Wakim overcome
At last a truly federal corporations legislative scheme has arrived. The new scheme came into effect on 15 July 2001. The legislation replaced the former State and Territory applied laws corporations regime following the referral of corporations law powers from the States and Territories.
As befitting its new status, the legislation has been given the new name of the Corporations Act 2001(Cth) (the Act). Although a new federal law, the Act in the main re-enacts most of the provisions of the Corporations Law with a few amendments to those provisions under the Corporations Law that were necessary for the previous applied laws regime
(Source: Minister for Financial Services & Regulation, FSR/ 052, 29/06/01. For more, see the press release)
New ASIC
The Australian Securities and Investments Commission Act 2001 (Cth) (the 2001 Act) came into force on 15 July 2001 replacing the Australian Securities and Investments Commission Act 1989 (the 1989 Act). As with its sister legislation the Corporations Act 2001 (Cth), the 2001 Act re-enacts most of the provisions of the 1989 Act but removes those provisions under the 1989 Act that applied the 1989 Act as a law of the States and Territories.
The road to the federal Corporations Act 2001
On 15 July 2001 the Corporations Act 2001 (Cth) received royal assent. It replaced the previous Corporations Law regime that had been operating since 1991.
Constitutional issues
The 1991 regime was an applied laws regime that allowed separate corporations legislation enacted in all the States and Territories to operate as a national Corporations Law regime. The Commonwealth does not have a direct power over all matters relating to corporations. Section 51(xx) of the Constitution allows the Commonwealth to legislate with respect to 'foreign, corporations, and trading and financial corporations formed within the limits of the Commonwealth'. This power does not allow the Commonwealth to legislate with respect to some important Corporations Law matters, such as the incorporation of companies (Huddard Parker (1909)) The 1991 regime is the last of a number of attempts by the Commonwealth to gain the capacity to legislate with respect to corporations.
The operation of the 1991 regime
The 1991 regime was established when the States and the Northern Territory passed laws (referred to as 'Corporations ([Name of State]) Act') that applied the ASIC Act 1989 (ACT) and the Corporations Act 1989 (ACT) in each jurisdiction. The operation of the regime was also governed by a Heads of Agreement between the States, Territories and the Commonwealth.
The regime was able to have a national effect as a result of various provisions in the laws. These provisions included:
- a uniform text and citation;
- the facility for amendments that were made to the ACT laws to apply in all States and the Northern Territory;
- ASIC's sole responsibility for the administration and enforcement of the Corporations Law;
- the application of Commonwealth administrative law;
- the national operation of licences under the regime; and
- the cross vesting of jurisdiction that allowed all State and Territory courts and the Federal Court to exercise civil jurisdiction under the Corporations Law of any jurisdiction and for all State and Territory courts to exercise any criminal jurisdiction under the Corporations Law.
In 1999 Re Wakim; Ex parte McNally (1999) 198 CLR 511 was handed down. Re Wakim found that Ch III of the Federal Constitution did not allow the Federal Court to exercise state jurisdiction. This meant that the Federal Court was no longer able to exercise jurisdiction over the majority of Corporations Law matters, limiting the cross vesting provisions in the Corporations Law and curtailing the national operation of the 1991 Corporations Law regime.
Corporations Act 2001 (Cth)
The Corporations Act 2001 (Cth) (the Act) is a single federal law. The Act is able to have effect as a federal law as the states have referred power to legislate with respect to corporations to the Commonwealth.* Under s 51(xxxvii) of the Constitution, the Commonwealth has power to legislate with respect to 'matters referred to the Parliament of the Commonwealth by the Parliament or Parliaments of any State or States'.
Each State, after a long period of negotiation with the Commonwealth, has enacted legislation referring their corporations power to the Commonwealth. NSW was the first State to legislate to that effect and that other States have largely followed the NSW legislation. The NSW legislation (Corporations (Commonwealth Powers) Act 2001 (NSW)) had referred the power to legislate with respect to corporations and financial products and services to the Commonwealth only in respect of those provisions in the Corporations Bill 2001 (Cth) and the Australian Securities and Investments Commission Bill 2001 (Cth) that were within the exclusive power of the NSW legislature. It is also beyond the objects of the reference of power to amend the Corporations Act with the sole or main underlying purpose or object of regulating industrial relations matters. Furthermore, the referral of legislative power is for a period of 5 years (which period can be extended or terminated prior to the full 5 years).
The Corporations Agreement governing the operation of the new regime was also revised. In particular, the Commonwealth had to seek the approval of the Ministerial Council to effect any amendments to the Act with the amendments taking effect only upon the agreement of at least 3 jurisdictions.
The Australian Securities and Investments Commission Act 2001 (Cth), will operate in effectively the same manner with some minor changes.
* (Eds: It is not necessary for the NT and ACT to refer their powers as the Commonwealth already has power to legislate with respect to the territories.)
