Corporations Amendment (Improving Corporate Governance) Bill 2002 [No. 2]
First Reading
2002
The Parliament of the
Commonwealth of Australia
THE SENATE
Presented and read a first time
Corporations Amendment (Improving Corporate Governance) Bill 2002
No. , 2002
(Senator Conroy)
A Bill for an Act to amend the Corporations Act 2001 to improve corporate governance, and for related purposes
Contents
1 Short title 1
2 Commencement 2
3 Schedule(s) 2
Schedule 1--Amendment of the Corporations Act 2001 3
A Bill for an Act to amend the Corporations Act 2001 to improve corporate governance, and for related purposes
The Parliament of Australia enacts:
This Act may be cited as the
Corporations Amendment (Improving Corporate Governance) Act 2002.
(1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, on the day or at the time specified in column 2 of the table.
| Commencement information |
| Column 1 | Column 2 | Column 3 |
| Provision(s) | Commencement | Date/Details |
| 1. Sections 1 to 3, Schedule 1 and anything in this Act not elsewhere covered by this table | The day on which this Act receives the Royal Assent |
|
Note: This table relates only to the provisions of this Act as originally passed by the Parliament and assented to. It will not be expanded to deal with provisions inserted in this Act after assent.
(2) Column 3 of the table is for additional information that is not part of this Act. This information may be included in any published version of this Act.
Back to Top Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.
1 Section 9 Insert:
analyst means the author of a research report.
2 Section 9
Insert:
protected disclosure means a disclosure which satisfies the applicable requirements in section 353.
3 Section 9
Insert:
research report means a written or electronic communication which includes an analysis of securities of a listed corporation, provides information reasonably sufficient upon which to base an investment decision, and includes a recommendation.
4 After section 201D
Insert:
(1) A notice of meeting of a listed corporation at which a person is standing for election as a director must contain the following information for each person standing for election, or re-election, as a director:
(a) any relationship between that person and any director of the company which may affect the independent conduct of the duties of a director; and
(b) any relationship between that person and the company; and
(c) all other directorships currently held by that person; and
(d) any other information required by the regulations.
(2) A person standing for election must give the company any information the company needs to comply with subsection (1).
5 Section 250T
Repeal the section, substitute:
(1) Subject to subsection (2), if the company's auditor or their representative is at the meeting, the chair of an AGM must allow a reasonable opportunity for the members as a whole at the meeting to ask the auditor or their representative questions relevant to the conduct of the audit and the preparation and content of the auditor's report.
(2) If the company is a listed corporation, the auditor or their representative must attend the AGM.
6 Subparagraph 300(1)(d)(ii)
Repeal the subparagraph, substitute:
(ii) granted to directors and to the five most highly remunerated executives (other than directors) of the company; and
7 Paragraph 300A(1)(a)
Omit "senior executives", substitute "executive officers".
8 After paragraph 300A(1)(c)
Add:
; and (d) for each of the directors and the five named executives (other than directors) of the company receiving the highest emolument, details of the value of options granted, exercised and lapsed unexercised during the year and their aggregation in the total emolument.
9 After subsection 308(1A)
Insert:
(1B) An auditor who audits the financial report for a financial year must report to members on all alternative treatments of financial information that have been discussed with executives of the company, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the auditor.
10 At the end of Division 3 of Part 2M.3
Insert:
Back to Top An auditor must make an annual declaration to the board of directors of a public company that the auditor has maintained its independence in accordance with this Act and the rules of the professional accounting bodies.
11 Paragraphs 324(1)(e) and (f)
Repeal the paragraphs, substitute:
or (e) the person is not independent from the company, including as provided in subsections (2A) and (2B).
12 Paragraphs 324(2)(f), (g) and (h)
Repeal the paragraphs, substitute:
(f) the firm is independent from the company, including as provided in subsections (2A) and (2B).
13 After subsection 324(2)
Insert:
Auditor independence
(2A) An auditor is not an independent auditor if:
(a) a current partner or professional employee of the audit firm is:
(i) an officer of the company; or
(ii) a partner, employer or employee of an officer of the company; or
(iii) a partner or employee of an employee of an officer of the company; or
(b) an immediate family member of a member of the audit engagement team is:
(i) a director of the company; or
(ii) an officer or employee of the company who is in a position to affect the subject matter of the audit engagement; or
(c) a former partner or professional employee of an audit firm is:
(i) a director of the company; or
(ii) an officer or employee of the company who is in a position to affect the subject matter of the audit engagement;
unless the individual:
(iii) does not influence the audit firm's operations or financial policies and does not participate or appear to participate in the audit firm's business or professional activities; and
(iv) has no capital balances in the audit firm; and
(v) has no financial arrangement with the audit firm other than one providing for regular payment of a fixed pre-determined dollar amount which is not dependent on the revenues, profits or earnings of the audit firm; or
(d) a former partner of an audit firm who was directly involved in the audit of a company becomes a director of the company within a period of two years of resigning as partner of the audit firm; or
(e) a member of the audit engagement team has, during the period covered by the audit report, been:
(i) an officer of the company; or
(ii) an employee of the company in a position to influence the subject matter of the audit engagement; or
(f) an officer of the company, or an employee of the company in a position to influence the subject matter of the audit engagement, receives any remuneration from the audit firm for acting as a consultant to it on accounting or auditing matters; or
(g) the audit firm, any member of the audit engagement team, or any of his or her immediate family has:
(i) a direct financial investment in the company; or
(ii) a material indirect financial investment in the company; or
(h) the audit firm has a material financial interest in an entity that has a controlling interest in the company; or
(i) any other client service personnel, or any of his or her immediate family, has a direct financial interest or a material indirect financial interest in the company; or
(j) subject to subsection (3), a partner of the audit firm, or an entity which the partner controls, or a body corporate in which the partner has a substantial holding, owes more than $10,000 (or such other amount as may be prescribed by the regulations) to the company; or
(k) the audit firm, any member of the audit engagement team, or any of his or her immediate family:
(i) accepts a loan from the company; or
(ii) makes a loan to the company; or
(iii) has a loan guaranteed by the company; or
(iv) guarantees the company's loan;
unless the loan is made in the ordinary course of the company's business and the loan is made under normal lending procedures, terms and conditions.
Back to Top (2B) An auditor is not an independent auditor if the auditor is not, or a reasonable investor with full knowledge of all relevant facts and circumstances would conclude that the auditor is not, capable of exercising objective and impartial judgment on all issues encompassed within the auditor's engagement.
Non-audit services not to be provided by auditor
(2C) An auditor that performs for any company any audit required by this Act must not provide to that company contemporaneously with the audit, any non-audit service, including but not restricted to:
(a) bookkeeping or other services related to the accounting records or financial statements of the company; or
(b) financial information systems design and implementation; or
(c) appraisal or valuation services, fairness opinions, or contribution-in-kind reports; or
(d) actuarial services; or
(e) internal audit outsourcing services; or
(f) management functions or human resources; or
(g) broker or dealer, investment adviser, or investment banking services; or
(h) legal services and expert services unrelated to the audit; or
(i) any other service prescribed by regulations made for the purpose of this section;
unless:
(j) the non-audit service is not described above and the activity is approved in advance by the audit committee of the company; or
(k) the person, company, audit firm, or transaction is exempted by ASIC from the provisions of this subsection.
14 Subsection 324(3)
Omit "paragraphs (1)(e) and (2)(f)" substitute "paragraph (2A)(j)".
15 Subsection 327(4)
Repeal the subsection, substitute:
(4) Subject to subsections (4A) and (4B), a person or firm appointed as auditor under subsection (3) holds office until death or removal or resignation from office in accordance with section 329 or until ceasing to be capable of acting as auditor by reason of subsection 324(1) or (2).
(4A) Where a person has been appointed as auditor of a listed corporation, that person cannot hold office as an auditor for longer than 5 years.
(4B) Where a firm has been appointed as auditor of a listed corporation, the audit partner responsible for the audit must change at least every 5 years and cannot be reappointed for a further 2 years.
16 Subsection 344(3)
After "312,", insert "313A,".
17 After Chapter 2N
Insert:
To be protected by this Act, any disclosure by an officer or an employee of a listed corporation must:
(a) be a disclosure of information that the officer or employee reasonably believes shows that the conduct of the listed corporation constitutes a breach of a provision of this Act; and
(b) be made in good faith; and
(c) be made to ASIC.
(1) A person who takes detrimental action against another person that is substantially in reprisal for the other person making a protected disclosure is guilty of an offence.
(2) In any proceedings for an offence against subsection (1), it lies on the defendant to prove that detrimental action shown to be taken against a person was not substantially in reprisal for the person making a protected disclosure.
(3) If a court finds a person guilty of an offence under subsection (1), the court may order the person to pay compensation to the person making the protected disclosure or to reinstate the person making the protected disclosure with the same seniority status that the person would have had but for the detrimental action.
(4) For the purposes of this section, detrimental action means action causing, comprising or involving
Back to Top any of the following:
(a) injury, damage or loss; or
(b) intimidation or harassment; or
(c) discrimination, disadvantage or adverse treatment in relation to employment; or
(d) dismissal from, or prejudice in, employment; or
(e) disciplinary proceedings.
(1) A person is not subject to any liability for making a protected disclosure and no action, claim or demand may be taken or made of or against the person for making the disclosure.
(2) This section has effect despite any duty of secrecy or confidentiality or any other restriction on disclosure (whether or not imposed by an Act) applicable to the person.
ASIC is not to disclose information that might identify or tend to identify a person who has made a protected disclosure unless:
(a) the person consents in writing to the disclosure of that information; or
(b) it is essential, having regard to the principles of natural justice, that the identifying information be disclosed to a person whom the information provided by the disclosure may concern; or
(c) ASIC is of the opinion that disclosure of the identifying information is necessary to investigate the matter effectively or it is otherwise in the public interest to do so.
18 At the end of Chapter 6CA
Add:
(1) Presentations given by a listed corporation during an analyst briefing shall be made generally available to all members of that corporation as prescribed by the regulations.
(2) For the purposes of subsection (1), an analyst briefing is a briefing provided to a representative or representatives of financial institutions regarding the performance or operation of a listed corporation.
19 After Division 4 of Part 7.7
Insert:
(1) An analyst has a duty to reasonably foreseeable users of a research report to use his or her best professional judgment in providing an objective and disinterested assessment of a listed corporation that is the subject of a research report.
(2) A person who is involved in a contravention of subsection (1) contravenes this subsection.
Note: This subsection is a civil penalty provision (see section 1317E).
(3) A person who is involved in a contravention of subsection (1) who is reckless or intentionally dishonest commits an offence.
(1) A research report must include the following:
(a) information about the remuneration or other benefits that the analyst may receive that might reasonably be expected to be capable of influencing the analyst in preparing the research report; and
(b) information about:
(i) any other interests, whether pecuniary or not and whether direct or indirect, of the analyst or any employer of the analyst; and
(ii) any associations or relationships between the analyst or the employer of the analyst, and the listed corporation that is the subject of the research report;
that might reasonably be expected to be capable of influencing the analyst in preparing the research report; and
Back to Top (c) any other information required by the regulations.
(2) A more detailed statement of the information required by one or more provisions of subsection (1) may be provided in the regulations.
(1) An analyst must not issue a research report regarding a listed corporation for which the analyst or the employer of the analyst acted as manager or co-manager of an initial public offering of securities for that corporation within the period prescribed by the regulations.
(2) An analyst must not issue a research report regarding a listed corporation for which the analyst or the employer of the analyst acted as manager or co-manager of any offering of securities (other than an initial public offering of securities) for that corporation within the period prescribed by the regulations.
(3) Notwithstanding subsections (1) and (2), an analyst may issue a research report that is issued due to significant news and events.
20 Paragraph 1311(1A)(c)
Repeal the paragraph, substitute:
(c) Chapters 2G, 2H, 2J, 2M (other than Part 2M.4 except as provided in paragraph (ca)), 2N, 2P and 5A;
21 After paragraph 1311(1A)(c)
Insert:
(ca) subsection 324(2C);
22 After paragraph 1317E(1)(ja)
Insert:
(jaa) subsection 950D(2) (analyst independence);
23 Schedule 3 (table item 1)
Repeal the item, substitute:
| 1 | Section 111AU | 400 penalty units or imprisonment for 10 years, or both. |
24 Schedule 3 (table item 30) Repeal the item, substitute:
30
| Section 184 | 4,000 penalty units or imprisonment for 10 years, or both. |
25 Schedule 3 (table items 50 and 51) Repeal the items, substitute:
| 50 | Subsection 209(3) | 4,000 penalty units or imprisonment for 10 years, or both. |
| 51 | Section 224 | 400 penalty units or imprisonment for 10 years, or both. |
26
Back to Top Schedule 3 (table item 83)
Repeal the item, substitute:
| 83 | Section 254T | 200 penalty units or imprisonment for 5 years, or both. |
27 Schedule 3 (table item 90) Repeal the item, substitute:
90
| Subsection 260D(3) | 4,000 penalty units or imprisonment for 10 years, or both. |
28 Schedule 3 (after table item 107) Insert:
107A
| Section 313A | 1,000 penalty units. |
29 Schedule 3 (after table item 116) Insert:
116A
| Subsection 324(2C) | 1,000 penalty units or imprisonment for 2 years, or both. |
30 Schedule 3 (table item 117) Repeal the item, substitute:
117
| Subsection 344(2) | 4,000 penalty units or imprisonment for 10 years, or both. |
31 Schedule 3 (after table item 119) Insert:
119A
| Subsection 354(1) | 200 penalty units or imprisonment for 5 years, or both. |
32
Back to Top Schedule 3 (table item 138)
Repeal the item, substitute:
138
| Subsection 588G(3) | 4,000 penalty units or imprisonment for 10 years, or both. |
33 Schedule 3 (table items 229A to 229C) Repeal the items, substitute:
| 229A | Subsection 674(2) | 400 penalty units or imprisonment for 10 years or both. |
| 229B | Subsection 674(5) | 200 penalty units or imprisonment for 5 years, or both. |
| 229C | Subsection 675(2) | 400 penalty units or imprisonment for 10 years, or both. |
| 229D | Subsection 679(1) | 100 penalty units. |
34 Schedule 3 (table item 235) Repeal the item, substitute:
| 235 | Section 726 | 400 penalty units or imprisonment for 10 years, or both. |
35 Schedule 3 (table item 240) Repeal the item, substitute:
240
| Subsection 728(3) | 400 penalty units or imprisonment for 10 years, or both. |
36
Back to Top Schedule 3 (after table item 273A)
Insert:
| 273AA | Subsection 950D(3) | 1,000 penalty units or imprisonment for 1 year, or both. |
| 273AB | Subsection 950E(1) | 1,000 penalty units or imprisonment for 1 year, or both. |
| 273AC | Subsection 950F(1) | 1,000 penalty units or imprisonment for 1 year, or both. |
| 273AD | Subsection 950F(2) | 500 penalty units or imprisonment for 6 months, or both. |
37 Schedule 3 (table items 309B to 312A) Repeal the items, substitute:
| 309B | Section 1041A | 400 penalty units or imprisonment for 10 years, or both. |
| 309C | Subsection 1041B(1) | 400 penalty units or imprisonment for 10 years, or both. |
| 310A | Subsection 1041C(1) | 400 penalty units or imprisonment for 10 years, or both. |
| 310B | Section 1041D | 400 penalty units or imprisonment for 10 years, or both. |
| 310C | Subsection 1041E(1) | 400 penalty units or imprisonment for 10 years, or both. |
| 311A | Subsection 1041F(1) | 400 penalty units or imprisonment for 10 years, or both. |
| 311B | Subsection 1041G(1) | 400 penalty units or imprisonment for 10 years, or both. |
| 311C | Subsection 1043A(1) | 4,000 penalty units or imprisonment for 10 years, or both. |
| 312A | Subsection 1043A(2) | 4,000 penalty units or imprisonment for 10 years, or both. |
38
Back to Top Schedule 3 (table items 334 to 337)
Repeal the items, substitute:
| 334 | Section 1307 | 200 penalty units or imprisonment for 5 years, or both. |
| 335 | Subsection 1308(2) | 200 penalty units or imprisonment for 5 years, or both. |
| 336 | Subsection 1309(1) | 200 penalty units or imprisonment for 5 years, or both. |
| 337 | Subsection 1309(2) | 100 penalty units or imprisonment for 2 years, or both. |