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Corporations Amendment (Stay on Enforcing Certain Rights) Regulations (No. 2) 2018

Corporations Amendment (Stay on Enforcing Certain Rights) Regulations (No. 2) 2018

Administered by Department of the Treasury

Legislation au F2018L00966 Regulations Not in force Legislative Instrument

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EXPLANATORY STATEMENT

Issued by authority of the Minister for Revenue and Financial Services

Corporations Act 2001

Corporations Amendment (Stay on Enforcing Certain Rights) Regulations (No.2) 2018

Section 1364 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, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

Subparagraphs 415D(6)(b)(i), 434J(5)(b)(i) and 451E(5)(b)(i) of the Act provide that regulations can prescribe a right contained in a kind of contract, agreement or arrangement to which subsections 415D(1), 434J(1) and 451E(1) do not apply. Subsections 415D(1), 434J(1) and 451E(1) provide for a stay on enforcing rights merely because of various arrangements or restructures such as the appointment of an administrator, the presence of a managing controller over all or a substantial portion of a corporation’s property or because an entity is the subject of a compromise or arrangement.

The Corporations Amendment (Stay on Enforcing Certain Rights) Regulations 2018 amended the Corporations Regulations 2001 to insert new provisions that prescribe kinds of contracts, agreements or arrangements for the purposes of subparagraphs 415D(6)(b)(i), 434J(5)(b)(i) and 451E(5)(b)(i) of the Act. This ensures that rights in those kinds of arrangements remain available to the parties to those arrangements should the events in subsections 415D(1), 434J(1) or 451E(1) occur.

The Corporations Amendment (Stay on Enforcing Certain Rights) Regulations (No.2) 2018 (the Regulations) amend the Corporations Regulations 2001 to repeal and substitute paragraph 5.3A.50(2)(f). The Regulations broaden the scope of paragraph 5.3A.50(2)(f) to provide that rights provided for under a contract, agreement or arrangement for the supply of essential or critical goods or services to government, or to the public on behalf of government, will continue to be available to the parties to those arrangements. Rights provided for under a contract, agreement or arrangement for the carrying out of essential or critical works for government will also continue to be available to the relevant parties.

Exposure drafts of the Corporations Amendment (Stay on Enforcing Certain Rights) Regulations 2018, and accompanying explanatory materials, were released for public consultation from 16 April 2018 to 11 May 2018. Submissions received during these consultations and subsequent discussions with stakeholders were taken into account in the development of the Regulations, in particular the decision to broaden paragraph 5.3A.50(2)(f).

The Regulations are a legislative instrument for the purposes of the Legislation Act 2003.

The Regulations commenced on 1 July 2018, immediately after the commencement of the Corporations Amendment (Stay on Enforcing Certain Rights) Regulations 2018.

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Corporations Amendment (Stay on Enforcing Certain Rights) Regulations (No.2) 2018

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instrument

The Regulations prescribe that the stay on ipso facto clauses will not apply to rights contained in the kinds of arrangements set out in Attachment. This ensures that the parties will remain able to exercise their contractual rights where these are triggered by a relevant insolvency event.

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms.

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.

ATTACHMENT

Explanation of provisions

Clauses 1, 2, 3 and 4—Machinery provisions

Clauses 1 to 4 of the Corporations Amendment (Stay on Enforcing Certain Rights) Regulations (No.2) 2018 (the Regulations) are machinery provisions setting out:

• the name of the Regulations;

• the day the Regulations commenced, which is 1 July 2018, immediately after the commencement of the Corporations Amendment (Stay on Enforcing Certain Rights) Regulations 2018;

• the authority for making the Regulations; and

• that the items in the schedule to the Regulations amend or repeal each instrument that is specified in the schedule and have effect according to their terms.

Item 1 of Schedule 1— Paragraph 5.3A.50(2)(f)

Item 1 of Schedule 1 repeals and substitutes Paragraph 5.3A.50(2)(f) of the Corporations Regulations 2001. The paragraph has been broadened to provide that rights provided for under a contract, agreement or arrangement for the supply of essential or critical goods or services to government, or to the public on behalf of government, will continue to be available to the parties to those arrangements. Rights provided for under a contract, agreement or arrangement for the carrying out of essential or critical works for government will also continue to be available to the relevant parties.

Examples of types of essential or critical goods, services and works include public transport services, public security or safety services, and works affecting essential public infrastructure such as new roads or railways. The paragraph is also intended to cover services that are essential because they facilitate the provision of essential services to government or to the public. Examples of services which could be considered essential to the provision of essential services include signalling services for public transport, and maintenance services and cleaning services for trains or other vehicles used in providing public transport services.

Overview

The Corporations Amendment (Stay on Enforcing Certain Rights) Regulations (No.2) 2018 were introduced to address gaps in the enforcement of rights under certain contracts, agreements, or arrangements during insolvency events. Enacted by the Parliament of Australia under the authority of the Corporations Act 2001, these Regulations were designed to ensure that essential services and works continue uninterrupted during periods of corporate restructuring or insolvency. The primary objective of these Regulations is to maintain the availability of rights in contracts for essential goods and services to government or the public, and for essential works, thereby safeguarding the continuity of critical services during corporate difficulties. Developed in response to consultations and stakeholder feedback, the Regulations amend the Corporations Regulations 2001 to broaden the scope of paragraph 5.3A.50(2)(f), ensuring that parties to contracts for essential services and works retain their contractual rights despite insolvency events. This amendment aims to protect essential services such as public transport, security, and infrastructure maintenance, ensuring that such services remain uninterrupted, thereby supporting public welfare and government operations during corporate crises. The Regulations are a legislative instrument under the Legislation Act 2003 and were compatible with human rights as assessed under the Human Rights (Parliamentary Scrutiny) Act 2011.

Scope and Application

The Corporations Amendment (Stay on Enforcing Certain Rights) Regulations (No.2) 2018 is a legislative instrument that amends the Corporations Regulations 2001 to refine the scope of contracts and agreements to which the stay on enforcing certain rights does not apply. This Act applies to corporations, trustees, and other relevant entities within Australia, aiming to ensure that specific contractual rights remain enforceable in the event of certain insolvency-related events. The stay provisions in the Act prevent the enforcement of rights in certain contractual arrangements from being triggered by events such as the appointment of an administrator, the presence of a managing controller over a substantial portion of a corporation's property, or when an entity is subject to a compromise or arrangement. The Regulations broaden the exclusions to include contracts for the supply of essential or critical goods or services to government, or to the public on behalf of government, as well as for the carrying out of essential or critical works for government. These exclusions ensure that critical services and infrastructure can continue to be maintained during insolvency proceedings, thereby safeguarding public interest and continuity of essential services. The Regulations, which commenced on 1 July 2018, are compatible with human rights as they do not engage any of the applicable rights or freedoms under the international instruments.

Key Provisions

The Corporations Amendment (Stay on Enforcing Certain Rights) Regulations (No.2) 2018 (the Regulations) make specific amendments to the Corporations Regulations 2001, particularly in relation to the enforcement of rights in certain types of contracts, agreements, and arrangements under the Corporations Act 2001 (the Act). The Regulations (in section 3) broaden the scope of paragraph 5.3A.50(2)(f) of the Corporations Regulations 2001. This change ensures that rights provided for under contracts, agreements, or arrangements for the supply of essential or critical goods or services to government, or to the public on behalf of government, will continue to be available to the parties involved in those arrangements (paragraph 5.3A.50(2)(f)). Additionally, rights concerning the carrying out of essential or critical works for government will also remain enforceable. This ensures continuity in the provision of essential services, such as public transport, security, safety, and infrastructure maintenance, during periods when a corporation is subject to insolvency events like the appointment of an administrator. The Regulations impose specific obligations on the parties involved in contracts, agreements, or arrangements that fall under the scope of the amended paragraph 5.3A.50(2)(f). These parties must ensure that their rights to enforce such contracts or agreements continue to be available, despite any insolvency events affecting the other party. This requirement is intended to maintain the continuity of essential services that are critical for public safety and government operations. The Regulations also require the parties to comply with the broader definitions and criteria set out in the amended paragraph, ensuring that their rights are clearly understood and upheld in the context of the described essential services. Under the Corporations Act 2001, breaches of the Act or the Regulations can lead to various civil or criminal consequences, depending on the nature and severity of the breach. The Act provides for penalties such as fines, imprisonment, or both for serious violations. For example, under section 1311(1) of the Act, a person who contravenes a civil penalty provision can be fined up to $210,000 for a corporation and $42,000 for an individual, or both. Additionally, under section 1317E, officers of a corporation can be subject to personal liability for breaches of the Act. The penalties are designed to enforce compliance and deter non-compliance with the provisions of the Act and the Regulations.

Area of Law: Corporate Law & Governance
Instrument: Regulation
Concepts: Regulatory Standards; Reporting & Disclosure Obligations; Enforcement Powers
Catchwords: Stay on Enforcing Certain Rights

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.

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