
and New Zealand
(and possibly between Australia
and other jurisdictions) in relation to securities offerings. The Bill
has generally been supported by stakeholders and has met with bipartisan
support in the Senate Standing Committee on Economics, as well as in the
House of Representatives.
- Joint Standing Committee on Treaties, ‘Report 75:
Review of Treaties tabled on 11 October 2005 (2), 28 February and 28 March 2006 (2)’, par. 8.5.
- Explanatory Memorandum, Corporations (NZ Closer
Economic Relations) and Other Legislation Amendment Bill 2007, p. 41.
- ibid., p. 25.
- Productivity Commission, Research Report, December
2004, p. xxvii.
- Senate Standing Committee on Economics, ‘Corporations
(NZ Closer Relations) and Other Legislation Amendment Bill 2007 [Provisions]’,
Canberra, May 2007.
- Catherine King MP,
‘Second reading speech: Corporations (NZ Closer Economic Relations)
and Other Legislation Amendment Bill 2007’, House of Representatives,
Debates, 10 May 2007, p. 43.
- Ms Cherie Rebecca Parker, Senior Analyst, Market Integrity
Unit, Corporations and Financial Services Division, Markets Group, Treasury,
Senate Standing Committee on Economics, Transcript, 23 April 2007, p.
E2.
Jerome Davidson
7 June 2007
Law and Bills Digest Section
Parliamentary Library
© Commonwealth of Australia
This work is copyright. Except to the extent of uses permitted by the
Copyright Act 1968, no person may reproduce or transmit any part of this
work by any process without the prior written consent of the Parliamentary
Librarian. This requirement does not apply to members of the Parliament
of Australia acting in the course of their official duties.
This work has been prepared to support the work of the Australian Parliament
using information available at the time of production. The views expressed
do not reflect an official position of the Parliamentary Library, nor
do they constitute professional legal opinion.
Feedback is welcome and may be provided to: web.library@aph.gov.au.
Any concerns or complaints should be directed to the Parliamentary Librarian.
Parliamentary Library staff are available to discuss the contents of publications
with Senators and Members and their staff. To access this service, clients
may contact the author or the Library’s Central Entry Point for
referral.
|
