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Legislative Council - Fifty-Second Parliament, First Session (52-1)
2010-07-20 Daily Xml
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TRUSTEE COMPANIES (COMMONWEALTH REGULATION) AMENDMENT BILL

Introduction and First Reading

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

Second Reading

The Hon. P. HOLLOWAY (Minister for Mineral Resources Development, Minister for Urban Development and Planning, Minister for Industrial Relations, Minister Assisting the Premier in Public Sector Management) (17:57): 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.

On 2 June 2008, the Council of Australian Governments (COAG) agreed that the Commonwealth Government would assume responsibility for regulating trustee companies at the entity level.

On 12 February 2009, the Premier signed the 'National Partnerships Agreement To Deliver a Seamless National Economy' (the NPA). The NPA requires the Commonwealth, the States and the Territories to enact the legislation necessary to give effect to 27 deregulation priorities, including the regulation of trustee companies. The NPA provides for the payment by the Commonwealth to the State of 'reward' payments. These payments are contingent on the States and Territories meeting their obligations for the seamless national reform program, including the regulation of trustee companies. If South Australia does not meet its obligations for the regulation of trustee companies, the NPA reward payments are at risk.

The NPA Implementation Plan requires the Commonwealth and the States and Territories to enact the legislation necessary to give effect to COAG's agreement on the regulation of trustee companies.

The Trustee Companies (Commonwealth Regulation) Amendment Bill 2010 implements South Australia's obligations under the NPA to give effect to the COAG agreement on the regulation of trustee companies.

A trustee company is a company under the Corporations Act 2001 of the Commonwealth (the Corporations Act) authorised, under State and Territory legislation, to perform personal trustee and deceased estate administration services (traditional trustee company services).

In South Australia, the primary legislation is the Trustee Companies Act 1988 (the Trustee Companies Act). Only companies listed in Schedule 1 of that Act can provide traditional trustee company services in South Australia.

The trustee company industry is small. Currently there are 10 trustee companies listed in Schedule 1 of the Trustee Companies Act. Most of these trustee companies were licensed or approved under the legislation of, and have operations in, many jurisdictions.

Most trustee companies have expanded their activities into other areas of wealth creation, management and transfer. They now offer a range of financial services, including acting as superannuation trustees, acting as Responsible Entities for managed funds, providing custodial or depository services, and acting as trustees for debenture holders. They are regulated under Commonwealth legislation for these other financial activities.

Whereas a trustee company can provide these other financial services across Australia by dint of their licensing or approval under Commonwealth legislation, under the State and Territory regulated trustee company regime they also had to be licensed or authorised in each State or Territory in which they offer traditional trustee company services.

In addition to being subject to the respective trustee companies' legislation, trustee companies are subject to other State and Territory legislation when undertaking traditional trustee company services. For example, each State and Territory has a Trustee Act as well as legislation about wills, administration and probate.

The Corporations Legislation Amendment (Financial Services Modernisation) Act 2009 of the Commonwealth commenced on 6 May 2010. Schedule 2 of that Act inserts a new Chapter 5D into the Corporations Act, and makes consequential amendments to Chapters 7 and 10 of the Corporations Act. These provisions (the Commonwealth trustee company provisions) implement the transfer of entity level trustee company regulation to the Commonwealth.

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. Both settlors/testators and beneficiaries will be 'retail clients' of trustee companies for the purposes of Chapter 7 of the Corporations Act. Retail clients are afforded greater protection under Chapter 7 than non-retail clients.

The Commonwealth provisions provide that authorised trustee companies are—

required to be an Australian registered public company or a wholly-owned subsidiary of a public company;

regulated by ASIC;

required to hold an Australian Financial Services Licence (AFSL) with an appropriate authorisation to carry out traditional trustee companies services;

subject to the consumer protection, licensing and conduct requirements of the Corporations Act and the Australian Securities and Investment Commission Act 2001 of the Commonwealth;

to the extent appropriate—subject to the disclosure requirements of the Corporations Act;

required to have suitable internal and external dispute resolution arrangements;

in the case of charitable trusts—subject to fee regulation, in the form of 'grandfathering' of fees charged to existing clients, and capping of fees charged to new clients, with a review of these arrangements after 2 years;

in the case of non-charitable trusts and estates—subject to deregulation of the fees that can be charged to clients (provided that the fee schedule is disclosed on the Internet and that no more than the fees specified in the published fee schedule at the time the administration of the trust/estate is begun are charged);

subject to director and employee liability arrangements that are consistent with the obligations in place for other corporations under the Corporations Act;

subject to a $5 million capital adequacy requirement;

subject to a cap of 15% on the shareholding of any single shareholder and associates, together with a divestment regime and a Ministerial discretion to consent to share acquisitions above the cap (for example, for wholly-owned subsidiaries); and

permitted to hold common funds, which are able to continue to attract external investment.

State and Territory Public Trustees will not be subject to the new Commonwealth regulatory regime unless the relevant Government consents to this occurring.

The Bill amends the Trustee Companies Act to—

delete the definition of 'trustee company' and substitute a definition that a trustee company is a licensed trustee company within the meaning of Chapter 5D of the Corporations Act;

repeal provisions that are inconsistent with the Commonwealth trustee company provisions (Chapter 5D, 7 and 10 of the Corporations Act);

facilitate the transfer of a trustee company's business to another licensed trustee company if its licence is cancelled;

allow for the making of regulations to provide for the voluntary transfer of business between 2 (Commonwealth) licensed trustee companies; and

allow for necessary transitional matters to be dealt with by regulation.

The Bill also amends the definition of 'trustee company' in the Administration and Probate Act 1919, the Financial Institutions Duty Act 1983, the Guardian and Administration Act 1993, the Legal Practitioners Act 1981 and the Trustee Act 1936 as a consequence of the proposed amendments to the Trustee Companies Act.

These amendments are necessary if South Australia is to comply with its obligations under the COAG agreement and the NPA about the regulation of trustee companies. All States and Territories have enacted, or will enact, similar legislation.

I commend the Bill to the House.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Commencement

3—Amendment provisions

These clauses are formal.

Part 2—Amendment of Trustee Companies Act 1988

4—Amendment to long title

This proposed amendment is a drafting amendment.

5—Amendment of section 3—Interpretation

The amendments proposed to this section are consequential on the taking over of entity level regulation by the Commonwealth. In particular, a trustee company will, in the future, be defined as a licensed trustee company within the meaning of Chapter 5D of the Corporations Act 2001 of the Commonwealth (the Corporations Act).

6—Repeal of sections 9 to 12

Currently, sections 9 to 12 make provision for the fees, commission and other charges that may be charged by a trustee company in relation to the administration or management of an estate or perpetual trust. These sections are to be repealed as a result of the Commonwealth taking responsibility for the regulation of such matters.

7—Amendment of section 13—Investment of trust funds

This proposed amendment is consequential on the Commonwealth taking over responsibility for the regulation of common funds.

8—Repeal of sections 15 to 15B

Currently, sections 15 to 15B make provision for the establishment and management of common funds by trustee companies. These sections are to be repealed as a result of the Commonwealth taking over responsibility for the regulation of such matters.

9—Amendment of section 16—Power of trustee company acting in representative capacity to hold its own shares etc

This proposed amendment is consequential.

10—Repeal of section 16A

This section is to be repealed. It currently makes provision for the recovery of GST and will be otiose once the Commonwealth has responsibility for the regulation of trustee companies.

11—Repeal of sections 17 to 22

Currently, sections 17 to 22 make provision for returns, accounts, audits, prospectuses and other information required to be provided by trustee companies. The repeal of these sections is consequential on the regulation of trustee companies being assumed by the Commonwealth.

12—Insertion of Part 3A

New Part 3A makes provision for the regulation of the transfer of estate assets and liabilities under Part 5D.6 of the Corporations Act. The Australian Securities and Investments Commission (ASIC) will be the regulator of such matters.

Part 3A—Transfer of estate assets and liabilities

Division 1—Preliminary

25A—Interpretation

This section contains definitions for the purposes of this new Part. In particular, an expression used in this Part that is defined in the Corporations Act will, unless the contrary intention appears, have the same meaning as in that Act.

Division 2—Compulsory transfers

25B—Purpose and application of Division

New section 25B provides that the purpose of this Division is to facilitate compulsory transfers of estate assets and liabilities under Part 5D.6 of the Corporations Act.

This Division applies if ASIC—

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

(b) issues a certificate of transfer under section 601WBG of the Corporations Act stating that the transfer is to take effect.

25C—Compulsory transfers of transferring company's estate assets and liabilities

New section 25B provides that, to the extent of the transfer, the receiving company is taken to be the successor in law of the transferring company. Details of just what that means are then set out in the section.

25D—Certificates evidencing operation of Division

This section makes provision for the issuing of certificates by ASIC as evidence of the transfer of ownership to a receiving company of specified assets or liabilities.

25E—Registration or record of transfer

This section authorises and requires the Registrar-General or other authority to register or record in an appropriate manner the transfer of assets and liabilities.

25F—Exemption from State taxes

This section provides that no State taxes are chargeable in respect of a compulsory transfer of estate assets or liabilities facilitated under this Division.

Division 3—Voluntary transfers

25G—Voluntary transfer of transferring company's estate assets and liabilities

This section allows regulations to be made to facilitate the voluntary transfer of estate assets and liabilities from 1 trustee company to another trustee company where ASIC has made a determination under the Corporations Act allowing the transfer.

Division 4—Relationship of Part with other laws

25H—Relationship of Part with other laws

This section provides that new Part 3A has effect despite anything in a contract, deed, undertaking, agreement or other instrument. In addition, nothing done by or under new Part 3A—

(a) places a receiving company, a transferring company or another person in breach of contract or confidence or otherwise makes any of them guilty of a civil wrong; or

(b) places a receiving company, a transferring company or another person in breach of—

(i) a law of the State; or

(ii) a contractual provision prohibiting, restricting or regulating the assignment or transfer of an asset or liability or the disclosure of information; or

(c) releases a surety, wholly or partly, from all or any of the surety's obligations.

13—Repeal of section 27

Current section 27 provides that if a trustee company is guilty of an offence, the manager and each company director is also guilty of an offence. Deemed criminal liability is contrary to Commonwealth policy and thus the repeal of this section is related to the Commonwealth assuming the regulation of trustee companies.

14—Repeal of section 30

This proposed amendment is a drafting amendment.

15—Amendment of section 31—Regulations

This proposed amendment adds a new regulation making power to provide for the making of regulations of a saving or transitional nature consequent on the amendment of the principal Act by any other Act, or relevant to the interaction between the principal Act and an Act of the Commonwealth.

16—Repeal of Schedule 1

This Schedule currently lists the companies that are trustee companies under the principal Act. The Schedule is to be repealed as a consequence of the insertion of the new definition of trustee company in section 3 of the principal Act.

17—Repeal of Schedule 2

Schedule 2 is spent and so is to be repealed.

Schedule 1—Consequential amendments and transitional provisions

Part 1—Amendment of Administration and Probate Act 1919

Part 2—Amendment of Guardianship and Administration Act 1993

Part 3—Amendment of Legal Practitioners Act 1981

Part 4—Amendment of Trustee Act 1936

The amendments to these Acts are consequential on the insertion of the new definition of trustee company in section 3 of the Trustee Companies Act.

Part 5—Transitional provisions

1—Interpretation

2—Transitional provision

The transitional provisions confirm that a company that was listed as a trustee company for the purposes of Schedule 1 of the Trustee Companies Act immediately before the commencement of this measure is a licensed trustee company within the meaning of Chapter 5D of the Corporations Act. Consequently, the repeal of Schedule 1 does not affect the appointment of a Schedule 1 trustee company made before the repeal as—

(a) the executor of a will, or the administrator of an estate of a deceased person; or

(b) a trustee, agent, attorney, manager or receiver; or

(c) the guardian of a child; or

(d) the administrator, committee, guardian or manager of the estate of a person who is unable to manage his or her own affairs.

Also, the Trustee Companies Act (as amended by this measure) continues to apply to a Schedule 1 trustee company and, except to the extent of any inconsistency with the Corporations Act—

(a) any duties, obligations, immunities, rights and privileges of a Schedule 1 trustee company arising before the repeal of that Schedule are not affected by the repeal; and

(b) the assets and liabilities of a Schedule 1 trustee company are not affected by the repeal; and

(c) any action taken or notice given by a Schedule 1 trustee company before the repeal of that Schedule or the amendment of the Trustee Companies Act by this measure is not affected by the repeal or amendment.

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

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