ASIC Corporations and Credit (Amendment and Repeal) Instrument 2016/1182

EXPLANATORY STATEMENT for
ASIC CORPORATIONS (AMENDMENT AND REPEAL) INSTRUMENT 2016/1182

Prepared by the Australian Securities and Investments Commission

Corporations Act 2001

National Consumer Credit Protection Act 2009

The Australian Securities and Investments Commission (ASIC) makes ASIC Corporations and Credit (Amendment and Repeal) Instrument 2016/1182 (the Amendment and Repeal Instrument) under subsections 283GA(1), 341(1), 601QA(1), 601YAA(1), 741(1), 926A(2), 951B(1), 992B(1) and 1020F(1) and paragraph 911A(2)(l) of the Corporations Act 2001 (the Act) and subsection 109(3) of the National Consumer Credit Protection Act 2009 (the NCCP Act).

Subsection 283GA(1) of the Act provides that ASIC may exempt a person from a provision of Chapter 2L of the Act or declare that Chapter 2L applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration.

Subsection 341(1) of the Act provides that ASIC may make an order in respect of a specified class of companies, registered schemes or disclosing entities that relieves any of the entities in question, their directors and auditors from specified requirements of parts 2M.2, 2M.3 or 2M.4 (other than Division 4) of the Act.

Subsection 601QA(1) of the Act provides that ASIC may exempt a person from a provision of Chapter 5C of the Act or declare that the Chapter applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration.

Paragraph 601YAA(1)(a) of the Act provides that ASIC may exempt a person or a class of persons from all or specified provisions of Chapter 5D of the Act.

Subsection 741(1) of the Act provides that ASIC may exempt a person from a provision of Chapter 6D of the Act or declare that the Chapter applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration.

Paragraph 911A(2)(l) of the Act provides that a person does not need to hold an Australian financial services licence for the provision of a financial service that is covered by an exemption specified by ASIC in writing and published in the Gazette.

Subsection 926A(2) of the Act provides that ASIC may:

Paragraph 951B(1)(a) of the Act provides that ASIC may exempt a person or a class of persons from all or specified provisions of Part 7.7 of the Act.

Subsection 992B(1) of the Act provides that ASIC may:

Subsection 1020F(1) of the Act provides that ASIC may:

Paragraphs 109(3)(a) and (d) of the NCCP Act provide that ASIC may, by legislative instrument, exempt a class of persons from all or specified provisions to which Part 2-6 of the NCCP Act applies or declare that such provisions apply in relation to a class of persons as if specified provisions were omitted, modified or varied as specified in the declaration.

The Amendment and Repeal Instrument amends a number of existing ASIC class orders. Under subsection 33(3) of the Acts Interpretation Act 1901 (as in force as at 1 January 2005 and as applicable to the relevant powers because of section 5C of the Act), where an Act confers a power to make, grant or issue any instrument (including rules, regulations or by-laws), the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument.

1.                                             Background

The Act requires certain entities to appoint registered company auditors, audit firms or authorised audit companies to conduct audits or perform other tasks.  Audit firms and authorised audit companies must, among other things, include registered company auditors as members.

Part 9.2 of the Act specifies how individuals may be registered as auditors. ASIC must be satisfied that an individual meets the requirements in section 1280 of the Act before registering a person as a registered company auditor. Similarly, a company must be qualified to be registered under s 1299B of the Act for it to be registered as an authorised audit company.

Under subsection 1280(2), ASIC must register a person as an auditor if, among other things, ASIC is satisfied that the person satisfies all the components of an auditing competency standard approved by ASIC or had such practical experience in auditing as is prescribed. ASIC may, on application, approve an auditing competency standard under subsection 1280A(1).

ASIC Regulatory Guide 180 Auditor Registration assists auditors and prospective auditors for their application for registration as a registered company auditor or an authorised audit company. The Guide also explains how ASIC may exercise its power to approve an auditing competency standard.

In November 2004, CPA Australia and The Institute of Chartered Accountants in Australia (now operating as Chartered Accountants Australia and New Zealand) issued the auditing competency standard (the CPA/ICAA standard). Under the CPA/ICAA standard, applicants for registration were required to demonstrate their competency to carry out particular tasks in specific contexts. ASIC approved the CPAA/ICAA standard under section 1280A. ASIC’s approval was not lodged for registration on the Federal Register of Legislative Instruments.

The Legislative Instruments Act 2003 (the LI Act) required legislative instruments made in 2004 to be lodged with the Attorney-General's Department by 1 October 2006 for registration on the Federal Register of Legislative Instruments. Failure to lodge such an instrument by that date results in the instrument being deemed to have been repealed.

In 2014 it came to ASIC’s attention that the instrument by which it approved the CPA/ICAA standard was likely to be a legislative instrument. ASIC never lodged it for registration. On 1 October 2006 the instrument was possibly taken to have been repealed by the LI Act. Given that ASIC had been registering auditors in reliance on the CPA/ICAA standard, the legal effectiveness of those registrations was uncertain. This uncertainty meant the effectiveness of certain registrations of authorised audit companies since 1 October 2006 was also in doubt, since section 1299B obliges each of the directors of the company to be a registered company auditor.

To resolve the uncertainty ASIC made ASIC Class Order [CO 14/757] ([CO 14/757]) which offered prospective relief, to those whose registration was in doubt, extent possible. [CO 14/757] allowed auditors whose registration may have been adversely affected by the failure to register the CPA/ICAA standard to have done acts and things that must be done by a registered company auditor and authorised audit company.  It did this by modifying certain provisions of the Act (and legislative instruments made under the Act); and exempting the affected auditors from certain provisions of the Act (and legislative instruments made under the Act).

[CO 14/757] was rendered unnecessary in September 2016 as the Government introduced remedial legislation: the Corporations Amendment (Auditor Registration) Act 2016 (Corporations Amendment). The Corporations Amendment ensures the validity of the registration of auditors in reliance on the CPA/ICAA standard since 1 October 2006, with effect from their purported registration.

The Corporations Amendment achieves the same purpose as [CO 14/757], providing relief to auditors whose registration may have been adversely affected since 1 October 2006.

2.                                                Purpose of the instrument

The purpose of the Amendment and Repeal Instrument is to repeal [CO 14/757] which is now rendered unnecessary as a result of the Government's introduction of the Corporations Amendment.

The Amendment and Repeal Instrument also makes amendments to other ASIC instruments to remove the amendments made by [CO 14/757].

3.                                                Operation of the Instrument

Schedule 1 of the Amendment and Repeal Instrument amends the following ASIC instruments to remove amendments made by [CO 14/757]:

(a)   ASIC Class Order [CO 02/237];

(b)   ASIC Class Order [CO 09/425];

(c)   ASIC Class Order [CO 10/654];

(d)   ASIC Class Order [CO 12/752];

(e)   ASIC Class Order [CO 13/760];

(f)    ASIC Class Order [CO 13/761];

(g)   ASIC Class Order [CO 13/762];

(h)   ASIC Class Order [CO 13/763];

(i)     ASIC Corporations (Disregarding Technical Relief) Instrument 2016/73; and

(j)     ASIC Corporations (Disclosing Entities) Instrument 2016/190.

Schedule 1 of the Amendment and Repeal Instrument repeals [CO 14/757].

4.                                                Consultation 

As discussed above, the Corporations Amendment achieved the same purpose as [CO 14/757], accordingly [CO 14/757] is now redundant.

ASIC has not consulted on the making of this instrument. The instrument is of a technical nature and consultation would be unnecessary.