Corporations Amendment Regulations 2000 (No. 4) 2000 No. 50
EXPLANATORY STATEMENT
STATUTORY RULES 2000 No. 50
Issued by the Authority of the Minister for Financial Services and Regulation
Corporations Act 1989
Corporations Amendment Regulations 2000 (No. 4)
Section 22 of the Corporations Act 1989 empowers the Governor-General to make regulations, not inconsistent with the Act or the Corporations Law, prescribing, among other things, matters that are required by the Corporations Law to be prescribed by regulations, or necessary or convenient to be prescribed by regulations for carrying out or giving effect to the Corporations Law.
Paragraph 249D(1)(b) of the Corporations Law requires the directors of a company to call and arrange a general meeting at the request of at least 100 members who are entitled to vote at the general meeting.
The Corporate Law Economic Reform Program Act 1999 inserted a new section 249D(1A) into the Corporations Law that permits by regulation an alteration of the 100 member rule under paragraph 249D(1)(b), in the case of a specific company or class of companies.
The purpose of the regulations is to provide that the number of members of a public company on whose request the directors of that company must call and arrange to hold a general meeting is at least 5% of the total number of members. This will replace the current threshold for public companies of 100 members in paragraph 249D(1)(b).
The State and the Northern Territory Ministers on the Ministerial Council for Corporations have been consulted on the regulations and have given their agreement, as required by the Corporations Agreement reached between State, Northern Territory and Commonwealth Ministers who had responsibilities in relation to corporate regulation in June 1990.
The Amending Regulations insert regulation 2G.2.01 into the Corporations Regulations 1990 to prescribe a 5% threshold of members for shareholders requisitioning meetings of public companies. This is proposed in light of concerns raised by the public with the Government and the Parliamentary Joint Statutory Committee on Corporations and Securities (PJSC) and the Companies and Securities Advisory Committee (CASAC). The PJSC has recommended that the Corporations Law be amended so that the only test to requisition a general meeting is 5% of the issued capital of the company. Although CASAC has not yet finally reported, it has indicated that the threshold should be a proportion of the company's issued share capital.
The concerns are that the existing numerical 100 member threshold under paragraph 249D(1)(b) of the Corporations Law gives disproportionate influence to minority shareholders and that the Law does not provide adequate protection against calls for company general meetings for improper purposes. The regulations are intended to temporarily address these concerns, while maintaining the balance between the interests of minority and majority shareholders. The Government will, however, reconsider this matter in the context of its response to the MSC's report and CASAC's final report.
Details of the Regulations are in the Attachment.
The Regulations will commence on gazettal.
ATTACHMENT
Corporations Amendment Regulations 2000 (No. 4)
Regulation-1 - Name of regulations
Regulation 1 provides for the name of the regulations.
Regulation 2 - Commencement
Regulation 2 provides that the regulations commence on gazettal.
Regulation 3 Amendment of Corporations Regulations 1990
Regulation 3 provides that Schedule 1 amends the Corporations Regulations 1990.
Schedule 1
Item 1 in Schedule 1 inserts regulation 2G.2.01 into the Corporations Regulations 1990.
Paragraph 2G.2.01(1) provides that for the purposes of subsection 249D(1A) of the Corporations Law, the regulation applies to a public company.
Paragraph 2G.2.01(2) provides that for the purposes of the application of paragraph 249D(1)(b) to the company, the number of members of the company on whose request the directors of the company must call, and arrange to hold, a general meeting is at least 5% of the total number of members of the company.
Overview
The Corporations Amendment Regulations 2000 (No. 4) were enacted to address concerns regarding the disproportionate influence exerted by minority shareholders under the Corporations Act 1989, specifically in relation to the calling of general meetings by directors at the request of shareholders. These regulations were issued under the authority of the Minister for Financial Services and Regulation and were developed in response to recommendations and consultations with relevant stakeholders, including the State and Northern Territory Ministers on the Ministerial Council for Corporations. The primary objective of these regulations is to introduce a more balanced approach to the requisitioning of general meetings by altering the existing threshold from 100 members to at least 5% of the total number of members for public companies. This change aims to mitigate the potential for improper calls for meetings while safeguarding the interests of both minority and majority shareholders. The regulations are set to commence upon gazettal and will be reconsidered in the context of broader corporate law reforms.
Scope and Application
The Corporations Amendment Regulations 2000 (No. 4) amends the Corporations Regulations 1990 to change the threshold for shareholders of a public company to requisition a general meeting from a fixed number of 100 members to a percentage-based threshold of at least 5% of the total number of members. This regulation applies to public companies and alters the current requirement under the Corporations Law, which previously mandated that directors must call and arrange a general meeting upon the request of at least 100 members. The change aims to address concerns that the existing numerical threshold disproportionately favoured minority shareholders and failed to adequately protect against meetings being called for improper purposes. The regulations were developed in consultation with State and Northern Territory Ministers and are set to commence upon gazette. The regulation is temporary and will be reconsidered in light of further reports from the Ministerial Council on Corporate Law and the Companies and Securities Advisory Committee.
Key Provisions
The main operative sections of the Corporations Amendment Regulations 2000 (No. 4) amend the Corporations Regulations 1990 by inserting regulation 2G.2.01 (regulation 3). This regulation stipulates that for the purposes of section 249D(1A) of the Corporations Act 1989, the regulation applies to a public company, setting a new threshold for the number of members required to requisition a general meeting (paragraph 2G.2.01(1)). Specifically, it provides that the number of members must be at least 5% of the total number of members of the company for the directors to call and arrange a general meeting (paragraph 2G.2.01(2)).
The regulations impose obligations on public companies and their directors. Public companies must ensure that at least 5% of their total members can requisition a general meeting, as per the new threshold set by the regulation. Directors of these companies are required to call and arrange a general meeting if such a requisition is made by the requisite number of members. This amendment ensures that the rights of minority shareholders are balanced against the potential for improper requisitioning of meetings by a small number of shareholders.
Breach of the provisions set out in these regulations can lead to significant consequences. While the explanatory statement does not explicitly outline specific offences or penalties, the underlying legislation, the Corporations Act 1989, provides a framework for enforcement. Directors who fail to call a general meeting when the requisite number of members have made a valid requisition may face legal action from the shareholders, and the company itself may be subject to court orders compelling compliance. The penalties for non-compliance would depend on the specific circumstances and the remedies sought by the aggrieved parties under the Corporations Act.
The regulations are intended to address concerns about the disproportionate influence that the existing 100-member threshold gave to minority shareholders and to protect against calls for general meetings for improper purposes. By setting a new threshold of 5% of the total number of members, the regulations aim to balance the interests of both minority and majority shareholders, providing a more equitable framework for requisitioning general meetings in public companies.