LEGAL experts have warned that the Federal Government’s proposed changes to the Corporations Law may be unconstitutional and could reduce the current rights of corporations to defend themselves through the courts.There are also concerns that the Au...
LEGAL experts have warned that the Federal Government’s proposed changes to the Corporations Law may be unconstitutional and could reduce the current rights of corporations to defend themselves through the courts.
There are also concerns that the Australian Securities and Investment Commission will have markedly increased powers, with the ability to make its own judgements on when it considers there has been a breach of the continuous disclosure rules, and to pass its
own judgements and impose penalties.
Under Section 8 in the ninth phase of the Corporate Law and Economic Reform Program (CLERP 9), the onus moves to companies to either pay up or appeal the penalty.
Under the current regulatory framework, only the courts may impose financial penalties in relation to contraventions of the continuous disclosure regime.
“It is proposed that ASIC should be able to impose financial penalties through a third process that could potentially involve both administrative and judicial proceedings,” it says in section 8 of CLERP 9.
“ASIC would hold a hearing to determine whether it should form an opinion that an entity had contravened the continuous disclosure provisions of the Corporations Act.
“If ASIC formed an opinion that a contravention had occurred, it would issue an infringement notice notifying the entity of its opinion and indicating that the breach may be addressed through payment of a fixed financial penalty set out by statute.
“An entity that receives an infringement notice following an ASIC hearing would be able to decide for itself whether to pay the specified penalty and bring the matter to an end or whether it will require ASIC to prove its case before the courts.”
Australian Institute of Company Directors CEO John Hall said he had concerns over the continuous disclosure proposal.
“The Australian Securities and Investments Commission already has wide powers to seek injunctions from the courts and there has been no discussion or evidence in CLERP 9, which shows that injunctions are not currently an effective enforcement tool,” he said.
“I strongly disagree with the proposal to grant ASIC the power to issue penalties for suspected failure to disclose information.
“This transfer of power may be unconstitutional. We have raised the question of whether it is unconstitutional or not. It remains to be seen.
“ASIC would be seen as the prosecutor, jury and judge. We
think this proposal needs to be
very carefully examined because
it raises a whole new process.”
Allens Arthur Robinson partner Bob Baxt believes the proposed changes create a dangerous precedent.
“As a lawyer and someone who believes in the principles of the fundamental rights of anyone to the presumption of innocence until proven guilty, I think this will be a very dangerous move,” Professor Baxt told WA Business News.
Professor Baxt believes it would be unconstitutional if it was found that ASIC was given judicial power. While he acknowledged that the wording of the document was such that this may not be the case, the practical effect of the changes would be that ASIC would be able to provide binding rulings, he said.
“They [ASIC] will be issuing an order, which says in effect that you are guilty, and they want you to pay up,” Professor Baxt said.
However, the reform package makes it clear that a payment of the financial penalty would not be taken as an admission of guilt from the corporation.
But Professor Baxt believes the reality is that many companies would be forced to pay the fine even when innocent, rather than go through a costly and lengthy appeal process in the courts.
Explaining the rationale for the new power, CLERP 9 says: “This process … would remedy a significant gap in the current enforcement framework by facilitating
the imposition of a financial penalty”.
Both ASIC and the business community have in the past expressed concerns about the commission’s inability to enforce decisions.
Yet both Professor Baxt and Mr Hall believe ASIC’s current powers to seek injunction, which exist under current Corporations Law, may be power enough.
“How do we know these powers don’t work … they haven’t been tested yet,” Professor Baxt said.
There are also concerns that the Australian Securities and Investment Commission will have markedly increased powers, with the ability to make its own judgements on when it considers there has been a breach of the continuous disclosure rules, and to pass its
own judgements and impose penalties.
Under Section 8 in the ninth phase of the Corporate Law and Economic Reform Program (CLERP 9), the onus moves to companies to either pay up or appeal the penalty.
Under the current regulatory framework, only the courts may impose financial penalties in relation to contraventions of the continuous disclosure regime.
“It is proposed that ASIC should be able to impose financial penalties through a third process that could potentially involve both administrative and judicial proceedings,” it says in section 8 of CLERP 9.
“ASIC would hold a hearing to determine whether it should form an opinion that an entity had contravened the continuous disclosure provisions of the Corporations Act.
“If ASIC formed an opinion that a contravention had occurred, it would issue an infringement notice notifying the entity of its opinion and indicating that the breach may be addressed through payment of a fixed financial penalty set out by statute.
“An entity that receives an infringement notice following an ASIC hearing would be able to decide for itself whether to pay the specified penalty and bring the matter to an end or whether it will require ASIC to prove its case before the courts.”
Australian Institute of Company Directors CEO John Hall said he had concerns over the continuous disclosure proposal.
“The Australian Securities and Investments Commission already has wide powers to seek injunctions from the courts and there has been no discussion or evidence in CLERP 9, which shows that injunctions are not currently an effective enforcement tool,” he said.
“I strongly disagree with the proposal to grant ASIC the power to issue penalties for suspected failure to disclose information.
“This transfer of power may be unconstitutional. We have raised the question of whether it is unconstitutional or not. It remains to be seen.
“ASIC would be seen as the prosecutor, jury and judge. We
think this proposal needs to be
very carefully examined because
it raises a whole new process.”
Allens Arthur Robinson partner Bob Baxt believes the proposed changes create a dangerous precedent.
“As a lawyer and someone who believes in the principles of the fundamental rights of anyone to the presumption of innocence until proven guilty, I think this will be a very dangerous move,” Professor Baxt told WA Business News.
Professor Baxt believes it would be unconstitutional if it was found that ASIC was given judicial power. While he acknowledged that the wording of the document was such that this may not be the case, the practical effect of the changes would be that ASIC would be able to provide binding rulings, he said.
“They [ASIC] will be issuing an order, which says in effect that you are guilty, and they want you to pay up,” Professor Baxt said.
However, the reform package makes it clear that a payment of the financial penalty would not be taken as an admission of guilt from the corporation.
But Professor Baxt believes the reality is that many companies would be forced to pay the fine even when innocent, rather than go through a costly and lengthy appeal process in the courts.
Explaining the rationale for the new power, CLERP 9 says: “This process … would remedy a significant gap in the current enforcement framework by facilitating
the imposition of a financial penalty”.
Both ASIC and the business community have in the past expressed concerns about the commission’s inability to enforce decisions.
Yet both Professor Baxt and Mr Hall believe ASIC’s current powers to seek injunction, which exist under current Corporations Law, may be power enough.
“How do we know these powers don’t work … they haven’t been tested yet,” Professor Baxt said.
