TRUSTEE COMPANIES (TRANSFERS) AMENDMENT BILL

Second Reading

The Hon. G.E. GAGO (Minister for Agriculture, Food and Fisheries, Minister for Forests, Minister for Regional Development, Minister for Tourism, Minister for the Status of Women) (16:58): I move:

That this bill be now read a second time.

I seek leave to have the second reading explanation inserted in Hansard without my reading it.

Leave granted.

This Bill makes amendments to the Trustee Companies Act 1988 (the Trustee Companies Act) consequent on the enactment of amendments to the Corporations Act 2001 of the Commonwealth (the Corporations Act).

In 2010, South Australia amended the Trustee Companies Act, by way of the Trustee Companies (Commonwealth Regulation) Amendment Act 2010, to provide for the transfer of entity-level regulation of trustee companies to the Commonwealth. Enactment of the legislation was necessary to fulfil South Australia's obligations under the National Partnership Agreement to Deliver a Seamless National Economy (the NPA) to transfer to the Commonwealth the responsibility for entity-level regulation of trustee companies.

Under the Commonwealth trustee company provisions, traditional functions of trustee companies (administering charitable and other trusts, obtaining probate, acting as the executor of a deceased estate or under power of attorney) are deemed to be financial services for the purposes of the Corporations Act. This means a trustee company providing traditional trustee company services must hold an Australian Financial Services Licence and be subject to the conduct, disclosure, compensation and dispute resolution obligations in Chapter 7 of the Corporations Act.

For trustee companies that did not hold an Australian Financial Services Licence at the commencement of the Commonwealth legislation, transitional arrangements provided that such trustee companies are deemed to hold an Australian Financial Services Licence with authorisation to provide traditional trustee company services until the end of the transitional period. The transitional period expires on 31 December 2012.

In April 2011, further Commonwealth amendments to the trustee company provisions of the Corporations Act came into effect which included, among other things, provisions allowing the voluntary transfer of trustee business between companies.

The 2011 Commonwealth amendments to the Corporations Act provide for the voluntary transfer of trustee company business from one trustee company to another. Prior to the Commonwealth taking responsibility for entity-level regulation of trustee companies, many corporate groups operated subsidiaries in States and Territories to hold trustee company authorisation in that jurisdiction. The Commonwealth advised at the time of making its 2011 amendments that the trustee company industry is keen to rationalise operations by transferring estate management functions to one licensed trustee company within the same group. State and Territory legislation is required to make the regime effective by giving legal effect to the transfer of estate assets and liabilities, so that the receiving company will be taken to be the successor in law of the transferring company, to the extent of the transfer.

Voluntary transfers were not included in the earlier Commonwealth amendments to the Corporations Act but were expected by States and Territories. In January 2010, the Commonwealth advised that it would amend its legislation in due course to make provision for voluntary transfers. As the South Australian amendments had not yet been introduced due to the 2010 election, the South Australian Bill was able to include a regulation making power, which was in terms sufficiently broad to deal with the expected Commonwealth amendments to the Corporations Act providing for voluntary transfers.

The Commonwealth has recently advised South Australia that the provisions in South Australia's Trustee Companies Act to support the voluntary transfer of trustee company business from one entity to another (such as from a company with a deemed Australian Financial Services Licence to a company holding an Australian Financial Services Licence) do not operate as required by the Corporations Act following its amendment by the Commonwealth. After 31 December 2012, companies operating under a deemed Australian Financial Services Licence will cease to be deemed licence holders and must apply for their own Australian Financial Services Licence or apply to ASIC for a transfer determination. These companies will be unable to apply for a transfer determination without South Australian supporting legislation in place.

Urgent amendment to the Trustee Companies Act is therefore required to facilitate voluntary transfers so that companies operating with a deemed licence may apply for a transfer determination prior to the expiry of their deemed Australian Financial Services Licence on 31 December 2012. Such transfers will now be facilitated within the Trustee Companies Act itself rather than by supporting regulations, consolidating the transfer provisions—both compulsory and voluntary—in the Act.

The amendments will not make substantive changes to the Trustee Companies Act. The amendments are intended to change the mechanism by which the Trustee Companies Act facilitates the voluntary transfer of trustee company business from one trustee company to another. The amendments are to be considered consequential to the 2011 amendments made by the Commonwealth to the Corporations Act.

The relevant Commonwealth provisions are found in Part 5D.6 of the Corporations Act. Part 5D.6 of the Corporations Act provides that ASIC may, if certain conditions are satisfied, make a transfer determination that there is to be a transfer of estate assets and liabilities from the transferring company to the receiving company if ASIC has either cancelled the Australian Financial Services Licence of the transferring company, or the transferring company has applied for a determination. Again upon certain conditions being satisfied, ASIC issues a certificate of transfer under section 601WBG, to effect the transfer of estate assets and liabilities to the receiving company.

One of the conditions that must be satisfied before ASIC can make a transfer determination is that legislation to facilitate the transfer that satisfies certain requirements has been enacted in the State or Territory in which the transferring company is registered and the State or Territory in which the receiving company is registered.

The Trustee Companies (Transfers) Amendment Bill 2012 makes the necessary amendments to facilitate the voluntary transfer requirements in the Corporations Act.

I commend the Bill to Members.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Amendment provisions

These clauses are formal. There being no commencement clause included, this measure will come into operation on the day on which it is assented to by the Governor.

Part 2—Amendment of Trustee Companies Act 1988

3—Repeal of heading to Part 3A Division 1

Part 3A is currently divided into Divisions, in particular, because that Part currently makes separate provision for compulsory transfers of estate assets and liabilities from 1 trustee company to another trustee company, and voluntary transfers of estate assets and liabilities from 1 trustee company to another trustee company, under Part 5D.6 of the Corporations Act 2001 of the Commonwealth (the Commonwealth Act). Since the recent enactment of amendments to the Commonwealth Act, there is no longer any need in our legislation to separately deal with compulsory and voluntary transfers in as much detail as currently, and so, there is no longer any need to divide Part 3A into Divisions.

4—Amendment of section 25A—Interpretation

The proposed amendments to various definitions in this clause are consequential on doing away with Divisions under Part 3A.

5—Repeal of heading to Part 3A Division 2

This proposed amendment repeals the heading to Division 2 of Part 3A.

6—Amendment of section 25B—Purpose and application of Part

A number of the proposed amendments to section 25B are consequential on doing away with Divisions under Part 3A. The more substantial amendment proposes to repeal current subsection (2) and substitute a subsection that will provide that Part 3A applies if the Australian Securities and Investment Commission (ASIC)—

makes a determination under section 601WBA of the Commonwealth Act that there is to be a transfer of estate assets and liabilities from a specified trustee company (the transferring company) to another trustee company (the receiving company); and

issues a certificate of transfer under section 601WBG of the Commonwealth Act stating that the transfer is to take effect.

A note is to be inserted to the effect that section 601WBA of the Commonwealth Act enables ASIC to make a transfer determination if—

ASIC cancels the licence of the transferring company (in which case the determination is a compulsory transfer determination); or

the transferring company applies to ASIC for a transfer determination (in which case the determination is a voluntary transfer determination).

7—Amendment of section 25C—Transfer of transferring company's estate assets and liabilities

8—Amendment of section 25D—Certificates evidencing operation of Part

9—Amendment of section 25F—Exemption from State taxes

The proposed amendments to sections 25C, 25D and 25F are consequential.

10—Repeal of Part 3A Division 3

Division 3 currently provides for the making of regulations to facilitate the voluntary transfer of estate assets and liabilities from a transferring company to a receiving company where ASIC has made a determination allowing the transfer. This clause proposes to repeal Division 3 and is consequential.

11—Repeal of heading to Part 3A Division 4

This proposed amendment is consequential.

Debate adjourned on motion of the Hon. D.W. Ridgway.