Home | Databases | WorldLII | Search | Feedback Australian Senate Standing Committee for the Scrutiny of Bills - Scrutiny Digests

You are here: 

Corporate Collective Investment Vehicle Framework and Other Measures Bill 2021 [2022] AUSStaCSBSD 3 (4 February 2022)

Corporate Collective Investment Vehicle Framework and Other Measures Bill 2021

Significant matters in delegated legislation^[7]

1.8 Schedules 1 to 5 to the bill seek to amend the Corporations Act 2001 and other relevant legislation to establish a regulatory and tax framework for Corporate Collective Investment Vehicles (CCIVs). The bill seeks to insert a range of powers to prescribe matters in delegated legislation to:

• provide additional circumstances where a person is, or is not, a protected member of a CCIV;^[8]

• the requirements for the issue of shares by a CCIV;^[9]

• the requirements or restrictions for cross-investment;^[10]

• the requirements for the reduction of share capital;^[11]

• the matters to be considered in determining the extent to which money or property of a CCIV forms part of the assets of a sub-fund of the CCIV;^[12]

• the matters to be considered in determining the extent to which a liability of a CCIV forms part of the liabilities of a sub-fund of the CCIV;^[13]

• how the money or property of a CCIV may be held, including exempting classes of assets from these requirements;^[14] and

• exempt conduct engaged in by the CCIV from being also engaged in by its corporate director.^[15]

1.9 The committee's consistent scrutiny view is that matters which may be significant to the operation of a legislative scheme should be included in the primary legislation unless a sound justification for the use of delegated legislation is provided. The committee notes that there is not a justification for each of these provisions in the explanatory memorandum and that where there is, it often relies on a desire for flexibility or a similarity with either existing Commonwealth or comparable overseas regimes.^[16]

1.10 The committee has generally not accepted a desire for administrative flexibility or consistency with existing legislation to be a sufficient justification for leaving significant matters to delegated legislation. It is unclear to the committee why at least high-level guidance regarding some of these matters could not be included on the face of the primary legislation. For example, in relation to proposed section 1230R, the explanatory memorandum states that it is intended that the regulations will include a restriction on circular investment.^[17] It is unclear to the committee why this could not be included on the face of the primary legislation.

1.11 The committee requests the Assistant Treasurer's more detailed advice regarding:

• why it is considered necessary and appropriate to leave the matters outlined in paragraph [1.8] to delegated legislation; and

• whether the bill could be amended to provide at least high-level guidance regarding these matters on the face of the primary legislation.

Henry VIII clause—modification of primary legislation by delegated legislation^[18]

1.12 Proposed section 1243A provides that the regulations may modify proposed chapter 8B or any other provisions of the Corporations Act 2001 in relation to specified CCIVs, specified classes of CCIVs or sub-funds or all CCIVs or sub-funds.

1.13 A provision that enables delegated legislation to amend primary legislation is known as a Henry VIII clause. There are significant scrutiny concerns with enabling delegated legislation to override the operation of legislation which has been passed by Parliament as such clauses impact on the level of parliamentary scrutiny and may subvert the appropriate relationship between the Parliament and the Executive. As such, the committee expects a sound justification for the use of a Henry VIII clause to be provided in the explanatory memorandum.

1.14 In this instance, the explanatory memorandum states:

This regulation-making power is included to ensure timely resolution of any unforeseen outcomes arising from a new, untested regime. Enabling the modification of the operation of the Corporations Act by regulations will provide the Government with the necessary flexibility to make targeted adjustments that may be necessary to address inappropriate or anomalous outcomes that would be inconsistent with the policy intention of the establishment of CCIVs.^[19]

1.15 While noting this explanation, the committee has not generally accepted a desire for administrative flexibility to be a sufficient justification for allowing delegated legislation to modify the operation of primary legislation. The committee notes that delegated legislation, made by the executive, is not subject to the same level of parliamentary scrutiny inherent in bringing proposed changes in the form of an amending bill.

1.16 The committee therefore requests the Assistant Treasurer's more detailed advice regarding:

• why it is considered necessary and appropriate to allow regulations made under proposed subsection 1243A(1) to modify any provision of proposed Chapter 8B or the Corporations Act 2001 more generally; and

• whether the bill can be amended to provide at least high-level guidance constraining the scope of this broad modification power, for example, by providing that before the Governor-General makes regulations for the purposes of proposed subsection 1243A(1), the minister must be satisfied that the modifications would be consistent with the objects set out in the bill.^[20]

[7] Schedule 1, item 4 proposed sections and subsections 1222K(5), 1230(5), 1230R, 1231A(4), 1233H(5) 1233L(4) 1234G,  1234J (4), 1234K and 1241A(6) and schedule 3, item 14, proposed subsection 243F(6). The committee draws senators’ attention to these provisions pursuant to Senate Standing Order 24(1)(a)(iv).

[8] Proposed subsection 1222K(5).

[9] Proposed subsection 1230(5).

[10] Proposed section 1230R.

[11] Proposed subsection 1231A(4).

[12] Proposed subsection 1233H(5).

[13] Proposed subsection 1233L(4).

[14] Proposed section 1234G, subsection 1234J(4) and section 1234K.

[15] Proposed subsection 1241A(6) and proposed subsection 243F(6).

[16] See for example, explanatory memorandum p. 136.

[17] Explanatory memorandum, p. 136.

[18] Schedule 1, item 4, proposed section 1243A. The committee draws senators’ attention to this provision pursuant to Senate Standing Order 24(1)(a)(iv).

[19] Explanatory memorandum, p. 272.

[20] See proposed sections 1221 (objects of Chapter 8B—Corporate collective investment vehicles), 1235A (objects of Division 2 of Part 8B.6—Arrangements and reconstructions of sub-funds), 1236 (objects of Division 2 of Part 8B.6—Receivers, and other controllers, of property of sub-funds), 1237 (objects of Division 5 of Part 8B.6—Winding up of sub-funds), and 1238 (objects of Division 6 of Part 8B.6—Recovering property of sub-funds).