EXPLANATORY STATEMENT
Select Legislative Instrument 2007 No. 193
Issued by the authority of the Parliamentary Secretary to the Treasurer
Corporations Act 2001
Corporations Amendment Regulations 2007 (No. 2)
Subsection 1364(1) of the Corporations Act 2001 (the Act) provides that the Governor‑General may make regulations prescribing matters required or permitted by the Act to be prescribed by regulations, or necessary or convenient to be prescribed by such regulations for carrying out or giving effect to the Act.
The Regulations move the disclosure requirements for director and executive remuneration in the accounting standards into regulation 2M.3.03 of the Corporations Regulations 2001. This will allow the requirements to be repealed from the accounting standards. This is aimed at reducing the number of legislative sources that companies are required to make reference to in order to determine their remuneration reporting obligations. The Regulations also repeal existing regulation 2M.6.04 of and the associated Schedule 5B to the Corporations Regulations 2001, as they have been made redundant by amendments to the Corporations Act 2001.
Details of the Regulations are set out in the Attachment.
Under the Corporations Agreement 2002, the State and Territory Governments referred their constitutional powers with respect to corporate regulation to the Commonwealth. Under subclauses 506(1) and 507(2) of the Corporations Agreement, the Commonwealth is required to consult with and receive the approval of at least 3 State and Territory Ministers of the Ministerial Council for Corporations (the Council) before making a regulation under the national law. The Commonwealth has received approval of the Council for the Regulations. In addition, under subclause 511(3), the Commonwealth is required to consult with the Council as to whether proposed regulations should be exposed for public comment for between one and three months. The Commonwealth has received the approval of the Council to waive the public disclosure period for the Regulations.
The Act specifies no other conditions that need to be met before the power to make the Regulations may be exercised.
The Regulations would be a legislative instrument for the purposes of the Legislative Instruments Act 2003.
The Regulations commence on the day after they are registered.
Attachment
Details of the Corporations Amendment Regulations 2007 (No. 2)
Regulation 1 – Name of Regulations
This regulation provides that the title of the Regulations is the Corporations Amendment Regulations 2007 (No. 2).
Regulation 2 – Commencement
This regulation provides for the Regulations to commence on the day after they are registered on the Federal Register of Legislative Instruments.
Regulation 3 – Amendment of Corporations Regulations 2001
This regulation provides that the Corporations Regulations 2001 (the Principal Regulations) are amended as set out in Schedule 1 and that they apply in relation to a financial year that begins on or after the day on which these Regulations commence.
Schedule 1 – Amendment
Item [1] – Regulation 2M.3.03
These amendments incorporate paragraphs Aus25.2 to Aus25.7.2 from accounting standard AASB 124 Related Party Disclosures into regulation 2M.3.03.
Item [2] – Regulation 2M.6.04 and Item [3] – Schedule 5B
These amendments repeal regulation 2M.6.04 and the associated Schedule 5B. The requirements in regulation 2M.6.04 and Schedule 5B have been made redundant by the amendments in the Corporations Legislation Amendment (Simpler Regulatory System) Act 2007 and the amendments to regulation 2M.3.03 outlined in item [1].
Overview
The Corporations Amendment Regulations 2007 (No. 2) were introduced to streamline the disclosure requirements for director and executive remuneration by moving them from the accounting standards into the Corporations Regulations 2001. This was enacted to reduce the number of legislative sources companies need to reference for their remuneration reporting obligations. The regulations were approved by the Ministerial Council for Corporations and came into effect on the day after their registration on the Federal Register of Legislative Instruments. This initiative aligns with the policy objective of simplifying the regulatory system as outlined in the Corporations Legislation Amendment (Simpler Regulatory System) Act 2007, thereby enhancing compliance efficiency for corporations.
Scope and Application
The Corporations Amendment Regulations 2007 (No. 2) are subordinate legislation made under the Corporations Act 2001. These Regulations apply to all entities subject to the Act, which includes corporations, limited partnerships, and other entities registered or required to be registered under the Act. The Regulations primarily concern the disclosure of director and executive remuneration, shifting these requirements from accounting standards into regulation 2M.3.03 of the Corporations Regulations 2001. By doing so, the Regulations aim to streamline and reduce the number of legislative sources that companies must reference to determine their remuneration reporting obligations. Additionally, they repeal regulation 2M.6.04 and Schedule 5B, which have been rendered redundant by amendments to the Corporations Act 2001. Geographically, the application of these Regulations is national, given the Commonwealth's exclusive legislative power over corporations law as per the Corporations Agreement 2002. The Regulations were made following consultation and approval by the Ministerial Council for Corporations, and they commence on the day after their registration on the Federal Register of Legislative Instruments.
Key Provisions
The Corporations Amendment Regulations 2007 (No. 2) primarily amend the Corporations Regulations 2001 by moving certain disclosure requirements for director and executive remuneration from the accounting standards into regulation 2M.3.03 (Item [1]) and repealing the redundant regulation 2M.6.04 and Schedule 5B (Items [2] and [3]). These changes are intended to streamline the legislative sources that companies must reference for their remuneration reporting obligations. Section 1364(1) of the Corporations Act 2001 allows the Governor-General to make regulations that are necessary or convenient for carrying out or giving effect to the Act. The Regulations, therefore, effectively update the Corporations Regulations 2001 to reflect these changes.
Under the Corporations Amendment Regulations 2007 (No. 2), companies are required to ensure their remuneration reporting aligns with the new provisions in regulation 2M.3.03. This includes disclosing the remuneration of directors and executives in a manner consistent with the incorporated accounting standards, thereby ensuring transparency and compliance with updated regulatory expectations. Additionally, the repeal of regulation 2M.6.04 and Schedule 5B means that companies no longer need to adhere to these redundant requirements, simplifying their compliance obligations.
The Regulations impose several obligations on companies, primarily centred around the accurate and timely disclosure of director and executive remuneration. Companies must ensure that their financial reports and disclosures are prepared in accordance with the updated requirements in regulation 2M.3.03. This involves meticulous record-keeping and adherence to the specified disclosure standards to maintain compliance. Furthermore, companies must be aware of the repealed regulation 2M.6.04 and Schedule 5B and ensure that they do not inadvertently apply these redundant requirements in their financial reporting.
Failure to comply with the Corporations Amendment Regulations 2007 (No. 2) may result in civil or criminal consequences. While the specific penalties are not detailed in the explanatory statement, non-compliance with the Corporations Act 2001 generally attracts penalties that can include substantial fines for companies and, in more severe cases, criminal charges for individuals. These penalties underscore the importance of adhering to the updated regulatory requirements to avoid potential legal repercussions.