Corporations Amendment (No. 1) Act 2009

Overview

The Corporations Amendment (No. 1) Act 2009 was enacted by the Parliament of Australia to address the need for greater alignment between Australian corporate law and international standards, particularly in relation to the recognition and enforcement of foreign court orders concerning corporate management. The Act amends the Corporations Act 2001 to ensure that individuals disqualified from managing corporations by foreign courts are also disqualified in Australia. This legislative change aims to enhance the consistency and effectiveness of corporate governance across jurisdictions, thereby protecting stakeholders and maintaining the integrity of the Australian corporate landscape.

Scope and Application

The Corporations Amendment (No. 1) Act 2009 is a Commonwealth Act that amends the Corporations Act 2001. The Act applies to the management of corporations and extends to individuals and entities involved in the management of corporations. It specifies that individuals who are disqualified by a court order from a foreign jurisdiction from being a director of a foreign company or being concerned in the management of a foreign company are disqualified from managing corporations in Australia. Additionally, the Act allows for the disqualification of persons by the Court on application by the Australian Securities and Investments Commission (ASIC) if they are disqualified under the law of a foreign jurisdiction from carrying on activities substantially similar to being a director or being concerned in the management of a foreign company, and the Court is satisfied that such disqualification is justified. The Act applies to court orders made on or after its commencement and to disqualifications that arise on or after its commencement. The Act does not specify any exclusions, exemptions, or thresholds, and its application may be extended or restricted through subordinate instruments.

Key Provisions

The Corporations Amendment (No. 1) Act 2009 (C2009A00009) introduces several amendments to the Corporations Act 2001, primarily focusing on disqualifications for managing corporations based on foreign court orders and laws. The key provisions of this Act are contained in Schedule 1, which outlines specific amendments to the Corporations Act 2001. Section 199A(3) is amended to include a reference to subsection 206EAA, expanding the scope of disqualifications (item 1). A new subsection 206B(6) is added, stipulating that a person is disqualified from managing corporations if they are disqualified under a foreign court order from being a director or involved in the management of a foreign company (item 2). Additionally, a new section 206EAA is inserted, empowering the Court to disqualify a person from managing corporations based on a foreign jurisdiction’s law, provided certain conditions are met (item 3). Section 206H is amended to exclude subsection 206B(6) and section 206EAA from its scope (item 4). Paragraph 1274AA(1)(a) is updated to include references to section 206EAA (item 5), and paragraph 1274AA(2)(aa) is amended to incorporate new subparagraph (ab) regarding court orders under section 206EAA (item 6). Lastly, Part 10.11 is added to address transitional provisions, ensuring that the new subsection 206B(6) applies to orders made by foreign courts on or after the commencement of the item, and the new section 206EAA applies to disqualifications arising on or after its commencement (items 7 and 8). Under the Corporations Amendment (No. 1) Act 2009, the Australian Securities and Investments Commission (ASIC) is given the authority to apply to the Court for a disqualification order against a person who has been disqualified from managing corporations under a foreign jurisdiction’s law or by a foreign court order. The Court can then disqualify such individuals from managing corporations in Australia for a period it deems appropriate, considering factors such as the duration of the foreign disqualification and the person’s conduct. This amendment extends the reach of Australian corporate law by recognising and enforcing disqualifications from other jurisdictions. Additionally, the Act imposes obligations on individuals who may be affected by foreign disqualifications to ensure they comply with Australian law. These obligations include reporting any foreign disqualifications to ASIC and potentially facing disqualification from managing Australian corporations. The Act also introduces several offences and penalties for non-compliance with its provisions. For instance, knowingly or recklessly contravening a disqualification order can result in significant civil penalties, including fines of up to $210,000 for individuals and $1,050,000 for bodies corporate, as stipulated in section 1317E of the Corporations Act 2001. Criminal penalties may also apply, with potential fines of up to $210,000 for individuals and $1,050,000 for bodies corporate, and imprisonment for up to five years, as outlined in section 1311 of the Corporations Act 2001. These penalties are designed to deter non-compliance and ensure that individuals and corporations adhere to the disqualification orders imposed by the Court. The Act further emphasises the seriousness of these offences by including provisions for enforcement and compliance, ensuring that the law is upheld and that those who seek to evade disqualification face appropriate consequences.