Corporations Law Simplification Taskforce

Office of Regulation Review submissions

The Office of Regulation Review forwarded four submissions to the Corporations Law, Simplifications Task Force.

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Contents

Submission 1 Share Capital Rules - Proposals for Simplification

Proposal 8: A company may reduce its share capital if it follows the procedures in paragraphs 9-13.

Issues a) Should there be any limit on the size of capital reductions which can be made in any 12 month period? What should the limit be?

Proposal 9: A company must give the ASC 14 days notice of a proposed capital reduction.

Proposal 17: A company must give the ASC 14 days notice before giving financial assistance.

Issues: Should this be required in the circumstances referred to in paragraph 14? If not, should paragraphs 18 and 19 apply to those circumstances?

Proposal 22: If a company acquires control of an entity that has a relevant interest in a share in that company, then within 12 months, the company must either:

cause the controlled entity to dispose of its relevant interest in a share in the controlling company, or
end its control of the controlled entity.

During this period, the voting rights attaching to the shares in the controlling company cannot be exercised.

Proposal 23: If a company acquires a relevant interest in 10% or more of its voting shares, the ASC may refer the acquisition to the Corporations and Securities Panel for a declaration that the acquisition is unacceptable, having regard to its effect on potential takeovers of the company. This rule will not apply in the case of an acquisition arising from a buy-back.

Proposal 25: As at present, the maximum period within which options created by public companies over their unissued shares can be exercised will be 5 years.

Submission 2 Company Meetings - Proposals for Simplification

Proposal 4: A company will be able to hold a general meeting at 2 or more venues using any technology that gives members attending the meeting a reasonable opportunity to hear and be heard (eg speaker telephones for small propriety companies, video-conference).

Proposal 5: The chairperson of a general meeting must allow a reasonable opportunity for members at the meeting to question, discuss or comment on, the management of the company.

Issue 5(a): Should members be able to pass advisory resolutions concerning the management of the company, as in New Zealand and Ontario?

Issue 5(b): Should members be able to ask questions of the auditors about their report to members?

Issue 5(c): If so, Should questions be restricted to any qualification in the report? Should the auditor be required to attend annual general meetings?

Proposal 6: A member of a company (whether public or propriety) may be represented at a meeting by a proxy appointed in writing (article 54).

Proposal 7: A vote given by a proxy will be valid even if the proxy form has not been witnessed, despite anything in the company’s articles.

Proposal 9: Public companies will no longer have to hold a statutory meeting, or prepare a statutory report, after allotting shares under their first prospectus (section 244).

Proposal 13(q): The rules about general meetings will cover the following matters: Notice of a general meeting may be given to members by giving it to them personally, pre-paid post addressed to the member or any personal representative appointed to administer the member’s affairs (article 95).

Issue: Should a company be able to give notice by any other means (eg by fax or email)?

Submission 3 Company Aims - Proposals for Simplification

Submission 4 Accounts and Audit Proposals

Background
Accounts and audit simplification: general issues for consideration
Market failure
Identification of goals, costs and benefits of regulations
Demand for information
Consistency of proposals with other rules and regulations
Role of the auditor
Uniformity with accounting regulations

Proposal 5: A company which controls other entities will have to prepare annual accounts for the entity itself and for the whole group. This rule will not prevent the use of equity accounting in appropriate situations.

Issue: should ‘control’ be defined?

Issue: are there circumstances when an entity could be relieved of the obligation to prepare consolidated accounts?

Proposal 6: As at present, disclosing entities will also have to prepare half-year accounts. If the entity controls another entity, it will only need to prepare consolidated half-year accounts.

Proposal 7: Accounts will comprise: a profit and loss statement, a balance sheet, a cash flow statement, notes to these 3 statements, additional disclosures required by the Law or the accounting standards.

Proposal 9: The rules under which banks and life insurance companies are exempted from some of the accounting requirements in the Law will be repealed. These exemptions will, however, be preserved until the accounting standards currently being developed for these bodies are completed.

Issue: should the temporary exemption be given by regulation or by ASC class order?

Proposal 11: The directors will be required to prepare a report on the accounts. In this report, the directors must: state the accounts give a true and fair view, declare whether the company is solvent, and discuss and analyse the entity’s financial condition and results of its operations.

Issue: should the auditor be required to express an opinion on the discussion and analysis? What would be the form of this opinion? For instance, should the auditor be required to state whether the discussion and analysis is consistent with the financial statements?

Proposal 14: Accounts (including consolidated accounts) which are required to be lodged with the ASC will have to be audited. The director’s declaration about solvency will also have to be audited.

Issue: should the Law require auditors to comply with standards made by the Auditing Standards Board? If so, what should be the sanction for failure to comply with standards?

Proposal 15: As at present, an audit report for annual accounts will state whether the accounts: comply with the Law, and give a true and fair view of the entity’s financial position.

Issue: should the form of an audit report be specified in the Law? If not, should it have to state anything in addition to the two matters mentioned here?

Proposal 25: As at present, the ASC will be able to exempt companies from compliance with particular accounting obligations.

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