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Corporations (Administrative Actions) Bill
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EXPLANATORY MEMORANDUM
Overview
The object of this Bill is to give validity to certain potentially invalid
administrative actions taken before the commencement of the proposed Act
by Commonwealth authorities or officers acting under powers or functions
conferred on them by laws of the State relating to corporations.
Background
The Commonwealth Constitution gives the Commonwealth Parliament
limited powers to regulate corporations under section 51(xx) of the
Commonwealth Constitution. That provision allows the Commonwealth
Parliament to legislate with respect to "foreign corporations, and trading or
financial corporations formed within the limits of the Commonwealth".
The Commonwealth Parliament also has other legislative powers under the
Commonwealth Constitution that assist it to regulate corporate activities,
such as the interstate trade and commerce power (section 51(i)), and the
postal, telegraphic, telephonic, and other like services power (section 51(v)).
However, the High Court has held that the Commonwealth's constitutional
powers do not extend to regulating aspects of a number of important
commercial areas such as the incorporation of companies, certain activities of
non-financial and non-trading corporations, and certain activities of
unincorporated bodies that engage in commerce.
In contrast, the States have broad powers to regulate corporations and
corporate activities (subject to the Commonwealth Constitution).
As a result of the restrictions on the powers of the Commonwealth
Parliament, a national scheme of corporate regulation requires co-operation
among the Commonwealth and the States and Territories. Several different
schemes of co-operation have been implemented at different times since
1961.
541146 BILL LA CIRCULATION 18/5/2001
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The current scheme commenced on 1 January 1991. Under that scheme, the
substantive law of corporate regulation (known as the Corporations Law) is
contained in an Act of the Commonwealth enacted for the Australian Capital
Territory and the Jervis Bay Territory (the Capital Territory). Laws of each
State and the Northern Territory apply the Corporations Law of the Capital
Territory (as in force for the time being) as a law of the State or Northern
Territory. The effect of this arrangement is that, although the Corporations
Law operates as a single national law, it actually applies in each State and the
Northern Territory as a law of that State or Territory, not as a law of the
Commonwealth.
The Corporations Law is administered by a Commonwealth body, the
Australian Securities and Investments Commission (ASIC) established by the
Australian Securities and Investments Commission Act 1989 of the
Commonwealth (ASIC Act). Each State and the Northern Territory have
passed legislation applying relevant provisions of the ASIC Act as a law of
that jurisdiction (known as the ASC Law or ASIC Law).
Legislation of each State and the Northern Territory confers functions
relating to the administration and enforcement of the Corporations Law on
ASIC, the Commonwealth Director of Public Prosecutions and the Australian
Federal Police. These bodies are responsible for the investigation and
prosecution of offences under the Corporations Law.
The High Court decision in Hughes
In The Queen v Hughes (2000) 171 ALR 155, the High Court indicated that
where a State gave a Commonwealth authority or officer a power to
undertake a function under State law together with a duty to exercise the
function, there must be a clear nexus between the exercise of the function
and one or more of the legislative powers of the Commonwealth set out in
the Commonwealth Constitution.
If this view prevails, the Commonwealth would not be able to authorise its
authorities or officers to undertake a function under State law involving the
performance of a duty (particularly a function having potential to adversely
affect the rights of individuals) unless the function could be supported by a
head of Commonwealth legislative power.
Although the Court found that the particular exercise of the prosecution
function by the Commonwealth Director of Public Prosecutions in question
in Hughes was valid, it made no finding about the validity of the conferral of
the prosecution function generally, or of other functions under the
Corporations Law scheme.
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The decision in Hughes may have implications for the validity of a range of
administrative actions taken by Commonwealth authorities and officers under
the Corporations Law scheme (the current scheme) and the previous co-
operative scheme (the previous scheme). A number of Commonwealth
authorities have functions and powers under the current scheme, including
ASIC and the Commonwealth Director of Public Prosecutions.
Commonwealth authorities, most notably the National Companies and
Securities Commission (NCSC), had functions and powers under the
previous scheme. Much of the work of the NCSC was carried out by State
and Territory authorities as delegates of the NCSC, and the Bill applies to
actions of those delegates on the basis that the actions of a delegate are
treated as actions of the principal. Since the commencement of the
Corporations Law, Commonwealth authorities have continued to carry out
functions under the previous scheme, including ASIC and the
Commonwealth Director of Public Prosecutions.
Many or all actions by these Commonwealth authorities are likely to be valid,
because they could be supported by the Commonwealth's legislative powers.
However, the validity of each action can only be determined on a case by
case basis, having regard to the particular circumstances of each action.
Giving validity to Commonwealth administrative actions
This Bill provides that every invalid administrative action taken under the
current or previous scheme has (and is deemed always to have had) the same
force and effect as it would have had if it had been taken by a State authority
or officer of the State on which or on whom the relevant function or power
had been conferred.
This provision overcomes any doubts about the validity of administrative
actions by Commonwealth authorities or officers under the current and
previous schemes. Other jurisdictions propose to introduce similar
legislation to achieve a uniform effect.
This Bill preserves rights and liabilities potentially affected by invalid
administrative actions, and specifically confirms the validity of the
registration or incorporation of companies under the current and previous
schemes.
This Bill applies to administrative actions taken before the commencement of
the proposed Corporations legislation. The validity of future actions by
Commonwealth authorities and officers will be assured by the reference of
matters to the Commonwealth Parliament by the Corporations
(Commonwealth Powers) Bill proposed to be enacted by each State.
Both Victoria and New South Wales have enacted this legislation. The New
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South Wales Corporations (Commonwealth Powers) Act 2001 came into
operation on 4 April 2001 and the new Corporations legislation has been
introduced into the Commonwealth Parliament in reliance on that reference
of powers by New South Wales.
Clause Notes
Clause 1 sets out the purpose of the proposed Act.
Clause 2 provides for the commencement of the proposed Act immediately
before the proposed new Corporations Act 2001 of the
Commonwealth comes into operation.
Clause 3 defines certain words and expressions used in the proposed Act.
The expression invalid administrative action is defined as an
administrative action that was taken before the commencement of
the proposed Act by a Commonwealth authority or officer
pursuant to a function or power conferred under the current or
previous scheme (the relevant function or power), and that is
invalid because its conferral on the Commonwealth authority or
officer is not supported by a head of power in the
Commonwealth Constitution.
Clause 4 deals with the application and operation of the proposed Act.
Sub-clause (1) provides that the proposed Act binds the Crown.
Sub-clause (2) provides that the proposed Act has effect despite
any provision of the Corporations (Victoria) Act 1990 or of the
laws applied by that Act, and avoids a possible argument that
section 5 of that Act would otherwise prevent the Bill from
affecting the operation of that Act.
Sub-clause (3) provides that the proposed Act extends to affect
rights and liabilities that are or have been the subject of legal
proceedings.
Sub-clause (4) provides that the proposed Act does not affect
rights and liabilities arising between parties to legal proceedings
heard and finally determined before the commencement of the
proposed Act to the extent to which they arise from, or are
affected by, an invalid administrative action.
Clause 5 provides that every invalid administrative action has (and is
deemed always to have had) the same force and effect as it would
have had if it had been taken by a duly authorised State authority
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or officer of the State. The clause does not in terms validate
administrative actions taken by Commonwealth authorities and
officers, but rather attaches to the actions retrospectively the
same force and effect as would have ensued had the actions been
taken by State authorities and officers (a similar distinction was
drawn in The Queen v Humby; ex parte Rooney (1973) 129 CLR
231).
Clause 6 complements clause 5 and does not affect the generality of clause
5. The clause declares that the rights and liabilities of all persons
are (and always have been) for all purposes the same as if every
invalid administrative action had been taken by a duly authorised
State authority or officer of the State.
Clause 7 complements clauses 5 and 6 and does not affect the generality of
those clauses. The clause specifically declares that clauses 5 and
6 extend to the registration or incorporation of corporations. The
formation of corporations was held by the High Court in State of
New South Wales v The Commonwealth of Australia (1990) 169
CLR 482 to lie outside the legislative competence of the
Commonwealth Parliament.
Clause 8 ensures that the proposed Act does not reinstate administrative
actions that, since the action was taken, have been affected by
another action or process. For example, if a decision has been
altered on review, the proposed Act does not reinstate the
decision in its original form. The Bill applies to the decision as it
is affected by later actions from time to time.
Clause 9 provides that it is immaterial for the purposes of the proposed
Act that a Commonwealth authority or officer does not have a
counterpart in the State, or that the powers and functions of State
authorities or officers do not correspond to the powers and
functions of Commonwealth authorities or officers.
Clause 10 provides that the proposed Act does not give rise to any liability
against the State.
Clause 11 states that it is the intention of clause 10 to alter or vary
section 85 of the Constitution Act 1975.
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