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Explanatory note
This explanatory note relates to this Bill as introduced into Parliament.*
*
the application of various provisions of the Corporations Law to
co-operatives (including the appointment of external administrators,
insolvency, winding up, and the issue of debentures),
*
the management of co-operatives (including the requisitioning of
general meetings, lodging of annual returns and duties and liabilities
of
directors),
*
powers and responsibilities of co-operatives in connection with the
obtaining of financial accommodation (including the issue of CCU's
and compulsory loans by members),
*
functions of the Registrar with respect to certificate evidence and the
consideration of applications for registration of co-operatives.
Amended in committee--see table at end of volume.
The amendments proposed to be made by the Bill are as follows:
(a) New provisions of the Corporations Law dealing with the
appointment of external administrators are applied to co-operatives,
with certain modifications. Consequential changes are made to
provisions dealing with official management (which is now obsolete).
Modifications allow the Registrar to appoint an administrator for the
purposes of the applied provisions of the Corporations Law and
provide that the administrator need not be a registered liquidator. The
Bill also applies new provisions of the Corporations Law allowing for
the reciprocal application of orders in other jurisdictions concerning
the administration or winding up of co-operatives. (Schedule 1 (l),
(2), (11), (12), (17), (33)(36), (43)(60))
(b) An existing provision of the Act which disapplies the Corporations
Law to co-operatives is amended to make it clear that the provision
does not prevent Parts 7.1 1 and 7.12 of the Corporations Law
(containing requirements relating to issues of securities such as
prescribed interests) applying to co-operatives, other than in relation
to shares in, debentures of, deposits with, or CCU's issued by a
co-operative. This will confirm the existing view that the
Carparations Law applies to the issue of prescribed interests by
co-operatives. (Schedule 1 (8)(10))
(c) Requirements relating to the requisitioning of general meetings of a
co-operative are altered so that a general meeting will be able to be
convened on the requisition of 50 members or any members who are
together able to cast 20% (rather than 5%, as is presently required) of
the total votes able to be cast at a meeting of the co-operative.
(Schedule 1 (13))
(d) The existing requirement that a director's resignation does not take
effect until 1 month after notice of resignation is given is altered so
that a resignation can take effect immediately. (Schedule 1 (16))
(e) New provisions of the Corporations Law relating to insolvency are
applied to co-operatives. At present, the Act applies to co-operatives
provisions of the Corporations Law providing for the duties of
officers of a company when the company is trading while insolvent.
These provisions (in particular section 592 of the Corporations Law)
have been amended and substantially replaced by Part 5.7B of the
Corporations Law. The proposed amendments apply these new
provisions of the Corporations Law. Consequential savings and
transitional provisions are enacted to save the operation of the now
defunct provisions of the Corporations Law that are applied by the
current provisions of the Act until the application of the new
provisions commences. (Schedule 1 (3), (19), (34) (proposed section
343B), (66) (proposed clause 16 of Schedule 6))
Explanatory note page 2
(f) The provision of the Act dealing with the grounds for refusal of an
application for registration of a co-operative is amended to make it
clear that the Registrar can refer an application to the Co-operatives
Council as an alternative to refusing the application, for the Council's
recommendation on whether the application should be granted or
refused. (Schedule 1 (6))
(g) The existing provision in the Act dealing with the standard of care and
diligence required of officers of co-operatives is amended to adopt an
objective standard (in line with the parallel provision of the
Corporations Law), namely the degree of care and diligence that a
reasonable person in a like position in a co-operative would exercise.
(Schedule 1 (18))
(h) The Bill will require a co-operative to lodge annual returns within 4
months after the end of the financial year of the co-operative, instead
of at least 14 days before the annual general meeting of the
co-operative as at present. (Schedule 1 (20))
(i) The Bill will remove an existing provision that prevents a
co-operative from obtaining financial accommodation, or giving
security in connection with obtaining financial accommodation, unless
authorised by its rules to do so. The existing power for the regulations
to impose restrictions or requirements on co-operatives in relation to
the obtaining of financial accommodation is retained. An existing
provision dealing with the legal capacity of co-operatives is amended
to make it clear that the provision is subject to the regulations (and not
just the Act). A consequential change is made to the provision dealing
with the contents of the rules of a co-operative to remove a provision
that is inconsistent with the existing abolition by the Act of the
doctrine of ultra vires in relation to co-operatives. Consequential
changes are also made. (Schedule 1 (7), (21), (22), (25), (42))
(j) An existing provision of the Act which adopts Part 7.12 of the
Corporations Law is amended to make it clear: that those provisions
are adopted only for the purposes of applying to the issue of
debentures of a co-operative. This does not prevent the Corporations
Law from applying of its own force to prescribed interests issued by a
co-operative, as referred to above. It will also be made clear that the
adopted provisions do not apply to compulsory loans by members
under section 268 of the Act. The existing provision is further
amended to apply Part 7.11 of the Corporations Law (dealing with
unlawful conduct in relation to the issue of securities) to the issue of
debentures of a co-operative. (Schedule 1 (23), (24))
Explanatory note page 3
(k) An existing provision that allows a co-operative to raise money by
requiring members to lend money to the co-operative is amended to
require a co-operative proposing to raise funds in this way to issue a
disclosure statement, approved by the Registrar, setting out how the
funds raised are to be used, the total amount of the loan to be raised
and the basis on which the contribution of each member is to be
calculated. This is similar to the disclosure statement required in
relation to a proposal by a co-operative to raise funds by requiring
members to take up or subscribe for additional shares. (Schedule 1
(26))
(l) The Bill will make it clear that the holders of CCU's issued by a
co-operative rank in accordance with the terms of issue of the CCU's
for priority of payment of capital and interest in a winding up and that
the terms of issue can provide for a ranking anywhere from behind
contributories (shareholders) up to and including equality with other
creditors. (Schedule 1 (27)(29))
(m) The existing provision of the Act which applies the winding up
provisions of the Corporations Law is amended to make it clear that
the applied provisions are to be read subject to specific provisions of
the Act which deal with the liability of members of the co-operative.
(Schedule 1 (30), (32))
(n) The Registrar is given power to intervene as a party in any
proceedings relating to a matter arising under the Act or the
regulations. The ASC has a parallel power under the Corporations
Law. (Schedule 1 (37))
(o) The existing provision in the Act that confers power on the Court to
grant injunctions is amended to enable a person to seek an injunction
under the section in respect of actual or threatened conduct if the
person's interests have been, are or would be affected by the conduct.
Currently only the Registrar can seek an injunction under the
provision. The amendment will bring the provision into line with the
parallel provision of the Corporations Law. (Schedule l (41))
(p) An existing evidentiary provision of the Act will be expanded to allow
the Registrar to give certificate evidence as to whether or not a
requirement of the Act has been complied with within a specified
period or by a particular date (whether or not that requirement relates
to a function of the Registrar). (Schedule 1 (38))
Explanatory note page 4
(q) The Bill inserts additional provisions with respect to the interpretation
and application of provisions of the Corporations Law adopted by the
Act. For example, definitions in relation to adopted provisions are to
be read as if they formed part of the Act and regulations and penalties
made under an adopted provision are to be read as forming part of the
Act. The amendment makes it clear that applied provisions of the
Corporations Law are applied as in force from time to time.
(Schedule 1 (14), (39), (40))
(r)
Consequential savings and transitional provisions are enacted. An
additional transitional provision is added to the original transitional
provisions of the Act to make it clear that the Registrar can exercise
functions in relation to defunct co-operatives even if they became
defunct under the Co-operation Act 1923, which is now superseded.
(Schedule 1 (61)(66))
(s)
Minor or consequential amendments are also made. (Schedule 1 (4),
(5), (15), (31))
Clause 2 provides for the commencement of the proposed Act on a day or
days to be appointed by proclamation.
Clause 3 is a formal provision giving effect to the Schedule of amendments
to the Co-operatives Act 1992.
Schedule l contains the amendments to the Co-operatives Act 1992
described above.
Explanatory note page 5