Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2002-2003
THE PARLIAMENT OF THE
COMMONWEALTH OF AUSTRALIA
HOUSE OF
REPRESENTATIVES
EXPLANATORY
MEMORANDUM
(Circulated by
authority of the Minister for Agriculture, Fisheries and Forestry,
the Hon
Warren Truss MP)
DAIRY PRODUCE AMENDMENT BILL 2003
GENERAL
OUTLINE
From 1 July 2003, the statutory corporation, the Australian
Dairy Corporation was converted into a private company, limited by guarantee.
Additionally, all assets and liabilities of the Dairy Research and Development
Corporation were transferred to the new private company. This company, known as
Dairy Australia Limited, was declared the industry services body by the Minister
for Agriculture, Fisheries and Forestry, and is required to undertake research
and development and other activities for the benefit of the Australian dairy
industry. The industry services body is also required to manage the Dairy
Structural Adjustment Fund in the form of a trust.
This
Bill
entitles the industry
services body to be fully indemnified out of the assets of the Dairy Structural
Adjustment Fund;
applies this
entitlement to be fully indemnified before, during and after commencement of
this Bill;
enables the industry
services body to raise money other than by borrowing, in respect of its role in
keeping and administering the Dairy Structural Adjustment Fund –
specifically to deal in
securities;
enables the industry
services body to enter into and deal with contracts through
hedging;
enables the industry
services body to raise money other than by
borrowing;
provides for money
standing to the credit of the Dairy Structural Adjustment Fund to be used for
these purposes;
includes the Reserve
Bank in the definition of an Australian Authorised Deposit Taking
Institution.
Finally, Schedules 2 and 3 of this Bill will commence from 1
July 2003, which will ensure that financial undertakings by the company are not
exposed or otherwise affected detrimentally.
There will be no financial impact on the Commonwealth.
NOTES ON
CLAUSES
Clause 1 provides for the Act to be cited as the Dairy Produce
Amendment Act 2003.
Clause 2 sets out the commencement information in a table and specifies
that sections 1 to 3 and Schedule 1 will commence upon Royal Assent to the Bill.
Schedules 2 and 3 are to commence immediately after the commencement of the
Dairy Industry Service Reform Act 2003, which was 1 July 2003. The
commencement of schedules 2 and 3 at this time is necessary to ensure the
industry services body is not exposed or in any way impeded in its prudent
management of the Dairy Structural Adjustment Fund and that there is no concern
as to the nature of current contracts and financial arrangements, which could
potentially have a detrimental effect on the Dairy Structural Adjustment
Fund.
Clause 3: Schedule(s)
This clause provides that each
act specified in a schedule to the Bill is amended or repealed as set out in the
relevant schedules and that any other item in a schedules has affect in
accordance with its provisions.
Item 1 Before paragraph 79(o) of Schedule 2
This item provides
for the entitlement of the industry services body to be fully indemnified
against any liability incurred in relation to the management of the Dairy
Structural Adjustment Fund to be funded from the Dairy Structural Adjustment
Fund, should an amounts become payable. Section 79 deals with all matters for
which money standing to the credit of the Dairy Structural Adjustment Fund can
be expended.
Section 197 of the Corporations Act 2001 provides that, if a trustee
is not fully indemnified against liabilities which may arise in the course of
administering the trust – in this case, the Dairy Structural Adjustment
Fund - a person who is a director of a corporation when it incurs a liability
while acting, or purporting to act, as trustee, is liable to discharge the whole
or a part of the liability. This item provides for the industry services body
to be fully indemnified against any liability that may arise in the course of
the industry services body keeping and administering the Dairy Structural
Adjustment Fund in the form of a Trust. The indemnity is to be internalised to
the Dairy Structural Adjustment Fund.
However, this clause does not
indemnify the industry services body against acts such as, for example, bad
faith, fraud, a breach of trust, or otherwise than a reasonably prudent trustee
would act, which is in accordance with the principles of trust law.
This item allows for the entitlement of the industry services body to be
fully indemnified out of the assets of the Dairy Structural Adjustment Fund to
apply before, on or after commencement. This is to provide clarity about the
industry services body’s recourse to an indemnity for liabilities that may
have arisen prior to the commencement. A temporary Commonwealth indemnity has
been provided to the directors of the industry services body until such time as
the Act can be amended, at which time, it is intended that a deed of release
will be executed. It is preferable that this entitlement is clear and
consistent, whether in relation to liabilities arising before this item, or
after. This will have no detrimental effect on the industry services body, but
rather, simplifies the understanding of its indemnity entitlement.
This item makes provision for the industry services body to raise money other
than by borrowing. As outlined in Item 3, this may include dealing in
securities, hedging through currency contracts and obtaining credit. Such
facilities will be part of normal and prudent management of the Dairy Structural
Adjustment Fund and were previously available to the Australian Dairy
Corporation in its management of the Fund. This provision was removed from the
Dairy Produce Act as part of the conversion of the Australian Dairy Corporation
into a private company limited by guarantee. It is appropriate the facility be
reinstated for the industry services body.
Item 3 After clause 77C of
Schedule 2
This item makes provision for the industry services body to
borrow or raise money otherwise than by borrowing, by dealing with securities,
and provides an explanation of the term dealing with securities,
including a range of mechanisms for doing so. The term securities is
also defined in this item to mean stocks, debentures, debenture stocks, notes,
bonds, promissory notes, bills of exchange and similar instruments or documents.
Additionally, this item inserts a new provision to allow the industry
services body to hedge through a number of types of contracts, including
currentcy, interest rate and futures contracts, dealings in currency and
interest rate swaps and options. Such contracts are limited to contracts
entered into for the purposes of managing risk of variations in the costs of
borrowings or the raising of money for the purpose of making payments for which
the money standing to the credit of the Dairy Structural Adjustment Fund can be
used.
The item defines the terms currency contract and futures
contract. An additional clause is to be added to provide for the industry
services body to raise money, otherwise than by borrowing through obtaining
credit through the issue of an instrument acknowledging a debt in consideration
of the payment or deposit of money, or the provision of credit or the obtaining
of credit.
This item will ensure the company can deal with securities
as part of its normal management program for keeping and administering the Dairy
Structural Adjustment Fund. This facility was available to the Australian Dairy
Corporation in its function of keeping and administering the Dairy Structural
Adjustment Fund, prior to its conversion to Dairy Australia.
Item 4
Paragraph 78(h) of Schedule 2
Section 78 of the Dairy Produce Act deals
with money that can be paid into the Dairy Structural Adjustment Fund. The term
“or otherwise raised” is inserted to ensure that money raised as
described in items 2 and 3 can be deposited into the Fund.
Item 5
After paragraph 78(h) of Schedule 2
This item provides for money received
by the industry services body as described in Item 3, which includes money
raised through hedging contracts, can be paid into the Dairy Structural
Adjustment Fund.
Items 6 and 7 Paragraphs 79(m) and 79 (n) of Schedule
2
Section 79 of the Dairy Produce Act deals with expenditure of money
standing to the credit of the Dairy Structural Adjustment Fund. The terms
“or otherwise raised” and “or otherwise raising” are
inserted into these paragraphs to ensure that money standing to the credit of
the Dairy Structural Adjustment Fund can be expended on activities as described
in items 2 and 3.
Item 8 After paragraph 79(n) of Schedule
2
This item provides for the money standing to the credit of the Dairy
Structural Adjustment Fund to be expended on obligations and liabilities in
respect of contracts dealt with under item 3. This ensures that the industry
services body can undertake such activities and meet any associated obligations
out of the Dairy Structural Adjustment Fund. This is an appropriate use of
these monies, as they relate to the industry services body’s function of
keeping and administering the Dairy Structural Adjustment Fund.
Items
9 and 10 Paragraph 94(2)(d) of Schedule 2
Paragraph 94 deals with
outstanding items, which the Minister must be satisfied have been satisfied
before declaring the levy termination day for the Dairy Adjustment Levy. As
with items 6 and 7 above, these items provide for expenses associated with money
raised otherwise than by borrowing to be included in the type of expenses the
Minister must be satisfied are not outstanding at the time of the
declaration.
Item 11 Paragraph 94(2)(d) of Schedule 2
This item
removes a full stop and inserts a semi-colon after expanded, to provide for
additional items in this paragraph.
Item 12 At the end of subclause
94(2) of Schedule 2
This item provides for the type of expenses the
Minister must be satisfied are not outstanding at the time of the declaration of
the levy termination day to include expenses, obligations and liabilities in
respect of contracts dealt with under item 3.
SCHEDULE 3 –
Depositing money of the Dairy Structural Adjustment Fund
Item 1
Subclause 79A(2) of Schedule 2 (after paragraph (a) of the definition of
Australian ADI)
This item provides for the Reserve Bank of
Australia to be included in the definition of an Australian ADI, that is an
Australian Authorised Deposit Taking Institution, as the Reserve Bank is not
included in the definition of an Australian ADI in the Banking Act 1959,
which is referenced in the Dairy Produce Act.