Commonwealth Numbered Regulations - Explanatory Statements

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CORPORATIONS REGULATIONS (AMENDMENT) 1991 NO. 281

EXPLANATORY STATEMENT

STATUTORY RULES 1991 No. 281

Issued by the Authority of the Attorney-General

Corporations Act 1989

Corporations Regulations (Amendment)

Section 22 of the Corporations Act 1989 (the Act) empowers the Governor-General to make regulations, not inconsistent with the Act or the Corporations Law (the Law), prescribing, inter alia, matters which are required by the Law to be prescribed by regulations or necessary or convenient to be prescribed by regulations for carrying out or giving effect to the Law.

In accordance with the Heads of Agreement between Commonwealth, State and Territory Ministers having responsibilities in relation to corporate regulation, the Attorney-General has consulted the relevant State and Territory Ministers who then voted to approve the proposed amendments insofar as they relate to matters within their deliberative jurisdiction.

The purposes of the Regulations are:

1.       to clarify the transitional provisions concerning the application of prescribed requirements on company financial reports;

2.       to make technical amendments to certain fundraising provisions;

3.       to prescribe an additional index so that Chapter 8 of the Law will apply to eligible exchange-traded options based on this index or the Australian Stock Exchange All Ordinaries Price Index;

4.       to make amendments of a technical and minor nature to the list of forms in Schedule 1 and to the body of some of the forms in Schedule 2;

5.       to make amendments of a technical and minor nature to financial statement requirements in Schedule 5;

6.       to correct an omission of several words from subclause 9 of Part 3 of Schedule 8; and

7.       to amend the list in Schedule 11 of overseas futures exchanges which are recognised exchanges for the purposes of the Law.

8.       to make further amendments of a technical and minor nature.

Details about the Regulations are at Attachment A.

ATTACHMENT A

Regulation 1

Commencement

This regulation provides for regulations 4, 5, 8 and 18 to commence on 1 January 1991. These regulations make certain corrections in the Corporations Regulations, and it is desirable, in the interests of commercial certainty and to avoid any possibility of an unexpected and unnecessary loss of rights or imposition of additional liabilities, that their application commence from the date when those Regulations first came into force, being 1 January 1991.

Regulations 4 and 5 make clear what options are available to persons compiling accounts during the transitional period following 1 January. Regulation 8 restores an exemption which existed prior to 1 January. In these cases, no one could be disadvantaged by the regulations commencing with effect from 1 January. Regulation 18 corrects errors in Schedule 5 to the Corporations Regulations, which deals with material required to be included in financial statements. Conceivably, some persons may already have compiled such statements in reliance on the unamended version of Schedule 5. Accordingly, regulation 21 provides that, notwithstanding the retrospective commencement of regulation 18, no one who has relied on the unamended version of Schedule 5 is to be liable to prosecution.

Regulation 2

Amendment

Regulation 2 states that the Corporations Regulations are to be amended as set out in these Regulations.

Regulation 3

Regulation 1.07 (General requirements for documents)

Regulation 3 amends the margin size for documents to be lodged with the Australian Securities Commission (the Commission).

Regulations 4 and 5

Regulation 3.6.02 (Financial statements prescribed requirements under subsection 297(1) of the Corporations Law)

Regulation 3.6.04 Financial reporting requirements

Regulation 4 clarifies the transitional provisions concerning the application of prescribed requirements on company financial reports. The effect is that the former requirements set out in Schedule 7 to the Companies Regulations will continue to apply to financial years ending before 1 January 1991. The new requirements set out in Schedule 5 to the Corporations Regulations will apply to financial years commencing on or after 1 January 1991. In relation to financial years commencing before 1 January 1991 and ending after that day, companies will have an option of using either Schedule 7 or Schedule 5. Regulation 5 is consequential upon the changes effected by regulation 4.

Regulation 6

Regulation 3.8.01 (Annual return)

In their annual return, companies are required to disclose various information in respect of their top 10 shareholdings. Some companies are also required to provide similar information in respect of all other shareholders. The inclusion of new subparagraph 3.8.01(x)(iiiA) will align the disclosures made in these two cases by requiring disclosure of the number of shares held by each shareholder outside the top 10 shareholders.

Regulation 7

Regulation 3.8.02 (Documents that are to accompany an annual return)

Regulation 7 corrects a typographical error.

Regulation 8

Regulation 7.3.11 (Exemptions from licensing, etc: prescribed interests)

Regulation 8 is intended to restore an exemption enjoyed under the co-operative companies and securities scheme by certain persons (e.g. trustee companies) from various licensing provisions of Chapter 7 of the Corporations Law (the Law).

The unintended omission of that exemption resulted from a minor change in the wording of subregulation 7.3.11(1) from that of the previous corresponding subregulation 26(2) of the Securities Industry Regulations (SI Regulations).

A number of bodies are exempt from the requirement to have an approved deed in relation to prescribed interest schemes (by virtue of declarations which are made under section 1084 of the Law or by virtue of "grandfathering provisions" in the State Corporations Acts). However, offers of the prescribed interests in question are not excluded offers within the meaning of subregulation 7.3.11(1) and accordingly, the bodies concerned are prima facie subject to the licensing provisions. Under subregulation 26(2) of the SI Regulations, such bodies would have been exempt from the relevant licensing provisions by virtue of not being required to have an approved deed.

The amendment proposed by regulation 8 continues an existing exemption that applied under the co-operative scheme legislation up to 31 December 1990.

Regulation 9

Regulation 7.12.06 (Excluded offers or invitations: paragraph 66(3)(k) of the Corporations Law)

Regulation 9 corrects an omission of several words from subparagraph 7.12.06(a)(v).

Regulation 10

Regulation 7.12.07 (Agent's authority to be lodged)

Where an agent signs a prospectus lodged under paragraph 1018(1)(a) of the Law, regulation 7.12.07 requires the agent's authority to be attached to the prospectus. However, the regulation does not currently require an agent's authority where the agent signs a supplementary prospectus lodged under paragraph 1024(1)(b) of the Law. Regulation 10 extends the obligation imposed by regulation 7.12.07 to lodge a copy of the instrument authorising an agent of a director to lodge a prospectus to the lodgment of a supplementary prospectus.

Regulation 11

Regulation 7.12.11 (Section 1021 (Specific provisions applicable to all Prospectuses)

Regulation 11 amends regulation 7.12.11 so as to set a limitation period of 2 years in respect of the disclosure of interests which various persons have in the promotion of a prescribed interest scheme. As presently drafted, regulation 7.12.11 would require the disclosure of such information even if it is only of historic interest.

Regulation 12

Regulation 7.12.12 (General provisions applicable to all prospectuses)

Regulation 12 corrects an omission of several words from regulation 7.12.12 thereby bringing the general requirement concerning prospectus contents in that regulation into line with section 1022 of the Law (i.e., all such information as investors and their professional advisers would reasonably require and reasonably expect to find in the prospectus).

Regulation 13

Regulation 7.12.15 (Prescribed covenants: paragraph 1069(1)(n) of the Corporations Law)

Subparagraph 7.12.15(6)(b)(i) of the Corporations Regulations sets out a covenant regulating how a management company is to deal with any application moneys received. This varies depending on whether or not such moneys is accompanied by a completed application form from a current prospectus.

The amendment made by Regulation 13 clarifies the situation where a completed application form does not accompany application moneys and also provides a mechanism for dealing with any interest that has accrued on application moneys while being held on trust as well as dealing with accounting mechanics as between the trustee or representative and the management company. The amendment to regulation 7.12.15 by Regulation 13 is twofold. New covenants are inserted into subregulation 7.12.15(2) to bind the trustee or representative and into paragraph 7.12.15(6)(b) to bind the management: company.

The amendments to paragraph 7.12.12(6)(b) require the management company to:

       as soon as practicable return the application moneys to the applicant; or

       attempt to obtain a completed application form from the applicant; and

       pay the moneys to the trustee or representative as soon as possible after their receipt but not later than the close of business on the next working day after the receipt; and

       if interest accrues while the moneys are held in trust by the trustee or representative ask the applicant in writing whether the applicant would like the interest to be dealt with as application moneys or to be paid to the applicant.

The amendments to subregulation 7.12.15(2) require the trustee or representative to if the management company:

       gives the application moneys to the trustee or representative, hold the moneys in a trust account on trust for the applicant until the application form is received; and

       advises the trustee or representative that the form has been received within the prescribed time -

-       apply the moneys within the prescribed time; and

-       treat the interest accrued on moneys held in trust as additional application moneys if the applicant in writing advises the management company that the interest accrued is to be treated as such; or

-       as soon as practicable, pay the interest accrued on moneys held in trust to the applicant if the applicant in writing advises the management company that the interest is to be so paid.

Regulation 14

New regulation 8.1.02 - Eligible exchange-traded options

The term "eligible exchange-traded option" is defined in section 9 of the Law to include a contract that is entered into on a futures market of a futures exchange and under which one of two parties acquires an option or right to be paid by the other party an amount of money to be determined by reference to the amount by which a specified number is greater or less than the number of a specified index, being the Australian Stock Exchange All Ordinaries Price Index or a prescribed index.

Regulation 14 prescribes the Australian Stock Exchange Twenty Leaders Share Price Index as "a prescribed index" for the purposes of the definition of "eligible exchange-traded option".

Regulation 15

Regulation 9.2.04 (Practical experience in auditing)

Regulation 15 corrects two minor errors in regulation 9.2.04.

Regulation 16

Schedule 1

Schedule 1 provides particulars of the list of forms contained in Schedule 2. Regulation 16 amends Schedule 1 by inserting a number of new items into the Schedule and substituting others.

Regulation 17

Schedule 2

Regulation 17 contains amendments to the Forms which are contained in Schedule 2 to the Corporations Regulations.

The majority of these amendments are technical amendments. For example the prefix "000/" has been removed from form numbers in all relevant forms and a number of minor typographical amendments e.g. in respect of section references, have been made.

In all forms which contain references to "ACN" or "ARBN", full stops have been inserted to bring such references into line with the current law relating to Australian Company Numbers

In Forms 203, 304, 310, 407 and 409 the substitution of the term "registered" instead of "registrable" represents a correction of an error in describing the bodies referred to in these forms.

Subregulation 17.32 inserts a new form into Schedule 2. Form 322 is entitled 'Application for extension of time to hold the Annual General Meeting'. This form is not a prescribed form and it is not mandatory for a company which makes an application to the Commission under subsection 245(5) of the Law, to provide the required information in accordance with Form 322. The form is included merely to provide guidance to applicants.

Subregulation 17.44 amends the title of Form 315 to more appropriately describe its purpose.

Subregulation 17.45 corrects a reference to a non-existent regulation.

Subregulation 17.54 amends Form 408 to remove irrelevant material which was printed at the end of this form.

Subregulation 17.87 substitutes new Forms 523 and 524 which contain minor structural and typographical (in the case of Form 523) changes to the forms from the current forms bearing the same numbers.

Subregulation 17.90 amends paragraph 2(a) of Form 603. Form 603 is the form prescribed under subsection 709(3) of the Law for notification by a person who is a substantial shareholder of interests in shares of the company.

Paragraph 2(a) of Form 603 is amended to limit the requirement, that a substantial shareholder provide a total of voting shares in which he or she or his or her associates has a relevant interest, to those shares to which he or she is entitled.

This change is made in consequence of changes made to the concept of entitlement in subsection 609(1) of the Law in the translation from the co-operative scheme provisions to the Law, which removed anomalies arising from the relationship between the association provisions (now in section 12 of the Law) and the entitlement provisions. In consequence of these changes a person is not necessarily entitled to all shares in which an associate has a relevant interest, and it is a person's entitlement that determines his or her status as a substantial shareholder under section 709 of the Law.

Note (2) of the form is also amended to specify paragraph 709(3)(c) of the Law as the provision under which a copy of a contract, scheme or arrangement or memorandum giving particulars may be required to be annexed to the form (subregulation 17.91).

Paragraphs 1.A(b) and 1.C(b) of Form 604 are also amended to take account of the changes to the entitlement provisions referred to above (subregulations 17.92 and 19.93).

Note (2) of the form is to specify paragraph 710(3)(d) as the provision under which a copy of a contract, scheme or arrangement or memorandum giving particulars is required to be annexed to the form (subregulation 17.94).

Note (3) to Form 605 is amended to specify paragraph 711(3)(e) as the provision under which a copy of a contract, scheme or arrangement or memorandum giving particulars is required to be annexed to the form (subregulation 17.95).

Subregulations 17.99 and 17.100 amend Form 711 to rationalise the financial disclosure requirements for securities licensees.

Subregulation 17.101 inserts a new form into Schedule 2. Form 902 is the prescribed form for the purposes of paragraph 1274(8)(h) of the Law. It is entitled 'Notification of information supplementary to a form or document previously lodged'. This form is to be used to supplement a document that has been submitted for lodgment with the Commission which has not been duly completed.

Subregulation 17.102 inserts a new form into Schedule 2. Form 909 is entitled 'Notification Of The Office At Which A Register Or A Branch Register Is Kept'. This form is not a prescribed form and it is not mandatory for a company which lodges a notice with the Commission of a change in address of the place (other than the company's registered office or an office at its principal place of business) at which any register or branch register of the company is kept under subsection 1302(4) of the Law, to provide the required information in accordance with Form 909. The form is included merely to provide guidance to companies.

Regulation 18

Schedule 5

Regulation 18 makes a number of corrections in Schedule 5 to the Corporations Regulations. Schedule 5 sets out a series of requirements to be met by a company in preparing financial statements at the end of the company's financial year. One of the more significant amendments is the deletion of item 25(1)(d) in that Schedule thus bringing item 25 into line with the equivalent item in Schedule 7 to the Companies Regulations under the co-operative companies and securities scheme. Another is subregulation 18.8 which complements subregulation 16.7 by making it clear that the definition of "income" for the purposes of the disclosure of the remuneration of executive officers of listed corporations does not include amounts paid in respect of overseas-based employment by an unlisted subsidiary of the listed corporation.

Regulation 19

Schedule 8

Schedule 8 contains details of information required to be given in an explanatory statement by directors of companies to creditors and members in relation to a proposed compromise or arrangement.

Subregulation 19.1 corrects an omission of several words from subclause 9(2) in Part 3 of Schedule 8 which occurred when the provision was being transcribed from the equivalent provision in the Companies Regulations.

Regulation 20

Schedule 11

Schedule 11 sets out a list of the overseas futures exchanges that will be 'recognised futures exchanges' for the purposes of the Law. The list is drawn up in consultation with industry participants. The list will be amended to provide for the inclusion of the Deutsche Terminborse, the new German Exchange, and the deletion of the Baltic Futures Exchange which has merged with the London Futures and Options Exchange.

Regulation 21

Transitional: financial statements

Regulation 1 provides for amendments to Schedule 5 (which sets out a series of requirements to be met by a company in compiling financial statements at the end of the company's financial year) to commence on 1 January 1991.

In order to avoid any disadvantage to persons who may have already completed accounts in reliance upon the unamended version of Schedule 5, regulation 21 provides that it will not be an offence if financial statements made out before the commencement of the regulation are made out in accordance with the unamended version of Schedule 5.


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