Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard   

Previous Fragment    Next Fragment
Wednesday, 8 May 1985
Page: 1856

Mr LIONEL BOWEN (Attorney-General)(4.12) —I move:

That the Bill be now read a second time.

This is the first of two Bills that I am introducing today pursuant to the Commonwealth's obligations under the co-operative companies and securities scheme. I would like to outline, for the benefit of honourable members, the administrative and legislative context in which the Bill has been prepared, and the principal amendments proposed. A detailed description of the provisions of the Bill is contained in the explanatory memorandum which has been circulated to honourable members for information.

Co-operative Companies and Securities Scheme

The formal agreement executed by the Commonwealth and all the States on 22 December 1978 provides the framework for a co-operative Commonwealth-State scheme for a uniform system of law and administration regulating companies and the securities industry. The scheme covers the relevant law operating in the six States and the Australian Capital Territory. In accordance with the formal agreement, this legislation has been agreed to by the Ministerial Council for Companies and Securities. If passed by this Parliament, it will have the effect of automatically amending the corresponding State companies legislation.

Outline of Proposals

During January this year the Ministerial Council released for public comment two proposed amendments to the Companies Act. One dealt with limited liability for the holders of units in unit trusts and the other was for the introduction of a new, shorter form of annual return. In respect of the first proposal, the Ministerial Council subsequently decided that the aims of the proposal could be more simply and appropriately achieved by administrative rather than legislative means. The legislative amendments which had been drafted to give effect to the proposal were necessarily complex and had the potential to operate inequitably. Instead the National Companies and Securities Commission will require, in appropriate cases, that a prospectus include a prominent statement as to whether the trust deed limits the liability of a unit holder, or whether the unit holder's liability is not limited. Investors may protect themselves by investing only in funds where the trust deed limits their liability to any unpaid subscriptions.

The second proposal, which was released for public comment in January and which is the subject of the Bill that I am now introducing, involves a reduction of the regulatory burden on the business community by introducing more streamlined annual reporting obligations for the majority of companies. As originally released for public comment, the proposal contained four basic elements. The introduction of a new form of annual return which could be partially prepared by the State and Territory corporate affairs commissions as delegates of the National Companies and Securities Commission, using their computer facilities; the inclusion of key items of financial information in annual returns of all companies; relieving exempt proprietary companies that do not have their accounts audited of the obligation to lodge a copy of their accounts and other documents with their annual returns; and a reduction in the time limits for lodging annual returns with the corporate affairs commissions. It was intended that the reduction in the amount of information included in and annexed to an annual return would more closely tailor that information to the requirements of people searching company records.

Public submissions generally welcomed the concept of the short form of annual return. However, there was opposition to any reduction in the time limits for lodgment of annual returns and the proposal that all companies should be required to disclose key items of financial information. Following its consideration of the views expressed in the public submissions, the Ministerial Council decided to proceed with a modified version of the original proposal. The principal changes were the retention of the existing maximum time limits for lodgment of annual returns and the retention of the existing exemption under which exempt proprietary companies that have appointed an auditor do not have to disclose any financial information. This proposal will be partly implemented by amending the Companies Act and partly by amending the Companies Regulations. The amendment to the regulations will provide for the introduction of the new form of annual return. Amendments to the regulations will also make the changes required to relieve exempt proprietary companies of the requirement to attach full accounts to their annual returns.

I now turn to the two main aspects of the proposal which require amendments to be made to the Companies Act, namely, the new method of preparing annual returns and the timing of their lodgment with State and Territory Corporate Affairs Commissions.

Preparation Of Annual Returns

The Bill amends section 263 of the Companies Act to enable the corporate affairs commission to partially prepare an annual return for each company using information that each company has previously supplied to it. Upon receipt of a partially completed annual return from the corporate affairs commissions, companies will be required to make any amendments that might be required to the information inserted by the relevant corporate affairs commissions; insert any additional information that might be required; and lodge the completed document with the relevant corporate affairs commission within the period allowed under the Companies Act. The procedures outlined will apply only in those States and Territories where the delegates of the NCSC have automatic data processing facilities programmed for that purpose. Where delegates do not have ADP facilities, companies will be required to prepare their annual returns, using the new form, in much the same way as they do at the present time.

Lodgment of Annual Returns

This Bill amends section 263 of the Companies Act to provide that the annual return of a company may be lodged with the NCSC at any time between the end of the company's financial year and one month after the date of the annual general meeting held in respect of that financial year. The effect of this amendment will be to make the ending of a company's financial year the event which creates the requirement to lodge an annual return, rather than the holding of the annual general meeting as at present. Thus, although the existing maximum time limits will continue to apply for the lodgment of annual returns by the majority of companies, companies will be able to lodge their returns prior to the date of their annual general meetings if they so desire.

There is, nevertheless, one small group of companies that will be required to lodge their annual returns within a shorter period of time than at present. These are the companies that have established a branch share register outside Australia. As these companies have to obtain information from their branch share registers for the purpose of completing their annual returns, they are currently allowed an extra month in which to lodge those returns with the NCSC to compensate for communication delays between Australia and other parts of the world. However, with modern communication facilities, information can be obtained from overseas almost as quickly as from other parts of Australia. Accordingly, there appears to be no reason why these companies cannot lodge their annual returns within the same time limits as are imposed on other companies.

Consequential Amendments

Clause 7 of the Bill will insert a new section 265A in the Companies Act which will provide that where a company should have lodged documents with the National Companies and Securities Commission giving details of changes in company officers, registered office and the like, those documents will be deemed to have been lodged with the National Companies and Securities Commission if all of the particulars required to have been included in them are included in the company's annual return. Further streamlining of the regulatory requirements will be achieved by dispensing with various requirements for separate certificates to be attached to annual returns. The information will simply be required as separate items in the annual return itself. It is proposed that the substantive amendments will be proclaimed in the second half of 1985. As a consequence, for the majority of companies the changes will first apply in respect of annual returns that are lodged in 1986.

Financial Impact Statement

I will now make some reference to the financial impact that this Bill will have on Government revenues and expenditure. The changes in this Bill will result in additional costs to the National Companies and Securities Commission for matters such as partially completing annual returns and sending them to companies. However, this increase in costs will be more than offset by a lower cost for processing lodged returns. In the case of the Australian Capital Territory Corporate Affairs Commission, the cost of preparing and dispatching partially completed annual returns is estimated to be $9,000 per annum, while expected savings are in the order of $18,000 per annum. The savings to State governments will be considerably greater in respect of the amendments applied as State laws. As mentioned previously, the overall effect of these changes will be to reduce the regulatory burden imposed on companies. As a consequence, they should result in a lowering of the cost of completing and lodging future annual returns. However, it has not been possible to quantify the extent of this cost saving to the commercial community. The Government commends the Companies Amendment Bill to the House.

Debate (on motion by Mr MacKellar) adjourned.