CORPORATIONS AMENDMENT (IMPROVING ACCOUNTABILITY ON TERMINATION PAYMENTS) BILL 2009

i Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009

No. , 2009

Contents

Short title ............................................................................................ 1

Commencement .................................................................................. 1

Schedule(s) ......................................................................................... 2

Schedule 1--Amendme nts

Part 1--Main amendments

Corporations Act 2001

Part 2--Other amendments

Corporations Act 2001

Part 3--Application

Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009 No.

, 2009 1

A Bill for an Act to amend the law relating to

corporations, and for related purposes

The Parliament of Australia enacts:

1 Short title

This Act may be cited as the Corporations Amendment (Improving

Accountability on Termination Payments) Act 2009.

2 Commence ment

(1) Each provision of this Act specified in column 1 of the table

commences, or is taken to have commenced, in accordance with

column 2 of the table. Any other statement in column 2 has effect

according to its terms.

2 Corporations Amendment (Improving Accountability on Termination Payments) Bill

2009 No. , 2009

Commencement information

Column 1

Column 2

Column 3

Provision(s)

Commencement

Date/Details

1. Sections 1 to 3

and anything in

this Act not

elsewhere covered

by this table

The day on which this Act receives the

Royal Assent.

2. Schedule 1,

Part 1

The day after this Act receives the Royal

Assent.

3. Schedule 1,

Part 2

Immediately after the commencement of the

provision(s) covered by table item 2.

4. Schedule 1,

Part 3

The day after this Act receives the Royal

Assent.

Note:

This table relates only to the provisions of this Act as originally

passed by both Houses of the Parliament and assented to. It will not be

expanded to deal with provisions inserted in this Act after assent.

(2) Column 3 of the table contains additional information that is not

part of this Act. Information in this column may be added to or

edited in any published version of this Act.

3 Schedule(s)

Each Act that is specified in a Schedule to this Act is amended or

repealed as set out in the applicable items in the Schedule

concerned, and any other item in a Schedule to this Act has effect

according to its terms.

Amend ments Schedule 1

Main amendments Part 1

Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009 No.

, 2009 3

Schedule 1

Amendments

Part 1

Main amendments

Corporations Act 2001

1 Section 9

Insert:

base salary has the meaning specified in regulations made for the

purposes of this definition.

2 Section 9 (paragraph (b) of the definition of benefit)

Repeal the paragraph, substitute:

(b) when used in Division 2 of Part 2D.2 (sections 200 to

200J)--has the meaning given by section 200AB.

3 Section 9 (definition of board or managerial office)

Repeal the definition.

4 Section 9

Insert:

managerial or executive office has the meaning given by

section 200AA.

5 Section 9 (definition of payment)

Omit "200A", substitute "200".

6 Section 9 (definition of person)

Omit "200A", substitute "200".

7 Before section 200A

Insert:

200 Inte rpreting this Division

For the purposes of this Division, in determining whether a benefit

is given:

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4 Corporations Amendment (Improving Accountability on Termination Payments) Bill

2009 No. , 2009

(a) give a broad interpretation to benefits being given, even if

criminal or civil penalties may be involved; and

(b) the economic and commercial substance of conduct is to

prevail over its legal form.

200AA Meaning of managerial or executive office

If the company is a disclosing entity

(1) For a company to which section 300A applies for the previous

financial year for the company, a person holds a managerial or

executive office in the company during the current financial year if

the person's details were included in the directors' report for that

previous financial year for the company in accordance with

paragraph 300A(1)(c).

Note:

A person holding a managerial or executive office ceases to do so if

the person's details are not included in the next directors' report.

However, this is not relevant to whether the person has retired from an

office or position in the company (see paragraph 200A(1)(f)).

(2) The person is taken to hold the managerial or executive office for

the whole of the current financial year unless and until the person

retires from an office or position in the company before the end of

that year.

Note:

Retires has an extended meaning (see section 200A).

Otherwise

(3) For a body corporate not covered by subsection (1), a managerial

or executive office for the body corporate is:

(a) an office of director of the body corporate; or

(b) any other office or position in connection with the

management of the body corporate's affairs that is held by a

person who also holds an office of director of the body

corporate or a related body corporate.

200AB Meaning of benefit

(1) For the purposes of this Division, a benefit includes any of the

following:

(a) a payment or other valuable consideration;

(b) any kind of real or personal property;

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Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009 No.

, 2009 5

property;

(d) any legal or equitable right;

(e) a thing specified in regulations made for the purposes of this

paragraph.

Note:

For specification by class, see subsection 13(3) of the Legislative

Instruments Act 2003.

(2) However, for the purposes of this Division, a benefit does not

include a thing specified in regulations made for the purposes of

this subsection.

Note:

For specification by class, see subsection 13(3) of the Legislative

Instruments Act 2003.

Note:

The heading to section 200A is altered by omitting "office" and substituting "an office

or position".

8 Subsection 200A(1)

After "office" (wherever occurring), insert "or position".

Note:

The following heading to subsection 200A(1) is inserted "General rules".

9 At the end of subsection 200A(1)

Add:

; and (f) when working out whether a person has retired from an

office or position, disregard whether or not the person's

details are included in a directors' report in accordance with

paragraph 300A(1)(c).

10 After subsection 200A(1)

Insert:

Rules in regulations

(1A) Without limiting subsection (1), a benefit is given in connection

with a person's retirement from an office or position if the benefit

is given in circumstances specified in regulations made for the

purposes of this subsection.

Note:

For specification by class, see subsection 13(3) of the Legislative

Instruments Act 2003.

11 Subsection 200A(2)

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6 Corporations Amendment (Improving Accountability on Termination Payments) Bill

2009 No. , 2009

After "office" (wherever occurring), insert "or position".

Note:

The following heading to subsection 200A(2) is inserted "Related benefits".

12 Subsection 200B(1)

Repeal the subsection, substitute:

Benefits in connection with retirement if person has held a

managerial or executive office

(1) An entity mentioned in subsection (1AA) must not give a person a

benefit in connection with a person's (the retiree's) retirement

from an office, or position of employment, in a company or a

related body corporate if:

(a) the office or position is a managerial or executive office; or

(b) the retiree has, at any time during the last 3 years before his

or her retirement, held a managerial or executive office in the

company or a related body corporate;

unless there is member approval under section 200E for the giving

of the benefit.

Note 1:

This subsection extends to benefits given by way of compensation for,

or otherwise in connection with, a person's loss of an office or

position (see subsections 200A(1) and (3)).

Note 2:

Sections 200F, 200G and 200H provide for exceptions to this

subsection.

Note 3:

The recipient of the benefit need not be the retiree.

(1AA) The entities are as follows:

(a) the company;

(b) an associate of the company (other than a body corporate that

is related to the company and is itself a company);

13 Subsection 200B(1A)

Omit "person's", substitute "retiree's".

14 Subsection 200B(3)

Omit "a person's retirement from an office" (wherever occurring),

substitute "the retiree's retirement from an office or position".

15 Paragraph 200C(1)(a)

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Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009 No.

, 2009 7

Omit "board or managerial office", substitute "managerial or executive

office".

16 Subsection 200C(1) (note)

Repeal the note.

17 Paragraph 200D(1)(a)

Omit "board or managerial office", substitute "managerial or executive

office".

18 Subsection 200D(1) (note)

Repeal the note.

19 Subsection 200E(1)

Repeal the subsection, substitute:

Conditions for member approval

(1) For the purposes of section 200B, the conditions set out in

subsections (1B), (2) and (2A) must be satisfied for there to be

member approval under this section for the giving of the benefit to

the person in connection with the retiree's retirement from the

office or position.

(1A) For the purposes of section 200C, the conditions set out in

subsections (1B) and (2) must be satisfied for there to be member

approval under this section for the giving of the benefit.

First condition

(1B) The first condition is that the giving of the benefit be approved by

a resolution passed at a general meeting of:

(a) the company; and

(b) if the company is a subsidiary of a listed domestic

corporation--the listed corporation; and

(i) is a domestic corporation that is not listed; and

(ii) is not itself a subsidiary of a domestic corporation;

the holding company.

20 Subsection 200E(2) (first sentence)

Schedule 1 A mendments

Part 1 Main amendments

8 Corporations Amendment (Improving Accountability on Termination Payments) Bill

2009 No. , 2009

Repeal the sentence, substitute: "The second condition is that details of

the benefit must be set out in, or accompany, the notice of the general

meeting that is to consider the resolution.".

Note:

The following heading to subsection 200E(2) is inserted "Second condition".

21 Subparagraph 200E(2)(b)(i)

Omit "prescribed".

22 After subsection 200E(2)

Insert:

Third condition--for approvals relating to section 200B

(2A) The third condition is that at the general meeting, a vote on the

resolution must not be cast (in any capacity) by or on behalf of:

(a) the retiree; or

(b) an associate of the retiree.

(2B) Subsection (2A) does not prevent the casting of a vote if:

(a) it is cast by a person as a proxy appointed by writing that

specifies how the proxy is to vote on the resolution; and

(b) it is not cast on behalf of the retiree or an associate of the

retiree.

(2C) The regulations may prescribe cases where subsection (2A) does

not apply.

23 Subsection 200E(3)

Omit "The approval extends to", substitute "For the purposes of

subsection (1B), the resolution may give approval by approving".

Note:

The following heading to subsection 200E(3) is inserted "Meeting may approve a lesser

benefit".

24 Subsection 200E(4)

Omit "The approval", substitute "Member approval under this section".

Note:

The following heading to subsection 200E(4) is inserted "Effect of approval on

directors' duties".

25 Paragraph 200F(1)(a)

After "office", insert "or position".

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Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009 No.

, 2009 9

26 Subsection 200F(2)

After "an office", insert "or position".

27 Subparagraph 200F(2)(a)(ii)

After "office" (wherever occurring), insert "or position".

28 Paragraph 200F(2)(b)

Omit "other payments (if any) already made or payable", substitute

"other benefits (if any) already given".

29 Paragraph 200F(2)(b)

Omit "board or managerial offices", substitute "offices or positions".

30 Paragraph 200F(2)(b)

Omit all the words after "exceed", substitute "the amount worked out

under whichever of subsections (3) and (4) is applicable".

31 Subsections 200F(3) and (4)

Repeal the subsections, substitute:

(3) This subsection applies if the relevant period for the person is less

than 1 year. The amount worked out under this subsection is :

Estimated

Number of days in

annual base salary

relevant period

365

where:

estimated annual base salary is a reasonable estimate of the base

salary that the person would have received from the company and

related bodies corporate during the relevant period if the relevant

period had been 1 year.

Note:

The relevant period for the person is defined in subsection (5).

(4) This subsection applies in every other case. The amount worked

out under this subsection is:

(a) if the relevant period is 1 year--the base salary that the

person received from the company and related bodies

corporate during the relevant period; or

Schedule 1 A mendments

Part 1 Main amendments

10 Corporations Amendment (Improving Accountability on Termination Payments) Bill

2009 No. , 2009

(b) if the relevant period is more than 1 year but less than 2

years--the average annual base salary that the person

received from the company and related bodies corporate

during the relevant period, worked out as if:

(i) the relevant period were 2 years; and

(ii) the person's annual base salary for the second year were

a reasonable estimate of what the person would have

received as base salary after the first year of the relevant

period had the relevant period been 2 years; or

salary that the person received from the company and related

bodies corporate during the relevant period; or

(d) if the relevant period is more than 2 years but less than 3

years--the average annual base salary that the person

received from the company and related bodies corporate

during the relevant period, worked out as if:

(i) the relevant period were 3 years; and

(ii) the person's annual base salary for the third year were a

reasonable estimate of what the person would have

received as base salary after the second year of the

relevant period had the relevant period been 3 years; or

(e) if the relevant period is 3 years or more--the average annual

base salary that the person received from the company and

related bodies corporate during the last 3 years of the relevant

period.

32 Subsection 200F(5)

Omit "an office", substitute "a managerial or executive office".

33 Paragraph 200G(1)(a)

Omit "a board or managerial office (the relevant office)", substitute "an

office or position".

34 Paragraph 200G(1)(c)

Omit "other payments (if any) already made or payable", substitute

"other benefits (if any) already given".

35 Paragraph 200G(1)(c)

Omit "board or managerial offices", substitute "offices or positions".

Amend ments Schedule 1

Main amendments Part 1

Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009 No.

, 2009 11

36 Paragraph 200G(1)(c)

Omit "the payment limit set by subsection (2)", substitute "the amount

worked out under whichever of subsections (2) and (3) is applicable".

37 Subsections 200G(2) and (3)

Repeal the subsections, substitute:

(2) This subsection applies if the relevant period for the person is less

than 1 year. The amount worked out under this subsection is:

Estimated

Number of days in

annual base salary

relevant period

365

where:

estimated annual base salary is a reasonable estimate of the base

salary that the person would have received from the company and

related bodies corporate during the relevant period if the relevant

period had been 1 year.

Note:

The relevant period for the person is defined in subsection (6).

(3) This subsection applies in every other case. The amount worked

out under this subsection is:

(a) if the relevant period is 1 year--the base salary that the

person received from the company and related bodies

corporate during the relevant period; or

(b) if the relevant period is more than 1 year but less than 2

years--the average annual base salary that the person

received from the company and related bodies corporate

during the relevant period, worked out as if:

(i) the relevant period were 2 years; and

(ii) the person's annual base salary for the second year were

a reasonable estimate of what the person would have

received as base salary after the first year of the relevant

period had the relevant period been 2 years; or

salary that the person received from the company and related

bodies corporate during the relevant period; or

(d) if the relevant period is more than 2 years but less than 3

years--the average annual base salary that the person

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Part 1 Main amendments

12 Corporations Amendment (Improving Accountability on Termination Payments) Bill

2009 No. , 2009

received from the company and related bodies corporate

during the relevant period, worked out as if:

(i) the relevant period were 3 years; and

(ii) the person's annual base salary for the third year were a

reasonable estimate of what the person would have

received as base salary after the second year of the

relevant period had the relevant period been 3 years; or

(e) if the relevant period is 3 years or more--the average annual

base salary that the person received from the company and

related bodies corporate during the last 3 years of the relevant

period.

38 Subsection 200G(5)

Repeal the subsection.

39 Subsection 200G(6)

Insert:

relevant period: if a person has held a managerial or executive

office in the company or a related body corporate:

(a) throughout a period; or

(b) throughout a number of periods;

the relevant period for that person is that period or the period

consisting of those periods.

40 Subsection 200J(1)

Repeal the subsection, substitute:

(1) If an entity (the giver) contravenes section 200B by giving a

benefit to a person (the recipient), then the amount of the benefit,

or the money value of the benefit if it is not a payment:

(a) is taken to be received by the recipient on trust for the giver;

and

(b) must be immediately repaid by the recipient to the giver.

(1A) An amount repayable under subsection (1) to the giver:

(a) is a debt due to the giver; and

(b) may be recovered by the giver in a court of competent

jurisdiction.

Schedule 1 A mendments

Part 2 Other amendments

14 Corporations Amendment (Improving Accountability on Termination Payments) Bill

2009 No. , 2009

Part 2

Other amendments

Corporations Act 2001

42 Paragraph 200F(1)(a)

Repeal the paragraph, substitute:

(a) a benefit that is a payment made in respect of leave of

absence to which the person is entitled under an industrial

instrument; or

Amend ments Schedule 1

Application Part 3

Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009 No.

, 2009 15

Part 3

Application

43 Application

(1)

The amendments made by Part 1 apply in relation to a retirement from

an office, or position of employment, held under:

(a) an agreement entered into; or

(b) an agreement renewed or extended; or

agreement happens;

on or after the commencement of that Part.

(2)

If the amendments made by Part 1 apply in relation to a person's

retirement from an office or position in a company, the person's

relevant period for the purposes of section 200F or 200G of the

Corporations Act 2001 applies to managerial or executive offices held

by the person:

(a) in the company or related bodies corporate; and

(b) before, on or after the commencement of that Part.

(3)

Despite the amendment made by Part 2 (the Part 2 amendment),

paragraph 200F(1)(a) of the Corporations Act 2001 (as amended by

Part 1 of this Schedule) continues to apply, in relation to agreements

entered into before 1 January 1991, as if the Part 2 amendment had not

been made.

Commonwealth of Australia Bills

CORPORATIONS AMENDMENT (IMPROVING ACCOUNTABILITY ON TERMINATION PAYMENTS) BILL 2009