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CORPORATIONS REGULATIONS (AMENDMENT) 1991 NO. 453EXPLANATORY STATEMENT
STATUTORY RULES 1991 No. 453
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 and the draft Corporations 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, and the Ministerial Council for Corporations has approved the proposed amendments insofar as they relate to matters within its deliberative function under the Heads of Agreement and draft Corporations Agreement.
The purposes of the Regulations are:
1. to amend the references to the Corporations Law contained in paragraph 3.8.01(z) of the Corporations Regulations;
2. to insert a reference to two new forms in the list of forms in Schedule 1 and to insert the body of those forms in Schedule 2;
3. to make amendments of a minor nature to the body of a number of other forms in Schedule 2;
4. to omit a further form in Schedule 2 and substitute a new form;
5. to make amendments to the terminology presently used in Schedule 5, to restore uniformity of terms between the Law and Schedule 5 following recent amendments to the Law; and
6. to make a savings and application provision in respect of the amendments to Schedule 5.
Details of the Regulations are at Attachment A.
Regulation 3.8.01 (Annual Return)
The omission of subsections 332(3) and (4) of the Corporations Law ("the Law") and the insertion of equivalent requirements in new sections 331B and 331E of the Law by Schedule 3 of the Corporations Legislation Amendment Act 1991 ("the Amending Act") make it necessary to amend the references to the Law contained in regulation 3.8.01, which sets out the matters to be included in an annual return of a company.
Regulation 2.1 amends sub-subparagraph 3.8.01(z)(ii)(A) by inserting a reference to section 331E of the Law in place of the reference to paragraph 332(3)(a) or (b) of the Law. The effect of this amendment is to continue the existing requirement that the annual return of a company include a statement by its auditor about whether the auditor's report contained a statement relating to the auditor not being satisfied about various matters referred to in the nominated provision of the Law. These matters include whether the financial statements of the company are properly drawn up in accordance with the Law and applicable accounting standards so as to give a true and fair view of the company's profit or loss and state of affairs.
Regulation 2.2 amends sub-subparagraph 3.8.01(z)(ii)(B) by inserting a reference to section 331E of the Law in place of the reference to subsection 332(4) of the Law. The effect of this amendment is to continue the existing requirement that the annual return of a company include a statement by its auditor about whether the auditor's report contained a statement relating to any deficiency, failure or shortcoming concerning any matter referred to in the nominated provision of the Law. These matters include whether the auditor has obtained all of the information and explanations needed for the purposes of the audit, whether the company kept proper accounting records and a number of matters concerning the preparation of consolidated accounts.
Schedule 1 (List of forms in Schedule 2)
Schedule 1 of the Corporations Regulations provides particulars of the list of forms contained in Schedule 2 of the Corporations Regulations.
Regulation 3.1 inserts a new item, item 22A, (Form 356 - Notification of retiring directors) into Schedule 1.
Regulation 3.2 inserts a new item, item 26A, (Form 350 - Certification of compliance with stamp duties law), into Schedule 1.
The necessity for the new items is discussed below in the discussion relating to regulations 4.8 and 4.10.
Schedule 2 (Forms)
The amendments to sections 100, 187 and 242 of the Law and the insertion of new paragraph 242(7)(e) in the Law by Schedule 2 of the Amending Act make a number of consequential amendments to Forms 201, 202, 203, 401 and 402 necessary.
Regulations 4.1, 4.4, 4.5, 4.11 and 4.12 substitute several lines of text dealing with the occupier's consent in each of Forms 201, 202, 203, 401 and 402, in consequence of the amendment to paragraph 100(d) of the Law. The amendment removes the existing requirement that, where the address of premises specified in each of those forms is not occupied by the body corporate to which the form relates, the occupier of those premises also sign the form. Instead, the officer of the body corporate who signs the form is required to indicate whether the occupier's consent to the specification of those premises as the body corporate's office has been obtained.
In consequence of the amendment to section 187(1) of the Law, which deleted the obligation to lodge a return of the deemed allotment of shares under subsection 187(6), regulation 4.2 deletes (without replacement) the text in Form 201 dealing with the satisfaction of section 187(1).
The amendment made by regulation 4.6, to omit the existing text in Form 207 relating to notification of subscribers' shares, is also consequential upon the amendment of section 187(1) of the Law.
Regulation 4.3 corrects a typographical error.
The insertion of paragraph 242(7)(e) in the Law necessitated a consequential amendment to Form 304, to enable the lodging party to specify the date on which the change of name or address occurred. That amendment has been made by regulation 4.7.
Regulation 4.8 inserts a new Form 356, Form of notification of retiring directors. This amendment is consequential on the insertion of section 242A in the Law, requiring retiring directors to notify the Commission of their retirement where at least half the directors of the company cease to be directors on the same day.
Regulation 4.9 omits the existing Form 309 and substitutes a new Form 309. The amendments incorporated in the amended Form 309 include amendment of the section requiring a brief description of the liability secured by the charge, to allow a line for statement of the maximum prospective liability, where appropriate.
The signature blocks appearing on the front and reverse sides of the Form 309 have been amended to a less restrictive form. The amended signature blocks better reflect the requirements of the Law which allows the lodgement of Form 309 by "any interested person"(section 270). The same signature block has been used on the new form of certification of compliance with stamp duties law, Form 350. The person who signs a Form 350 in relation to a charge need not be the same person who has signed the Form 309 in relation to that particular charge. The phrase "any interested person", as it relates to the lodgement of either of these documents, includes attorneys or agents for either the corporation or the chargee.
The amended Form 309 makes provision for the situation where an original instrument creating or evidencing the charge, rather than a copy of such an instrument, accompanies the Form 309.
Form 309 previously required the lodging party to indicate whether or not the documents accompanying the Form 309 have been stamped. The amended Form 309 merely requires the lodging party to indicate whether a separate, duly completed certification of compliance with stamp duties law (new Form 350) accompanies the Form 309. The provision for stamp duties certification in a separate form, rather than as part of Form 309, facilitates provisional registration of a charge pending stamping of the documents and the subsequent lodgement of the separate stamp duties certification.
Regulation 4.10 inserts in Schedule 2 the new Form 350. The wording of the form of certification reflects the requirements of section 265(4)(b) of the Law.
The provisions in Schedule 3 of the Amending Act provide for extensive amendment of the accounts and audit provisions in Parts 3.6 and 3.7 of the Law. The major outcome of these amendments is to require a company to produce a single set of consolidated accounts in respect of financial years ending on or after 31 December 1991, covering both the company and all the corporate and non-corporate "entities" which it "controls". As a consequence, some of the terminology used in Schedule 5 of the Corporations Regulations, especially as it applies in relation to groups of companies, was at variance with the Law. The amendments restore uniformity of terms in the Law and the Regulations.
Although the majority of the changes are concerned with substituting new terminology for old, the change of terminology and the introduction of the consolidated accounts requirements has necessitated the following consequential amendments:
• regulation 5.2 amends subclause 1(1) of Schedule 5 by inserting a definition of "controlled entity". The term is defined to mean an entity that is under the control of a chief entity.
• regulation 5.17 amends subclause 1(3) of Schedule 5 by omitting the existing provision, which deals with the meaning of notes to the group accounts where the group accounts are not prepared as one set of consolidated accounts, and substitutes a new provision, which explains the meaning of the expression "related entity". The former provision can be omitted because the amendments to the Law mean that in future group accounts must be prepared as a single set of consolidated accounts. The new provision, which is modelled on the provision of the Law dealing with the meaning of "related body corporate", provides that two entities are related where-
- the first entity is the chief entity of the second entity;
- the first entity is under the control of a second entity; or
- the first entity and the second entity are both under the control of a third entity.
• Regulation 5.36 omits clause 5 of Schedule 5. Clause 5, which deals with the situation where the group accounts are not presented as a single set of consolidated accounts, is no longer necessary because group accounts must, in future, be presented as a single set of consolidated accounts.
• Regulation 5.49 omits para. 9(1)(c) of the schedule. This paragraph, which requires the separate disclosure of any amount derived using the equity method of accounting in determining the profit or loss, is no longer required because the equity accounting standard provides for the disclosure of all material investments in the notes to the accounts or consolidated accounts. The standard specifically excludes the use of equity accounting in the accounts or consolidated accounts themselves (ie. the profit and loss account and balance sheet without the explanatory notes).
• Clause 5.154 omits clause 36 of Schedule 5. This clause sets out additional requirements where the group accounts are not prepared as a single set of consolidated accounts and is not required because group accounts will have to be prepared as a single set of consolidated accounts.
• Clause 5.163 omits clause 39 of Schedule 5. This clause, which provides that inter-company balances and transactions must be eliminated when consolidated accounts are being prepared, is no longer required because the matter is dealt with in the accounting standard on consolidated accounts.
The other regulations in regulation 5 each replace one or more of the old expressions listed below with the corresponding new expression:
body corporate or|
related entity (depending on
context in which expression used)
Whether an old expression has been replaced every time it is used by the new expression depends on the context in which the expression is used: for example, the use of the expression "holding company" in the definition of "remuneration" in subclause 1(1) of Schedule 5 has been retained because it refers to a corporation formed or incorporated outside Australia. Section 295 of the Law restricts the use of the expression "chief entity", which is used elsewhere in the amendments instead of "holding company", to companies incorporated in jurisdictions in which the Law applies.
Application of Schedule 5
This regulation provides for the orderly commencement of the proposed amendments to Schedule 5. In the absence of this provision, the amendments would come into operation on the day on which these amendments to the Corporations Regulations were notified in the Gazette.
Regulation 6.1 provides that Schedule 5 as amended by regulation 5 does not apply to any financial year of a company that ends before 31 December 1991.
Regulation 6.2 provides that Schedule 5 as amended by regulation 5 applies to each financial year of a company that ends on or after 31 December 1991.