Commonwealth Numbered Regulations - Explanatory Statements

[Index] [Search] [Download] [Related Items] [Help]

CORPORATIONS AMENDMENT REGULATIONS 2000 (NO. 7) 2000 NO. 206

Statutory Rules 2000 No. 206

Issued by the Minister for Financial Services and Regulation

Corporations Act 1989

Corporations Amendment Regulations 2000 (No. 7).

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, prescribing, among other things, matters which are required by the Corporations Law to be prescribed by regulations, or necessary or convenient to be prescribed by regulations for carrying out or giving effect to the Corporations Law.

The primary purpose of the Regulations is to provide temporary and ongoing relief from certain provisions of the Corporations Law as they apply to building societies, credit unions and friendly societies ('transferring institutions') that transferred from the previous State and Territory-based financial institutions scheme to the Corporations Law on 1 July 1999 pursuant to the second stage of the financial sector reforms.

The Regulations facilitate the transition of transferring institutions to the Corporations Law framework by:

*       extending transitional relief from the requirement under section 153 of the Corporations Law to use the company's name and CAN on all of its public documents and negotiable instruments;

*       providing ongoing relief in relation to the giving of notices to members entitled to vote at meetings of the members and in relation to the provision of annual financial reports to members;

*       permitting transferring institutions to use streamlined procedures to effect minor constitutional changes and to consolidate different classes of membership shares into a single 'standard' class of shares. The Regulations will exclude from their scope any change that materially alters the rights or obligations of members;

*       providing transitional relief from specific provisions of the Corporations Law, such as the obligation to hold an annual general meeting within a certain time; and

*       clarifying the application of certain provisions of the Corporations Law to transferring institutions.

The State and the Northern Territory Ministers on the Ministerial Council for Corporations have been consulted about the Regulations and have given their agreement, as required by the Corporations Agreement reached between State, Northern Territory and Commonwealth Ministers who had responsibilities in relation to corporate regulation in 1990.

Details of the Regulations are in the Attachment.

Regulations 1, 2 and 3 (formal) and Schedule 1 (dealing with requirements under section 153 of the Corporations Law) are taken to have commenced on 1 July 2000. They are not in breach of section 6 of the Act (dealing with retrospective commencement of regulations) as the rights of private persons are not affected so as to disadvantage those persons and they do not impose a liability on a private person in respect of anything done or omitted to be done before the regulations are notified in the Gazette. The institutions that are affected are relieved from the requirement to comply with section 153 of the Corporations Law. Retrospective commencement will be of benefit to institutions as it will extend the relief provided under the former regulation from 1 July 2000 to 31 December 2000 and ensure that the relief is continuous throughout this period.

The Regulations in Schedule 2 commence on gazettal.

ATTACHMENT

CORPORATIONS AMENDMENT REGULATIONS 2000 (No. 7)

Regulation 1: Name of Regulation

Regulation 1 provides for the name of the regulations.

Regulation 2: Commencement

Regulation 2 provides for the commencement of the regulations. Regulations 1, 2 and 3 and Schedule 1 are taken to commence on 1 July 2000. Schedule 2 commences on gazettal.

Regulation 3: Amendment of Corporations Regulations 1990

Regulation 3 provides that Schedules 1 and 2 amend the Corporations Regulations 1990.

Schedule 1 Amendments taken to have commenced on 1 July 2000

Item [1] - regulation 12.2.05

Item [1] modifies regulation 12.2.05 by deleting the words "for the period of 12 months starting on the transfer date." Current regulation 12.2.05 provides relief from the requirement to comply with section 153 of the Corporations Law (the requirement to use the company's name and ACN on all of its public documents and negotiable instruments). The relief provided under current regulation 12.2.05 ceases from 1 July 2000. The removal of the words has the effect of extending the period during which section 153 does not apply, to the 'transition period' (defined in clause 1 of Schedule 4 to the Corporations Law).

The duration of the relief under this regulation is provided for by regulation 12.2.01, which states that the regulations contained in Division 1 of Part 12.2 are made under clause 28 of Schedule 4 to the Corporations Law. Clause 28(3) of the Corporations Law states that regulations made for the purposes of that clause cease to have effect at the end of the transition period.

It is necessary for this regulation to commence from 1 July 2000 (i.e. it will have a retrospective effect) in order to ensure that it has a continuous operation during the transition period. The regulation will not be in breach of section 6 of the Corporations Act 1989 as the rights of private persons are not affected so as to disadvantage those persons and it does not impose a liability on a private person in respect of anything done or omitted to be done before the regulation is notified in the Gazette. The institutions that are affected are currently relieved from the requirement to comply with section 153 of the Corporations Law. The regulation extends the period of relief to 31 December 2000, which is beneficial to these institutions.

Schedule 2 Amendments commencing on gazettal

Item [1] - regulation 12.1.01: definition of 'member share'.

Item [1] inserts in regulation 12.1.01 the definition of 'member share' which is to apply for the purpose of some provisions of Chapter 12. 'Member share' is defined as having the meaning provided for by current regulation 12.8.03.

Item [2] - regulation 12.2.02: certain constitutional changes

Former regulation 12.2.02 provided that subsection 123(1) of the Corporations Law concerning the use of the company seal did not apply in relation to a transferring financial institution for the period of 28 days starting on the transfer date (1 July 1999). As that period has now expired, it is no longer necessary to retain former regulation 12.2.02. It has been replaced with a new regulation, which will operate for the remainder of the transition period.

Clause 24 of Schedule 4 to the Corporations Law requires transferring entities to make certain changes to their constitutions during the transition period, so that they are consistent with their new corporate form under the Corporations Law. Normally, constitutional changes require a special resolution and general meeting of members under subsection 136(2) of the Corporations Law.

The purpose of regulation 12.2.02 is to facilitate compliance by transferring entities with clause 24 of Schedule 4 to the Corporations Law by permitting them to make certain necessary constitutional changes consequential on transition to the Corporations Law, without the need for a general meeting. Regulation 12.2.02 permits a board of directors of an entity to make minor changes to the constitution without the need for a special resolution or a general meeting of members. The relief provided by proposed regulation 12.2.02 also applies if members at a general meeting make the specified constitutional changes.

Subregulation 12.2.02(1) specifies the types of changes that may be made under the regulation. In order to safeguard the interests of members, regulation 12.2.02 ensures that the changes to the constitution that may be effected by resolution of the directors are 'consequential' or minor' in nature.

Statements of member liability under a guarantee

Under paragraph 12.2.02(1)(f), insertions of the member guarantee statements for companies limited by guarantee or shares and guarantee may not be made by directors' resolution if the total amount of the guarantee exceeds $20. Any proposal to include a guarantee amount of more than $20 will need to be put to a general meeting of members. A statement of the guarantee in the constitution will not impose any liability on existing members, because of clause 16 of Schedule 4 to the Corporations Law and will not therefore materially alter the rights and obligations of members. Members joining after the guarantee statement is incorporated in the constitution will be liable under it in the event the company is wound up.

Rights and obligations attaching to shares

Clause 24 of Schedule 4 to the Corporations Law requires transferring entities to set out the rights and obligations attaching to each kind of share on issue, including shares that were taken to have been issued by virtue of the transfer legislation. This must be done before the end of the transition period.

Some entities that became companies limited by shares have, through various means, issued (or have been taken to have issued) various different classes of member shares. (A 'member share' is a share that bestows membership rights such as the right to use the services provided by the entity. It is not tradeable. The term is defined in current regulation 12.8.03). Such entities may wish to 'standardise' their share structures, so that the various categories of member shares that have been issued, or are taken to have been issued, are converted into a single or common class of shares. That 'standard' class may be a new class, or it may already exist.

The regulations facilitate consolidation of member shares in this manner by entities that wish to do so by:

*       providing a streamlined facility (paragraph 12.2.02(1)(g)) for the creation of a new standard class of share to be included in the constitution of the entity (if required)); and

*       once the standard class is included in the constitution, providing a facility for existing member shares to be converted into the standard class of member shares (see Item [4] below).

It is envisaged that current and future members will hold the standard class of member share. Paragraph 12.2.02(1)(g) and Item [4] below, together permit the board of directors of a transferring entity that is a company which is limited by shares, to include in its constitution a new class of shares, for the purpose of converting different classes of member shares set out at paragraphs 12.2.04(1)(a), (b) or (c) into a single class of shares in the company (Item [4]).

Paragraph 12.2.02(2)(a) specifically excludes any alteration of benefit fund rules as defined in subsection 16B(1) of the Life Insurance Act 1995 from the scope of regulation 12.2.02. Amendments to benefit fund rules are governed by the procedures and processes in that Act.

Paragraph 12.2.02(2)(b) excludes from the scope of the provision any changes to the company constitution that materially alter the rights or obligations of members.

Modifications to company constitutions under regulation 12.2.02 may only be made during the transition period. Any changes to company constitutions after the expiration of the transition period must be made by special resolution of a meeting of the members.

Item [3] - subregulation 12.2.03(3)

Former subregulation 12.2.03(3) provided that "subregulations 12.2.03(1) and 12.2.3(2) cease to have effect at the end of the transition period." It is unnecessary to provide in subregulation 12.2.03(3) that the subregulations cease to have effect at the end of the transition period because current regulation 12.2.01 states that the regulations contained in Division 1 of Part 12.2 are made under clause 28 of Schedule 4 to the Corporations Law. Clause 28(3) of Schedule 4 states that regulations made for the purposes of that clause cease to have effect at the end of the transition period. Item [3] therefore omits subregulation 12.2.03(3).

Item [4] - regulation 12.2.04: conversion of certain kinds of shares

Former regulation 12.2.04 disapplied section 144 of the Corporations Law for '28 days starting on the transfer date.' As that period has now expired, it is no longer necessary to retain regulation 12.2.04. It has therefore been replaced by a new regulation 12.2.04.

The transfer of entities to the Corporations Law as public companies limited by shares, and the resultant issue of statutory shares (as provided for in clauses 12 and 14 of Schedule 4 to the Corporations Law and regulations 12.8.11 and 12.8.12) have resulted in some transferring financial institutions' members holding different classes of shares, even though those shares confer the same kind of rights and obligations.

Item [4] permits the boards of directors of transferring financial institutions that became companies limited by shares to consolidate the different classes of membership shares. Subregulation 12.2.04(1) permits the conversion to a single class of shares to be made by resolution of the board of directors without a general meeting of members of the company being held. The shares to be converted must be shares of the kind described in paragraphs 12.2.04(1)(a), (b) or (c).

Under regulation 12.2.04, the conversion process is effected in two steps. First, prior to conversion, there must be included in the company constitution, the 'standard' class of shares into which existing member shares are to be converted. If the class of shares into which the different classes of member shares are to be converted is not already included in the constitution, the directors of the board may create that class using the mechanism outlined at Item [2] above (paragraph 12.2.02(1)(g)). Secondly, subregulation 12.2.04(2) sets out the preconditions that must be met before the conversion of the different classes of member shares into the single class of member shares may occur. This includes, at paragraph 12.2.04(2)(a), the requirement that the rights and obligations of holders of converted shares whose shares are converted to the new class are set out in the company's constitution.

Subregulation 12.2.04(2) operates to exclude certain types of conversion being made by resolution of the board of directors. Paragraph 12.2.04(2)(b) provides that the directors may not make any conversion where the conversion materially alters the rights or obligations of holders of converted shares. In addition, the conversion facility under regulation 12.2.04 cannot be used if the class of shares to which the different classes of share are converted (including paid and unpaid amounts) has a value greater than $20.

Subregulation 12.2.04(4) guards against potential abuse of the conversion facility by inserting reporting requirements (in addition to the conditions precedent to conversion set out at subregulation 12.2.04(2)). Under subregulation 12.2.04(4), any transferring financial institution that makes use of the conversion process is required to lodge a copy of the resolution of the directors with the Australian Securities and Investments Commission (ASIC) within one month of the resolution being adopted and a declaration by the directors that the requirements of subregulation 12.2.04(2) have been met.

Subregulation 12.2.04(5) provides that the resolution takes effect on lodgment with ASIC.

Under subregulation 12.2.04(6), ASIC or members who hold 10% or more of the converted shares are able, within twelve months of the resolution taking effect, to challenge the conversion on the basis that the preconditions set out in subregulation 12.2.04(2) have not been met. If the court is satisfied that the preconditions set out in subregulation 12.2.04(2) have not been met, it may order the purported conversion to be set aside. Subregulation 12.2.04(7) provides that the order has effect from the time of the purported conversion, to ensure that the holders of the shares are restored to the position they would have been in but for the purported conversion. A copy of an order made by the court to set aside the purported conversion is to be lodged with ASIC within 14 days of the order being made (subregulation 12.2.04(8)).

Regulations 12.2.12 (see Item [7] below) and 12.8.06A (see Item [14] below) modify the operation of section 254K and 254M of the Corporations Law respectively, where the company converts different membership shares using the facility provided in regulation 12.2.04.

A resolution of the board of directors to convert the different classes of member shares to a single class under regulation 12.2.04 may only be made during the transition period.

Item [5] - regulations 12.2.06 and 12.2.07

Regulation 12.2.06: age of directors

Former regulation 12.2.06 provided transitional relief (i.e. until 31 December 2000) from section 228 of the Corporations Law, which at the time regulation 12.2.06 took effect, concerned the appointment of aged directors to public companies. Under previous section 228, directors of companies who were older than 72 years of age could only continue as directors if appointed by a special resolution of the meeting of the company, and would hold office only until the next annual general meeting of the company.

As a result of the Corporations Law Economic Reform Act 1999 (No 156 of 1999), a re-numbering of certain sections of the Corporations Law has occurred. The previous section 228 is now found at section 201C of the Corporations Law. It is necessary to insert the correct reference.

Regulation 12.2.06 is made pursuant to clause 28 of Schedule 4 to the Corporations Law. Under subclause 28(3), regulations made for the purposes of that clause cease to have effect at the end of the transition period. Item [5] deletes the words 'for the transition period' (in current regulation 12.2.06) as they are no longer necessary. Section 201C applies to transferring institutions from 1 January 2001.

Regulation 12.2.07: disclosure of directors' remuneration

Former regulation 12.2.07 provided transitional relief from section 239 of the Corporations Law, which at the time regulation 12.2.07 took effect, enabled members of the company or of a subsidiary of the company, to require disclosure of directors' emoluments and other benefits.

Following the Corporations Law Economic Reform Act 1999 (No 156 of 1999), current section 239 no longer concerns the disclosure of directors' emoluments. Instead, previous section 239 has been re-cast as new section 202B, which concerns the ability of members to obtain information about directors' remuneration. It is necessary to insert the correct reference.

Regulation 12.2.07 is made pursuant to clause 28 of Schedule 4 to the Corporations Law. Under subclause 28(3), regulations made for the purposes of that clause cease to have effect at the end of the transition period. Item [5] deletes the words 'for the transition period' (in current regulation 12.2.07) as they are no longer necessary.

Regulation 12.2.07A: when AGMs to be held

Regulation 12.2.07A modifies subsection 250N(2) of the Corporations Law in its application to companies to which Division 1 of Part 12.2 applies, by omitting the words "and within 5 months after the end of its financial year." The amendment will allow institutions a greater degree of flexibility in holding their Annual General Meetings and meetings to modify their constitutions as required by Clause 24 of Schedule 4 to the Corporations Law. Regulation 12.2.07A is made pursuant to clause 28 of Schedule 4 to the Corporations Law. Under subclause 28(3), regulations made for the purposes of that clause cease to have effect at the end of the transition period.

Item [6] - subregulation 12.2.10(1)

Former subregulation 12.2.10(1) provided for the continuing validity under section 327 of the Corporations Law of auditors appointed before the transfer date under previous governing Codes. particular, where a transferring financial institution had appointed an auditor under any of the Friendly Societies Codes in force immediately before the transfer date (1 July 1999), the auditor was deemed under former subregulation 12.2.10(1) to have been appointed as an auditor of a transferring friendly society on the transfer date in accordance with section 84 of the Life Insurance Act.

The Friendly Societies (Western Australia) Code became law in Western Australia in May 1999. The Western Australian Code, which repealed the former Friendly Societies (Western Australia) Act 1894, under which auditors were appointed to Western Australian friendly societies prior to the enactment of the Western Australian Code, did not provide for the appointment of auditors. The Friendly Societies Act 1894 of Western Australia performed this function.

In order to ensure that auditors that held office in Western Australian friendly societies at the transfer date continue to be validly appointed under the Corporations Law, it is necessary to amend subregulation 12.2.10(1) to expressly provide for the transitional situation in Western Australia.

Item [6] therefore makes a modification to subregulation 12.2.10(1) by inserting the words "or the Friendly Societies Act 1894 of Western Australia" after the words "a previous governing Code."

Item [7] - after regulation 12.2.10:

Regulation 12.2.11

To facilitate the transfer of withdrawable shares of building societies to the Corporations Law, State and Territory laws converted all withdrawable shares of building societies in existence "immediately before the transfer date" to deposits. To preserve their status as members of the building society, clauses 12, 13 and 14 of Schedule 4 to the Corporations Law were intended to have the effect that persons without shares in building societies "immediately before the transfer date" were taken to be issued with a membership share, or to have given a guarantee, as appropriate, on transfer.

Subclauses 12(1)(b), 12(1)(c) and 14(1)(d) of Schedule 4 to the Corporations Law were intended to take effect after a State or Territory law deemed withdrawable shares of a building society to have become, immediately before the transfer date, a deposit with the company. This intention is expressed in the explanatory memorandum to the Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999 (No. 44, 1999), paragraph 6.53.

Despite the intention that the Corporations Law provisions take effect after State and Territory legislation took effect, this may not be readily apparent on a reading of the Corporations Law and the State and Territory legislation together, as both have adopted the phrase "immediately before the transfer date" to define when they took effect.

Item [7] therefore inserts regulation 12.2.11, to clarify that existing subclauses 12(1)(b), 12(1)(c) and 14(1)(d) of Schedule 4 to the Corporations Law take effect after the State and Territory provisions that converted withdrawable shares of building societies to deposits took effect.

Regulation 12.2.12

Subregulation 12.2.12(1) modifies the application of section 254K of the Corporations Law in relation to a share of a company that has been converted under the facility provided under regulation 12.2.04. Subregulation 12.2.12(2) provides that the company may redeem the converted shares on the same terms that the member shares were redeemable before the conversion if the shares are partly paid.

Item [8] - Part 12.4: notice of meetings of certain bodies corporate

Under former Part 12.4, transferring financial institutions were relieved from the Corporations Law requirements for meetings of members, and were permitted instead to comply with the meeting requirements of the previous governing Codes. The relief applied for 6 months starting on the transfer date. As that period has elapsed, and Part 12.4 provides relief of an ongoing nature from certain of the Corporations Law requirements regarding these matters, it is no longer necessary to retain Part 12.4 in its former form. It is replaced by a new Part 12.4.

Section 249J of the Corporations Law requires written notice of meetings of members to be given individually to each member entitled to vote at the meeting. Subsection 249H(1) provides that the minimum period of notice to be given to a member is 21 days. Section 249L sets out the information that must be included in a notice of a meeting, including information about a member's right to appoint a proxy.

Part 12.4 provides ongoing relief from: the requirement to give members entitled to vote at meetings of the members, notices of meetings; the requirement to send a proxy appointment form or a proxy list under paragraph 249Z(b) of the Corporations Law; and the requirement to send a statement under subsection 249P(6) of the Corporations Law where the body corporate (defined at subregulation 12.4.01 (1)) gives the member (or an applicant for membership of the body corporate) notice that the member (or applicant) may elect to be notified of meetings of the company's members, and the member (or applicant) elects not to receive notices, or fails to elect to receive them.

Subregulation 12.4.01 (1) provides relief from notice of meeting requirements to companies that are transferring financial institutions or companies permitted to use the expression "building society," "credit society" or "credit union" under section 66 of the Banking Act 1959.

Subregulation 12.4.01(2) sets out the members to whom the proposed regulation is to apply, that is, members listed in the subregulation who are entitled to vote at a meeting of members of the body.

The relief under Part 12.4 is not available where a meeting is held for the purposes of Chapter 5 or Chapter 6 of, or Part 5 of Schedule 4 to, the Corporations Law. Examples of meetings held for the purposes of Chapters 5 and 6 include a meeting held pursuant to subsection 411 (1) (Chapter 5) or a meeting held to vote on a resolution to approve a proportional bid for a class of a company's securities under subsection 648E(1) (Chapter 6). Part 5 of Schedule 4 to the Corporations Law applies where a body corporate proposes to demutualise. A demutualisation may result in fundamental changes to the business of a body corporate and the rights and obligations of its members. The operation of Part 5 of Schedule 4 to the Corporations Law is preserved to ensure there is adequate disclosure to members when a demutualisation is undertaken. Where an exemption from the operation of Part 5 of Schedule 4 is granted by ASIC, the relief under Part 12.4 is otherwise available.

Subregulation 12.4.03(1) enables bodies corporate to whom the Part applies, to give election notices to members entitled to vote and to applicants for membership who become members of the body corporate that are entitled to vote.

Subregulation 12.4.03(2) requires that the notice of election include certain information about notices of meetings and the consequences of electing not to receive them. This enables members to make informed decisions as to whether to receive notices or not.

Under paragraph 12.4.03(3), the member (or applicant) is taken not to have made an election to receive notices of meetings if the body corporate has not received notification of the election within 21 days of the notice being given.

Subregulation 12.4.03(4) provides that subsection 249H(1), section 249J, subsection 249P(6) and paragraph 249Z(b) of the Corporations Law do not apply to a body corporate where the member elects not to receive notices or does not make an election. Bodies corporate will not have to give members who elect not to receive notices, notices of meetings as required by section 249L (and will not need to include the statement concerning proxies under paragraph 249L(d) of the Corporations Law).

Subregulation 12.4.03(5) mirrors proposed subregulation 12.4.03(4) in relation to an applicant for membership who becomes a member to whom Part 12.4 applies.

Subregulation 12.4.04(2) requires bodies corporate that use the facility in regulation 12.4.03, to advertise notices of each meeting of the body corporate in at least one edition of a daily newspaper circulating generally in each jurisdiction in which the body corporate carries on business. Subregulation 12.4.04(3) requires that the advertised notice of meeting set out the place, date and time of the meeting, state the general nature of the meeting's business, state that a member entitled to vote may request personal notice of the meeting and indicate how notice of the meeting may be obtained by members wanting to receive a notice that complies with section 249L of the Corporations Law.

Regulation 12.4.05 provides that where a body corporate has sent members election notices, it must continue to display notices of meetings of members at its registered office and at every place at which it carries on business that is open to the public. Under the regulation, the notice needs to be displayed for a period of at least 21 days before the day the meeting is to be held. Section 249L of the Corporations Law sets out the contents of the notice.

Regulation 12.4.06 provides that members may request that notices of meetings be given to them at any time. Such a request may be for a particular meeting or it may be a standing request. If a request is made, subsection 249H(1), section 249J, subsection 249P(6) and paragraph 249Z(b) of the Corporations Law will apply to the body corporate in relation to the member, for the meeting(s) to which the member's request relates. A member might request a notice of meeting within 21 days of a meeting. In such circumstances, subregulation 12.4.06(4) requires that the body corporate comply with the request as soon as practicable.

Regulation 12.4.07 requires the body corporate to record both the date on which an election notice is given to the member and the election made by the member. The body corporate must record the details no later than 28 days after the election notice is given to members.

The form that an election notice under subregulation 12.4.03(1) will take is not prescribed by Part 12.4. Nor does Part 12.4 specify where the details required by regulation 12.4.07 are to be recorded. However, they may be recorded in a register maintained under Part 2C of the Corporations Law.

Item [9] - financial reporting by certain bodies corporate

Former Part 12.6 provided transitional relief from annual financial reporting requirements of the Corporations Law for financial years ending before the transfer date (1 July 1999). Part 12.6 in part preserved or modified financial reporting requirements of the previous governing Codes and those of the Corporations Law. As these requirements no longer apply, and Part 12.6 provides ongoing relief from certain of the Corporations Law requirements, it will not be necessary to retain Part 12.6 in its former form. It is replaced by a new Part 12.6.

The new Part 12.6 provides ongoing relief from financial reporting requirements to companies that are transferring financial institutions or companies permitted to use the expression "building society," "credit society" or "credit union" under section 66 of the Banking Act 1959.

Annual financial reports

The Corporations Law sets out the annual financial reporting requirements with which each company must comply. Section 314 requires companies to send to their members individual copies of annual financial reports for a financial year. Part 12.6 provides relief from the requirements of section 314 as it applies to those companies falling within the definition of subregulation 12.6.01(1) in relation to members specified in subregulation 12.6.01(2).

Subregulation 12.6.03(1) allows a body corporate to give a member (or an applicant for membership) a choice of receiving 'full' financial reports (consisting of the financial report for the year, together with the directors' and auditor's reports), or a 'concise' report (if the company prepares a concise report). Note that a company is not required to prepare concise reports under the Corporations Law. If the member elects not to receive the relevant reports or fails to make an election, the body corporate is not required to comply with section 314 of the Corporations Law in respect of that member.

Subregulation 12.6.03(2) requires certain information regarding the significance of annual financial reports and the consequence of electing not to receive reports, to be included in the notice provided to each member or applicant. This assists members to make an informed decision about whether to receive reports. The notice must also indicate that notwithstanding an election not to receive reports or a failure to make an election, a member may change his or her mind and elect to receive reports by notifying the body corporate.

Subregulation 12.6.03(3) specifies that a member is taken not to have elected to receive an annual financial report once a period of 21 days after the notice was given has elapsed and the member has not notified the body corporate. If the member makes a positive election to receive annual financial reports, and notifies the body corporate within the 21 day period, the body corporate is required to comply with section 314 of the Corporations Law in respect of that member.

Subregulations 12.6.03(4) and (5) clarify that in the event that the member or applicant elects not to receive reports or does not make an election, the body corporate is not required to provide that member or applicant who becomes a member with either a full or a concise report.

However, under paragraph 12.6.03(3)(2)(c), the right of a member to have financial reports sent out at any time, which is provided for in paragraph 316(1)(b) of the Corporations Law, will continue to operate. A positive election to receive reports, that is notified to the body corporate at any time before or after the lapse of the 21 day period, will have effect under paragraph 316(1)(b) of the Corporations Law and must be complied with.

Subregulation 12.6.04(1) requires a body corporate that has utilised the facility under the new Part 12.6, to make available to members, copies of reports for collection at its registered office and at every other place where it conducts business that is open to the public. Subregulation 12.6.04(2) requires that those reports be available to members from the time such reports are required under subsection 315(1) of the Corporations Law until one month after the day on which its next annual general meeting is held, thereby ensuring that reports are available to all members for a reasonable time.

Regulation 12.6.05 requires the body corporate to record both the date on which an election notice is given to members and the election made by each member. The body corporate must record the details no later than 28 days after the election notice is given to members.

The form that an election notice under subregulation 12.6.03(1) will take is not prescribed by Part 12.6. Nor does Part 12.6 specify where the details required by regulation 12.6.05 are to be recorded. However, they may be recorded in a register maintained under Part 2C of the Corporations Law.

Item [10] - Part 12.8, heading

The heading of Part 12.8 provides for 'shares in certain transferring financial institutions.' Item [10] replaces "transferring financial institutions" with "bodies corporate" to better reflect the scope of that Part.

Item [11] - regulation 12.8.01

Item [11] omits the definition of 'member share' from regulation 12.8.01. The definition is instead set out in regulation 12.1.01.

Item [12] - paragraph 12.8.02(a)

Former paragraph 12.8.02(a) provided for the application of Part 12.8 to a body corporate that "is a transferring institution of this jurisdiction; and a company that is permitted to use the expression "building society," "credit society" or "credit union" under section 66 of the Banking Act 1959."

It is intended that Part 12.8 apply to companies that are transferring financial institutions as well as companies that are not transferring financial institutions but are able to use the expression 'building society,' 'credit society,' or 'credit union.' Item [12] clarifies the scope of Part 12.8 by replacing the word "and" at the end of paragraph (a) with the word "or".

Item [13] - paragraph 12.8.03 (2)(c)

Paragraph 12.8.03(2)(c) replaces "several" with "two or more." "Several " may imply that the shares are to be held by more than two persons and may exclude the possibility of two persons holding the shares. Item [13] therefore clarifies that the holding of member shares by two persons is included by replacing "several" with "two or more."

Item [14] - regulation 12.8.06A

Item 14] modifies the application of section 254M(1) of the Corporations Law in relation to a share of a company that has been converted under the facility provided under proposed regulation 12.2.04. Subregulation 12.8.06A(2) provides that if a converted share is partly paid a shareholder is not liable to pay a call on the share, or on a winding up of the company, to the extent that the amount unpaid is increased as a result of the conversion, without the consent of the shareholder. If there is a prior obligation to pay up an unpaid amount in respect of shares that are converted, the obligation remains. The provision is only intended to provide relief from any liability to pay up an unpaid amount that arises from the conversion of the shares and that is without the shareholder's consent.