Purpose of the Bill

The purpose of the Treasury Laws Amendment (Modernising Business Communications and Other Measures) Bill 2022 (the Bill) is to amend existing statutes to ‘maintain and improve Treasury portfolio legislation’ and thereby ‘ensure it remains current and fit-for-purpose’.[1]

Structure of the Bill

The Bill comprises four Schedules each of which amend a number of statutes:

• Schedule 1 is about modernising business communication. It has four Parts which relate to the following topics:
  • documents and meetings under the Corporations Act 2001
  • virtual hearings and examinations
  • payment methods
  • publication requirements
• Schedule 2 contains amendments arising from the Australian Law Reform Commission (ALRC) Financial Services Interim Report. It has five Parts which:
  • remove erroneous references and redundant definitions
  • create consistent headings for sections defining terms
  • establish application and transitional provisions
  • make consequential amendments
• Schedule 3 contains five Parts with amendments to rationalise the ending of Australian Securities and Investments Commission (ASIC) instruments
• Schedule 4 comprises two Parts which make miscellaneous and technical amendments.

Structure of this Bills Digest

As the matters covered by each of the Schedules are independent of each other, the relevant background, stakeholder comments (where available) and analysis of the provisions are set out under each Schedule number.

Senate Standing Committee on Economics

The Bill has been referred to the Senate Standing Committee on Economics for inquiry and report by 25 January 2022.[2] At the time of writing this Bills Digest, no submissions had been published and the Committee has requested an extension of time to report until 3 March 2023 to allow it to consider the evidence received and to conclude its deliberations.

At the time of writing this Bills Digest, only one submission to the Committee had been published. That submission, from the Financial Services Council indicated its support for the measures in Schedule 1 to the Bill:

Making communication requirements technology neutral will benefit consumers, creating faster turnaround times and improved accessibility of advice to clients in rural and regional locations, and to clients who, for various reasons, find it difficult to travel and attend appointments in person.[3]

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.

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 is compatible.[4]

Parliamentary Joint Committee on Human Rights

At the time of writing this Bills Digest, the Parliamentary Joint Committee on Human Rights had not made a statement about the Bill.

Schedule 1—modernising business communications

Commencement

Parts 1, 2 and 3 of Schedule 1 to the Bill commence on the day after Royal Assent.

The amendments in Part 4 of Schedule 1 commence on the earlier of a day to be fixed by Proclamation or 6 months after Royal Assent.

Background

On 21 April 2021 the former Coalition Government announced that it would look towards modernising laws within the Treasury portfolio so that they would be technology neutral.[5] Accordingly, the Treasury Laws Amendment (Modernising Business Communications) Bill 2022 (the first Bill) was introduced into the House of Representatives on 17 February 2022. However, the Bill did not proceed and lapsed at the dissolution of the 46th Parliament.

The Office of Impact Analysis published a Regulation Impact Statement in respect of the first Bill. An updated preface to the Regulation Impact Statement is included in the Explanatory Memorandum to the current Bill.

Rationale for the amendments

Rapid digital and technological advances continue to be a feature of the business and consumer environment. However, regulations have not always kept pace.[6]

As early as 2016, Treasury circulated a proposals paper—Technology neutrality in distributing company meeting notices and materials—as part of its response to the Financial System Inquiry.[7] The paper reflected the Government’s commitment to improving financial regulation by making it technology neutral.[8] Proposed reforms canvassed a technology neutral means:

… by which communications must occur when companies distribute meeting notices and materials to members… Technology neutrality in communications requirements has the potential to enable the provision of data in more usable forms in a timelier manner, through lower cost communication channels, and enable flexibility in the manner in which it is presented.[9]

The suggested reforms did not progress at that time. However, in 2019, the Senate Select Committee on Financial Technology and Regulatory Technology (the Committee) re-emphasised the importance of technology neutrality in laws.[10] In its Interim Report, the Committee noted that a number of submitters had suggested additional measures that could be taken to help modernise the Corporations Act and make it more technology friendly.[11]

Temporary changes which necessarily were enacted by the Government during the COVID-19 pandemic highlighted the need for business to be able to adapt and respond quickly to a changing business environment. Those changes, made under the Corporations Act, provided for virtual meetings and electronic execution of documents, to ensure businesses could continue to operate and meet their regulatory obligations through the COVID-19 pandemic. Those measures have now been made permanent.[12]

Schedule 1 to the Bill amends the Corporations Act and other Commonwealth statutes to ‘modernise communication methods available to consumers, businesses and regulators when interacting with each other’.[13]

Stakeholder comments

At the time of writing this Bills Digest, no comments had been made about this aspect of the Bill by non-government parties/independents or by major interest groups.

Key issues and provisions

Documents and meetings

Expanding the range of documents that can be signed electronically

Under section 9 of the Corporations Act a reference to a document is a reference to any record of information, and includes:

• anything on which there is writing
• anything on which there are marks, figures, symbols or perforations having a meaning for persons qualified to interpret them
• anything from which sounds, images or writings can be reproduced with or without the aid of anything else and
• a map, plan, drawing or photograph.

Part 1 of Schedule 1 amends Part 1.2AA of the Corporations Act which applies to a document, including a deed, that is to be signed by a person with the express or implied authority of a company; or by a director of a company with or without using the company seal.[14] Item 4 repeals and replaces subsections 110(1)–(3) of the Corporations Act so that the rules about technology neutral signing of documents which are set out in section 110A will apply to all documents (including a deed) that are required or permitted to be signed under the Corporations Act.

The effect of the change is that all documents may be signed electronically or by signing a physical form of the document by hand.[15]

Expanding the range of documents that can be sent electronically

Currently section 110C of the Corporations Act applies to a limited list of documents that are sent to a person by a company, a responsible entity of a registered scheme, a corporate director of a corporate collective investment vehicle (CCIV),[16] a disclosing entity or an entity that is specified in regulations. Item 9 in Part 1 of Schedule 1 to the Bill repeals and replaces section 110C so that the section applies broadly to those documents which are to be sent, given, served or dispatched under specified Chapters of the Corporations Act,[17] Schedule 2 to the Corporations Act and to a class of documents which may be specified in regulations. The effect of the amendment is that those documents may be sent in either hard copy or electronic form.

There are exceptions to this general rule. The new provision does not apply to a document that is required or permitted to be sent by, or to, the Australian Securities and Investments Commission (ASIC), the Registrar or the Takeovers Panel (proposed subsection 110C(5)).

Address for documents

Currently section 110D sets out the ways that technology can be used to send documents. Item 11 inserts proposed subsections 110D(5)–(7) into the Corporations Act to specify the address to which a document is sent.

Physical form

Currently paragraphs 110D(1)(a) and (b) allow a document to be sent to a recipient in a physical form; or by giving information in physical form thereby allowing the recipient to access the document electronically. The latter option is dependent upon there being a reasonable expectation at the time that it is sent, that the document would be readily accessible for subsequent reference (subsection 110D(2)). Proposed subsection 110D(5) of the Corporations Act provides that such documents or information are to be sent to the recipient’s nominated electronic address or an address which the sender knows because of the recipient’s membership or interest in the company, registered scheme, CCIV, disclosing entity or notified foreign passport fund.

Electronic form

Currently paragraphs 110D(1)(c) and (d) of the Corporations Act allow for a recipient to be sent a document in electronic form, or information by means of an electronic communication, that allows the recipient to access the document electronically—provided there is a reasonable expectation at the time that it is sent, that the document would be readily accessible for subsequent reference (subsection 110D(2)). Proposed subsection 110D(6) operates so that those electronic communications are to be sent to an electronic address nominated by the recipient.

Election

Section 110E of the Corporations Act sets out the rights of members of companies, registered schemes, CCIVs and disclosing entities of a document to elect to receive their documents in physical or electronic form by notifying the sender of that election. Items 13 and 18 in Schedule 1 to the Bill expand that right to include members of a notified foreign passport fund, holders of securities in the target for a takeover bid and any other person specified in the Regulations: (proposed paragraphs subsections 110E(1)(e)-(g) and proposed paragraphs 110J((3)(e)-(g)).

Currently section 110F of the Corporations Act provides that a failure to comply with a member’s election creates an offence of strict liability where the sender does not take reasonable steps to comply with the election. Item 17 inserts proposed subsections 110F(4A) and (4B) into the Corporations Act. Under new subsection 110F(4A) the sender does not fail to comply with the election if he or she reasonably believes that none of the addresses (including any electronic addresses) for the recipient are current.

Lost members—documents deemed to be sent and received

Item 19 inserts proposed section 110JA into the Corporations Act which provides that a sender does not need to send a document if the member is uncontactable in specified circumstances as explained below.

First, the relief from sending documents only applies where a document is required or permitted to be sent and:

• a company is the sender and the recipient is a member of the company
• the responsible entity of a registered scheme is the sender and the recipient is a member
• the corporate director of a CCIV is the sender and the recipient is a member
• a disclosing entity is the sender and the recipient is a member of the disclosing entity or a managed investment scheme (proposed paragraph 110JA(1)(c)).

Second, the sender has received notification that the recipient’s address in the register of members and their electronic address for receiving electronic documents is not current. In addition the sender reasonably believes that none of the notified addresses are current and is unable to ascertain a current address for the recipient after taking reasonable steps[18] to do so: proposed subsection 110JA(3). These are called the ‘conditions for relief’.

Third, in that case, the sender is deemed to send the document as required when the document is first sent to one or more members and the recipient is deemed to have received the document at the time it is taken to be sent: proposed subsection 110JA(2).

The sender must take reasonable steps during the period of 6 to 18 months after the conditions of relief are first met to advise the recipient that the sending of documents has been suspended but will be resumed if the recipient provides a current address (which may be electronic) to which the documents may be sent. If the sender fails to take such steps, the deeming provision will cease to apply: proposed subsections 110JA(5) and (6).

Virtual hearings and examinations

Part 2 of Schedule 1 to the Bill amends the Australian Prudential Regulation Authority Act 1998 (APRA Act), Australian Securities and Investments Commission Act 2001 (ASIC Act), Competition and Consumer Act 2010 (CCA), National Consumer Credit Protection Act 2009 (NCCPA) and the Tax Agent Services Act 2009 (TASA) to ensure that bodies established under these Acts can use technology for hearings and examinations.

In each case, the Bill inserts the definition of virtual enquiry technology being any technology that allows a person to appear at all or part of a hearing, examination or other enquiry without being physically present at the hearing, examination or other enquiry.[19]

The Bill provides (in near equivalent terms for each of the relevant Acts) for:

• examinations/ hearings to be conducted at one or more physical venues with or without the use of virtual enquiry technology or using virtual enquiry technology only
• where virtual enquiry technology is used the person conducting the proceedings must ensure that the use of the virtual enquiry technology is reasonable
• where the examination/ hearing is held at more than one physical venue with or without the use of virtual enquiry technology or using virtual enquiry technology only, then the person conducting the proceedings may appoint a single place and time at which the examination is taken to have been held.[20]

Key issue–when is use of technology reasonable

Whilst the Bill requires that the use of virtual enquiry technology for a hearing, examination or other enquiry must be reasonable, that term is not defined. Nor are there examples of what might or might not be considered reasonable in any notes to the relevant provisions.

According to the Explanatory Memorandum:

If the regulator decides to use virtual enquiry technology at a hearing or examination, the regulator must ensure that the use of the technology is objectively reasonable. This obligation is designed to protect a person’s rights (including their existing rights to procedural fairness) if they appear at a hearing or examination using virtual enquiry technology, while also giving regulators the necessary flexibility to hold hearings or examinations efficiently. The obligation ensures that persons are not unfairly disadvantaged if the hearing or examination occurs virtually. It also ensures that regulators only hold virtual hearings or examinations if they permit genuine, realistic and proper consideration of all relevant issues, and do not interfere with the person’s existing rights to respond to adverse information.[21] [emphasis added]

Although this explanation implies that a person’s rights are protected if they appear at a hearing or examination using virtual technology, that is not explicitly stated. It might be helpful to insert appropriate examples of reasonable use of technology in each of the relevant sections for the information of regulators and individuals.

Payment methods

Part 3 of Schedule 1 to the Bill makes minor amendments to subsection 254P(2) of the Corporations Act, subsection 129C(2) of the Excise Act 1901 and section 32 of the Small Superannuation Accounts Act 1995 to facilitate the greater use of electronic payments by removing restrictions that preserve where or how a payment may be made.

For instance, item 81 repeals section 32 of the Small Superannuation Accounts Act which currently refers to deposits made to the Commissioner of Taxation in lieu of superannuation contributions and which are to be made by way of valid cheque, money order or cash.

Publication requirements

Part 4 of Schedule 1 to the Bill amends the CCA, the Corporations Act, the Income Tax Assessment Act 1936 (ITAA 1936), the Income Tax Assessment Act 1997 (ITAA 1997), the Insurance Act 1973 the Life Insurance Act 1995, the NCCPA, the Private Health Insurance (Prudential Supervision) Act 2015, the Productivity Commission Act 1998, the Superannuation Industry (Supervision) Act 1993 (SIS Act) and the Tax Administration Act 1953 (TAA). The amendments are intended to modernise existing requirements that require notices to be published in newspapers.

The Regulation Impact Statement which was prepared in respect of the first Bill set out the reasons for the proposed changes:

Using newspapers as a method for public notification is less useful than it was at the time when these regulations were originally introduced. Provisions that require public notices in newspapers may no longer be reaching the intended audience and achieving the intended purpose. Businesses and regulators often need to supplement their notices in newspapers with more contemporary methods of communication to reach their intended audience—illustrating the unnecessary burden and cost on business that these requirements can produce.[22]

The amendments are not in identical terms. However, the intended outcomes are. For instance:

• the amendments to the CCA remove references to publishing a notice in a ‘national newspaper’ and substitute references to publishing a notice ‘in a manner that results in the notice being accessible to the public and reasonably prominent’: items 83–86
• items 108 and 109 amend the ITAA 1937 and the ITAA 1997 in near equivalent terms
• the amendments to the Corporations Act repeal the existing definitions of daily newspaper and national newspaper in section 9 of that Act. In addition, proposed subsection 254Q(5A) (item 91) provides for a notice to be published ‘in a manner that results in the notice being accessible to the public and reasonably prominent’ or in a manner specified by ASIC in a legislative instrument. These terms are replicated with respect to publishing notices in relation to the cessation of business: proposed sections 601CCA and 601CLA
• a minor variation is to be found in the amendments to the National Credit Code which is contained in Schedule 1 to the NCCPA. Items 125–129 amend Division 1 of Part 4 which sets out the rules to be followed by credit providers who alter the obligations of debtors under credit contracts, mortgages and guarantees. The amendments require that notices about unilateral changes in terms must be published ‘in a manner that results in the notice being accessible to the debtor and reasonably prominent’, or in a manner specified by ASIC in a legislative instrument.

Financial impact

According to the Explanatory Memorandum, Schedule 1 to the Bill has no financial implications for the Commonwealth.[23]

In addition, it notes that the ‘average regulatory cost reductions of the measures in Schedule 1 to the Bill are $59.3 million per year’.[24]

Schedule 2—ALRC financial services interim report

Commencement

The amendments in Schedule 2 to the Bill commence on the day after Royal Assent.

Background

In the final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry carried out by Commissioner Kenneth Hayne (the Hayne Royal Commission), the Commissioner opined that ‘the more complicated the law, the harder it is to see unifying and informing principles and purposes’.[25] To that end Commissioner Hayne recommended simplifying the law so that its intent is met.[26] In its formal response to the Hayne Royal Commission, the Government agreed.[27]

On 11 September 2020, the Australian Law Reform Commission (ALRC) was requested to undertake an inquiry into simplification of the legislative framework for corporations and financial services regulation.[28] The Terms of Reference required the ALRC to survey the relevant legislation and make recommendations for simplification:

… with the aim of promoting meaningful compliance with the substance and intent of the law, and laying the foundations for an adaptive, efficient, and navigable regulatory framework, recognising that there are emerging new business models, technologies, and practices.[29]

Interim report A

The ALRC published its first interim report (Interim Report A) in November 2021. The Report contains detailed research about the use of definitions in the Corporations Act and the ASIC Act including regulatory overlaps and inconsistencies.[30]

The Corporations Act and the Corporations Regulations contain a large number of definitions, and defined terms are used remarkably frequently. The Act contains 1,349 definitions of 1,077 unique terms (some terms have multiple definitions). The Corporations Regulations contain an additional 455 definitions (definitions contained in the Act ordinarily apply to the Regulations as well).[31]

Interim Report A provides an analysis of the use of differing terminology across international jurisdictions, as well as the different definitional approaches and uses of legislative hierarchy.[32]

The ALRC’s Interim Report A makes a number of recommendations including, but not limited to:

• the definitions of all words and phrases that are not used as defined terms in the Corporations Act should be removed from that Act[33]
• the Corporations Act should be amended so that the heading of any provision that defines one or more terms (and that does not contain substantive provisions) includes the word ‘definition’.[34]

Policy position of non-government parties/independents

At the time of writing this Bills Digest, no comments had been made about this aspect of the Bill by non-government parties/independents.

Position of major interest groups

The ALRC conducted extensive consultation with stakeholders as part of its review process. It noted:

There has been a level of consensus amongst stakeholders that the law in this area is “too complex” and in need of simplification. Acknowledging that a degree of legal complexity is necessary to regulate complex and evolving industries, most stakeholders nevertheless recognise that some aspects of complexity are unnecessary and unhelpful…

Some stakeholders have described the intricacy of key statutory definitions as ‘impenetrable’. Many have urged that relevant provisions on a particular topic should be grouped together ‘in one place’ to the extent possible, rather than spread unpredictably across different levels of the legislative hierarchy.[35]

Key issues and provisions

The amendments in Schedule 2 to the Bill respond to the ALRC’s recommendations arising from Interim Report A. The amendments to the ASIC Act and the Corporations Act are largely cosmetic and are intended to improve ‘the navigability and clarity of the corporations and financial services law’.[36]

Removing redundant definitions

Item 2 in Schedule 2 to the Bill removes redundant definitions from section 9 of the Corporations Act.[37] According to the Explanatory Memorandum to the Bill:

These terms are not used in the Corporations Act or the Corporations Regulations, or are only used in the Corporations Regulations. For defined terms that are used in the Corporations Regulations, it is more appropriate for the definition to be located in the Corporations Regulations.[38]

Using consistent headings

The words used in headings in the Corporations Act for provisions containing definitions are not consistent.

The amendments in items 4–80, 144 and 148 are intended to ensure that headings of provisions containing definitions are set out in a consistent form across the Corporations Act. For instance, section 51M is currently entitled Mutual entities. Item 11 omits the words Mutual entities and substitutes the words Meaning of mutual entity. The substance of section 51M remains unchanged.

Single use definitions

Items 83, 85, 87 and 90 repeal definitions from section 9 of the Corporations Act because they are only used in one section.

Schedule 2 locates relatively simple definitions in section 9 of the Corporations Act. For instance, items 86 and 89 update the current definitions of examinable affairs and reproductions respectively to simplify the language.

By way of contrast, the definition of funeral expenses facility in section 761A of the Corporations Act is only used in the definition of funeral benefit. For the purposes of Chapter 7 of the Corporations Act, a funeral expenses facility means a scheme or arrangement for the provision of benefits consisting of the payment of money, on the death of a person, for the purpose of meeting the whole or a part of the expenses of and incidental to the funeral, burial or cremation of the person. Item 100 repeals the definition of funeral expenses facility.

Item 99 repeals and replaces the definition of funeral benefit. The new definition incorporates the substance of the repealed definition of funeral expenses facility into the definition of funeral benefit.

Similarly items 91–96 and 106–109 insert longer or more complex definitions in a separate subsection of the section in which the defined term is used—so that the provision is easier to read. For instance, item 94 inserts proposed subsection 300A(5) into the Corporations Act to make clear what positions must be covered by the annual directors’ report as required under section 300A.

Definitions about resolutions

Items 110 and 111 repeal and replace the definitions of extraordinary resolution and special resolution in section 9 of the Corporations Act. In each case the new definition provides a signpost to the operative sections of the Corporations Act which are relevant to the making of such resolutions. Specifically, item 112 inserts proposed section 250MA which sets out the requirements for making a special resolution in relation to a company. Item 113 inserts proposed section 253LA into the Corporations Act setting out the requirements for the making of a special resolution or an extraordinary resolution by the members of a registered scheme.

Other amendments

Item 124 in Schedule 2 repeals the definition of rules in section 9 whilst item 125 inserts a new definition of rules of court being rules of the Federal Court; rules of a State or Territory Supreme Court; or rules of the Federal Circuit and Family Court of Australia (Division 1) as the case requires. Items 126–137 insert the updated definition into various sections.

Similarly, item 140 repeals the existing definition of professional member of an audit team in section 9 of the Corporations Act. Item 141 inserts a new definition of professional member which provides a signpost to the operative section of the Corporations Act—that is, section 324AE. Item 148 repeals and replaces section 324AE to provide a specific meaning of professional member—audit team. The substance of the section is unchanged. The amendments merely ensure consistency in the manner in which the term is used.

Financial impact

According to the Explanatory Memorandum, the amendments in Schedule 2 to the Bill have no financial impact.[39]

In addition, the amendments in Schedule 2 to the Bill have no ongoing additional compliance cost impact or additional impact on regulatory burden.[40]

Schedule 3—rationalisation of ending ASIC instruments

Commencement

The amendments in Schedule 3 to the Bill commence on the day after Royal Assent.

Background

Schedule 3 to the Bill makes amendments to laws in the Treasury portfolio to move matters currently in ASIC legislative instruments into the primary law. According to the Explanatory Memorandum to the Bill:

Approximately 200 ASIC legislative instruments will sunset or cease to operate before 2028. As these instruments approach their end dates, Treasury and ASIC will progressively review the instruments to determine whether the structure and navigability of the law would be improved if the matters in the instruments were instead contained in the primary law or regulations.[41]

The amendments do not change the effect or intent of the ASIC legislative instruments. They merely insert equivalent amendments into primary legislation.

Stakeholder comments

At the time of writing this Bills Digest, no comments had been made about this aspect of the Bill by non-government parties/independents or by major interest groups.

Key issues and provisions

Operation of ASIC Class Order [CO 12/340]

Chapter 5D of the Corporations Act implements the transfer of certain regulatory responsibilities from the states and territories to the Commonwealth in relation to trustee companies that provide ‘traditional trustee company services’, including performing estate management functions, preparing wills, applying for probate of a will and establishing and operating common funds. The Chapter created a national licensing system for trustee companies. These trustee companies are required to hold an Australian financial services licence covering the provision of traditional trustee company services.[42]

Existing section 601RAB of the Corporations Act provides that a company may be prescribed as a trustee company by the Corporations Regulations 2001. However, before a company may be listed in the Regulations the Minister must be satisfied that, amongst other things, an unacceptable control situation does not exist in relation to it in respect of any person.[43]

ASIC made Class Order [CO 12/340] in accordance with subsection 601YAA(1) of the Corporations Act which provides that ASIC may declare that Chapter 5D of the Corporations Act applies to a person or class of persons as if specified provisions were omitted, modified or varied as specified in the declaration.

The Class Order, as made, sets out the definitions of proposed licensed trustee company and proposed trustee company and created section 601VAAA to make clear that Part 5D.5 of the Corporations Act which operates to impose a limit on the control of licensed trustee companies also applies to proposed licensed trustee companies.

What the Bill does

Item 2 in Part 1 of Schedule 3 to the Bill amalgamates the two definitions in CO 12/340 and inserts the definition of proposed licensed trustee company into section 601RAA of the Corporations Act.

In addition, item 3 inserts proposed section 601VAA into the Corporations Act to provide that an unacceptable control situation exists in relation to a licensed trustee company and in relation to a particular person; or a proposed licensed trustee company and in relation to a particular person if the person’s voting power in the company is more than:

• 15% or
• if an approval of a higher percentage is in force under Division 2 in relation to the company and in relation to the person—that higher percentage.

Existing subsection 601VBA(1) of the Corporations Act provides that a person may apply for approval to have voting power in excess of 15% in a licensed trustee company if the person lodges an application with ASIC. Item 4 amends subsection 601VBA(1) to extend the right to seek approval for a higher voting power limit to a person in respect of a proposed licensed trustee company. ASIC must give the application to the Minister as soon as possible.[44]

Item 8 amends subsection 601VCB(4) of the Corporations Act so that the Minister may grant an application in respect of a proposed licensed trustee company if it would be in the interests of that company and its clients for the application to be granted were that company a licensed trustee company.

Similarly, items 10–14 amend section 601VBE of the Corporations Act so that the existing rules for varying the percentage that have been approved are extended to proposed licensed trustee companies. Likewise, items 15–18 amend section 601VBF of the Corporations Act so that existing provisions which allow the Minister to revoke an approval are extended to proposed licensed trustee companies.

Operation of Instrument 2022/498

Part 7.7 of the Corporation Act sets out the rules to be followed to ensure that persons who are provided with a financial service are given a financial services guide (FSG). Within Part 7.7, paragraph 951B(1)(c) of the Corporations Act empowers ASIC to declare that the Part applies in relation to a person or a financial product, or a class of persons or financial products, as if specified provisions of Part 7.7 were omitted, modified or varied as specified in the declaration.

ASIC Corporations (Financial Services Guide Given in a Time Critical Situation) Instrument 2022/498 was made in June 2022. It creates a notional section 941E which has the effect that information in an FSG given to a client in a time critical situation need only be up to date as at the time the earlier statement of key information was given to a retail client in accordance with subsection 941D(2).

What the Bill does

Item 25 in Part 2 of Schedule 3 to the Bill repeals and replaces section 941E of the Corporations Act with text which is in equivalent terms to those in Instrument 2022/498. The Instrument will be repealed when the amendments in Schedule 3 commence (item 26).

The effect of the section is that ‘an FSG given after the provision of a financial service in a time critical case will be the same as an FSG that is given before the provision of a financial service in normal cases’.[45]

Operation of Instrument 2022/66

Part 7.9 of the Corporations Act sets out the rules for financial product disclosure relating to the issue, sale and purchase of financial products.

The ASIC Corporations (PDS Requirements for General Insurance Quotes) Instrument 2022/66 is a relief instrument made under paragraph 1020F(1)(c) of the Corporations Act which empowers ASIC to declare that Part 7.9 applies in relation to a person or a financial product, or a class of persons or financial products, as if specified provisions were omitted, modified or varied as specified in the declaration. Instrument 2022/66 was made on 17 February 2022 and will be repealed when the amendments in Schedule 3 to the Bill commence (item 31).

The Instrument inserts notional section 1012GA into the Corporations Act to modify the requirement to give a Product Disclosure Statement (PDS). It enables a quote for a general insurance product to be given to a retail client in the course of, or because of, a telephone call that is not unsolicited contact (within the meaning of section 992A of the Corporations Act[46]). Instrument 2022/66 does this by applying the requirement differently depending on a decision by the client about whether the client wants a PDS to be given at this stage of the sale process. Under the relief, the client can choose to receive the PDS, and, if they do, the general insurer or intermediary must give a PDS as soon as practicable after the quote is given. This means that the PDS can be given after the telephone call.[47]

What the Bill does

Item 30 in Schedule 3 to the Bill inserts proposed section 1012GA into the Corporations Act in equivalent terms to notional section 1012GA in the Instrument. This means that the relief continues without change.

Operation of Instrument 2022/61

Chapter 2L of the Corporations Act sets out the rules relating to debentures. Within Chapter 2L, subsection 283GA(1) empowers ASIC to declare that the Chapter applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration. The ASIC Corporations (Describing Debentures—Secured Notes) Instrument 2022/61 is such a declaration.

Section 283BH of the Corporations Act sets out how debentures may be described—so that there are three categories ‘mortgage debenture’, ‘debenture’ and ‘unsecured note’ (sometimes called a ‘unsecured deposit note’). The category under which a debenture will fall depends on the nature of any security, the type of property offered as collateral under the security and whether the property that constitutes the security is sufficient to meet the obligations under the debenture. Only tangible property, that is property that has an actual physical existence, such as goods and lands, is considered for this purpose.[48]

Instrument 2022/61 notionally modifies section 283BH of the Corporations Act to introduce an additional category of debenture called ‘secured notes’. For this category of debenture, security may be provided over intangible property, subject to various conditions. [49]

Without the benefit of Instrument 2022/61, the Act would require debentures that are secured by intangible property, such as loans receivable, to be referred to as ‘unsecured notes’.

What the Bill does

Item 32 in Schedule 3 to the Bill inserts proposed table item 2A into the table in subsection 283BH(1) which sets out the categories of debentures so that a secured note is one of those categories—provided that the circumstances in proposed subsection 283BH(4) are satisfied.

Item 33 inserts proposed subsection 283BH(4) and proposed section 283BHA into the Corporations Act. The wording of subsection 283BH(4) is in equivalent terms to the same subsection in instrument 2022/61.

Proposed subsection 283BHA contains the requirements that are set out in subsections (5) and (6) of the Instrument albeit with additional headings and clearer drafting. The substance of Instrument 2022/61 has not been changed.

Instrument 2022/61 will be repealed when the amendments in Schedule 3 commence (item 34).

Operation of Class Order CO 14/41

Part 5 of Schedule 3 to the Bill amends the National Consumer Credit Protection Act 2009 (NCCPA) and the National Credit Code (which is located in Schedule 1 to the NCCPA).[50]

Subclause 203A(3) of the National Credit Code (the Code) allows ASIC, by legislative instrument, to exempt a class of persons, contracts, mortgages, guarantees or consumer leases from all or specified provisions of this Code. Accordingly, ASIC originally made Class Order [CO 14/41] on 11 February 2014. The Class Order has been repeatedly extended, most recently on 24 February 2022. It will continue in effect until it is repealed by the commencement of Schedule 3 to the Bill (item 40).

The current form of ASIC Class Order [CO 14/41] defines a simple arrangement as an agreement that defers or reduces the obligations of a debtor[51] or a lessee[52] for a period of no more than 90 days. Where such simple arrangements exist, the Class Order relieves a credit provider or lessor from requirements in the Code to:

• record the fact that the credit provider and debtor (or lessor and lessee) have agreed to change the contract (or consumer lease) in a hardship variation and
• provide written notice setting out the particulars of any changes to the terms of the contract (or consumer lease).

What the Bill does

Items 35–38 in Part 5 of the Bill amend the Code to formalise these arrangements. Instead of inserting a definition of simple arrangement the amendments merely reduce the relevant obligations under a credit contract (proposed subclauses 72(4A) and 73(1A)) and under a consumer lease (proposed subclauses 177B(4A) and 177C(1A)) for a period not exceeding 90 days.

Financial impact

The amendments in Schedule 3 to the Bill have ‘no financial implications.[53] In addition they are ‘unlikely to have more than a minor impact on compliance costs’.[54]

Schedule 4

Schedule 4 contains miscellaneous and technical amendments to a range of Commonwealth statutes.

The amendments in Part 1 to Schedule 4 commence on the day after Royal Assent. The amendments in Part 2 to Schedule 4 commence on the first 1 January, 1 April, 1 July or 1 October to occur after Royal Assent.

According to the Explanatory Memorandum to the Bill the amendments in Schedule 4 to the Bill are ‘estimated to have a small but unquantifiable impact on receipts over the forward estimates period’.[55]