Commonwealth Numbered Regulations - Explanatory Statements

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CORPORATIONS AMENDMENT REGULATIONS 2000 (NO. 4) 2000 NO. 50

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.