2008-2009-2010

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

HOUSE OF REPRESENTATIVES

SUPPLEMENTARY EXPLANATORY MEMORANDUM

Amendments moved on behalf of the Government

(Circulated by the authority of the

Minister for Financial Services, Superannuation, Corporate Law and Human Services, the Hon Chris Bowen)

Chapter 1            Explanation of amendment............................................... 1

Context of amendments

1.1                   On 26 May 2010, the Government introduced the Corporations Amendment (Corporate Reporting Reform) Bill 2010 (the Bill) into Parliament.

1.2                   The Bill contains measures to significantly reduce the regulatory burden on companies limited by guarantee.  The Bill also prohibits companies limited by guarantee from paying dividends to their members, as the corporate structure of such companies means that they are not suited for conducting for-profit activities which could legitimately warrant the payment of dividends to members.

1.3                   Since the Bill’s introduction, an issue has arisen about the ability of certain companies limited by guarantee to pay a dividend.  This issue has been addressed by the minor amendment to the Bill.

Detailed explanation of new law

1.4                   The amendment provides that the prohibition on companies limited by guarantee from paying a dividend applies only to companies limited by guarantee incorporated on or after commencement of the Bill.  This amendment will allow existing companies limited by guarantee to pay dividends if they need to do so.

1.5                   The amendment to the Bill commences at the same time as the Bill.