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CORPORATIONS AMENDMENT REGULATION 2012 (NO. 7) (SLI NO 233 OF 2012)
Select Legislative Instrument 2012 No. 233
Corporations Act 2001
Corporations Amendment Regulation 2012 (No. 7)
Subsection 1364(1) of the Corporations Act 2001 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.
The Act provides for the regulation of corporations, financial markets, products and services.
Under the Act, all companies must maintain a register of members (shareholders) and provide access to this share register upon request, unless, amongst other things, the request is made for an improper purpose. Improper purposes are prescribed under regulation 2C.1.03 of the Corporations Regulations 2001 (the Principal Regulations), and include unsolicited offers to purchase financial products off-market (that is, not via a licensed securities market such as the Australian Securities Exchange). This prescribed improper purpose is defined by reference to Division 5A of Part 7.9 of the Act, which applies to unsolicited offers to purchase financial products off-market. However, by virtue of section 1019D of the Act, Division 5A of Part 7.9 only applies to offers made or received in this jurisdiction. As a result, unsolicited share offers made or received outside Australia do not fall within the improper purposes as currently prescribed.
The proper purpose test was introduced as part of the Corporation Amendment (No. 1) Act 2010 (CAB1) in order to prohibit the practice of making unsolicited below-value share offers to shareholders of listed companies. Such activity would often prey upon unsophisticated shareholders, who may be unaware of the market value of their investment. In order to curb this predatory activity, the making of 'off-market offers to purchase securities in a listed company, other than for the purposes of a takeover' was identified in the explanatory memorandum accompanying CAB1 as an improper purpose. No distinction was made between such offers being made or received in Australia, and those being made or received overseas. The current jurisdictional limitation that applies to unsolicited off-market offers arises as an unintended consequence of the drafting, rather than the result of a policy intent.
The Corporations Amendment Regulation 2012 (No. 7) (the Amendment Regulation) makes a minor amendment to the Principal Regulations to rectify this unintended consequence, so that this prescribed 'improper purpose' for obtaining access to a company's share register is not limited by jurisdiction.
The corporate regulator, the Australian Securities and Investments Commission (ASIC), has been consulted on the Amendment Regulation. Given that it comprises a very minor amendment which is intended to rectify an unintended consequence resulting from the drafting and is consistent with the policy intent of the proper purpose test, the Amendment Regulation has not been exposed for public consultation.
Under the Corporations Agreement 2002 (the Corporations Agreement), the State and Territory Governments referred their constitutional powers with respect to corporate regulation to the Commonwealth. Pursuant to subclause 506(1) of the Corporations Agreement, the Legislative and Governance Forum for Corporations (the Forum, formerly the Ministerial Council for Corporations) has been consulted, and approved, the proposed Amendment Regulation. Three State/Territory Ministers approved the Amendment Regulation, as required by subclause 507(2) of the Corporations Agreement. Given the minor nature of the proposed amendment, the Forum has agreed to dispense with public consultation as permitted by subclause 511(3) of the Corporations Agreement.
The Act does not impose any conditions that need to be satisfied before the power to make the Amendment Regulation may be exercised.
The Office of Best Practice Regulation advised that a Regulation Impact Statement was not required as the amendment was 'machinery' in nature.
The Amendment Regulation is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
The Amendment Regulation commences the day after it is registered on the Federal Register of Legislative Instruments.
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
CORPORATIONS AMENDMENT REGULATION 2012 (No. 7)
This Legislative Instrument 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 Legislative Instrument
Under the Corporations Act 2001 (the Act), a company must maintain a register of its members (shareholders) and provide access to this share register upon request, unless, amongst other things, the request is made for an improper purpose (known as the proper purpose test). Improper purposes are prescribed under regulation 2C.1.03 of the Corporations Regulations 2001 (the Regulations), and include unsolicited offers to purchase financial products off-market.
Such activity often preys upon unsophisticated shareholders, accessing their personal details in order to make unsolicited below-value share offers. The proper purpose test was introduced in 2010 in order to curb this predatory activity. The policy intent of the proper purpose test does not consider the matter of jurisdiction. However, an unforseen consequence of the drafting means that unsolicited share offers made or received outside Australia do not fall within the improper purposes as currently prescribed.
The Corporations Amendment Regulation 2012 (No. 7) makes a minor amendment to the Regulations to rectify this unintended consequence, such that this prescribed 'improper purpose' for obtaining access to a company's share register is not limited by jurisdiction.
Human rights implications
This Legislative Instrument engages Article 17 and Article 19 of the International Covenant on Civil and Political Rights (ICCPR).
Article 17 protects the right to privacy and reputation. This Legislative Instrument advances shareholders' right to privacy by extending the protection currently provided by the 'unsolicited share offers' prescribed improper purpose so that it is no longer limited by jurisdiction. This will protect the privacy of foreign residents who hold investments on the Australian Securities Exchange (ASX).
Article 19 protects the right to freedom of expression, which includes the freedom to seek, receive and impart information and ideas of all kinds. This Legislative Instrument infringes on Article 19, as it expands the current restriction regarding access to share registers so that it is no longer limited by jurisdiction. Article 19 states that the exercise of these rights carries with it special duties and responsibilities and may therefore be subject to certain restrictions, whereby infringing on this Article may be allowed under particular circumstances, including for respect of the rights or reputations of others.
This limitation on the right to information is considered reasonable, necessary and proportionate to achieve the objectives of the Legislative Instrument. Further, the benefits resulting from advancing shareholders' right to privacy are considered to outweigh the limitation on others' rights to access shareholder information for the purpose of making unsolicited share offers.
This Legislative Instrument is compatible with human rights as it advances the protection of human rights, specifically the right to privacy under Article 17 of the ICCPR. While this Legislative Instrument infringes on the right to information under Article 19 of the ICCPR, it does so to protect others' right to privacy under Article 17. This falls under an allowable restriction of Article 19, for respect of the rights or reputations of others.
Parliamentary Secretary to the Treasurer