The government has begun the work of simplifying and clarifying corporate and finance law that was recommended by the Hayne royal commission, with the release of a draft bill and regulations implementing recommendations of the Australian Law Reform Commission in its review of corporate and financial services legislation.
The ALRC began its review in 2020, following Hayne’s recommendation that the law needed to be simplified to ensure that its intent is met. It released an interim report last November.
The terms of reference for the review were fairly narrow. They did not require the ALRC to consider whether the substantive law by which corporations and financial services are regulated requires reform.
Rather, the focus of the review is the extent to which reform of the existing regulatory framework might simplify corporations and financial services laws, and provide an adaptive, efficient and navigable legislative framework within the context of existing policy settings, and ensure there is meaningful compliance with the substance and intent of the law.
That is, the ALRC was asked to suggest ways to simplify the form without addressing underlying policy issues. As the ALRC pointed out in the interim report, this is not a straightforward task. In some cases it is the underlying policy that contributes to the complexity of the law.
As a result, the key features of the draft bill, Treasury Law Amendment (Measures for Consultation) Bill 2022: ALRC Financial Services Interim Report, are fairly technical.
Currently, the Corporations Act includes definitions of terms that are not used in the Act or in Corporations Regulations. Under the new law terms that are defined in the Act are used in the Act.
Some of the terms include “Australian bank”, “arbitrage transaction”, “deal”, “financial corporation” and “cash management trust interest”. These terms are defined in the Corporations Act but are not used as defined terms in the Act or regulations. They have been removed.
Some definitions have been removed where the definition does not alter the basic meaning of a word. The current Corporations Act defines the words “have”, “hold”, “information” and “statement”.
Some other definitions have been clarified. The definition of “rules” has been removed and provisions that previously used the term “rules” as a defined phrase now use the phrase “rules of court.”
The bill replaces definitions that include substantive obligations within the definitions. The explanatory memorandum accompanying the draft bill says: “The function of definitions should be to convey or enhance meaning. The inclusion of substantive obligations within definitions should be avoided where possible, as it conceals the substantive obligation. This makes it harder for regulated entities to understand their rights and obligations.”
For example, the terms “extraordinary resolution” and “special resolution” have new definitions and the substantive requirements are located in new operative provisions.