CORPORATIONS (COMMONWEALTH POWERS) (TERMINATION DAY) AMENDMENT BILL

Introduction and First Reading

Received from the House of Assembly and read a first time.

Second Reading

The Hon. G.E. GAGO (Minister for Regional Development, Minister for Public Sector Management, Minister for the Status of Women, Minister for Consumer Affairs, Minister for Government Enterprises, Minister for Gambling) (16:47): I move:

That this bill be now read a second time.

I seek leave to have the detailed explanation of the bill Incorporated in Hansard without my reading it.

Leave granted.

The Corporations (Commonwealth Powers) Act 2001 (the Act) refers, from the Parliament of South Australia, to the Parliament of the Commonwealth, the power to enact the text of the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001 (the ASIC Act).

The Act also enables the Commonwealth to amend the legislation in relation to the formation of corporations, corporate regulation and the regulation of financial products or services.

All State parliaments have enacted legislation referring these matters to the Commonwealth Parliament.

Relying upon the references, the Commonwealth Parliament has, under section 51(xxxvii) of the Constitution, enacted the Corporations legislation: the Corporations Act 2001 and the ASIC Act. This legislation is the basis for the Corporations Scheme: the legislative and regulatory scheme under which companies, securities and financial services and markets are regulated in Australia.

South Australia's participation in the Corporations Scheme is fundamental to our economic wellbeing. It provides a regulatory framework under which South Australian based corporations can operate and trade nationally and internationally. The State's participation in the Scheme in turn depends upon South Australia's status as a referring State, a status that will be lost if the references of power terminate.

Section 5(1) of the Corporations (Commonwealth Powers) Act 2001 originally provided that the references would terminate on the fifth anniversary of the day of commencement of the legislation. In 2005, the provision was amended so it currently provides that, unless terminated earlier, the references of power terminate on the 10^th anniversary of the day of the commencement of the Corporations legislation. As the Corporations legislation, commenced on 15 July, 2001, that date is 15 July, 2011.

This Bill amends section 5(1) to extend the references of power from the tenth to the fifteenth anniversary of the commencement of the Corporations legislation. All other States have agreed to extend their references to the same date.

This will extend the operation of the Corporations Scheme, and South Australia's participation in it, until 15 July, 2016.

I seek leave to have the remainder of the second reading inserted into Hansard without my reading it.

The Corporations Scheme commenced on 15 July, 2001 after more than 18 months of negotiations between the Commonwealth and the States over the establishment of a constitutionally-sound system of corporate regulation.

The Scheme replaced the national scheme laws (based on the Commonwealth's administration of the States' and Northern Territory's Corporations Law), the Constitutional certainty of which was undermined by the Wakim and Hughes decisions of the High Court.

Although the Commonwealth sought open-ended references of power from the States, this was not agreed. The States were prepared to refer power only for a fixed period, in the end, five years. There were reasons for this: The States were of the view that the references of power should not be a permanent solution to the problems posed by the Wakim and Hughes decisions.

The States were also concerned about the Commonwealth misusing the referred amendment power to legislate in areas unconnected with corporate regulation and the regulation of financial products and markets. Although the referral Acts and the relevant inter-governmental agreement, the Corporations Agreement 2002, contain safeguards against this, in reality, these measures are limited. The States believed that the best protection against misuse was to limit the references of power to a fixed period of time.

The first extension of the references of power occurred in 2005. The Commonwealth initially sought agreement from the States to replace the five-year references with open-ended references. However, while recognising the need to ensure certainty for the business and investment communities, the States' still favoured a permanent constitutional solution and had concerns about the potential for misuse of the referred power. Therefore, the States and the Commonwealth agreed to a five-year extension of the references of power in 2005.

As the references are now due to expire on 15 July 2011, there have been negotiations as to the length of the next extension of the references. There was initially a suggestion from the Commonwealth that the States consider a ten year referral, rather than five. However, the States are still of the view that the period of referral must balance the desire for consistency and continuity with the risk of the misuse of the power. Therefore, another five year extension has been agreed.

Unlike all other States, the South Australian legislation requires Parliament to approve an extension by amendment to the Corporations (Commonwealth Powers) Act. The opportunity could have been taken to allow for future extensions by proclamation. However the Government has taken the view that this is of sufficient importance to the State to warrant Parliamentary consideration of future extensions.

Section 5(1) of the Act provides that both references of power terminate on the day that is the 10^th anniversary of the day of commencement of the Commonwealth's corporations legislation. This date is 15 July, 2011.

To extend the references for a further five years, clause 3 of the Bill amends section 5(1) of the Act to move the termination of the references back to the 15^th anniversary of the commencement of the national scheme. The new termination date will be 15 July, 2016.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Commencement

3—Amendment provisions

These clauses are formal.

Part 2—Amendment of Corporations (Commonwealth Powers) Act 2001

4—Amendment of section 5—Termination of references

It is proposed to amend section 5(1) to provide that the references terminate on the 15^th anniversary of the commencement of the Corporations legislation.

Debate adjourned on motion of Hon. S.G. Wade.

At 16:52 the council adjourned until Wednesday 4 May 2011 at 14:15.