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1
Corporations (Administrative Actions) Bill 2001
CORPORATIONS (ADMINISTRATIVE
ACTIONS) BILL 2001
EXPLANATORY NOTES
GENERAL OUTLINE
Objectives of the Legislation
The objective of this Bill is to give validity to certain potentially invalid
administrative actions taken before the commencement of the proposed Act
by Commonwealth authorities or officers acting under powers or functions
conferred on them by laws of the State relating to corporations.
Reasons for the objectives and how they will be achieved
The Commonwealth Constitution gives the Commonwealth Parliament
limited powers to regulate corporations under section 51 (xx) of the
Commonwealth Constitution. That provision allows the Commonwealth
Parliament to legislate with respect to "foreign corporations, and trading or
financial corporations formed within the limits of the Commonwealth".
The Commonwealth Parliament also has other legislative powers under
the Commonwealth Constitution that assist it to regulate corporate
activities, such as the interstate trade and commerce power (section 51 (i)),
and the postal, telegraphic, telephonic, and other like services power
(section 51 (v)).
However, the High Court has held that the Commonwealth's
constitutional powers do not extend to regulating aspects of a number of
important commercial areas such as the incorporation of companies,
certain activities of non-financial and non-trading corporations, and certain
activities of unincorporated bodies that engage in commerce.
In contrast, the States have broad powers to regulate corporations and
corporate activities (subject to the Commonwealth Constitution). As a
result of the restrictions on the powers of the Commonwealth Parliament, a
national scheme of corporate regulation requires co-operation among the
Commonwealth and the States and Territories. Several different schemes of
co-operation have been implemented at different times since 1961.
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Corporations (Administrative Actions) Bill 2001
The current scheme commenced on 1 January 1991. Under that scheme,
the substantive law of corporate regulation (known as the Corporations
Law) is contained in an Act of the Commonwealth enacted for the
Australian Capital Territory and the Jervis Bay Territory (the Capital
Territory).
Laws of each State and the Northern Territory apply the Corporations
Law of the Capital Territory (as in force for the time being) as a law of the
State or Northern Territory. The effect of this arrangement is that, although
the Corporations Law operates as a single national law, it actually applies
in each State and the Northern Territory as a law of that State or Territory,
not as a law of the Commonwealth.
The Corporations Law is administered by a Commonwealth body, the
Australian Securities and Investments Commission (ASIC) established by
the Australian Securities and Investments Commission Act 1989 of the
Commonwealth (ASIC Act). Each State and the Northern Territory have
passed legislation applying relevant provisions of the ASIC Act as a law of
that jurisdiction (known as the ASC Law or ASIC Law).
Legislation of each State and the Northern Territory confers functions
relating to the administration and enforcement of the Corporations Law on
ASIC, the Commonwealth Director of Public Prosecutions and the
Australian Federal Police. These bodies are responsible for the
investigation and prosecution of offences under the Corporations Law.
The High Court decision in Hughes
In The Queen v Hughes (2000) 171 ALR 155, the High Court indicated
that, where a State gave a Commonwealth authority or officer a power to
undertake a function under State law together with a duty to exercise the
function, there must be a clear nexus between the exercise of the function
and one or more of the legislative powers of the Commonwealth set out in
the Commonwealth Constitution.
If this view prevails, the Commonwealth would not be able to authorise
its authorities or officers to undertake a function under State law involving
the performance of a duty (particularly a function having potential to
adversely affect the rights of individuals) unless the function could be
supported by a head of Commonwealth legislative power.
Although the Court found that the particular exercise of the prosecution
function by the Commonwealth Director of Public Prosecutions in question
in Hughes was valid, it made no finding about the validity of the conferral
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Corporations (Administrative Actions) Bill 2001
of the prosecution function generally, or of other functions under the
Corporations Law scheme.
The decision in Hughes may have implications for the validity of a range
of administrative actions taken by Commonwealth authorities and officers
under the Corporations Law scheme (the current scheme) and the previous
co-operative scheme (the previous scheme). A number of Commonwealth
authorities have functions and powers under the current scheme, including
ASIC and the Commonwealth Director of Public Prosecutions.
Commonwealth authorities, most notably the National Companies and
Securities Commission (NCSC), had functions and powers under the
previous scheme.
Much of the work of the NCSC was carried out by State and Territory
authorities as delegates of the NCSC, and the Bill applies to actions of
those delegates on the basis that the actions of a delegate are treated as
actions of the principal. Since the commencement of the Corporations Law,
Commonwealth authorities have continued to carry out functions under the
previous scheme, including ASIC and the Commonwealth Director of
Public Prosecutions.
Many or all actions by these Commonwealth authorities are likely to be
valid, because they could be supported by the Commonwealth's legislative
powers. However, the validity of each action can only be determined on a
case by case basis, having regard to the particular circumstances of each
action.
Giving validity to Commonwealth administrative actions
The Bill provides that every invalid administrative action taken under the
current or previous scheme has (and is deemed always to have had) the
same force and effect as it would have had if it had been taken at the
relevant time by a duly authorised State authority or officer of the State.
This provision overcomes any doubts about the validity of administrative
actions by Commonwealth authorities or officers under the current and
previous schemes. Other jurisdictions propose to introduce similar
legislation to achieve a uniform effect.
The Bill preserves rights and liabilities potentially affected by invalid
administrative actions, and specifically confirms the validity of the
registration or incorporation of companies under the current and previous
schemes.
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Corporations (Administrative Actions) Bill 2001
The Bill applies to administrative actions taken before the
commencement of the proposed Corporations legislation. The validity of
future actions by Commonwealth authorities and officers will be assured by
the reference of matters to the Commonwealth Parliament by the
Corporations (Commonwealth Powers) Bill proposed to be enacted by each
State. The NSW Corporations (Commonwealth Powers) Bill has been
enacted and commenced on 4 April 2001 and the new Corporations
legislation of the Commonwealth has been introduced into the
Commonwealth Parliament in reliance on that reference of powers.
Administrative cost to Government of implementation
It is not anticipated that there will be any costs incurred by the
Queensland Government in implementing this Bill.
The Bill is likely to reduce costs incurred by persons as a result of
litigation that may have ensued over certain potentially invalid administrative
actions taken before the commencement of the proposed Act by Commonwealth
authorities or officers acting under powers or functions conferred on them by laws
of the State relating to corporations.
Fundamental legislative principles
The Bill is generally consistent with the fundamental legislative
principles outlined in section 4 of the Legislative Standards Act 1992.
The Bill validates potentially invalid administrative actions taken by
Commonwealth authorities and officers before commencement of the
proposed new Commonwealth Corporations Act 2001 by giving them the
same effect that they would have had if they had been taken by State
authorities or officers of the State.
Accordingly, the Bill has the potential to adversely affect rights and
liberties retrospectively. However, this is essentially a curative measure,
which is necessary to remove uncertainty.
The national Corporations Law scheme has been operating for over ten
years on the assumption that the scheme had a sound constitutional footing.
The Bill is necessary to overcome the serious consequences that would
otherwise flow from a potential determination that the administrative
actions of Commonwealth authorities and officers under this scheme were
invalid.
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Corporations (Administrative Actions) Bill 2001
The Bill has no effect on the rights or liabilities of parties to proceedings
that have been heard and determined.
This Bill was prepared through the Standing Committee of Attorneys-
General and the Ministerial Council for Corporations, in conjunction with
the Special Committee of Solicitors-General and the Parliamentary
Counsel's Committee.
All Government Departments were consulted during the preparation of
the Bill.
NOTES ON PROVISIONS
Clause 1 sets out the name (also called the short title) of the proposed
Act.
Clause 2 provides for the commencement of the proposed Act
immediately before the proposed new Corporations legislation of the
Commonwealth comes into operation.
Clause 3 defines certain words and expressions used in the proposed
Act. The expression invalid administrative action is defined as an
administrative action that was taken before the commencement of the
proposed Act by a Commonwealth authority or officer pursuant to a
function or power conferred under the current or previous scheme, and that
is invalid because its conferral on the Commonwealth authority or officer is
not supported by a head of power in the Commonwealth Constitution.
Clause 4 deals with the application and operation of the proposed Act.
Clause 4 (1) provides that the proposed Act binds the Crown. Clause 4 (2)
provides that the proposed Act has effect despite any provision of the
Corporations (Queensland) Act 1990 or of the laws applied by that Act, and
avoids a possible argument that section 5 of that Act would otherwise
prevent the Bill from affecting the operation of that Act. Clause 4 (3)
provides that the proposed Act extends to affect rights and liabilities that
are or have been the subject of legal proceedings.
Clause 4 (4) provides that the proposed Act does not affect rights and
liabilities arising between parties to legal proceedings heard and finally
determined before the commencement of the proposed Act to the extent to
which they arise from, or are affected by, an invalid administrative action.
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Corporations (Administrative Actions) Bill 2001
Clause 5 provides that every invalid administrative action has (and is
deemed always to have had) the same force and effect as it would have had
if it had been taken by a duly authorised State authority or officer of the
State. The clause does not in terms validate administrative actions taken by
Commonwealth authorities and officers, but rather attaches to the actions
retrospectively the same force and effect as would have ensued had the
actions been taken by State authorities and officers (a similar distinction
was drawn in The Queen v Humby, Ex parte Rooney (1973) 129 CLR 231).
Clause 6 complements clause 5 and does not affect the generality of
clause 5. The clause declares that the rights and liabilities of all persons are
(and always have been) for all purposes the same as if every invalid
administrative action had been taken by a duly authorised State authority or
officer of the State.
Clause 7 complements clauses 5 and 6 and does not affect the generality
of those clauses. The clause specifically declares that clauses 5 and 6
extend to the registration or incorporation of companies. The formation of
corporations was held by the High Court in The State of New South Wales v
The Commonwealth of Australia (1990) 169 CLR 482 to lie outside the
legislative competence of the Commonwealth Parliament.
Clause 8 ensures that the proposed Act does not reinstate administrative
actions that, since the action was taken, have been affected by another
action or process. For example, if a decision has been altered on review,
the proposed Act does not reinstate the decision in its original form. The
Bill applies to the decision as it is affected by later actions from time to
time.
Clause 9 provides that it is immaterial for the purposes of the proposed
Act that a Commonwealth authority or officer does not have a counterpart
in the State, or that the powers and functions of State authorities or officers
do not correspond to the powers and functions of Commonwealth
authorities or officers.
Clause 10 provides that the proposed Act does not give rise to any
liability against the State.
© State of Queensland 2001