Northern Territory Second Reading Speeches

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CORPORATIONS REFORM (CONSEQUENTIAL AMENDMENTS NT) BILL 2001

Mr Speaker, on behalf of and at the request of the Attorney-General, I move that the bills be now read a second time.

The purpose of these bills is to reform the law of the Northern Territory in respect of corporations. This follows agreement between the Commonwealth, States and the Northern Territory concerning the regulation of corporations for the five year period expected to commence on 1 July 2001.

The current Australian regulation of corporations is the outcome of High Court decisions and negotiations between the Commonwealth, States and the Northern Territory.

The High Court has held that the Commonwealth’s constitutional powers do not extend to regulating all aspects of the incorporation of companies along with various activities of non-financial companies, activities of non-trading companies and various business activities of unincorporated bodies. This means that the regulation of corporations and of the commercial behaviour usually engaged in by corporations is, in the absence of constitutional change, always likely to be jointly governed by the states and the Commonwealth.

Accordingly, since the early 1960’s there have been a number of schemes for the national regulation of corporations. The first was legislation in each state and territory and with no Commonwealth legislation. The legislation of each jurisdiction started out the same and was administered locally. In the Northern Territory, this was the Companies Ordinance of 1963. Over time, the acts began to differ in both content and in the manner of their administration.

In the early 1980’s, the states and the Commonwealth established a new cooperative scheme under which they applied as local state law, the Companies Act 1981 of the Commonwealth. Commonwealth legislation established the National Companies and Securities Commission, which had various national roles. However, day to day administration and enforcement of the legislation remained the responsibility of state governments. The Northern Territory joined this scheme on 1 July 1986 with the main Northern Territory legislation being the Companies (Application of Laws) Act 1986.

Following various corporate collapses in the late 1980’s, it was considered by the Commonwealth that there was a need for stronger centralised regulatory control over corporations. Accordingly, the Commonwealth moved to introduce a new scheme that would have meant that it alone would regulate corporations. This move was successfully challenged by the states in the High Court. The Court found that the Commonwealth could not enact laws that comprehensively dealt with the process of the incorporation of companies. Subsequently, there was an agreement, reached in Alice Springs in 1990, for a new scheme. This scheme retained the basic feature that the Corporations law would be in the form of a Commonwealth Act. As with the 1981 legislation, the Commonwealth Act would be applied by state and territory acts as being local law. However, the 1991 scheme removed from the states and the Northern Territory any local regulatory responsibility. Instead, this rested with the Australian Securities Commission. Policy responsibility was shared between the states, the Northern Territory and the Commonwealth as agreed in the Corporations Agreement administered by the Ministerial Council for Corporations. This scheme commenced operation on 1 January 1991, with the main Northern Territory Act being the Corporations (Northern Territory) Act.

In recent years, the 1991 scheme has come under attack on the basis that it is state law that purports to give functions and duties to Commonwealth Courts and Agencies. The High Court has made a number of decisions that indicate that it is constitutionally very risky to continue to base Commonwealth regulation of companies on state laws. At this point, it should be noted that these constitutional problems do not appear to affect the Northern Territory, excepting to the extent that it is in the interests of the Northern Territory to have a secure and certain national regulation of companies.

There were many options about how to remove the legal doubts. These ranged from major constitutional reform to minor adjustments on a case by case basis. However, by late 2000, the Commonwealth, together with the larger states, had reached an agreement for the reform of the regulation of corporations and associated matters. The main elements of the agreement were: that the states refer to the Commonwealth the power to enact laws that accord with the text of legislation tabled in state parliaments. This referral would be such as to give the Commonwealth Parliament the power to make certain laws with respect to corporations and associated matters; that the states refer to the Commonwealth the power to make amendments to that legislation. However, the making of any such amendments are to be regulated by an Agreement between the Commonwealth, states and the Northern Territory; that the states, along with the Northern Territory, continue to have the power to make laws that may operate in a way that is inconsistent with the Commonwealth legislation; and that this scheme would operate for a period of five years.

Subsequently, the Northern Territory and most other states have now agreed to this reform and have set 1 July 2001 as being the date of commencement of the new scheme. The new scheme involves the enactment by the Commonwealth of the Corporations Act 2001, the Australian Securities and Investment Commission Act 2001 and associated legislation. Aside from transitional matters and matters concerning inconsistent laws, these acts will be broadly the same as the core Commonwealth Acts that formed the basis of the 1991 scheme. The significant difference is that they will have a more secure constitutional foundation and will operate as Commonwealth laws, rather than state or Territory laws. In the states, this new scheme involves: firstly, the enactment of a law that refers constitutional powers to the Commonwealth (for example, the NSW Corporations (Commonwealth Powers) Act 2001 which came into operation on 4 April 2001); and secondly, the enactment of laws that deal with transitional matters and with consequential amendments.

The Northern Territory’s unique constitutional position means that it has no powers to refer to the Commonwealth, in order for the Commonwealth to enact the new laws so that they operate in the Northern Territory. However, the Northern Territory strongly supports the need for national corporations laws with constitutional foundations that are absolutely secure. At the same time, the Northern Territory recognises that it is absolutely necessary that the states and the Northern Territory continue to have a significant role in policy development concerning corporations matters. Accordingly, the Corporations (Northern Territory Request) Bill 2001 contains a request to the Commonwealth that it enact laws based on the text of legislation tabled in the Parliament of New South Wales. This particular bill indicates my government’s commitment to the new scheme.

The Corporations (Northern Territory) Amendment Bill 2001 makes minor amendments to the Corporations (Northern Territory) Act. These amendments are designed to ensure that this act has had, at the time of commencement of the scheme, the same operation as equivalent acts in the states. The amendments to this act, as made by this bill, are limited to matters consequential on Commonwealth reforms and other changes to corporations law made over the past few years.

The Corporations Reform (Northern Territory) Bill 2001 sets out what is to be the law of the Northern Territory relating to corporations. The purpose is to complement the operation of the Commonwealth legislation particularly as regard to events that may have occurred prior to the commencement of the new scheme. The main provisions of this bill are: to ensure that rights and liabilities under the old schemes are not affected other than to the extent that they have been replaced by new, but equivalent, rights and liabilities as set out in the Corporations Act 2001 of the Commonwealth; to remove any doubts that may exist about the operation of Northern Territory laws under the 1991 scheme. These doubts arise because section 5 of the Corporations (Northern Territory) Act purports to say that all Northern Territory laws made after 1 January 1991 operate subject to the Corporations Law. The Corporations Reform (Northern Territory) Bill 2001 provides that such laws operate according to their own tenor and regardless of what may have been the effect of section 5; to permit the application of Commonwealth law as Northern Territory law in circumstances where it might not otherwise apply in the Northern Territory; to permit the Supreme Court to make rules in respect of the jurisdiction given to it by Northern Territory legislation and Commonwealth legislation in respect of corporations matters; and to permit regulations to be made that deal with transitional matters.

The transitional provisions contained in the Corporations Reform (Northern Territory) Bill 2001 need to be read with the transition provisions to be contained in Chapter 12 of the Corporations Act 2001 of the Commonwealth. The Commonwealth provisions aim to provide for the ‘federalisation’ of corporations matters. Thus, as far as is practicable, rights and liabilities under the Corporations Law will be replaced by rights and obligations under the Corporations Act 2001 of the Commonwealth. These changes will not effect the substance of rights and liabilities of companies and individuals. Nor will they affect the role of Northern Territory courts in dealing with either criminal law or civil law matters in respect of corporations.

The final bill in this package of reform is the Corporations Reform (Consequential Amendments NT) Bill 2001. The main purposes of this bill are: to repeal the acts that constituted the three old schemes, namely the 1960’s Companies Act scheme, the 1980’s Co-operative scheme and the 1990’s Corporations scheme, and to provide saving provisions arising from those repeals; and to provide for the amendment of some 93 acts, regulations and rules consequent on the enactment of the Corporations Act 2001 and the Australian Securities and Investment Commission Act 2001 by the Commonwealth.

This bill follows the same structure of bills being introduced throughout the Australian states. The only difference in policy detail is that the Northern Territory is repealing all of the old legislation whereas most of the states are merely ceasing the operation of the old schemes. It is intended that the effect will be the same.

There is no need for me to address each of the amendments proposed in the Corporations Reform (Consequential Amendments NT) Bill 2001. However, I will mention some matters. Firstly, one policy change contained in the Corporations Act 2001 is that section 119A has the effect that corporations will cease to be incorporated in a particular part of Australia. Instead, they will be incorporated in Australia. However, each such company will have a place of deemed registration determined in accordance with that section. Companies will, under the Corporations Act 2001, be obliged to nominate a place of registration and will only be able to change that place of registration with the approval of the relevant state or territory minister.

This change of policy is of relevance to those acts which operate on the basis of a nexus between a company and the Northern Territory. An example is the Taxation (Administration) Act which operates to impose certain stamp duty obligations on companies incorporated in the Northern Territory. Such acts will now rely on a nexus of deemed registration in the Northern Territory;

Second, a law of the Territory that is made after the commencement of the new legislation that is (despite the rules set out in Part 1.1A of the Corporations Act), inconsistent with a provision of that Act, will, in general terms, not be affected by the operation of the inconsistent provision in the Corporations Act 2001. In order to ensure that any inconsistency does not affect the operation of the Northern Territory law, the Territory law will need to contain a provision which displaces the operation of the Corporations Act, either in whole or in part. In order to minimise uncertainty about the operation of such provisions, this bill seeks to identify all such provisions and to add into the relevant acts, any appropriate displacement provision. Examples include the Cullen Bay Marina Act in relation to the Cullen Bay Marina Management Corporation, the Unit Titles Act in relation to the bodies corporate that exist under that act, the Co-operatives Act, the Territory Insurance Office Act, the Darwin Port Corporation Act and the Northern Territory Treasury Corporation Act;

Third, the opportunity has been taken to remove obsolete Corporations Law provisions. For example, section 96A of the Petroleum Act required Northern Territory approval to be obtained for money raising in respect of certain mining ventures known as drilling funds. This duplicated regulatory controls in the Corporations Law. The provision has been rarely, if ever, used and is to be repealed.

It is proposed that the Northern Territory, along with the Commonwealth and states, enact all of the necessary legislation in order that the new scheme commence operation on 1 July 2001. Given the short period of time between now and the proposed time of passage of the bills, I urge all Honourable Members to give urgent consideration to the provisions of these bills.

I commend the bills to the House.
Debate adjourned.


 

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