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Dairy Produce Amendment Bill 2004

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2002-2003

 

 

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

DAIRY PRODUCE AMENDMENT BILL 2003

 

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by authority of the Minister for Agriculture, Fisheries and Forestry,

the Hon Warren Truss MP)



DAIRY PRODUCE AMENDMENT BILL 2003

 

GENERAL OUTLINE

 

From 1 July 2003, the statutory corporation, the Australian Dairy Corporation was converted into a private company, limited by guarantee.  Additionally, all assets and liabilities of the Dairy Research and Development Corporation were transferred to the new private company.  This company, known as Dairy Australia Limited, was declared the industry services body by the Minister for Agriculture, Fisheries and Forestry, and is required to undertake research and development and other activities for the benefit of the Australian dairy industry.  The industry services body is also required to manage the Dairy Structural Adjustment Fund in the form of a trust.

 

This Bill

 

Ÿ    entitles the industry services body to be fully indemnified out of the assets of the Dairy Structural Adjustment Fund;

Ÿ    applies this entitlement to be fully indemnified before, during and after commencement of this Bill;

Ÿ    enables the industry services body to raise money other than by borrowing, in respect of its role in keeping and administering the Dairy Structural Adjustment Fund - specifically to deal in securities;

Ÿ    enables the industry services body to enter into and deal with contracts through hedging;

Ÿ    enables the industry services body to raise money other than by borrowing;

Ÿ    provides for money standing to the credit of the Dairy Structural Adjustment Fund to be used for these purposes;

Ÿ    includes the Reserve Bank in the definition of an Australian Authorised Deposit Taking Institution.

 

Finally, Schedules 2 and 3 of this Bill will commence from 1 July 2003, which will ensure that financial undertakings by the company are not exposed or otherwise affected detrimentally.

 

FINANCIAL IMPACT STATEMENT

 

There will be no financial impact on the Commonwealth.



NOTES ON CLAUSES

 

Clause 1: Short Title

 

Clause 1 provides for the Act to be cited as the Dairy Produce Amendment Act 2003 .

 

Clause 2: Commencement

 

Clause 2 sets out the commencement information in a table and specifies that sections 1 to 3 and Schedule 1 will commence upon Royal Assent to the Bill.  Schedules 2 and 3 are to commence immediately after the commencement of the Dairy Industry Service Reform Act 2003 , which was 1 July 2003.  The commencement of schedules 2 and 3 at this time is necessary to ensure the industry services body is not exposed or in any way impeded in its prudent management of the Dairy Structural Adjustment Fund and that there is no concern as to the nature of current contracts and financial arrangements, which could potentially have a detrimental effect on the Dairy Structural Adjustment Fund.

 

Clause 3: Schedule(s)

 

This clause provides that each act specified in a schedule to the Bill is amended or repealed as set out in the relevant schedules and that any other item in a schedules has affect in accordance with its provisions.

 

SCHEDULE 1 - Indemnification of industry services body

 

Item 1 Before paragraph 79(o) of Schedule 2

This item provides for the entitlement of the industry services body to be fully indemnified against any liability incurred in relation to the management of the Dairy Structural Adjustment Fund to be funded from the Dairy Structural Adjustment Fund, should an amounts become payable.  Section 79 deals with all matters for which money standing to the credit of the Dairy Structural Adjustment Fund can be expended.

 

Item 2 At the end of Part 3 of Schedule 2

Section 197 of the Corporations Act 2001 provides that, if a trustee is not fully indemnified against liabilities which may arise in the course of administering the trust - in this case, the Dairy Structural Adjustment Fund - a person who is a director of a corporation when it incurs a liability while acting, or purporting to act, as trustee, is liable to discharge the whole or a part of the liability .  This item provides for the industry services body to be fully indemnified against any liability that may arise in the course of the industry services body keeping and administering the Dairy Structural Adjustment Fund in the form of a Trust.  The indemnity is to be internalised to the Dairy Structural Adjustment Fund.

 

However, this clause does not indemnify the industry services body against acts such as, for example, bad faith, fraud, a breach of trust, or otherwise than a reasonably prudent trustee would act, which is in accordance with the principles of trust law. 

 

Item 3 Application

This item allows for the entitlement of the industry services body to be fully indemnified out of the assets of the Dairy Structural Adjustment Fund to apply before, on or after commencement.  This is to provide clarity about the industry services body’s recourse to an indemnity for liabilities that may have arisen prior to the commencement.  A temporary Commonwealth indemnity has been provided to the directors of the industry services body until such time as the Act can be amended, at which time, it is intended that a deed of release will be executed.  It is preferable that this entitlement is clear and consistent, whether in relation to liabilities arising before this item, or after.  This will have no detrimental effect on the industry services body, but rather, simplifies the understanding of its indemnity entitlement.

 

SCHEDULE 2 - Application of the Dairy Structural Adjustment Fund

 

Items 1 and 2  subclause 77C(1) and 77C(2) of Schedule 2

This item makes provision for the industry services body to raise money other than by borrowing.  As outlined in Item 3, this may include dealing in securities, hedging through currency contracts and obtaining credit.  Such facilities will be part of normal and prudent management of the Dairy Structural Adjustment Fund and were previously available to the Australian Dairy Corporation in its management of the Fund.  This provision was removed from the Dairy Produce Act as part of the conversion of the Australian Dairy Corporation into a private company limited by guarantee.  It is appropriate the facility be reinstated for the industry services body.

 

Item 3 After clause 77C of Schedule 2

This item makes provision for the industry services body to borrow or raise money otherwise than by borrowing, by dealing with securities, and provides an explanation of the term dealing with securities , including a range of mechanisms for doing so.  The term securities is also defined in this item to mean stocks, debentures, debenture stocks, notes, bonds, promissory notes, bills of exchange and similar instruments or documents. 

 

Additionally, this item inserts a new provision to allow the industry services body to hedge through a number of types of contracts, including currentcy, interest rate and futures contracts, dealings in currency and interest rate swaps and options.  Such contracts are limited to contracts entered into for the purposes of managing risk of variations in the costs of borrowings or the raising of money for the purpose of making payments for which the money standing to the credit of the Dairy Structural Adjustment Fund can be used.

 

The item defines the terms currency contract and futures contract .  An additional clause is to be added to provide for the industry services body to raise money, otherwise than by borrowing through obtaining credit through the issue of an instrument acknowledging a debt in consideration of the payment or deposit of money, or the provision of credit or the obtaining of credit. 

 

This item will ensure the company can deal with securities as part of its normal management program for keeping and administering the Dairy Structural Adjustment Fund.  This facility was available to the Australian Dairy Corporation in its function of keeping and administering the Dairy Structural Adjustment Fund, prior to its conversion to Dairy Australia.

 

Item 4 Paragraph 78(h) of Schedule 2

Section 78 of the Dairy Produce Act deals with money that can be paid into the Dairy Structural Adjustment Fund.  The term “or otherwise raised” is inserted to ensure that money raised as described in items 2 and 3 can be deposited into the Fund.

 

Item 5 After paragraph 78(h) of Schedule 2

This item provides for money received by the industry services body as described in Item 3, which includes money raised through hedging contracts, can be paid into the Dairy Structural Adjustment Fund.

 

Items 6 and 7 Paragraphs 79(m) and 79 (n) of Schedule 2

Section 79 of the Dairy Produce Act deals with expenditure of money standing to the credit of the Dairy Structural Adjustment Fund.  The terms “or otherwise raised” and “or otherwise raising” are inserted into these paragraphs to ensure that money standing to the credit of the Dairy Structural Adjustment Fund can be expended on activities as described in items 2 and 3.

 

Item 8 After paragraph 79(n) of Schedule 2

This item provides for the money standing to the credit of the Dairy Structural Adjustment Fund to be expended on obligations and liabilities in respect of contracts dealt with under item 3.  This ensures that the industry services body can undertake such activities and meet any associated obligations out of the Dairy Structural Adjustment Fund.  This is an appropriate use of these monies, as they relate to the industry services body’s function of keeping and administering the Dairy Structural Adjustment Fund.

 

Items 9 and 10 Paragraph 94(2)(d) of Schedule 2

Paragraph 94 deals with outstanding items, which the Minister must be satisfied have been satisfied before declaring the levy termination day for the Dairy Adjustment Levy.  As with items 6 and 7 above, these items provide for expenses associated with money raised otherwise than by borrowing to be included in the type of expenses the Minister must be satisfied are not outstanding at the time of the declaration.

 

Item 11 Paragraph 94(2)(d) of Schedule 2

This item removes a full stop and inserts a semi-colon after expanded, to provide for additional items in this paragraph.

 

Item 12 At the end of subclause 94(2) of Schedule 2

This item provides for the type of expenses the Minister must be satisfied are not outstanding at the time of the declaration of the levy termination day to include expenses, obligations and liabilities in respect of contracts dealt with under item 3. 

 



SCHEDULE 3 - Depositing money of the Dairy Structural Adjustment Fund

 

Item 1 Subclause 79A(2) of Schedule 2 (after paragraph (a) of the definition of Australian ADI )

This item provides for the Reserve Bank of Australia to be included in the definition of an Australian ADI, that is an Australian Authorised Deposit Taking Institution, as the Reserve Bank is not included in the definition of an Australian ADI in the Banking Act 1959 , which is referenced in the Dairy Produce Act.