Commonwealth Numbered Regulations - Explanatory Statements

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


CORPORATIONS REGULATIONS (AMENDMENT) 1991 NO. 218

EXPLANATORY STATEMENT

STATUTORY RULES 1991 No. 218

Subject - Corporations Act 1989

Corporations Regulations (Amendment)

(Amending regulations 5.6.23, 7.12.04, 7.12.06, 7.12.13, 7.12.15, 8.3.02, inserting regulations 7.1.03, 7.13.03 and 8.1.01)

Corporations Regulations (Amendment)

(Amending Schedules 2 and 9)

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

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.

Corporations Regulations (Amendment) (Amending regulations 5.6.23, 7.12.04, 7.12.06, 7.12.13, 7.12.15, 8.3.02, inserting regulations 7.1.03. 7.13.03 and 8.1.01)

The purposes of the Regulations are:

1.       to prescribe five named indexes so that Chapter 7 of the Law will apply to option contracts based on these indexes;

2.       to make certain drafting corrections and to limit the scope for avoiding the fundraising provisions;

3.       to prescribe Westpac Banking Corporation as an "eligible body" for the purposes of the provisions dealing with the transfer of marketable securities;

4.       to make an exemption to the provisions of Chapter 8; and

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

Details about the Regulations are at Attachment A.

Corporations Regulations (Amendment) (Amending Schedules 2 and 9)

The purposes of the Regulations are:

1.       to include further corporations in the list of authorised trustee corporations in Schedule 9;

2.       to make amendments of a technical nature to correct minor errors in some of the Forms in Schedule 2.

Details of the proposed Regulations are at Attachment B.

ATTACHMENT A

Regulation 1

Commencement

It is desirable that Regulations 4 and 9 commence on 1 January 1991, the date that the bulk of the Regulations under the Corporations Law came into force. Corresponding regulations were in force under the co-operative scheme legislation as it operated up until the commencement of the Corporations Law. These regulations have the same effect as the corresponding regulations under co-operative scheme law, and it is most desirable that there is no gap between the operation of these regulations and the previous regulations under the co-operative scheme law. Further, as these regulations merely replicate the effect of the corresponding co-operative scheme regulations and do not prejudice or impose obligations on any person, it is considered appropriate that they be given retrospective operation to commence on 1 January 1991. Section 6 of the Corporations Act 1989 permits regulations being given retrospective operation where they meet these conditions.

Regulation 2

Amendment

This regulation states that the Corporations Regulations are to be amended as set out in these Regulations.

Regulation 3

Creditors who may vote

Regulation 5.6.23 prescribes conditions which must be met by a person if they are to vote as a creditor at a meeting of creditors. The amendment is a technical drafting amendment aimed at better describing, in plain English, the term 'antecedent liability' which was used in Companies Regulation 95, which it replaces, in connection with such securities as bills of exchange.

Regulation 4

Prescribed Index: Definition of "Option Contract"

The phrase "option contract" is defined in s. 9 of the Law. Paragraph (b)(ii) of the definition includes contracts (entered into on a stock market) under which one of the parties acquires a right or option to be paid an amount determined by reference to a specified index, being the Australian Stock Exchanges All Ordinaries Price Index or a prescribed index.

The five named indexes in Regulation 7.1.03 are:

1.       the Nikkei Stock Average, which measures the aggregate price performance of 225 well known stocks trading on the Tokyo Stock Exchange;

2.       the S and P 500 Composite Stock Price Index, which is based on 500 stocks traded on the New York Stock Exchange;

3.       the FT-SE 100, which is an index of the market value of the shares of 100 leading UK companies on the International Stock Exchange of the United Kingdom and the Republic of Ireland;

4.       the Australian Stock Exchange Fifty Leaders Share Price Index;

5.       the Australian Stock Exchange Twenty Leaders Share Price Index.

Prescription of these indexes means that any organisation which gains approval from the Australian Stock Exchange Limited and publishers of the indexes will be able to sponsor options contracts based on one of the indexes.

Regulation 5

Regulation 7.12.04 (Exempt Rights or Interests: Definition of "Prescribed interest" in section 9 of the Corporations Law)

Regulation 7.12.04 declares rights or interests in, among other things, the following to be exempt rights or interests for the purposes of Chapter 7 of the Corporations Law:

•       private joint venture arrangements; and

•       private trusts.

Accordingly, interests in such arrangements are not securities for the purposes of Chapter 7 and hence provisions such as those relating to the regulation of fundraising do not apply to them. In order to prevent avoidance of the fundraising provisions by constructing investment schemes to fall within these exemptions, the existing exemptions are not available in relation to those schemes which are promoted by or on behalf of persons whose ordinary business is or includes the promotion of similar schemes.

In order to further restrict the scope for avoidance of the fundraising provisions, these regulations have been amended to the following effect:

•       to prevent avoidance by the establishment of different companies to promote different schemes by making the exemption unavailable to persons who are associates of persons in the business of promoting similar schemes; and

•       limiting the size of the schemes which are exempted by the regulations to those involving 15 or less parties.

The numerical limitation of 15 is sufficiently large to ensure that essentially private arrangements will continue to be exempted while at the same time making it uneconomic to attempt to promote public collective investment schemes under the exemption.

Regulation 6

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

Regulation 7.12.06(h) exempts distribution re-investment schemes in relation to unit trusts from the prospectus requirements. The amendment clarifies the operation of this exemption by making it clearer that it applies in relation to all distributions which unit trusts make to unit holders in respect of their investment.

Regulation 7

Regulation 7.12.13 (Section 1080 - (Particulars to be included in statement))

Section 1080 of the Law sets out the contents requirements for statements which, by s.1079, are required to accompany written secondary offers of securities. These requirements are framed principally with a corporate structure in mind and are generally ill-adapted to regulate prescribed interest schemes which are usually structured as trusts. Section 1063(2) of the Law enables the making of regulations modifying the effect of provisions relating to securities to make them more readily applicable to prescribed interests. Regulation 7.12.13 sets out certain modifications of s.1080 of the Corporations Law which have effect in relation to the application of that provision to securities that are prescribed interests.

The amendment also made minor drafting corrections. As the term "scheme" as defined in rep. 7.12.01 is only defined for the purposes of Pt. 7.12 of the Regulations but not the Law itself, the full meaning will be substituted for that term.

Regulation 8

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

Regulation 7.12.15 sets out certain covenants which particular classes of trust deeds in relation to prescribed interest schemes are required to contain.

Sub-regulation 7.12.15(4)

Sub-regulation 7.12.15(4) sets out a covenant binding holders of interests in property trusts not to vote in certain circumstances where they would have a conflict of interests, including when they are disposing of property to or acquiring , property from the trust. The amendment substituted a new sub-regulation 7.12.15(4) which has a similar effect but which:

•       incorporates a correction to a cross-referencing error; and

•       makes it clear that associates of persons with conflicts of interests are also precluded from voting.

Sub-regulation 7.12.15(5)

Sub-regulation 7.12.15(5) sets out covenants binding trustees of property trusts. By paragraph (d) therein, a trustee is required to covenant to prepare valuations of property on a certain basis including an assumption that there will be a reasonable period in which the sale will be negotiated having regard to the state of the market. The paragraph was amended to make it clear that the trustee is to instruct the qualified valuer which it is required to appoint under the covenant in paragraph 7.12.15(5)(b) to prepare the valuation (rather than to attempt to do so itself).

By paragraph 7.12.15(5)(g) trust deeds are required to include a covenant that the trustee will cause the property of the trust to be valued where it believes there has been a change in its value and at certain regular intervals. It has been amended to make minor drafting corrections, in order to make it clear that the regular valuations must take place:

•       where the management company is under a buy back obligation - at least every twelve months; or

•       otherwise - at least every three years.

Sub-regulation 7.12.15(6)

Sub-regulation 7.12.15(6) sets out certain covenants binding management companies of prescribed interest schemes.

Paragraph (f) therein precludes the management company from voting in certain situations where it may have a conflict of interest. It has been amended to make a minor drafting correction. The reference to associates of management companies is being removed as their conduct in such situations is regulated by the covenant set out in regulation 7.12.15(3).

Paragraph 7.12.15(6)(h) sets out a covenant regulating the persons to whom management companies may pay commission in relation to attracting investments. It has been amended to make a minor correction to make it clear that the references to holders of dealers licences and investment advisers licences therein refer to holders of such licences under the Corporations Law of every jurisdiction.

Sub-regulation 7.12.15(9)

Sub-regulation 7.12.15(9) sets out the circumstances where the management company and its associates are precluded from exercising votes attached to prescribed interests they hold.

These include resolutions calling for the retirement of the trustee of the scheme or in relation to substituting decisions of the trustee. Both of these provisions have been amended to also refer to such resolutions in relation to "representatives" of investors. Prescribed interest schemes structured other than as trusts (for example, a limited partnership) will have a "representative" protecting the interests of investors and performing other functions which are usually performed by the trustee.

Regulation 9

Eligible body: Subsection 1097(1) of the Corporations Law

Regulation 7.13.03 prescribes the Westpac Banking Corporation for the purpose of the definition of "eligible body" in sub-section 1097(1) of the Law. This enables Westpac to continue to participate in the Australian Stock Exchange's Flexible Accelerated Security Transfer System. This system allows participating companies to operate an uncertificated securities register and eliminates unnecessary paperwork. Westpac, which is incorporated under the Bank of New South Wales Act 1850 (NSW), cannot participate without being prescribed because it does not fall within the general definition of "company" within the Corporations Law (as it was not incorporated under the Corporations Law or one of its predecessors, but was incorporated by force of its own Act).

Regulation 10

Exemption from Parts 8.3, 8.4 and 8.5 of the Corporations Law

Section 30 of the Corporations Act 1989 enables the regulations to provide for persons and transactions to be exempted from the operation of the provisions of Chapter 7 or Chapter 8 of the Corporations Law to such extent as is prescribed.

Pursuant to section 30, regulation 8.1.01 provides that the licensing, regulatory, accounting and audit requirements of Parts 8.3, 8.4 and 8.5 of Chapter 8 of the Corporations Law do not apply to CSR Limited to the extent that CSR Limited provides services to the Crown in right of Queensland, the Queensland Sugar Board or another public authority of Queensland in connection with the sugar industry.

Regulation 11

Exemption: Part 8.3 - certain futures contracts

This is a technical amendment only. The reference to Part 7.3 in paragraph (b) of the definition of 'investment manager' in subregulation 8.3.2(1) is replaced by the correct reference, i.e. to Part 8.3. The amendment to subregulation 8.3.02(2) ensures that the exemption is in respect of the whole of Part 8.3, not just Divisions 1 and 5 of Part 8.3.


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