EXPLANATORY STATEMENT

 

Select Legislative Instrument 2007 No. 201

 

Issued by the authority of the Parliamentary Secretary to the Treasurer

 

Governance Review Implementation (Treasury Portfolio Agencies) Act 2007

 

Governance Review Implementation (Treasury Portfolio Agencies) (Application and Transitional Provisions) Regulations 2007

 

 

Paragraph 20(1)(b) of Schedule 2 to the Governance Review Implementation (Treasury Portfolio Agencies) Act 2007 (Governance Act) provides that the Governor‑General may make regulations prescribing matters necessary or convenient to be prescribed for carrying out or giving effect to that Schedule.

 

Part 9.7 of the Corporations Act 2001 (Corporations Act) provides that, ASIC holds unclaimed property on trust in the unclaimed monies account. In the event that property becomes unclaimed property, ASIC must, in the case of money pay it into an unclaimed money account, or in the case of property sell or dispose of the property and pay the proceeds into an unclaimed money account. ASIC may pay monies in the account to persons entitled to that money, and after six years must return it to consolidated revenue.

 

ASIC may invest the monies held in the unclaimed money account. Importantly, the Minister currently has the discretion to apply income earned from investing unclaimed monies.

 

The Governance Act makes ASIC an agency subject to the Financial Management Accountability Act 1997 (FMA Act). This is consistent with the recommendations of the June 2003 Review of the Corporate Governance of Statutory Authorities and Office Holders (the Uhrig Review).

 

Under the new regime, ASIC will hold money and property on behalf of the Commonwealth, rather than in its own right. Consequentially, a number of technical amendments were required to the Corporations Act and the Australian Securities and Investments Commission Act 2001 (ASIC Act). These reforms included the establishment of a statutory special account, titled the Companies and Unclaimed Monies Special Account, to replace the current regime for the treatment of unclaimed monies under Part 9.7 of the Corporations Act.

 

Property may become unclaimed property in a number of ways, but the most common example is where the whereabouts of a member of a company is unknown for six years then the shares held by that member become unclaimed property.

 

Under the FMA Act, money held on trust is an example of ‘special public money’, which is public money that is not held on account of the Commonwealth or for the benefit of the Commonwealth. This type of money is generally paid into a special account.

 

 

The special account is a ledger account recording a right to draw money from the consolidated revenue fund. The account replicates, as far as possible, the existing arrangements under Part 9.7 of the Corporations Act for the treatment of unclaimed money. Importantly, the Minister has retained the discretion to apply the proceeds of investment of the monies credited to the account as interest earned on the investment of unclaimed money (paragraph 135(2)(d)).

 

The new section 134 of the ASIC Acct sets out the types of money that must be credited to the new special account. The transitional provision in item 3 of Schedule 2 to the Governance Review Implementation (Treasury Portfolio Agencies) Act 2007 is to the effect that ‘unclaimed property’ under the previous Part 9.7 of the Corporations Act will be treated as ‘unclaimed property’ under the new Part 9.7, such that, it will be credited to the special account.

 

While the transitional provision discussed above provides for the transfer of all unclaimed money to the new special account, there was no separate identification (or treatment) of the amount of unclaimed property that consists of interest on investments earned prior to 1 July 2007.

 

As such, there was a need to create a transitional regulation to the effect that interest received on investments of companies unclaimed monies account funds made prior to 1 July 2007 are to be regarded as if they had been credited to the special account under the new paragraph 134(c).

 

The Regulations insert a transitional provision that any interest on an investment of unclaimed property made before 1 July 2007, regardless of whether the interest is received on or after 1 July 2007, may be applied in relation to certain proposals determined by the Minister.

 

The Regulations have the effect that income referred to in subregulations (2) and (3) may be debited from the Companies Unclaimed Moneys Special Account in the same way as if they were amounts referred to in paragraph 135(2)(d) of the ASIC Act.

 

The Regulations delivers the policy intent, that the transfer of ASIC to the FMA Act should not affect the operation of the companies unclaimed monies account. In particular, the Minister has retained the power to apply interest income on investments of the companies unclaimed monies account made prior to 1 July 2007.

 

Under the Corporations Agreement 2002, the State and Territory Governments referred their constitutional powers with respect to corporate regulation to the Commonwealth. Under subclauses 516(1) and 516(2) of the Corporations Agreement, the Commonwealth is required to notify the Ministerial Council for Corporations (the Council) of all legislative proposals for Commonwealth legislation that would alter the effect, scope or operation of the national law, at the earliest practicable time after the development of a legislative proposal.

 

The Council has been notified of the Regulations.

 

The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003. The Regulations commences on 1 July 2007.