Corporations Regulations (Amendment) 1992 No. 395
EXPLANATORY STATEMENT
STATUTORY RULES 1992 No. 395
Issued by the Authority of the Attorney-General
Corporations Act 1989
Corporations Regulations (Amendment)
Section 22 of the Corporations Act 1989 (the Act) empowers the Governor-General to make regulations, not inconsistent with the Act or the Corporations Law (the Law) prescribing, inter alia, matters which are required by the Law to be prescribed by regulations, or necessary or convenient to be prescribed by regulations for carrying out or giving effect to the Law.
In accordance with the Heads of Agreement and the draft Corporations Agreement between the Commonwealth, State and Northern Territory Ministers having responsibilities in relation to corporate regulation, the Attorney-General has consulted the relevant State and Territory Ministers in relation to the proposed regulation.
At present interests in limited partnerships agreements are included in the definition of participation interest in section 9 of the Corporations Law if the partnership agreement relates to an undertaking, scheme, enterprise or investment contract promoted by or on behalf of a person whose ordinary business is or includes the promotion of similar undertakings, schemes, enterprises or investment contracts, whether or not that person is, or is to become, a party to the agreement or proposed agreement.
The purpose of Regulation 2 is to include interests in the following additional limited partnerships in the definition of participation interest in section 9 of the Corporations Law:
(a) limited partnerships where any promoter of the limited partnership is not a party to the partnership;
(b) limited partnerships which relate to a scheme promoted by an associate of a person whose ordinary business is or includes the promotion of similar schemes; and
(c) limited partnerships which have or which are intended to have more than 15 partners, whether general or limited.
By including interests in such limited partnerships in the definition of participation interest in section 9 of the Corporations Law, interests in these limited partnerships are securities for the purposes of section 92 of the Law and fall within the definition of prescribed interest in section 9 of the Law.
As a result of the Regulations, persons offering interests in such limited partnerships will be required, subject to any exemption given by the Australian Securities Commission pursuant to section 1084 of the Law, to comply with the prospectus provisions contained in Division 2 of Part 7.12 and the approved deed provisions contained in Division 5 of Part 7.12 and in particular sections 1018 and 1065.
Details of the Regulations are at Attachment A.
ATTACHMENT A
Regulation 1
Amendment Regulation 1 provides that the Regulations amend the Corporations Regulations.
Regulation 2
New regulation 1.13A.
Regulation 1.13A includes in the definition of participation interest in section 9, the following limited partnerships:
(a) limited partnerships which relate to a scheme promoted by an associate of a person whose ordinary business is or includes the promotion of similar schemes;
(b) limited partnerships where any promoter of the limited partnership is not a party to the partnership; and
(c) limited partnerships which have or which are intended to have more than 15 partners, whether general or limited.
Overview
The Corporations Regulations (Amendment) 1992 No. 395, issued under the authority of the Attorney-General, addresses a specific gap in the existing regulatory framework concerning limited partnerships within the broader scope of corporate regulation in Australia. Enacted under the Corporations Act 1989, these regulations aim to enhance the definition of participation interests by including certain limited partnerships that were previously excluded. This amendment was prompted by the need to ensure that interests in these additional limited partnerships are appropriately classified as securities and thus subject to the relevant regulatory requirements. The objective is to bring clarity and consistency to the regulatory oversight of participation interests, thereby protecting investors and maintaining market integrity.
The amendment was developed in consultation with State and Territory Ministers, reflecting a collaborative approach to corporate regulation across different jurisdictions. The policy goal is to ensure that the prospectus and approved deed provisions, as outlined in Division 2 and Division 5 of Part 7.12 of the Corporations Law, apply to those offering interests in the specified limited partnerships. This ensures that such offers comply with necessary disclosure and regulatory standards, thereby safeguarding the interests of investors and promoting transparency in corporate dealings.
Scope and Application
The Corporations Regulations (Amendment) 1992 No. 395 applies to the Corporations Act 1989 and seeks to expand the definition of "participation interest" under section 9 of the Corporations Law to include certain interests in limited partnerships. This amendment applies to limited partnerships where any promoter of the partnership is not a party to the partnership, partnerships that relate to a scheme promoted by an associate of a person whose ordinary business is the promotion of similar schemes, and partnerships that have or are intended to have more than 15 partners, whether general or limited. The expanded definition means that these interests in limited partnerships are classified as securities under section 92 of the Law and fall within the definition of "prescribed interest" in section 9 of the Law. Consequently, the persons offering these interests are required to comply with the prospectus and approved deed provisions, subject to any exemptions granted by the Australian Securities Commission under section 1084 of the Law. The regulations extend to the Commonwealth and are subject to consultation with relevant State and Territory Ministers. The scope of these regulations is further detailed in Attachment A, which outlines the specific amendments made to the Corporations Regulations.
Key Provisions
The primary operative sections of the Corporations Regulations (Amendment) 1992 No. 395 are found in Regulation 1 and Regulation 2 (Attachment A). Regulation 1 outlines the amendment to the Corporations Regulations, and Regulation 2 introduces new regulation 1.13A, which expands the definition of participation interest in section 9 of the Corporations Law. Regulation 2 aims to include interests in additional limited partnerships within the scope of participation interest, thereby subjecting these interests to securities regulations.
The Act imposes specific obligations and requirements on entities offering interests in limited partnerships. According to Regulation 2, interests in limited partnerships where the promoter is not a party to the partnership, partnerships promoted by an associate of a promoter, and partnerships with more than 15 partners are now considered participation interests. Consequently, these entities must comply with the prospectus provisions in Division 2 of Part 7.12 and the approved deed provisions in Division 5 of Part 7.12 of the Corporations Law, particularly sections 1018 and 1065, unless exempted by the Australian Securities Commission under section 1084 of the Law.
Failure to comply with the regulations may result in civil or criminal consequences, although the specific penalties are not detailed within the explanatory statement. The Corporations Act 1989 generally provides for penalties, including fines and imprisonment, for breaches of the Act and associated regulations. The maximum penalties for breaches can vary depending on the nature and severity of the offence, as well as whether it is a civil or criminal matter. Compliance with the prospectus and approved deed provisions is crucial to avoid these potential consequences.