Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Corporations (Aboriginal and Torres Strait Islander) Amendment (Strengthening Governance and Transparency) Bill 2018

Bill home page  


Download WordDownload Word


Download PDFDownload PDF

 

 

 

2016-2017-2018

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

THE SENATE

 

 

 

 

CORPORATIONS (ABORIGINAL AND TORRES STRAIT ISLANDER) AMENDMENT (STRENGTHENING GOVERNANCE AND TRANSPARENCY) BILL 2018

 

 

EXPLANATORY MEMORANDUM

 

 

 

(Circulated by authority of the

Minister for Indigenous Affairs, Senator the Honourable Nigel Scullion)



Table of Contents

Glossary . 3

PURPOSE AND OBJECTIVES . 4

GENERAL OUTLINE .. 4

BACKGROUND .. 5

FINANCIAL IMPACT STATEMENT .. 5

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS . 5

NOTES ON CLAUSES . 6

Schedule 1 — Amendments . 7

Part 1 — Classification of Aboriginal and Torres Strait Islander corporations . 7

Part 2 — Constitutions . 9

Part 3 — Review of financial reports . 16

Part 4 — Subsidiaries and other entities . 21

Part 5 — Meetings and reporting obligations . 24

Part 6 — Members and membership . 30

Part 7 — Key management personnel 33

Part 8 — Related party transactions . 35

Part 9 — Special administration . 36

Part 10 — Voluntary deregistration . 37

Part 11 — Investigation and enforcement 39

Part 12 — Publication of notices . 42

Part 13 — Independent Directors . 43

Part 14 — Qualified privilege for auditors . 44

Part 15 — Resolutions to be the same in all material respects . 45

Part 16 — Unanimous requests for special administration . 46

Part 17 — Insolvency . 47

Part 18 — Conflicting duties under State or Territory legislation . 49

Part 19 — Minor technical amendments . 50

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS . 52

 



 

Glossary

The following abbreviations and acronyms are used throughout this explanatory memorandum

Abbreviation

Definition

Act

Corporations (Aboriginal and Torres Strait Islander) Act 2006

ACNC Act

Australian Charities and Not-for-profits Commission Act 2012

Accounting Standards

A standard in force under section 334 of the Corporations Act (which refers to accounting standards made by the Australian Accounting Standards Board)

AGM

Annual general meeting

ASIC

Australian Securities and Investments Commission

ASIC Act

Australian Securities and Investments Commission Act 2001

Bill

Corporations (Aboriginal And Torres Strait Islander) Amendment (Strengthening Governance And Transparency) Bill 2018

CATSI corporation

A corporation registered under the Act

CEO

Chief Executive Officer

Corporations Act

Corporations Act 2001

Guide to Framing Commonwealth Offences

Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers (September 2011 edition) developed by the Criminal Justice Division of the Attorney-General’s Department

ORIC

Office of the Registrar of Aboriginal and Torres Strait Islander Corporations, also known as the Office of the Registrar of Indigenous Corporations

PGPA Act

Public Governance, Performance and Accountability Act 2013

Registrar

Registrar of Aboriginal and Torres Strait Islander Corporations

 



 

CORPORATIONS (ABORIGINAL AND TORRES STRAIT ISLANDER) AMENDMENT (Strengthening Governance and Transparency) BILL 2018

PURPOSE AND OBJECTIVES

1.              The purpose of the Bill is to address minor technical deficiencies in the Act, reduce unnecessary regulatory burden for CATSI corporations, and maintain alignment with broader corporate law and regulation.

 

2.              The objectives of the Bill are to:

 

a.        make it easier and less costly for Aboriginal and Torres Strait Islander corporations to register and operate under the Act, in particular to ensure that regulation is proportional to size and overregulation is not occurring;

 

b.       promote economic development by Indigenous people through CATSI corporations, by providing more flexibility to create business structures and operate more effectively in small communities;

 

c.        provide greater transparency of the experience and remuneration of senior management as a safeguard for members and communities;

 

d.       better align the Registrar’s compliance powers with those of the Australian Securities and Investments Commission, and to provide lower level powers for earlier intervention in less serious transgressions; and

 

e.        make minor technical amendments.

GENERAL OUTLINE

3.       The Bill amends the Act to:

 

a.        simplify the classification structure for CATSI corporations (Part 1);

 

b.       simplify the way CATSI corporations’ constitutions are created (Part 2);

 

c.        allow greater flexibility in the design of corporate structures for CATSI corporations to allow for corporate membership, including minor modifications to how the Indigeneity requirement applies in the context of corporations with only two members (Part 4);

 

d.       streamline the general meeting and reporting processes, reducing the requirements for small CATSI corporations and increasing member access to reports for medium and large CATSI corporations (Parts 3 and 5);

 

e.        adapt provisions relating to members and membership to better suit the needs of CATSI corporations and to better protect members’ personal information (Part 6);

 

f.        increase the transparency of senior management arrangements, including by reporting CEO and senior management remuneration to members and to the Registrar (Part 7);

 

g.       modify the regulation of related third party transactions to take account of the impact in small communities of extensive kinship and family relationships (Part 8);

 

h.       broaden and clarify the grounds for putting CATSI corporations into special administration (Part 9);

 

i.         make the criteria for voluntary deregistration more flexible (Part 10);

 

j.         broaden the Registrar’s investigation and compliance powers, including by allowing the Registrar to accept enforceable undertakings (Part 11);

 

k.       implement technical improvements (Parts 12 to 18) and make minor technical amendments (Part 19); and

 

l.         make consequential and transitional amendments as required to give effect to the amendments.

 

BACKGROUND

4.              CATSI corporations play a crucial role in delivering services and supporting economic development in Indigenous communities, particularly in remote Australia. The Act came into effect on 1 July 2007 to provide these corporations with a specialist regulatory framework, making it easier for Aboriginal and Torres Strait Islander groups to form and manage corporations. The Act mirrors many of the provisions of the Corporations Act, but provides the flexibility and support needed to meet the unique needs of Aboriginal and Torres Strait Islander people.

 

5.              Following ten years of operation, the Registrar commissioned a technical review of the Act, to inform changes to modernise and improve the Act. The technical review, in general, found that there were opportunities to reduce regulatory burden and better align the regulation of CATSI corporations with that of similar entities regulated under the Corporations Act.

FINANCIAL IMPACT STATEMENT

6.              This Bill has no financial impact.

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

7.              This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

 

8.              The Statement of Compatibility with Human Rights is provided at the end of this Explanatory Memorandum.



 



NOTES ON CLAUSES

Clause 1—Short title

9.              Clause 1 provides for the Act to be cited as the Corporations (Aboriginal and Torres Strait Islander) Amendment (Strengthening Governance and Transparency) Act 2018.

Clause 2—Commencement

10.          Clause 2 provides for the whole of the Act to commence on 1 July 2019.

Clause 3—Schedules

11.          Clause 3 provides that each enactment specified in a Schedule to the Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to the Act has effect according to its terms.

 



Schedule 1 Amendments

 

Corporations (Aboriginal and Torres Strait Islander) Act 2006

Part 1 Classification of Aboriginal and Torres Strait Islander corporations

This part alters the current criteria for determining the size of a CATSI corporation. The amendments will provide for corporations to be registered as a small, medium or large corporation based on a simple revenue test only. The Regulations will set the threshold revenue amounts for each size. 
 CATSI corporations are classified according to size, which is relevant to determining the annual reporting obligations of corporations. Currently, a CATSI corporation’s size is determined by a tripartite test based on income, assets and number of employees. When enacted, a CATSI corporation’s size will be determined solely on the basis of consolidated revenue. 
 This new criterion for classification is easier to understand and apply, and also aligns with the criterion for determining size under the ACNC Act. Nearly 30 percent of CATSI corporations are also registered under the ACNC Act.

Item 1 - Section 37-10

12.          This item repeals and replaces section 37-10 of the Act to change the current criteria for classification, which is based on a tripartite income/assets/employees test, to a single criterion based on consolidated revenue. The consolidated revenue of a corporation (including its subsidiaries) is calculated in accordance with the relevant accounting standards (see Item 2).



13.          The thresholds for the revenue test will be prescribed in the regulations so that classifications, and the related annual reporting obligations, can be adjusted appropriately to reflect changes in the broader economic and regulatory environment.

 

Item 2 - Sections 37-20 and 37-25

14.          This item repeals section 37-20 of the Act, which is no longer relevant given the amendments made by Item 1. The item also repeals and replaces section 37-25 to explain that the accounting standards in force at the time should be used to determine a corporation’s consolidated revenue.

 

Item 3 - Section 700-1

15.          This item provides for definitions of large, medium and small corporations, by directing the reader to the relevant subsections in section 37-10 (see Item 1, above).

 

Item 4 - Transitional Provisions

16.          This item requires the Registrar to apply the new criterion for classification to applications for registration of a new corporation received prior to the commencement of this Part but not determined until after the commencement of this Part.

 

17.          This item requires the Registrar to have regard to size of the corporation during the financial year commencing 1 July 2018 as determined in accordance with the new criterion when deciding to alter the registered size of a corporation in the financial year commencing 1 July 2019.



 

Part 2 — Constitutions

Part 2 of the Bill changes how replaceable rules operate in relation to constitutions (also known as rule books). Currently, replaceable rules operate by default unless replaced or modified in a corporation’s constitution. This raises the possibility that members of CATSI corporations may not be aware of relevant internal governance rules. These amendments address this problem by requiring that all relevant replaceable rules must be in the constitution, whether or not the rules have been replaced or modified. CATSI corporations that are registered prior to the commencement date will have two years to comply with the new requirements. These amendments will not change the substantive content of internal governance rules that apply to CATSI corporations as at the date of commencement of these amendments.
 Part 2 also empowers the Registrar to make model constitutions that comply with the internal governance rules requirement under section 66-1. A corporation that chooses to adopt a model constitution will meet the internal governance rules requirement. The availability of model constitutions will simplify, and reduce the cost of, registering a corporation or changing a corporation’s constitution. 
 Part 2 also provides a process for the Registrar to reject an application for registration or constitutional change on the ground that, in the Registrar’s opinion, the proposed constitution is not fit for purpose. The question of whether a constitution is ‘fit for purpose’ is concerned with how the rules are expressed, for example, whether there is uncertainty in the operation of rules resulting from undue complexity or poor drafting. This differs from the question of whether the internal governance rules are adequate and workable for the purpose of paragraph 66-1(5)(b), which concerns the interrelationship of rules and their substantive content, for example, whether the proposed model of corporate governance is workable.
 If the Registrar exercises this power, the corporation will be required to consult members, who would then consider the reasons for the refusal. They can either confirm the constitution in its current state, which the Registrar must then approve if it otherwise complies with the internal governance rules requirement, or provide a redrafted version, which will be subject to the Registrar’s consideration. 
 Items 5 and 6 - Section 21-5, Subsections 22-5(1) and 23-5(1) (notes)

18.          Items 5 and 6 amend the notes contained immediately after section 21-5 and subsections 22-5(1) and 23-5(1) to direct the reader to the specific provision in subsection 29-20(2), which refers to the lodgment of a corporation’s constitution with the Registrar. As explained below, Item 17 will amend subsection 29-20(1).

Item 7 - Paragraph 26-1(2)(ca)

19.          Item 7 inserts a new paragraph after paragraph 26-1(2)(c) to provide that the Registrar must, when deciding whether or not to grant an application under section 21-1, 22-1 or 23-1, be satisfied that the constitution lodged by a corporation is fit for the purposes of the corporation. The question of whether a constitution is fit for purpose is concerned with the how the rules are expressed, for example, whether there is uncertainty in the operation of rules resulting from undue complexity or poor drafting.

Items 8 to 10 - Section 29-15

20.          These items remove subsection 2 and therefore the subsection numbers, as the section can be consolidated. The reference to members consenting to the applicable replaceable rules in paragraph 29-15(1)(c) is proposed to be removed as the pre-registration requirements that currently relate to replaceable rules will be dealt with by the approval of the constitution referred to in paragraph 29-15(1)(b).

Items 11 to 13 - Section 29-17

21.          These items remove subsection 2 and therefore the subsection numbers, as the section can be consolidated. The reference to members agreeing to the applicable replaceable rules in subparagraph 29-17(1)(a)(iii) is proposed to be removed as the pre-registration requirements that currently relate to replaceable rules will be dealt with by the approval of the constitution referred to in section sub-paragraph 29-17(1)(a)(ii).

Items 14 to 16 - Section 29-19

22.          These items remove subsection 2 and therefore the subsection numbers, as the section can be consolidated. The reference to members consenting to the applicable replaceable rules in paragraph 29-19(1)(c) is proposed to be removed as the pre-registration requirements that currently relate to replaceable rules will be dealt with by the approval of the constitution referred to in paragraph 29-19(1)(b).

Item 17 - Section 29-20

23.          Item 17 repeals the current subsection 29-20(1) and replaces it with a provision that a corporation will meet the internal governance rules requirement if its constitution is a model constitution or the constitution complies with the requirements set out in section 66-1.

Item 18 - Section 29-21

24.          This item inserts a new section providing for the Registrar to make model constitutions, including model constitutions for different classes of CATSI corporations. The Registrar must be satisfied that a model constitution complies with the requirements set out in section 66-1.

 

25.          To assist readers, subsection 29-21(5) clarifies that a model constitution is not a legislative instrument. This clarification is merely declaratory of the law as model constitutions are not legislative instruments within the meaning of subsection 8(1) of the Legislation Act 2003 .

Item 19 - Subsections 32-5(3) and (4)

26.          This item adds new subsections dealing with re-application for registration of a corporation following an original decision by the Registrar not to approve an application on the basis of not being satisfied that the constitution is fit for the purposes of the corporation. The item provides that, on re-application, a corporation’s constitution will be taken to be fit for its purposes if the corporation passes a special resolution stating that it is so. Subsection (4) specifies the documentation that must be lodged with the Registrar on re-application.

Item 20 - Section 57-1

27.          This item replaces a summary table for Part 3-2, to explain that the part will deal with the internal governance rules, including providing an explanation of the concept of replaceable rules and how they operate.

Item 21 - Division 60 (heading)

28.          This item removes the words “and when do they apply to a corporation” from the heading of the section.

Item 22 - Sections 60-1 and 60-5

29.          Item 22 repeals the existing sections 60-1 and 60-5 that explain the concept and operation of replaceable rules as they are currently, and replaces them with a single amended section 60-1 that explains the effect of replaceable rules under the proposed amendments. New section 60-1 provides that a replaceable rule does not have any effect on its own. This contrasts with the current provision that a replaceable rule applies except to the extent to which the rule is modified or replaced by the corporation’s constitution. This amendment reflects the new requirement that a corporation’s constitution must include rules that modify or replace the replaceable rules (see Items 30 and 33 below).

 

30.          Proposed subsection 60-1(3) provides that in certain circumstances replaceable rules are taken to be included in a corporation’s constitution. Consequently, all internal governance rules that currently apply to a CATSI corporation, will continue to apply even if a constitution does not comply with the new internal governance rules requirement under the amended subsection 29-20(1) (see Item 17 above). This will ensure that no corporation is left with a gap in its internal governance rules if it fails to meet the new internal governance rules requirement. It is anticipated that once all corporations are compliant with the new subsection 29-20(1), subsection 60-1(3) will have no further work to do, unless inadvertently, a replaceable rule is not modified or replaced in a constitution.

Item 23 - Section 60-10 (heading)

31.          This item removes the reference to “replaceable rules” in the heading of the section.

Item 24 - Subsection 60-10(1)

32.          This item removes reference to rules that “apply” to the corporation and instead replaces it with a reference to replaceable rules that “are taken” to be included in the corporation’s constitution. This is consistent with the idea that the replaceable rules (to the extent that they are modified or replaced) form part of the corporation’s constitution, rather than simply “applying” whether contained in a constitution or not.

Item 25 - Subsection 60-10(2)

33.          This item removes reference to “and rules” as being distinct from a corporation’s constitution, as, under the proposed amendments, the rules will be taken to be included (whether modified or replaced) in the constitution. In this way, a reference to a constitution now, by implication, includes reference to the replaceable rules.

Item 26 - Section 60-15

34.          This item repeals existing section 60-15, which explains that failure to comply with the replaceable rules is not a contravention of the Act. This provision is now included in the new subsection 60-1(2) at Item 22.

Item 27 - Paragraphs 63-1(a) and (b)

35.          This item changes the meaning of “internal governance rules” by removing reference to replaceable rules that apply to a corporation and replacing it with reference to replaceable rules that are taken to be included in a corporation’s constitution.

Item 28 - Division 66 (heading)

36.          This item modifies the heading for Division 66 to more accurately reflect the subject of the division.

Item 29 - Subsection 66-1(1)

37.          This item replaces the existing subsection 66-1(1) with a new subsection clarifying that for the purposes of the internal governance rules requirement in paragraph 29-20(1)(b), the subsequent subsections apply.

Item 30 - Subsection 66-1(3)

38.          This item replaces the existing subsection 66-1(3) with a new subsection that inserts a requirement that the corporation’s constitution must include provisions that modify or replace the replaceable rules unless it is a conditional replaceable rule that does not apply to the corporation. The new subsection also includes two notes, one to assist the reader in understanding the definition of “modify” and “replace” and another to direct the reader to a definition of conditional replaceable rules.

 

39.          The requirement in the current subsection 66-1(3) that a corporation’s constitution must cover any other matters specified by the Act is reflected in the new subsection 66-1(3AA).

Item 31 - Subsection 66-1(4)

40.          This item repeals subsection 66-1(4) as it is superseded by the new subsection 66-1(3) (see Item 30).

Item 32 - Subsection 66-1(6) (note 2)

41.          This item modifies a note to explain to the reader that the Registrar must refuse to register a change to a corporation’s constitution if, with the change, the corporation would not meet the internal governance rules requirement.

Item 33 - Section 66-5

42.          This item replaces current section 66-5 with a section explaining how a constitution modifies or replaces a replaceable rule. A corporation’s constitution modifies or replaces a replaceable rule by covering the matters provided for in a replaceable rule either differently from the replaceable rule or in the same way.

 

43.          Subsections 66-5(3) and (4) provide that regulations may be made that prescribe further matters to be covered in the replaceable rules, which reflects the current subsections 66-5(4) and (5). This will allow greater flexibility and responsiveness in meeting the needs of CATSI corporations by ensuring that the replaceable rules and their application remain relevant and effective in the future, taking into account that CATSI corporations can modify or replace replaceable rules.

 

44.          Item 33 also inserts a table at section 66-10 setting out what the conditional replaceable rules are and where they are found in the Act. Conditional replaceable rules are those rules that are only relevant if the condition set out in the table in section 66-10 applies to the corporation.

 

45.          Lastly, Item 33 inserts a new Section 66-15 clarifying that a corporation’s constitution is not limited to matters provided for in the replaceable rules.

Item 34 - Subsection 69-30(2)

46.          This item repeals and replaces subsection 69-30(2). It adds a new requirement to subsection 69-20(2) to the effect that the Registrar must not register a constitutional change unless satisfied the constitution would be fit for the purposes of the corporation. The new subsection 69-30(2A) provides a process in the event the Registrar refuses to register a constitutional change on the basis of paragraph 69-30(2)(b). This is consistent with the new provisions in subsections 32-5(3) and (4) (see Item 19 above).

Items 35 and 36 - Subsection 69-35(2)

47.          These items replace reference to “rules requirements” to be consistent with usage elsewhere in the Act.

Item 37 - Subsection 69-35(4)

48.          This item replaces a reference to internal governance requirements with a reference to the internal governance rules requirement found in section 66-1.

Item 38 - At the end of section 69-40 (note)

49.          This item adds a note to confirm that a constitutional change made under section 246-26 (longer terms of appointment for directors of small corporations) takes effect in accordance with subsection 246-26(2), rather than under section 69-40.

Items 39 to 41 - Paragraph 72-5(7)(b), Subsection 104-5(1) (heading) and Subsection 104-5(1)

50.          These items replace references to replaceable rules that apply to the corporation with references to replaceable rules taken to be included in a constitution. This is consistent with the idea that the replaceable rules (to the extent that they are modified or replaced) form part of the corporation’s constitution, rather than simply “applying” whether contained in a constitution or not.

Item 42 - Subsection 150-15(1) (note)

51.          This item replaces the note at subsection 150-15(1) to explain that the subsequent section, 150-20 has no effect unless modified or replaced in a corporation’s constitution. This reflects the new requirement in proposed subsection 66-1(3).

Items 43 to 46 - Sections 193-1, 198-1, 209-1, and 220-1

52.          These items amend the introductory sections of chapters or parts dealing with replaceable rules to clarify that all of the following rules are replaceable rules and can generally be modified or replaced in a corporation’s constitution.

Item 47 - Section 617-1 (table item 8, column headed “Decision”)

53.          Like Item 37 above, this item changes a reference to “requirements” in item 8 of the table at section 617-1 to “requirement”.

Item 48 - Section 700-1

54.          This item inserts a signpost definition in the Dictionary for the expression “conditional replaceable rule” directing the reader to the definition in section 66-10.

Item 49 - Section 700-1

55.          This item repeals the definition of “cover the matters provided for in the replaceable rules”, which will be redundant following the repeal of current section 66-5.

Item 50 - Section 700-1

56.          This item inserts a signpost definition in the Dictionary for the expression “internal governance rules requirement” by directing the reader to the definition in subsection 29-20(1).

Item 51 - 700-1 (definition of internal governance rule s requirements )

57.          This item repeals the definition of “internal governance rules requirements” because the term will be redundant as it is replaced with the definition “internal governance rules requirement” in Item 50.

Item 52 - Section 700-1

58.          This item inserts three new definitions relating to “model constitution”, “modify” and “replace”, reflecting the amendments proposed in relation to the replaceable rules and a corporation’s constitution.

Item 53 - Application

59.          This item provides that for registered corporations at the time the part commences, the amendments of this part do not apply for two years. However, where a corporation that was registered at the time this part commences, lodges a change to its constitution within the two-year period, the Registrar must apply section 69-30, although the reference to meeting the internal governance rules requirement is the requirement which was in existence prior to this part commencing.



 

Part 3 — Review of financial reports

Part 3 introduces reviews of financial reports as an alternative to audits under Chapter 7 of the Act. Reviews offer a less expensive alternative to an audit, while maintaining an adequate level of independent assurance of financial information in appropriate cases. This part provides for the making of regulations that will allow for the conduct of reviews. Various provisions relating to the conduct of audits are extended to the conduct of reviews. Also, this part expands the category of practitioners who will be qualified to undertake reviews, in contrast to the more restricted class of auditors. Item 54 - Paragraphs 201-170(1)(a) and (d)

60.          This item provides that members may ask questions of the corporation’s auditor, or auditor’s representative, at the AGM in relation to the conduct of the audit or review.

Item 55 - Subsection 327-1(3)

61.          This item amends subsection 327-1(3) to provide that a financial report may need to be reviewed.

Item 56 - Paragraph 327-1(3)(a)

62.          This item provides that Division 339 covers the conduct of the review.

Item 57 - Subsection 333-15(2) (heading)

63.          This item repeals the heading of subsection 333-15(2) and substitutes “Audit or review of financial report”.

Item 58 - Subsection 333-15(2)

64.          This item amends subsection 333-15(2) to replace “regulations made for the purposes of subsection (1) of this section” with “the regulations”.

Item 59 - Paragraph 333-15(2)(a)

65.          This item amends subsection 333-15(2) to provide that the regulations may require financial reports to be reviewed.

Item 60 - Paragraph 333-15(2)(aa)

66.          This item inserts a paragraph stating that the regulations may prescribe circumstances in which a financial report, or a part of it, may be reviewed instead of audited.

Item 61 - Paragraphs 333-15(2)(c) and (d)

67.          This item provides that paragraphs 33-15(2)(c) and (d) extend to reviews as well as audits.

Item 62 - Subsection 333-15(2) (note)

68.          This item amends the note to explain to the reader that for the purposes of paragraph 333-15(2)(a), Division 339 deals with the audit or review of a financial report.

Item 63 - Section 333-20 (heading)

69.          This item inserts “or review” after “audit”.

Item 64 - Paragraph 333-20(b)

70.          This item creates a duty to have financial reports reviewed if the preconditions in the section are met.

Item 65 - Paragraph 336-1(7)(a)

71.          This item provides that the Registrar may determine that a financial report, or a part of it, be reviewed.

Item 66 - Paragraphs 336-1(7)(c) and (d)

72.          This item provides that paragraphs 336-1(7)(c) and (d) extend to reviews as well as audits.

Item 67 - Paragraph 336-5(7)(a)

73.          This item provides that the requirement for a financial report, or a part of it, to be audited extends to a requirement that it be reviewed.

Item 68 - Paragraphs 336-5(7)(c) and (d)

74.          This item provides that paragraphs 336-5(7)(c) and (d) extend to reviews as well as audits.

Item 69 - Division 339 (heading)

75.          This item inserts “or review” after “Audit” in the heading of Division 339.

Items 70 to 72 - Section 339-1

76.          These items provide that the division deals with reviews of financial reports as well as audits of financial reports.

Items 73 to 75 - Section 339-5

77.          These items provide that the division applies to reviews that are required by the Act.

Items 76 and 77 - Section 339-15

78.          These items provide that if a review is required by an applied provision of the Corporations Act, the regulations or the Registrar, it must be conducted in accordance with the auditing standards.

Items 78 to 83 - Subsections 339-20(1) and (2)

79.          These items provide that section 339-20 applies to a review of a financial report as well as an audit of a financial report.

Items 84 to 87 - Section 339-25

80.          These items extend the application of the section to reviews.

Item 88 - Section 339-27

81.          This item inserts a new section that provides that the regulations may provide that an individual is taken to be a registered company auditor for the purposes of the review, if the individual is a member of a professional accounting body and has a designation, in respect of that membership, prescribed by the regulations for the purposes of this section.

Item 89 - Subdivision 339-B of Division 339 (at the end of the heading)

82.          This item inserts “or review” at the end of the heading.

 

Items 90 and 91 - Section 339-30

83.          These items make it clear that section 339-30 applies only to an audit.

Item 92 - Section 339-33

84.          This item inserts section 339-33, which specifies that the auditor must form a conclusion in relation to the review. Proposed section 339-33 is generally based on section 339-30 of the Act with the difference being that the auditor must form a conclusion in the case of a review, not an opinion as in an audit. This difference is consistent with the requirements for reviews under subsection 60-30(4) of the ACNC Act.

Item 93 - Section 339-35

85.          This item provides that if a review is required to be conducted in accordance with the auditing standards, the auditor must conduct the review in accordance with those standards.

Item 94 - Section 339-40 (at the end of the heading)

86.          This item reflects that the section does not apply to an auditor’s report for a review prepared under section 339-43.

Item 95 - Subsection 339-40(1A)

87.          This item makes it clear that the section does not apply to an auditor’s report prepared under section 339-43.

Item 96 - Subsection 339-40(1)

88.          This item replaces “a financial” with “the financial” in subsection 339-40(1) to match the amendment in Item 97.

Item 97 - Section 339-43

89.          This item inserts section 339-43 setting out what the auditor must include in the auditor’s report for a review. The section is generally based on section 339-40 of the Act with some modification to reflect that an auditor must form a conclusion under proposed section 339-33 in the case of a review, not an opinion as required under section 339-30 in the case of an audit.

Item 98 - Section 339-45

90.          This item provides that an auditor’s report prepared under section 339-40 or 339-43 must be prepared in the manner required by the regulations.

Items 99 to 103 - Section 339-50

91.          These items provide for the auditor’s independence declaration to apply to reviews.

Items 104 to 106 - Section 339-55

92.          These items provide for audit working papers prepared in the conduct of a review to be retained for seven years.

Item 107 - Paragraph 339-55(11)

93.          This item provides that audit working papers include, in relation to a review, working papers for the review.

Item 108 - Paragraphs 339-60(1)(a) and (2)(a) and (b), 339-65(1)(a) and (2)(a) and 339-70(1)(a), (2)(a) and (3)(a)

94.          This item extends the operation of sections 339-60, 339-65 and 339-70, which currently apply to the conduct of an audit, to the conduct of a review.

Item 109 - Subsections 339-75(1) and (2) and 339-80(1), (2) and (3)

95.          This item extends the operation of sections 339-75 and 339-80, which currently apply to the audit of a financial report, to the review of a financial report.

Item 110 - Paragraph 339-85(b)

96.          This item provides that an auditor has a right of access to the books of a corporation and may require an officer to give information for the purpose of a review.

Items 111 to 115 - Section 339-90

97.          These items extend existing offence provisions relating to the failure of an auditor to notify the Registrar of contraventions, to the context of an auditor’s role in relation to reviews.

Item 116 - Subsection 339-90

98.          This item repeals the subsection and replaces it with a new provision that extends the definition of persons involved in the conduct of an audit, to persons involved in the conduct of an audit or review.

Items 117 and 118 - Section 342-5

99.          These items extend existing requirements that CATSI corporations provide audit reports to members, to a requirement that CATSI corporations provide review reports to members.

Items 119 to 121 - Section 345-5

100.      These items ensure that when conducting a review of the financial report, auditors can obtain information from entities controlled by CATSI corporations that are required to prepare a consolidated financial report.

Items 122 and 123 - Section 345-15

101.      These items provide for the application of sections 345-1, 345-5 and 345-10 to entities that are no longer controlled by a CATSI corporation with respect to a review of a financial report of the CATSI corporation.

Item 124 - Subparagraphs 466-1(1)(b)(ii) and 472-1(1)(c)(i) and (d)(i)

102.      This item provides that the circumstances in which a disclosure of information regarding a breach of the Act will be protected by Part 10-5 include conducting a review.

Item 125 - Section 700-1 Paragraph (r)

103.      Item 125 amends paragraph (r) of the definition of “affairs” in section 700-1 to extend its operation to matters relating to or arising out of a review.

Item 126 - Section 700-1

104.      Item 126 inserts a definition of “auditor” to section 700-1. The definition of auditor includes an auditor that conducts a review of a report of the corporation.

Items 127 and 128 - Section 700-1

105.      These items insert a new signpost definition of “involved in the conduct of the audit or review” that refers to section 339-90(6), and repeal the existing definition of “person involved in the conduct of an audit” accordingly.



 

Part 4 Subsidiaries and other entities

Currently under the Act, it is difficult for corporations to establish wholly-owned subsidiary CATSI corporations. The difficulty arises from the requirement in subsection 246-5(3) of the Act that a majority of the directors of a corporation must be members of the corporation. Although a corporation can be a member of a corporation, only individuals, not body corporates, can be directors. A corporation that only has corporate members therefore cannot satisfy the requirements in subsection 246-5(3). 
 These amendments propose removing impediments to body corporates establishing wholly-owned or joint venture subsidiary CATSI corporations. It will also allow two member CATSI corporations, where one member is not an Aboriginal or Torres Strait Islander person, as long as the Aboriginal or Torres Strait Islander person has a casting vote. 
 These amendments will give CATSI corporations more flexibility in how they structure their affairs, and promote the use of CATSI corporations as vehicles for economic and social development, supported by a suitable regulatory framework. It will also mean a group of entities can be registered under the one legislative framework, with the same regulator, which will allow for streamlined compliance and reporting obligations. 
 Item 129 - Paragraph 21-1(1)(ca)

106.      This item inserts a new paragraph adding to the information required for an application for registration as a CATSI corporation if it is intended to be a wholly-owned subsidiary or another kind of body corporate. It will allow for differential treatment of applications based on proposed corporate membership.

Item 130 - Paragraph 22-1(2)(ga)

107.      This item inserts a new paragraph adding to the information required for an application for registration of an existing body corporate as a CATSI corporation if it is intended to be a wholly-owned subsidiary or another kind of body corporate. It will allow for differential treatment of applications based on proposed corporate membership.

Item 131 - Paragraph 23-1(2)(da)

108.      This item inserts a new paragraph adding to the information required for an application for registration of a CATSI corporation replacing two or more existing CATSI corporations if it is intended to be a wholly-owned subsidiary or another kind of body corporate. It will allow for differential treatment of applications based on proposed corporate membership.

Item 132 - Subsection 77-5(1)

109.      This item repeals the existing subsection and replaces it with a subsection in the same terms with the addition of further paragraphs dealing with the membership requirements of wholly-owned subsidiaries and eligible bodies corporate.

Item 133 - Paragraph 77-5(2)(aa)

110.      This item supports the formation of wholly-owned subsidiaries and joint venture entities by relieving applicants of the need to request an exemption from having at least five members.

Items 134 and 135 - Paragraphs 77-5(3)(b) and 77-5(4)(b)

111.      These items modify the subsections to provide that they do not apply to wholly-owned subsidiaries and eligible bodies corporate.

Item 136 - Section 201-115

112.      This item inserts a note at the end of the section drawing the attention of the reader to the possibility that the constitution of a corporation that is an eligible body corporate may need to modify the replaceable rule in subsection (2) to comply with section 201-117.

Item 137 - Section 201-117

113.      This item provides that at a general meeting of a CATSI corporation that is an eligible body corporate with two members, only one of which is an Aboriginal and Torres Strait Islander person, the Aboriginal and Torres Strait Islander person has a casting vote. This maintains the principle of the Indigeneity requirement in the context of two member CATSI corporations.

Item 138 - Subsection 246-5(1A)

114.      This item provides that, in relation to a CATSI corporation that has two directors, the requirement that the majority of directors of a CATSI corporation must be individuals who are Aboriginal and Torres Strait Islander persons is met if only one of those directors is an Aboriginal and Torres Strait Islander person, and that person has a casting vote.

Item 139 - Subsection 246-5(3)

115.      This item repeals the subsection requiring that the majority of the directors of a CATSI corporation are members of the corporation and replaces it with a subsection that establishes that the majority of the directors of a CATSI corporation must be members of the corporation unless the corporation is an eligible body corporate.

Item 140 - Section 700-1

116.      This item inserts a definition of “eligible body corporate”, being (a) a wholly-owned subsidiary of a CATSI corporation, or (b) a corporation whose only members are body corporates. A note is included to clarify that an eligible body corporate must meet the Indigeneity requirement in section 29-5.

Item 141 - Application

117.      This item provides that the proposed section 201-117 does not apply to a corporation that, prior to the commencement of the new legislation, was a registered Aboriginal and Torres Strait Islander corporation and had two members, one of whom was an Aboriginal or Torres Strait Islander person. Section 201-117 does not apply to the corporation for as long as it continues to have this composition of members.



 

Part 5 — Meetings and reporting obligations

All CATSI corporations are required to hold an AGM unless they apply for an exemption from the Registrar. For small corporations in remote locations, organising and holding AGMs can pose problems in contacting a geographically dispersed membership and achieving a quorum. This regulatory burden is not warranted for many small corporations given the nature of their affairs, for example, passive land-holding corporations.
 This part proposes enabling small corporations to pass a special resolution to not hold the next one or two AGMs. Directors cannot vote on the resolution, unless all members are directors. Once the resolution is passed, the corporation is obliged to advise the Registrar if there are any material changes in its circumstances. The Registrar will have the power to direct a corporation to call and hold an AGM if satisfied there is a need. All small corporations will still be required to lodge their general reports annually, and to provide these reports to members on request. 
 The proposed amendments will also allow all corporations to activate an automatic, 
 one-off extension of 30 days to hold an AGM. These extensions are available where there has been a death in the community, a natural disaster, cultural business or an unavoidable delay in the audit or review. Corporations cannot use this extension more than three years in a row.

Item 142 - Subsection 37-5(5)

118.      This item amends subsection 37-5(5) to require that if the Registrar issues a notice under this subsection and it has the effect that a special resolution not to hold an AGM ceases to have effect, the notice must indicate that the special resolution ceases to have effect.

Items 143 to 145 - Section 57-5

119.      These items add proposed section 201-153 to the table setting out the main provisions of the Act dealing with the internal governance rules of CATSI corporations.

Items 146 and 147 - Subsection 69-5(1)

120.      These items insert references to proposed section 246-26 into section 69-5. Section 69-5 sets out the steps a CATSI corporation must comply with to change its constitution. The new section 246-26 will provide for a change to a corporation’s constitution to allow for longer terms of appointment for directors of small corporations. Importantly, a change to a corporation’s constitution under section 246-26 differs from a change to a corporation’s constitution under section 69-5 in that the former will take effect immediately.

Item 148 - Subsection 69-20(3) (note)

121.      This item repeals the note at subsection 69-20(3) and substitutes it with the note that currently appears at the end of subsection 69-20(5). Repealing the note relating to section 6.1 of the Criminal Code reflects current legislative drafting practices but does not alter the substantive provision in subsection 69-20(3). Moving the existing note from subsection (5) to subsection (3) improves its utility.

Item 149 - Subsection 69-20(5) (note)

122.      This item repeals the note at subsection 69-20(5) which will now appear after subsection 69-20(3) (see Item 148).

Item 150 - Subsection 69-20(6)

123.      This item inserts subsection 69-20(6) that provides that section 69-20 does not apply to a change to a CATSI corporation’s constitution under section 246-26.

Item 151 - Section 198-1

124.      This item amends the section to provide that a CATSI corporation is generally required to hold an AGM. This allows for the proposed new provision in Item 156 allowing small corporations to pass a special resolution not to hold the next one or two AGMs.

Item 152 - Section 201-150

125.      This item inserts subsection 201-150(5) which sets out various exceptions to the offence provision in subsection 201-150(1) including the new exceptions referred to in paragraphs (a) and (c). As exceptions, the defendant will bear an evidential burden in relation to proving the matters in subsection 201-150(5) in accordance with subsection 13.3(3) of the Criminal Code . This burden does not displace the prosecution’s legal burden of proof. The evidential burden is justified on the grounds that the offence is one of strict liability and carries a relatively low penalty, the subject of the exceptions is not central to the question of culpability, and the matters in paragraphs (a) and (c) will be peculiarly within the knowledge of the defendant. This is consistent with the principles in the Guide to Framing Commonwealth Offences.

Item 153 - Section 201-153

126.      This item provides that if a CATSI corporation makes a statement under section 348-10, the five-month period of time for holding its AGM is automatically extended by 30 days. The corporation must hold its AGM within the extended period. A statement must be made within the period of five months plus 30 days to have any effect. A corporation is only entitled to one automatic extension of 30 days in a financial year. If a corporation requires an extension beyond five months and 30 days, an application for an exemption will have to be made in the usual way under section 201-155.

 

127.      Subsection 201-153 creates a new offence of strict liability. The justification for making this a strict liability offence is the regulatory nature of the offence and its consistency with the Act’s enforcement regime, and the relatively low maximum penalty, being 10 penalty units. The maximum penalty amount is consistent with other strict liability offence provisions in Subdivision 201G relating to the failure to hold AGMs.

Item 154 - Section 201-155 (at the end of the heading)

128.      This item inserts the words “on application to the Registrar” into the heading in order to distinguish section 201-155 from the new automatic extension provision in section 201-153.

Item 155 - Subsection 201-155(1)

129.      This item is a consequential amendment reflecting new section 201-153.

Item 156 - At the end of Division 201 - Subdivision 201-H

130.      This item inserts a new subdivision including sections 201-175, 201-180, 201-185 and 201-190, which deal with special resolutions by small corporations not to hold upcoming AGMs.

 

131.      Section 201-175 is a new section which provides that a CATSI corporation that is registered as a small corporation may pass a special resolution not to hold the next one or two AGMs. The corporation may only pass the special resolution if, at the same AGM, each of the directors is appointed for a term that continues until at least the latest date for holding the next AGM. The special resolution cannot be passed by circulating resolution. If there are members of the corporation who are not directors, the directors must not vote on the special resolution, unless the Registrar by written notice permits them to vote.

 

132.      To assist readers, subsection 201-175(6) clarifies that a notice under subsection (5) is not a legislative instrument. This clarification is merely declaratory of the law as a notice under subsection (5) is not a legislative instrument within the meaning of subsection (8)(1) of the  Legislation Act 2003 .

 

133.      Proposed section 201-180 provides that a CATSI corporation must lodge documents in relation to the special resolution with the Registrar within 28 days after the special resolution is passed.

 

134.      Proposed section 201-185 provides that if a material change occurs in relation to the affairs of a CATSI corporation during the term of a special resolution in effect under section 201-175, the corporation must give the Registrar written notice of the change within 28 days after the change occurs. This strict liability offence provision is justified on the grounds of the regulatory nature of the offence and its consistency with the Act’s enforcement regime, and the relatively low maximum penalty, being 5 penalty units. The maximum penalty amount is consistent with other strict liability offence provisions in the Act relating to the failure to notify the Registrar.

 

135.      This item also inserts section 201-190. This section provides that if the Registrar is satisfied that there is a need for an AGM, the Registrar can direct a CATSI corporation to hold an AGM that it would otherwise not have to hold because of a special resolution in effect under section 201-175. External merits review of a direction given by the Registrar is not provided. The AGM is an important meeting normally held once a year to allow the directors to formally provide the members with information of what has happened over the last 12 months. This includes giving the members reports and financial information, and allowing an opportunity for members to ask questions about how the corporation is managed. The ability of the Registrar to direct a CATSI corporation to hold an AGM protects the interests of members and ensures the accountability of directors.

Item 157 - At the end of subsection 204-1(6)

136.      This item inserts a note at the end of subsection 204-1(6) recognising the exception to this subsection created by subsection 201-175(3).

Item 158 - Subsection 246-25(2)

137.      This item replaces the words “subsection (4)” with “subsections (2A) and (4)”.

Item 159 - 246-25(2A)

138.      This item inserts subsection 246-25(2A), which provides that a director of a small corporation may be appointed for a period exceeding two years, but not exceeding three years, if the requirements set out in the section are met. This provision allows for the circumstance where a small corporation will not hold the next two AGMs.

Item 160 - Section 246-26

139.      This item inserts a new section that requires a small corporation to change its constitution to allow for terms of appointment for directors not exceeding three years and sets out the steps the corporation must take to change its constitution. Section 246-26 requires that a small corporation that elects not to hold AGMs under section 201-175, also changes its constitution to provide for longer terms of appointment for directors.

 

140.      Unlike the usual process for constitutional changes, a constitutional change under subsection 246-26(1) takes effect immediately under subsection (2). However, under subsections (3) and (4), if the special resolution not to hold the next one or two AGMs is not passed, or the corporation fails to lodge a copy of the special resolution as required under section 201-175, the constitutional change ceases to have effect. As a result, the terms of any directors appointed under the changed constitution will revert to the maximum term for directors permitted under the constitution as it stood prior to the change. Proposed subsection (5) requires the corporation to lodge particular documents including a copy of the constitutional change. Proposed subsection (6) requires the Registrar to register the constitutional change lodged under subsection (5). Proposed subsection (7) empowers the Registrar to direct the corporation to lodge a consolidated copy of the corporation’s constitution.

Item 161 - Subsection 327-1(6)

141.      This item inserts a new subsection into section 327-1, which provides an overview of the reporting requirements under Chapter 7. The proposed subsection 327-1(6) reflects the new requirement in proposed section 349-1 that the regulations may prescribe reports that must be laid before an AGM.

Items 162 and 163 - Section 330-10

142.      These items amend subsections 330-10(1) and (2), and recognise that the time for lodgment of the general report with the Registrar may be extended automatically under section 330-15.

Item 164 - Section 330-15

143.      This item inserts proposed section 330-15, which provides for an automatic extension of time for lodgment of the general report if a CATSI corporation makes a statement to the Registrar under section 348-10. Under proposed subsection 330-15(2), the time for lodgment is extended only once in relation to a corporation’s AGM and reports for a financial year, regardless of how many statements are made under section 348-10 and how many grounds for making statements apply in relation to the financial year. This has the effect that the same automatic 30 day period applies to extensions under proposed sections 330-15 and 348-3 for a financial year, i.e. a corporation is not entitled to two separate 30 day extensions under proposed sections 330-15 and 348-3.

Item 165 - Subsection 348-1(1)

144.      This item clarifies that the strict liability offence in subsection 348-1(1) relates to a failure to lodge a report under Part 7-3 within a particular timeframe, being “within the time for lodgment under subsection (3) (as extended under section 348-3, if applicable)”.

Item 166 - At the end of subsection 348-1(3) (note)

145.      This item inserts a note informing the reader that the time for lodgment under subsection 348-1(3) is extended if section 348-3 applies. This reflects the new provision in Item 167.

Item 167 - Section 348-3

146.      This item inserts a new section that provides for an automatic extension of 30 days to the time for lodgment of reports required under subsection 348-1(3) if a CATSI corporation makes a statement to the Registrar under section 348-10. Under proposed subsection 348-3, the time for lodgment is extended only once in relation to a corporation’s AGM and reports for a financial year, regardless of how many statements are made under section 348-10 and how many grounds for making statements apply in relation to the financial year. This has the effect that the same automatic 30 day period applies to extensions under proposed sections 330-15 and 348-3 for a financial year, i.e. a corporation is not entitled to two separate 30 day extensions under proposed sections 330-15 and 348-3.

Item 168 - Section 348-10

147.      This item inserts a new section, which allows a CATSI corporation to state that one or more specified grounds apply to it in relation to its AGM and reports for a financial year for the purposes of sections 201-153, 330-15 and 348-3. The specified grounds are a death in the community, a cultural activity, a natural disaster, and an unavoidable delay in obtaining an audit or review. Under proposed subsection 348-10(5), if a corporation has made a statement under section 348-10 for three consecutive financial years, a statement made in the fourth consecutive financial year has no effect.

Item 169 - At the end of Part 7-3 - Division 349

148.      This item inserts Division 349 that introduces an obligation on directors to lay certain reports for a financial year before the AGM held after the financial year. Proposed subsection 349-1(1) provides that the directors of a corporation must lay before the AGM any report in respect of the relevant financial year that is prescribed by the regulations for the purposes of this subsection. This strict liability offence provision is justified having regard to the nature of the offence and its consistency with the Act’s enforcement regime, and the relatively low maximum penalty, being 5 penalty units. The maximum penalty amount is consistent with other strict liability offences relating to AGMs.).

Item 170 - Subsection 439-15(1)

149.      This item replaces “or 201-155” with “section 201-153 or 201-155, or by a direction given under section 201-190” and provides that the Registrar may call and arrange to hold an AGM not held under sections 201-153, 201-155 and section 201-190.



 

Part 6 — Members and membership

Part 6 reforms the process in section 150-25 for cancelling membership when a member is not contactable. Having members who are not contactable can cause difficulties for a corporation in terms of its ability to meet quorum requirements for meetings. This, in turn, can affect the governance of the corporation and its ability to conduct its affairs effectively in the interests of all members. The proposed amendments will address these difficulties by reducing the minimum timeframe for establishing that a member is not contactable, while ensuring that a corporation takes reasonable steps to attempt to contact the member.
 Part 6 also introduces new provisions to protect someone’s personal safety by allowing particular information about a member or former member to be redacted in certain circumstances. 
 Item 171 - Subsections 150-25(3) and (4)

150.      This item repeals and replaces subsections 150-25(3) and (4) of the Act. The new subsection (3) sets out the manner and circumstances for cancelling a membership on the ground that the member is not contactable. Subsection (3) reduces the length of time within which contact must be attempted from two years to 12 months, and introduces a requirement to attempt contact using nominated alternative addresses for the member provided for the purposes of subsections 201-25(3) and (4).

 

151.      The new subsection 150-25(4) requires that notice of cancellation of membership must be provided to nominated alternative addresses as well as to the last address in the register of members. Like the repealed subsection (4), the new subsection (4) will be a strict liability offence provision with the same maximum penalty. This is consistent with the enforcement regime, including other strict liability offence provisions, in Division 150 of the Act.

Items 172 and 173 - Section 180-20 (heading) and 180-20(2)

152.      These items remove references to inspection of the register of members from section 180-20 as the requirements relating to inspection of the register of members are dealt with in section 180-25.

Item 174 - At the end of subsection 180-25(1) (note 3)

153.      This item adds a note to the end of subsection 180-25(1) that refers to the proposed new provisions in sections 180-26, 180-27 and 180-28 (see Item 175).

Item 175 - Sections 180-26, 180-27 and 180-28

154.      This item inserts sections 180-26, 180-27 and 180-28. Section 180-26 allows members of corporations to seek to have their personal information excluded from being made publicly available in the register of members where doing so may pose a risk to someone’s personal safety. To give effect to this, directors must make a determination regarding the information to be excluded. The proposed section also allows for the revocation of the determination when the directors no longer believe there is a risk to personal safety. Directors must lodge this determination with the Registrar within 28 days of the determination being made.

 

155.      To assist readers, subsection 180-26(5) clarifies that a notice under subsection (1) is not a legislative instrument. This clarification is merely declaratory of the law as a determination under subsection (1) is not a legislative instrument within the meaning of subsection (8)(1) of the  Legislation Act 2003 .

 

156.      Subsection 180-26(3) is a strict liability offence provision. Strict liability is justified on the grounds of the regulatory nature of the offence and its consistency with the Act’s enforcement regime, including the other strict liability offence provisions in Division 180, and the relatively low maximum penalty of 10 penalty units. The maximum penalty amount is consistent with the other strict liability offence provisions in Division 180.

 

157.      Section 180-27 requires corporations to ensure that a copy of the register of members or former members exists that excludes the information specified in a determination under section 180-26. This copy must indicate that it is a copy made for the purposes of this section. Subsection (3) provides for regulations that may prescribe requirements that a CATSI corporation or its directors must comply with in relation to copies of a register made for the purposes of this section. The provision for regulations allows regulatory flexibility to ensure that the requirements in relation to copies of a register made for the purposes of this section are appropriate.

 

158.      Section 180-28 empowers the Registrar to direct the corporation to allow a person to inspect, or be given a copy of, the register including some or all of the information redacted under section 180-26. External merits review of a direction given by the Registrar is not provided. The Registrar may only exercise this power if satisfied that a person has a genuine need for the information, and no-one’s personal safety will be put at risk as a result . A person who misuses information from a register of members, to contact or send material to a member that is not relevant to their membership or approved by the corporation, commits a criminal offence (existing subsection183-1(3)).

Item 176 - Subsection 180-30(3)

159.      This item inserts proposed subsection 180-30(3) which provides that where a determination under section 180-26 is in force at the time of the AGM, the register made available for inspection at the AGM is the redacted version.

Item 177 - Subsection 201-25(4A)

160.      This item inserts proposed subsection 201-25(4A) which provides that a corporation may record alternative contact information nominated by a member separately from the register of members, and must store the nominated information in the place it is required to keep its records under section 322-20. This allows the corporation some flexibility in how it manages alternative contact information.

Item 178 - Subsection 330-5(1A)

161.      This item clarifies that where a determination under section 180-26 is in force at the time a corporation is required to provide reports to the Registrar, the general report must not contain any information specified in the determination. This will prevent member information that is subject to a determination under proposed section 180-26 being provided to the Registrar and subsequently published on the public register.

Item 179 - Application - recording nominated addresses

162.      Subsection 201-25(4A) applies to information nominated after this Part commences.

Item 180 - Application - cancellation of membership on ground that member is not contactable

163.      This item allows for a smooth transition between the existing provisions and the amended provisions for cancelling membership on the ground of not being contactable. Proposed section 150-25 reduces the timeframe for attempting to contact a member from two years to 12 months, in order to cancel membership on the grounds of not being contactable. As such, membership cancellations under this section cannot occur for 12 months following the commencement of this Part. Corporations that have already been attempting to contact members under the existing provisions can continue to apply those provisions.

 



 

Part 7 Key management personnel

In order to increase the level of transparency of key management personnel employed by CATSI corporations, this Bill proposes to enable the regulations to require information about key management personnel employment history and remuneration to be reported in a remuneration report. Items 181 and 182 - Paragraph 327-1(1)(b) and Subsection 327-1(4)

164.      These items include a reference to remuneration reports required by the regulations in the overview provided in section 327-1. This corresponds to the substantive amendments in this part.

Item 183 - Subsection 330-5(1B)

165.      This item inserts a paragraph that provides that the regulations may require information about the employment history of key management personnel of the corporation, or an entity the corporation controls, for inclusion in a general report.

Item 184 - Section 333-1

166.      This item includes a reference to remuneration reports required by the regulations in the overview to Division 333 provided in section 333-1. This corresponds to the proposed amendment to section 333-5.

Items 185 to 187 - Section 333-5

167.      These items provide for the regulations to require CATSI corporations to prepare remuneration reports.

Item 188 - Subsection 333-10(4)

168.      This item provides that the regulations may require a remuneration report to include information about the remuneration of key management personnel of the corporation or an entity the corporation controls.

Item 189 - Subsection 333-15(3)

169.      This item proposes amending subsection 333-15(3) to exclude remuneration reports from the section 333-5 reports in respect of which regulations may be made under this subsection. This amendment corresponds to the proposed amendments to Division 342 under this Part.

Item 190 - Subsection 333-15(3) (note)

170.      This item amends the note to subsection 333-15(3) which corresponds to the proposed amendment in Item 189.

Item 191 - Section 333-25

171.      This item proposes adding a new section, section 333-25, which provides that if a CATSI corporation is required to include in a report prepared under Part 7-3 information about an individual who is or was a member of the key management personnel, the individual must give the corporation the information before the end of the relevant period. The requirement to provide the information before the end of the relevant period does not apply if the information has previously been given to the corporation.

 

172.      To ensure its regulatory effectiveness, proposed subsection 333-25(1) is a strict liability offence provision. Strict liability is justified on the grounds of the regulatory nature of the offence and its consistency with the Act’s enforcement regime, and the relatively low maximum penalty of 10 penalty units.

Items 192 to 197 - Sections 342, 348

173.      These items propose consequential amendments to sections 342-1, 342-5, 348-1 and 348-5 by inserting references to the new remuneration report.

Item 198 - Section 700-1

174.      This item inserts a definition of the expression “key management personnel” into the dictionary in section 700-1. The expression has the same meaning as in the accounting standards.



 

Part 8 — Related party transactions

The current rules for related party transactions can make it difficult for corporations, especially in small communities with extensive kinship ties and limited options for purchasing goods or services. This Part eases the requirements in relation to small corporations dealing with low value related party transactions, taking into account the diversity and special circumstances of classes of CATSI corporations. Item 199 - Section 287-3

175.      This item inserts proposed section 287-3, which provides an exemption to small CATSI corporations, from the requirement to obtain the approval of members to give a financial benefit to a related party in a financial year if the total amount of the financial benefit is less than an amount prescribed in the regulations. The section is based on section 213 of the Corporations Act.

Items 200 and 201 - Subsections 310-5(4A) and 310-15(3)

176.      These items insert proposed subsections 310-5(4A) and 310-15(3) requiring that before granting an exemption to a CATSI corporation the Registrar must be satisfied that giving a particular benefit will not cause detriment to the corporation.

Item 202 - Application

177.      This item provides that the exemption in section 287-3 applies in relation to a financial benefit given in a financial year that ends after the Part commences.

 

 

Part 9 Special administration

The purpose of this Part is to clarify the examinable affairs of a CATSI corporation and modify one of the grounds for determining that a CATSI corporation is to be under special administration. Item 203 - Paragraph 453-1(1)(f)

178.      This item inserts a proposed paragraph 453-1(1)(f) which provides that an authorised officer can report to the Registrar, drawing attention to any irregularity in the management of the corporation’s financial affairs. The purpose of paragraph (f) is to clarify that irregularity in the management of a corporation’s financial affairs is a relevant subject of an examination report under section 453-1.

Item 204 - Paragraph 487-5(1)(a)

179.      This item repeals and substitutes paragraph 487-5(1)(a) to provide a measure of financial distress as a ground for determining that a CATSI corporation is to be under special administration. The proposed new ground that a corporation is insolvent, or is likely to become insolvent, is a more relevant measure for this purpose than the current paragraph.

 



 

Part 10 Voluntary deregistration

Voluntary deregistration is cheaper and less complex than voluntary winding up. The purpose of this Part is to make deregistration a more feasible option for CATSI corporations in appropriate cases. Item 205 - Subsection 546-1(2)

180.      The purpose of this item is to clarify that all the conditions listed in subsection 546-1(2) must be met.

Item 206 - Paragraph 546-1(2)(a)

181.      This item proposes a change to the deregistration condition in paragraph 546-1(2)(a). Instead of the requirement for all members to agree to deregistration, agreement need only be obtained by special resolution. Obtaining the agreement of all members can be difficult, particularly for corporations with large memberships where some members may not be engaged in the affairs of the corporation, which is likely in the case of a corporation considering deregistration.

Item 207 - Paragraphs 546-1(2)(b), (c), (d) and (e)

182.      This item proposes a minor re-drafting of the paragraphs in subsection 546-1(2) to correspond with the proposed amendment in Item 205.

Item 208 - Subsection 546-1(2A)

183.      This item inserts a new subsection to allow an application for deregistration even though the conditions in paragraphs 546-1(2)(a) to (e) have not strictly been met. As this is a broad exemption provision, it is important that an application in these circumstances must specify the conditions that have not been met and provide persuasive reasons for them not being met.

Item 209 - Subsections 546-1(4), and (4A)

184.      This item proposes repealing and substituting subsection 546-1(4), as well as adding proposed subsection (4A). The new subsection (4) reproduces the current subsection with additional words requiring, as a precondition to publishing a notice in the Gazette, that the Registrar is not aware of any condition mentioned in subsection (2) not being met. Proposed subsection (4A) gives the Registrar a discretion to publish such a notice if satisfied it is justified even though one or more of the conditions in paragraphs (2)(a) to (e) have not been met. This allows for the deregistration of corporations in appropriate circumstances even though there has not been strict compliance with all the conditions in subsection (2). Subsection (4A) does not include paragraph (2)(f) which means a corporation cannot be deregistered if it is a party to legal proceedings. External merits review of the Registrar’s discretion to publish a notice in the Gazette is not provided. Section 546-1 deals with the process for voluntary deregistration and is similar to section 601AA in the Corporations Act. The Registrar cannot deregister a corporation until two months have passed since the Gazette notice. If, within those two months, the Registrar receives a request that the corporation wishes to remain registered, the Registrar will consider the request.

Item 210 - Application

185.      The amendments made by this Part will apply to applications for deregistration made after the commencement of this Part.



 

Part 11 Investigation and enforcement

Part 11 provides for the Registrar to accept enforceable undertakings in alignment with the powers of ASIC under the ASIC Act.
 This Part also aligns some aspects of the Registrar’s investigative powers with ASIC’s powers under the ASIC Act. In particular, this Part increases the Registrar’s power to require the production of books, and broadens the threshold for exercising the Registrar’s investigative powers generally.

Item 211 - Section 439-1

186.      This item adds to section 439-1 a brief overview of the Registrar’s power to accept enforceable undertakings.

Item 212 - Section 439-25

187.      This item adds 439-25, which empowers the Registrar to accept enforceable undertakings. The proposed section mirrors section 93AA of the ASIC Act. The provision for enforceable undertakings increases the range of lower level regulatory tools available to the Registrar to ensure compliance with the law and better align the Registrar’s compliance powers with those of ASIC. It is a discretionary and flexible remedy to achieve effective regulatory outcomes in appropriate cases.

Item 213 - Paragraph 453-1(1)(g)

188.      This item adds paragraph 453-1(1)(g) which integrates the Registrar’s new power in relation to enforceable undertakings with other powers under the Act by providing that a suspected contravention of an enforceable undertaking may be the subject of an examination of the books of a CATSI corporation.

Item 214 - Sections 453-2, 453-3 and 453-4

189.      This item inserts proposed section 453-2, which gives the Registrar broader powers based on ASIC’s powers to require the production of books. Subsection (1) is based on section 30(1) of the ASIC Act, and subsection (2) is based on paragraph 33(1)(a) of the ASIC Act. Both provisions impose legal duties to comply with the notices to produce. Subsection (3) reproduces the existing requirements with regard to notices to produce under subsection 453-5(2).

 

190.      Subsection 453-2(4) is based on paragraph 87(b) of the ASIC Act and empowers the Registrar to require the production of books immediately if it is reasonable in all the circumstances. This differs from the existing requirement under subsection 453-5(3) that a person must not be required to produce documents within a period less than 14 days after the notice is given. Allowing the Registrar to require the immediate production of books enables the Registrar to act expeditiously, for example, where there are concerns about the destruction, concealment or falsification of books.

 

191.      Existing section 461-15 overrides the privilege against self-incrimination in relation to, among other things, the production of books. Justification for this is set out in the revised explanatory memorandum for the Corporations (Aboriginal and Torres Strait Islander) Bill 2006 . That justification is consistent with the principles in the Guide to Framing Commonwealth Offences. It is also noted that the privilege against self-incrimination does not apply to bodies corporate.

 

192.      Subsections 453-2(5) and (6) create an offence provision and defence provision based on subsections 63(1) and (5) of the ASIC Act. The proposed offence provision in subsection (5) requires proof of the fault elements, unlike the existing strict liability offence in subsection 453-5(5). This higher level of criminal responsibility under subsection (5) justifies the larger penalty of 100 penalty units or imprisonment for two years, or both, compared to the existing penalty in subsection 453-5(5) of 30 penalty units or imprisonment for six months, or both. The defence provision in subsection (6) is justified because the legal burden of proving all elements of the offence, including fault elements, is on the prosecution. In these circumstances, what might constitute a reasonable excuse is a fact that is peculiarly within the knowledge of the defendant. Further, the prosecution bears the onus of disproving the defence of reasonable excuse in accordance with section 13.3(2) of the Criminal Code if the defendant successfully discharges the evidential burden.

 

193.      Subsection (7) defines “eligible persons” for the purpose of this section. It is based on the definition of the same expression in section 5 of the ASIC Act. This definition links to a signpost definition of this expression in section 700-1.

 

194.      Subsection 453-3(1) is based on section 38 of the ASIC Act. It complements proposed section 453-2 by empowering the Registrar to require a person to state where books may be found, or who last had possession or control of the books and where they may be found. The subsection imposes a legal duty to comply with the requirement.

 

195.      Subsection 453-3(2) and (3) create an offence provision and defence provision based on sections 63(1), (5) and (7) of the ASIC Act. The proposed offence provision in subsection 453-3(2) requires proof of the fault elements and the penalty is consistent with proposed subsection 453-2(5). The defence provision in proposed subsection 453-3(3) is justified because the legal burden of proving all elements of the offence, including fault elements, is on the prosecution. In these circumstances, whether the defendant has stated a matter to the best of the person’s belief or knowledge, or what might constitute a reasonable excuse, are facts that are peculiarly within the knowledge of the defendant. This is consistent with the principles in the Guide to Framing Commonwealth Offences. Further, the prosecution bears the onus of disproving the defence in accordance with section 13.1(2) of the Criminal Code if the defendant successfully discharges the evidential burden.

 

196.      Subsection 453-4(1) is based on section 39 of the ASIC Act. It complements proposed section 453-2 by empowering the Registrar to require a person to identify property of a corporation, and to explain how the corporation has kept account of that property. The subsection imposes a legal duty to comply with the requirement.

 

197.      Proposed subsections 453-4(2) and (3) create an offence provision and defence provision based on subsections 63(1), (5) and (8) of the ASIC Act. The proposed offence provision in subsection 453-4(2) requires proof of the fault elements and the penalty is consistent with proposed subsection 453-2(5). The defence provision in proposed subsection 453-4(3) is justified because the legal burden of proving all elements of the offence, including fault elements, is on the prosecution. In these circumstances, whether the defendant has performed the acts in paragraphs (1)(a) and (b) to the extent the person is capable of doing so, or what might constitute a reasonable excuse, are facts that are peculiarly within the knowledge of the defendant. This is consistent with the principles in the Guide to Framing Commonwealth Offences. Further, the prosecution bears the onus of disproving the defence of reasonable excuse in accordance with section 13.1(2) of the Criminal Code if the defendant successfully discharges the evidential burden.

Items 215 to 218 - consequential amendments to section 453-5

198.      These items make consequential amendments to section 453-5 due to the new power to require the production of books under proposed section 453-2.

Item 219 - Subsection 453-5(1)

199.      This item aligns the threshold for exercising the Registrar’s powers under subsection 453-5(1) with the ASIC commissioner’s powers under section 19 of the ASIC Act. In particular, the current threshold under subsection 453-5(1) that the Registrar “on reasonable grounds, believes” is broadened to “on reasonable grounds, suspects or believes”.

Item 220 - Section 453-15

200.      This item adds proposed section 453-15, which extends the Registrar’s power in relation to a body corporate under Division 453 to a person who is or has been an officer or employee of the body corporate. It is based on section 84 of the ASIC Act.

Items 221 and 230 - Paragraphs 456-1(1)(a) and 456-5(1)(a), and subsection 461-10(1)

201.      These items make consequential amendments to paragraphs 456-1(1)(a) and 456-5(1)(a), and subsection 461-10(1) due to the new power to require the production of books under proposed section 453-2.

Items 222 to 229 - Section 456-10

202.      These items make various changes to the language of section 456-10 consistent with section 37 of the ASIC Act on which it is based. Among other scenarios, this allows for the situation where books are produced to the Registrar, rather than an authorised officer.

Item 231 - Section 700-1

203.      This item inserts a signpost definition in the Dictionary for “eligible person” by directing the reader to the definition in subsection 453-2(7).



 

Part 12 — Publication of notices

Item 232 - Subsections 187-15(5), 225-15(4), 268-25(8), 310-15(5), 336-5(10), and 353-10(4)

204.      This item dispenses with the requirement to publish notices in the Gazette for some activities and, instead, provides for the Registrar to publish notices on the Registrar’s website.

Item 233 - Subsection 493-1(4 )

205.      This item repeals the subsection, no longer requiring the Registrar to publish notice of decisions regarding special administrations in the Gazette, and substitutes a requirement to publish notices on the Registrar’s website.

Item 234 - Subsection 526-20(8)

206.      This item repeals the subsection, no longer requiring the Registrar to publish notice of decisions regarding voluntary winding up in the Gazette, and substitutes a requirement to publish notices on the Registrar’s website.

Item 235 - Section 658-15

207.      This item effectively substitutes the current requirement that the Minister determine the form of a seal of the Registrar’s office by notice in the Gazette, with a requirement that the Minister determine the seal by notifiable instrument.

Item 236 - Paragraph 694-95(2)(b)

208.      This item is a consequential amendment which includes a failure to comply with a requirement to publish on a website within the scope of paragraph 694-95(2)(b).

Item 237 - Application

209.      This item provides that, other than for the amendment of section 658-15, the amendments made by this Part will apply in relation to the publication of a notice after this Part commences, whether or not the event the notice relates to occurred before or after this item commences.

 

210.      The item also provides that a determination of the Minister under section 658-15, made prior to this Part commencing, continues until revoked or varied after the commencement of this Part.



 

Part 13 — Independent Directors

 

This Part proposes amendments that facilitate the appointment of independent directors who bring relevant knowledge, skills and experience that can benefit CATSI corporations.

Items 238 and 239 - Section 57-5 (after table item 72)

211.      These items make consequential amendments to the table of internal governance rules in section 57-5 to insert reference to new section 246-17, and new subsection 246-25(1A).

Item 240 - Subsection 246-1(3)

212.      This item repeals subsection 246-1(3) which prevents the appointment of independent directors unless the corporation’s constitution provides otherwise.

Item 241 - Section 246-15

213.      This item amends section 246-15 to provide that members by resolution at a general meeting may not appoint a person who is not a member of the corporation or who is not an Aboriginal and Torres Strait Islander person. Section 246-15 is a replaceable rule that under the proposed new subsection 66-1(3) must be modified or replaced in a corporation’s constitution (see also proposed new section 66-5 for the meaning of modifying and replacing replaceable rules). As a replaceable rule, it will be open to corporations to modify section 246-15, for example, to allow members by resolution at a general meeting to appoint a person who is not a member of the corporation or an Aboriginal and Torres Strait Islander person.

Item 242 - Section 246-17

214.      This item inserts proposed section 246-17, which provides for the appointment of independent directors by other directors. Section 246-17 is a replaceable rule that under the proposed new subsection 66-1(3) must be modified or replaced in a corporation’s constitution (see also proposed new section 66-5 for the meaning of modifying and replacing replaceable rules). As a replaceable rule, it will be open to corporations to modify section 246-17.

Item 243 - Subsection 246-25(1A)

215.      This item sets out that an independent director can only be appointed for one year, unless otherwise specified in the constitution. This will ensure that directors can review the contribution of independent directors and the needs of the corporation at appropriate intervals. Subject to a corporation’s constitution, independent directors may be reappointed for consecutive terms.

Item 244 - Application

216.      The amendments made by this Part will apply in relation to the appointment of directors after this Part commences.

Part 14 — Qualified privilege for auditors

Item 245 - Part 15-3 (heading)

217.      This item removes the words “Registrar, Minister etc” from the heading of Part 15-3 to reflect the broader scope of Part 15-3 relating to the qualified privilege of auditors proposed in the following items.

Item 246 - At the end of Part 15-3 - Division 610

218.      This item inserts Division 610 dealing with qualified privilege for auditors.

 

219.      Proposed section 610-1 provides for auditors and other persons to enjoy qualified privilege in certain circumstances. It is based on section 1289 of the Corporations Act.

Item 247 - Section 694-120

220.      This item adds proposed section 694-120, which sets out the meaning of qualified privilege for the purposes of the Act. It is based on section 89 of the Corporations Act.

Item 248 - Section 700-1

221.      This item inserts a signpost definition of “qualified privilege” referring the reader to section 694-120.

Item 249 - Application

222.      The amendments made by this Part will apply in relation to statements made, notices given and publications occurring after this Part commences.



 

Part 15 — Resolutions to be the same in all material respects

This Part modifies the requirement for a resolution under Division 290 to give a financial benefit to a related party of the corporation. Currently, under section 290-30, the resolution must be the same as the proposed resolution set out in the proposed notice lodged under section 290-5. This Part proposes an amendment to the requirement that the resolution be the “same” to a requirement that it be the “same, in all material respects”. This is consistent with the use of this expression in subsections 290-20(1) and 290-25(1). The purpose of the proposed amendment is to ensure that resolutions are not invalidated, and the resources of a corporation are not wasted, by immaterial differences between a resolution and the proposed resolution set out in the proposed notice lodged under section 290-5. Item 250 - Section 290-30 (heading)

223.      This item amends the heading of section 290-30 to reflect the amendment in the following item.

Item 251 - Section 290-30

224.      This item amends section 290-30 by changing the requirement that the resolution be the same as the proposed resolution, to a requirement that it be the same, in all material respects.

Item 252 - At the end of Division 290 - Section 290-55

225.      This item adds proposed section 290-55, which provides for regulations relating to whether an explanatory statement, notice or resolution is the “same, in all material respects” for the purposes of sections 290-20, 290-25 and 290-30. The purpose of this amendment is to allow regulations to provide guidance on the meaning of “same, in all material respects” as that expression is used in the context of these sections. Using regulations for this purpose is desirable as it allows for flexibility in response to changes in the regulatory environment.

Item 253 - Application

226.      This item provides that the amendments made by this part will apply to resolutions voted on after this Part commences.

 

 

 



 

Part 16 — Unanimous requests for special administration



This Part removes the requirement for a show cause notice procedure under subsection 487-10(1) if the directors of a corporation unanimously request the Registrar to put the corporation under special administration.
 Ordinarily the Registrar must undertake a show cause notice procedure in accordance with subsection 487-10(1) before determining that a CATSI corporation is to be under special administration. This provides procedural fairness to the corporation by giving it an opportunity to answer the concerns raised by the Registrar. However, in some instances all the directors of a corporation may have already requested the Registrar to put the corporation under special administration. In these circumstances, the show cause notice procedure merely adds red tape, and delays the benefits of special administration. 
 Items 254 and 255 - Subsection 487-10(1) and (2)

227.      These items insert subsection 487-10(2A) which dispenses with the show cause notice procedure if all the directors of the corporation have requested the appointment of a special administrator.

Item 256 - Application

228.      This item provides that the amendments made by this Part will apply in relation to determinations that a corporation is to be under special administration made by the Registrar after this Part commences.



 

Part 17 Insolvency

Item 257 - At the end of section 166-10

229.      This item inserts a note at the end of section 166-10 that draws attention to the operation of proposed section 526-17.

Item 258 - Subsection 526-1(3)

230.      The item amends subsection 526-1(3) to provide that a winding up order under subsection (1) may be made on an application under section 166-10. This amendment ensures section 526-1 is consistent with proposed section 526-17 (see Item 262).

Item 259 - Section 526-12

231.      This item inserts proposed section 526-12. This section creates two new presumptions of insolvency for the purpose of paragraph 526-5(1)(i) that, unlike other presumptions of insolvency, are unique to the Act. Subsection (1) provides that a CATSI corporation is presumed to be insolvent if an authorised officer has stated in a report to the Registrar under subsection 453-1(1) that in the officer’s opinion the corporation has failed to keep financial records as required by section 322-10(1), or retain financial records for seven years as required by subsection 322-10(2). Before an authorised officer makes a statement in a report, the corporation must be given at least 14 days to produce the financial records.

 

232.      Subsection (2) provides that a CATSI corporation is presumed to be insolvent if a special administrator for the corporation has stated in a report to the Registrar that in the special administrator’s opinion the corporation has failed to keep financial records as required by section 322-10(1), or retain financial records for seven years as required by subsection 322-10(2).

 

233.      Under subsection (3), the presumptions in subsections (1) and (2) do not apply to a contravention that is minor or technical. Subsection (4) provides that the presumptions are rebuttable.

Items 260 and 261 - Paragraphs 526-15(4)(c) and 526-15(4)(d)

234.      These items amend subsection 526-15(4) with the effect that the Registrar is not required to seek leave of the Court to apply for an order that a corporation be wound up because it is insolvent.

Item 262 - Section 526-17

235.      This item inserts proposed section 526-17. This section provides that where an application under section 166-10 is made and the Court is satisfied that the corporation is insolvent, the Court may order that the corporation be wound up on the ground that it is insolvent. This section is based on section 459B of the Corporations Act to the extent it relates that to section 234 of the Corporations Act on which section 166-10 of the Act is based.

Item 263 - Application

236.      The amendments made by this Part apply in relation to applications made to the Court after the commencement of this Part.



 

Part 18 — Conflicting duties under State or Territory legislation

Items 264 to 267 - Subsections 265-1(1), 265-5(1), 265-10(1) and 265-15(1)

237.      These items add notes to subsections 265-1(1), 265-5(1), 265-10(1) and 265-15(1), drawing attention to the proposed section 265-23 (see Item 268 below).

Item 268 - Section 265-23

238.      Proposed section 265-23 ensures that acts done in good faith, with the belief that the act is necessary to comply with prescribed State and Territory legislation, will not contravene the care and diligence, good faith, use of position and use of information civil obligations. The potential for conflicting duties arises in the context of CATSI corporations that have been granted rights and interests in land under State or Territory legislation to be held for the benefit of Aboriginal and Torres Strait Islander persons. In particular, a conflict of duties potentially exists between a director’s duties under the Act and duties in relation to a person, or persons, for whose benefit the land is held and who may not be members of the corporation. Relevant State and Territory legislation may be prescribed in the regulations. Regulations for this purpose are appropriate as they can be responsive to changes in State and Territory legislation.

 

239.      Consequential amendments to the notes in subsections 265-1(1), 265-5(1), 265-10(1) and 265-15(1), and to paragraph 265-30(2)(b) reflect the addition of section 265-23.

Item 269 - Paragraph 265-30(2)(b)

240.      This item extends the operation of paragraph 265-30(2)(b) to proposed section 265-23 consistently with its operation in relation to section 265-20.

 



 

Part 19 Minor technical amendments

Item 270 - Subsection 85-15(3)

241.      This item replaces the word “this” in subsection 85(3) with the words “the requirement in subsection (2)”. The purpose of this amendment is to clarify the meaning of subsection 85-15(3) by removing a possible ambiguity in the use of the word ‘this’.

Item 271 - Paragraph 150-15(2)(a)

242.      This item replaces the word “uncontactable” in paragraph 150-15(2)(a) with the words “not contactable”. The purpose of this amendment is to promote consistency in the language of the Act, in particular in relation to the use of the expression “not contactable” in section 150-25.

Item 272 - Subsection 201-15(2)

243.      This item replaces the words “21 days” in subsection 201-15(2) with the words “28 days”. The purpose of this amendment is to promote consistency in the operation of related provisions in the Act. Currently, subsection 201-15(2) requires the directors to call a meeting within 21 days of being notified of the Registrar’s decision rejecting a request not to hold the meeting under subsection 201-10(4). The Registrar’s decision under subsection 201-10(4) is reviewable and, under section 620-5, the directors (or other persons whose interests are affected by the decision) may request the Registrar to reconsider the decision. The request must be made within 28 days. The 21 day limit under subsection 201-15(2) does not allow for the 28 day period to request the Registrar to reconsider the decision under section 620-5. Increasing the period to 28 days will allow for the 28 day period within which an application can be made for a review of the Registrar’s decision under section 620-5.

Item 273 - Subsection 249-10(2)

244.      This item repeals subsection 249-10(2). The purpose of this amendment is to remove confusion about the minimum possible notice period for member resolutions to remove directors. On the face of subsection 249-10(2), the second sentence appears to allow a notice period of less than 21 days. In fact, a minimum notice period of 21 days is mandated by subsection 201-20(3) and cannot be further shortened by subsection 249-10(2).

 

245.      Subsection 249-10(2) is based on subsection 203D(2) of the Corporations Act, however, the notice period has been shortened from two months in the Corporations Act to 21 days in the Act. Under the Corporations Act, subsection 203D(2) must be read together with subsection 249H(3) which provides that the relevant notice period must be at least 21 days. When read together, the effect of these provisions is that the standard notice period must be at least two months unless certain circumstances exist as set out in the second sentence of subsection 203D(2), in which case there must be at least a 21 day notice period. By contrast, under the Act, the effect of subsection 249-10(2), when read with subsection 201-20(3), is that the standard notice period is the same as the minimum notice period, being at least 21 days. Accordingly, subsection 249-10(2) serves no purpose.

 

 

Item 274 - Subparagraph 279-25(1)(a)(iii)

246.      This item replaces the word “or” at the end of subparagraph 279-25(1)(a)(iii) with the word “and”. The purpose of this amendment is to align section 279-25 with section 206E of the Corporations Act on which it is based. Accordingly, in order to disqualify a person under subsection 279-25(1), the Court must be satisfied that the disqualification is justified under paragraph (b) in addition to finding against the person in relation to one of the grounds in paragraph (a).

Item 275 - Subsection 304-15(1)

247.      This item inserts the words “, 22-1 or 23-1” after the words “section 21-1” in subsection 304-15(1). Subsection 304-15(1) and its current reference to section 21-1 mirrors section 205D of the Corporations Act and its reference to subsection 117(2). The requirements in relation to a person’s address for the purpose of an application under sections 22-1 and 23-1 are equally relevant to an application under section 21-1.

Item 276 - Section 407-15 (heading)

248.      This item replaces the words “Telephone or email” with the words “Oral or written” in the heading to section 407-15 in conformity with the amendment to subsections 407-15(1) and (2).

Item 277 - Subsections 407-15(1) and (2)

249.      This item replaces the words “Telephone or email” with the words “Oral or written” in subsection 407-15(1) and (2). Currently, section 407-15 allows the Registrar to accept telephone or email notice of a change to a detail in relation to a corporation in certain circumstances. This gives the Registrar a simple process for correcting obvious and minor errors. The amendment to subsections 407-15(1) and (2) extends this simple process to the situation where the Registrar receives personal notice of a change, not just by telephone or email. This is particularly relevant in the context of the Registrar’s staff working with corporations in the field.



 

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

 

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

Corporations (Aboriginal and Torres Strait Islander) Amendment

(Strengthening Governance and Transparency) Bill 2018

250.      This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

 

Overview of the Bill

251.      The Bill amends the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (the Act).

 

252.      Schedule 1 of the Bill amends the Act to provide a more streamlined regulatory framework for corporations registered under the Act (CATSI corporations) to ensure the level of regulation is proportional to size and overregulation is not occurring.

 

253.      The Bill should result in reduced compliance costs for all CATSI corporations, especially small corporations, which should enable more resources to be dedicated to the services they deliver.

 

254.      The Bill will also ensure that members of CATSI corporations will be better informed about the experience and remuneration of a corporation’s senior management, and directors will have a better idea of what would be an appropriate level of remuneration.

 

255.      CATSI corporations will be able to establish flexible business structures under the Act rather than having to do so under the Corporations Act 2001 .

 

256.      The Bill will also empower the Registrar of Aboriginal and Torres Strait Islander corporations (Registrar) to accept enforceable undertakings, allowing for a more efficient enforcement regime, promoting compliance with the Act.

 

257.      The Bill also includes a number of technical improvements and minor technical updates to ensure best practice and efficiency for both CATSI corporations and the exercise of the functions of the Registrar.

 

Human rights implications

258.      The Bill reduces the compliance burden and strengthens the transparency requirements for CATSI corporations - it does not directly advance or limit a relevant human right or freedom. However, by reducing the compliance burden and strengthening transparency, the Bill indirectly engages the right to self-determination, rights to equality and non-discrimination, the right to enjoy and benefit from culture and the right to privacy.

 

Right to self-determination

259.      The right to self-determination is contained in Article 1 of the International Covenant on Civil and Political Rights (ICCPR) and Article 1 of the International Covenant on Economic, Social and Cultural Rights (ICESCR). These articles specify that, by virtue of the right to self-determination, all peoples are free to “determine their political status and freely pursue their own economic, social and cultural development.”

 

260.      The right is also contained in Articles 3 and 4 of the UN Declaration on the Rights of Indigenous Peoples (UNDRIP). Article 4 specifically notes that in exercising the right to self-determination, Indigenous peoples have “the right to autonomy … as well as ways and means for financing their autonomous functions.” UNDRIP does not create legally binding obligations, but informs the way governments engage with and protect the rights of Indigenous people.

 

261.      The UN Committee on the Elimination of Racial Discrimination has stated that the right to self-determination involves “the rights of all peoples to pursue freely their economic, social and cultural development without outside interference.” [i] The right is widely understood to be exercisable in a manner that preserves territorial integrity, political unity and sovereignty of a country.

 

262.      The measures proposed by the Bill facilitate the economic development of Indigenous peoples by simplifying the processes involved in running a CATSI corporation. For instance, simplifying the existing classification system for CATSI corporations from one based on income, assets and employee numbers to a test based solely on revenue. This will lower the reporting obligations for many CATSI corporations.

 

263.      The Bill also modifies the regulation of related party transactions to take account of the impact of small communities and kinship and family relationships. This will make it easier for CATSI corporations to conduct transactions.

 

264.      Generally speaking, the proposed measures will make it easier for CATSI corporations to function. This facilitates Indigenous peoples’ ability to realise their own economic development and to continue to pursue their own financial autonomy. As such, the Bill indirectly advances the right of Aboriginal and Torres Strait Islander people to self-determination.

 

Rights of equality and non-discrimination

265.      The rights of equality and non-discrimination are contained in articles 2, 3, 16 and 26 of the ICCPR, article 2 of the ICESCR and article 5 of the Convention on the Elimination of All Forms of Racial Discrimination (CERD). These rights recognise that all human beings have the right to be treated equally and to not be discriminated against.

 

266.      Of particular relevance in the context of the Bill, the CERD establishes a general prohibition on racial discrimination. The Racial Discrimination Act 1975 implements this prohibition in Australian domestic law.

 

267.      Subsection 8(1) of the Racial Discrimination Act 1975 , in accordance with article 1(4) of CERD, allows ‘special measures’ which are designed to ensure advancement of certain groups. ‘Special measures’ are an exception to the general prohibition on racial discrimination, and are designed to “secure to disadvantaged groups the full and equal enjoyment of human rights and fundamental freedoms.” For a measure to be characterised as a ‘special measure’ it must:

·          be for a particular group or individuals;

·          be taken for the sole purpose of securing the adequate advancement of that group or those individuals;

·          be ‘necessary’; and

·          not continue after its objectives have been achieved.

 

268.      The measures in the Bill may be characterised as components of a broader ‘special measure’, being the Act in its entirety. The Bill promotes transparency and good governance in CATSI corporations for the benefit of the members of those corporations.

 

269.      The proposed measures are appropriate, adapted and proportionate and promote the development of self-management and financial autonomy among Aboriginal and Torres Strait Islander people.

 

Right to enjoy and benefit from culture

270.      The right to enjoy and benefit from culture is contained in article 27 of the ICCPR and article 15 of the ICESCR.

 

271.      Article 27 of the ICCPR protects the rights of individuals belonging to ethnic, religious and linguistic minorities in a country to enjoy their own culture, practice their own religion and use their own language. The UN Human Rights Committee has stated that “the enjoyment of those rights may require positive legal measures of protection and measures to ensure the effective participation of members of minority communities in decisions which affect them.” [ii]

 

272.      The Bill indirectly advances this right by providing CATSI corporations with an automatic extension of time to hold an annual general meeting or lodge an annual report due to circumstances such as a death in the community or obligations associated with a cultural activity.

 

Right to privacy

273.      The right to privacy is contained in article 17 of the ICCPR: “No one shall be subjected to arbitrary or unlawful interference with his privacy.”

 

274.      Rights can be limited where this is prescribed by law; there is a legitimate objective, and the limitation is reasonable, necessary and proportionate.

 

275.      The Bill proposes an amendment providing for circumstances where, if a director of a CATSI corporation considers that disclosure of details on the register of members would compromise the safety of a member or someone else, the CATSI corporation can redact this information. This promotes the right to privacy.

 

276.      Other parts of the same measure could potentially limit this right: the measure provides that the Registrar can order information about members to be released. However, this is necessary for effective governance and oversight of CATSI corporations, noting that the Registrar must be satisfied that the applicant has a genuine need for the information and that no-one’s personal safety will be put at risk as a result. The measure is reasonable, necessary and proportionate.

 

Offence provisions and human rights

277.      The right to a fair trial and fair hearing is contained in article 14(1) of the ICCPR: “In the determination of any criminal charge against him, or of his rights and obligations in a suit at law, everyone shall be entitled to a fair and public hearing by a competent, independent and impartial tribunal established by law.” The right to a fair hearing applies in both criminal and civil proceedings, including whenever rights and obligations are to be determined.

 

278.      Article 14(2) of the ICCPR protects the right to be presumed innocent until proven guilty according to law. An offence provision which requires the defendant to carry an evidential burden of proof, commonly referred to as a ‘ reverse burden offence ’, with regard to the existence of some fact engages and limits the presumption of innocence. The ‘reverse burden offences’ in the Bill are considered reasonable, necessary and proportionate because the facts that will be the subject of any reverse burden will be matters that are peculiarly within the knowledge of the defendant. Further, the reverse burden offences are justified having regard to the regulatory nature of the offence provisions. Details of the relevant provisions are in Items 152 and 214 of the explanatory memorandum.

 

279.      Strict liability offences engage and limit the presumption of innocence. There are offence provisions in the Bill that are strict liability offences . These offences are of a regulatory nature and are consistent with the Act’s enforcement regime, which includes other strict liability offences. The strict liability offences in the Bill are considered necessary to ensure the integrity of the regulatory regime under the Act. Requiring proof of fault for these particular offences would significantly limit the utility of these offence provisions. The penalties applying to the strict liability offences are proportionate in that they fall at the lower end of the range, not exceeding 50 penalty units. Details of the relevant provisions are in Items 152, 153, 156, 169, 171, 175 and 191 of the explanatory memorandum.

 

280.      Article 14(3)(g) of the ICCPR guarantees the right not to be compelled to incriminate oneself . The Bill gives the Registrar broader powers, based on ASIC’s powers in relation to the production of books. In particular, the existing powers relating to the production of books in section 453-5 will be replaced by new powers in section 453-2, 453-3 and 453-4 which are based on ASIC’s powers. Details of the relevant provisions are in Item 214 of the explanatory memorandum. These new provisions do not directly affect the privilege against self-incrimination. However, like the existing power to require production of books in section 453-5, the new provisions will be subject to the abrogation of the privilege against self-incrimination in the existing section 461-15. Justification for section 461-15 is set out in the revised explanatory memorandum for the Corporations (Aboriginal and Torres Strait Islander) Bill 2006 , which stated:

 

Proposed section 461-15 is based on section 68 of the ASIC Act, which also restricts the provision of derivative use immunity and provides use immunity for answers to questions, not for documents produced. The enactment of more limited immunities for ASIC and APRA followed extensive inquiries and empirical research into the particular difficulties of corporate regulation. The circumscribing of immunities was recommended by the Joint Standing Committee on Companies and Securities (1992) and by the ‘Review of the Derivative Use Immunity Reforms’ by John Kluver (1997). It was accepted that a full ‘use’ and ‘derivative use’ immunity would unacceptably fetter investigation and prosecution of corporate misconduct offences. In light of the Registrar’s similar role as a corporate regulator, a limited immunity is also justified here.

 

Conclusion

281.      The Bill is compatible with human rights. It indirectly advances the right to self-determination and economic development while taking into account the right to enjoy and benefit from culture and the right to privacy. The Bill also indirectly engages rights to equality and non-discrimination by improving the efficacy of an existing broader special measure for the advancement and protection of Aboriginal and Torres Strait Islanders.

 

 




[i] CERD, General Recommendation 21, The right to self-determination (Forty-eighth session, 1996), UN Doc A/51/18, annex VIII (1996), [125]

[ii] HRC, General Comment 23, Article 27 , UN Doc CCPR/C/21/Rev.1/Add.5 (8 April 1994), [7].