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Corporations (Aboriginal and Torres Strait Islander) Bill 2006

Part 6-5 Disqualification from managing corporations

Division 279 Disqualification from managing corporations

279-1   Disqualified person not to manage corporations

             (1)  A person who is disqualified from managing Aboriginal and Torres Strait corporations under this Part commits an offence if:

                     (a)  the person makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of an Aboriginal and Torres Strait Islander corporation; or

                     (b)  the person exercises the capacity to affect significantly an Aboriginal and Torres Strait Islander corporation’s financial standing; or

                     (c)  the person communicates instructions or wishes (other than advice given by the person in the proper performance of functions attaching to the person’s professional capacity or their business relationship with the directors or the corporation) to the directors of an Aboriginal and Torres Strait Islander corporation:

                              (i)  knowing that the directors are accustomed to act in accordance with the person’s instructions or wishes; or

                             (ii)  intending that the directors will act in accordance with those instructions or wishes.

Penalty:  50 penalty units or imprisonment for 12 months, or both.

             (2)  For an offence against subsection (1), strict liability applies to the circumstance that the person is disqualified from managing Aboriginal and Torres Strait Islander corporations under this Part.

Note:          For strict liability , see section 6.1 of the Criminal Code .

             (3)  If the corporation is a registered native title body corporate, a person who is a common law holder of native title does not contravene subsection (1) merely because the directors of the corporation do (or refrain from doing) a particular act:

                     (a)  in good faith; and

                     (b)  with the belief that doing (or refraining from doing) the act is necessary to ensure that the corporation complies with a Native Title legislation obligation.

Note:          A defendant bears an evidential burden in relation to the matters in subsection (3) (see subsection 13.3(3) of the Criminal Code ).

             (4)  It is a defence to a contravention of subsection (1) if the person had permission to manage the corporation under either section 279-30 or 279-35 and the person’s conduct was within the terms of that permission.

Note:          A defendant bears an evidential burden in relation to the matters in subsection (4) (see subsection 13.3(3) of the Criminal Code ).

             (5)  A person ceases to be a director, alternate director or a secretary of an Aboriginal and Torres Strait Islander corporation if:

                     (a)  the person becomes disqualified from managing Aboriginal and Torres Strait Islander corporations under this Part; and

                     (b)  the person is not given permission to manage the corporation under section 279-30 or 279-35.

Note:          If a person ceases to be a director, alternate director or a secretary under subsection (5), the corporation must notify the Registrar (see subsection 304-5(5)).

279-5   Automatic disqualification

Convictions

             (1)  A person becomes disqualified from managing Aboriginal and Torres Strait Islander corporations if the person:

                     (a)  is convicted on indictment of an offence that:

                              (i)  concerns the making, or participation in making, of decisions that affect the whole or a substantial part of the business of an Aboriginal and Torres Strait Islander corporation; or

                             (ii)  concerns an act that has the capacity to affect significantly the financial standing of an Aboriginal and Torres Strait Islander corporation; or

                     (b)  is convicted of an offence that:

                              (i)  is a contravention of this Act and is punishable by imprisonment for a period greater than 12 months; or

                             (ii)  involves dishonesty and is punishable by imprisonment for at least 3 months; or

                     (c)  is convicted of an offence against the law of a foreign country that is punishable by imprisonment for a period greater than 12 months.

The offences covered by paragraph (a) and subparagraph (b)(ii) include offences against the law of a foreign country.

             (2)  The period of disqualification under subsection (1) starts on the day the person is convicted and lasts for:

                     (a)  if the person does not serve a term of imprisonment—5 years after the day on which the person is convicted; or

                     (b)  if the person serves a term of imprisonment—5 years after the day on which the person is released from prison.

Bankruptcy or personal insolvency agreement

             (3)  A person is disqualified from managing Aboriginal and Torres Strait Islander corporations if the person is an undischarged bankrupt under the law of Australia, its external territories or another country.

             (4)  A person is disqualified from managing Aboriginal and Torres Strait Islander corporations if:

                     (a)  the person has executed a personal insolvency agreement under:

                              (i)  Part X of the Bankruptcy Act 1966 ; or

                             (ii)  a similar law of an external Territory or a foreign country; and

                     (b)  the terms of the agreement have not been fully complied with.

Disqualification under Corporations Act

             (5)  A person is disqualified from managing Aboriginal and Torres Strait Islander corporations at a particular time if the person is, at that time, disqualified from managing Corporations Act corporations under Part 2D.6 of the Corporations Act.

279-10   Extension of period of automatic disqualification

             (1)  This section applies if:

                     (a)  under subsection 279-5(1); or

                     (b)  as a result of the operation of subsection 206B(1) of the Corporations Act and subsection 279-5(5) of this Act;

a person is disqualified from managing Aboriginal and Torres Strait Islander corporations on being convicted of an offence.

             (2)  On application by the Registrar, the Court may extend by up to an additional 15 years the period of disqualification.

             (3)  The Registrar must apply:

                     (a)  before the period of disqualification begins; or

                     (b)  before the end of the first year of the disqualification.

             (4)  The Registrar may apply only once in relation to the disqualification.

             (5)  In determining whether an extension is justified (and if so, for how long), the Court may have regard to any matters that the Court considers appropriate.

279-15   Court power of disqualification—contravention of civil penalty provision

             (1)  On application by the Registrar, the Court may disqualify a person from managing Aboriginal and Torres Strait Islander corporations for a period that the Court considers appropriate if:

                     (a)  a declaration is made under:

                              (i)  section 386-1 (civil penalty provision) that the person has contravened a civil penalty provision; or

                             (ii)  section 1317E of the Corporations Act (civil penalty provision) that the person has contravened a corporation/scheme civil penalty provision (within the meaning of that Act); and

                     (b)  the Court is satisfied that the disqualification is justified.

             (2)  In determining whether the disqualification is justified, the Court may have regard to:

                     (a)  the person’s conduct in relation to the management, business or property of any Aboriginal and Torres Strait Islander corporation or Corporations Act corporation; and

                     (b)  any other matters that the Court considers appropriate.

279-20   Court power of disqualification—insolvency and non-payment of debts

             (1)  On application by the Registrar, the Court may disqualify a person from managing Aboriginal and Torres Strait Islander corporations for up to 20 years if:

                     (a)  within the last 7 years, the person has been an officer of 2 or more corporations when they have failed in the circumstances referred to in subsection (2); and

                     (b)  each of those corporations was either an Aboriginal and Torres Strait Islander corporation or Corporations Act corporation; and

                     (c)  the Court is satisfied that:

                              (i)  the manner in which each of the corporations was managed was wholly or partly responsible for the corporation failing; and

                             (ii)  the disqualification is justified.

             (2)  For the purposes of subsection (1), the circumstances are:

                     (a)  a Court orders the corporation to be wound up under:

                              (i)  section 526-1 of this Act; or

                             (ii)  section 459B of the Corporations Act;

                            because the Court is satisfied that the corporation is insolvent; or

                     (b)  the corporation enters into voluntary liquidation and creditors are not fully paid or are unlikely to be fully paid; or

                     (c)  the corporation executes:

                              (i)  a deed of corporation arrangement; or

                             (ii)  a deed of company arrangement (within the meaning of the Corporations Act);

                            and creditors are not fully paid or are unlikely to be fully paid; or

                     (d)  the corporation ceases to carry on business and creditors are not fully paid or are unlikely to be fully paid; or

                     (e)  a levy of execution against the corporation is not satisfied; or

                      (f)  a receiver, receiver and manager, or provisional liquidator is appointed in relation to the corporation; or

                     (g)  the corporation enters into a compromise or arrangement with its creditors under Part 5.1 of the Corporations Act (as applied by section 45-1 of this Act); or

                     (h)  the corporation is wound up and a liquidator lodges a report under subsection 533(1) of the Corporations Act (including that section as applied by section 526-35 of this Act)about the corporation’s inability to pay its debts.

Note:          To satisfy paragraph (h), the corporation must begin to be wound up while the person is an officer or within 12 months after the person ceases to be an officer. However, the report under subsection 533(1) of the Corporations Act may be lodged by the liquidator at a time that is more than 12 months after the person ceases to be an officer. Sections 513A to 513D of the Corporations Act contain rules about when a winding up begins.

             (3)  For the purposes of subsection (1), a person is an officer of a Corporations Act corporation if the person is an officer of that corporation for the purposes of the Corporations Act.

             (4)  In determining whether the disqualification is justified, the Court may have regard to:

                     (a)  the person’s conduct in relation to the management, business or property of any Aboriginal and Torres Strait Islander corporation or Corporations Act corporation; and

                     (b)  any other matters that the Court considers appropriate.

279-25   Court power of disqualification—repeated contraventions of Act

             (1)  On application by the Registrar, the Court may disqualify a person from managing Aboriginal and Torres Strait Islander corporations for the period that the Court considers appropriate if:

                     (a)  the person:

                              (i)  has at least twice been an officer of a body corporate that has contravened this Act or the Corporations Act while the person was an officer of the body corporate and each time the person has failed to take reasonable steps to prevent the contravention; or

                             (ii)  has at least twice contravened this Act or the Corporations Act while the person was an officer of a body corporate; or

                            (iii)  has been an officer of a body corporate and has done something that would have contravened subsection 265-1(1) or section 265-5 if the body corporate had been an Aboriginal and Torres Strait Islander corporation; or

                     (b)  the Court is satisfied that the disqualification is justified.

             (2)  For the purposes of subsection (1), a person is an officer of a Corporations Act corporation if the person is an officer of that corporation for the purposes of the Corporations Act.

             (3)  In determining whether the disqualification is justified, the Court may have regard to:

                     (a)  the person’s conduct in relation to the management, business or property of any Aboriginal and Torres Strait Islander corporation or Corporations Act corporation; and

                     (b)  any other matters that the Court considers appropriate.

279-30   Registrar’s power of disqualification

Power to disqualify

             (1)  The Registrar may disqualify a person from managing Aboriginal and Torres Strait Islander corporations for up to 5 years if:

                     (a)  within 7 years immediately before the Registrar gives a notice under subparagraph (b)(i):

                              (i)  the person has been an officer of 2 corporations; and

                             (ii)  each of those corporations was either an Aboriginal and Torres Strait Islander corporation or a Corporations Act corporation; and

                            (iii)  while the person was an officer, or within 12 months after the person ceased to be an officer of those corporations, each of the corporations was wound up and a liquidator lodged a report under subsection 533(1) of the Corporations Act (including that section as applied by section 526-35 of this Act) about the corporation’s inability to pay its debts; and

                     (b)  the Registrar has given the person:

                              (i)  a written notice requiring them to demonstrate why the person should not be disqualified; and

                             (ii)  an opportunity to be heard on the question; and

                     (c)  the Registrar is satisfied that the disqualification is justified.

             (2)  A notice under subsection (1) is not a legislative instrument.

             (3)  For the purposes of subsection (1), a person is an officer of a Corporations Act corporation if the person is an officer of that corporation for the purposes of the Corporations Act.

Grounds for disqualification

             (4)  In determining whether disqualification is justified, the Registrar:

                     (a)  must have regard to whether any of the Aboriginal and Torres Strait Islander corporations or Corporations Act corporations mentioned in subsection (1) were related to one another; and

                     (b)  may have regard to:

                              (i)  the person’s conduct in relation to the management, business or property of any Aboriginal and Torres Strait Islander corporation or Corporations Act corporation; and

                             (ii)  whether the disqualification would be in the public interest; and

                            (iii)  any other matters that the Registrar considers appropriate.

Notice of disqualification

             (5)  If the Registrar disqualifies a person from managing Aboriginal and Torres Strait Islander corporations under this section, the Registrar must give a written notice to the person advising the person of the disqualification.

Start of disqualification

             (6)  The disqualification takes effect from the time when a notice referred to in subsection (5) is served on the person.

Registrar power to grant leave

             (7)  The Registrar may give a person whom:

                     (a)  the Registrar has disqualified from managing Aboriginal and Torres Strait Islander corporations under this Part; or

                     (b)  ASIC has disqualified from managing corporations under Part 2D.6 of the Corporations Act;

written permission to manage a particular Aboriginal and Torres Strait Islander corporation or corporations. The permission may be expressed to be subject to conditions and exceptions determined by the Registrar.

             (8)  A permission under subsection (7) is not a legislative instrument.

279-35   Court power to grant leave

             (1)  A person who is disqualified from managing Aboriginal and Torres Strait Islander corporations may apply to the Court for leave to manage:

                     (a)  Aboriginal and Torres Strait Islander corporations; or

                     (b)  a particular class of Aboriginal and Torres Strait Islander corporation; or

                     (c)  a particular Aboriginal and Torres Strait Islander corporation.

             (2)  Subsection (1) does not apply if the person:

                     (a)  was disqualified by the Registrar under section 279-30; or

                     (b)  was disqualified under subsection 279-5(5) because ASIC disqualified the person from managing corporations under section 206F of the Corporations Act.

             (3)  The person must lodge a notice with the Registrar at least 21 days before commencing the proceedings.

             (4)  The order granting leave may be expressed to be subject to exceptions and conditions determined by the Court.

Note:          If the Court grants the person leave to manage the corporation, the person may be appointed as a director (see subsection 246-1(2)) or secretary (see subsection 257-10(2)) of the corporation.

             (5)  The person must lodge with the Registrar a copy of any order granting leave within 14 days after the order is made.

             (6)  On application by the Registrar, the Court may revoke the leave. The order revoking leave does not take effect until it is served on the person.