2010‑2011‑2012

The Parliament of the
Commonwealth of Australia

HOUSE OF REPRESENTATIVES

EXPOSURE DRAFT

Corporations Legislation Amendment (Remuneration Disclosures and Other Measures) Bill 2012

No.      , 2012

(Treasury)

A Bill for an Act to amend the law relating to corporations, and for related purposes

Contents
1	Short title	1
2	Commencement	1
3	Schedule(s)	2
Schedule 1—Amendment of the Corporations Act 2001	3
Part 1—Amendments	3
Part 2—Application provisions	8
Schedule 2—Amendment of the Australian Securities and Investments Commission Act 2001	9
Part 1—Amendments	9
Part 2—Application provisions	14
Schedule 3—Consequential amendments	17
Financial Sector (Business Transfer and Group Restructure) Act 1999	17

A Bill for an Act to amend the law relating to corporations, and for related purposes
The Parliament of Australia enacts:
1  Short title
		This Act may be cited as the Corporations Legislation Amendment (Remuneration Disclosures and Other Measures) Act 2012.
2  Commencement
		This Act commences on the day this Act receives the Royal Assent.
3  Schedule(s)
		Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

Schedule 1—Amendment of the Corporations Act 2001
Part 1—Amendments
1  Section 9
Insert:
material misstatement or omission: a misstatement or omission in the financial statements for a financial year is a material misstatement or omission if the misstatement or omission is material within the meaning of the accounting standards.
2  Paragraph 9.1 of the small business guide in Part 1.5
Repeal the paragraph, substitute:
9.1 Dividends
		Dividends are payments to shareholders.
		Dividends can only be declared if, immediately before the dividend is declared:
•	the company’s assets are sufficiently in excess of its liabilities; and
•	the directors of the company reasonably believe that the company will, immediately after the dividend is declared, be solvent.
		If dividends are not declared, they can only be paid if, immediately before the dividend is paid:
•	the company’s assets are sufficiently in excess of its liabilities; and
•	the directors of the company reasonably believe that the company will, immediately after the dividend is paid, be solvent.
		It is a replaceable rule (see 1.6) that the directors decide whether the company should pay a dividend.
[sections 254T, 254U]
3  Section 254T
Repeal the section, substitute:
254T  Circumstances in which a dividend may be declared or paid
Declaration of dividends
	(1)	A company must not declare a dividend unless, immediately before the dividend is declared:
	(a)	the company’s assets exceed its liabilities, and the excess is sufficient for the payment of the dividend; and
	(b)	the directors of the company reasonably believe that the company will, immediately after the dividend is declared, be solvent.
Note:	For a director’s duty to prevent insolvent trading on payment of dividends, see section 588G.
Payment of dividends without declaration
	(2)	A company must not pay a dividend unless, immediately before the dividend is paid:
	(a)	the company’s assets exceed its liabilities, and the excess is sufficient for the payment of the dividend; and
	(b)	the directors of the company reasonably believe that the company will, immediately after the dividend is paid, be solvent.
Note:	For a director’s duty to prevent insolvent trading on payment of dividends, see section 588G.
	(3)	Subsection (2) does not apply to a dividend that is declared.
Calculation of assets and liabilities
	(4)	The assets and liabilities of a company at a particular time are to be calculated for the purposes of this section in accordance with:
	(a)	if the company is required to prepare a financial report, for the financial year during which the time occurs, that complies with one or more of the accounting standards—accounting standards in force at that time; or
	(b)	otherwise—the financial records of the company.
4  Before paragraph 300A(1)(a)
Insert:
	(aa)	either:
	(i)	a description of the company’s process (the remuneration governance framework) for determining remuneration in relation to the key management personnel for the company or, if consolidated financial statements are required, for the consolidated entity; or
	(ii)	if that remuneration governance framework is set out in the financial report for the financial year or in another section of the directors’ report for the financial year—details of where it is set out; and
5  After paragraph 300A(1)(c)
Insert:
	(ca)	for each person referred to in paragraph (c):
	(i)	the total amount of remuneration that was granted to the person before the start of the year and paid to the person during the year; and
	(ii)	the total amount of remuneration that was granted, and paid, to the person during the year; and
	(iii)	the total amount of remuneration that was granted to the person during the year (whether or not payment is dependent on satisfaction of a performance condition), but that is not to be paid to the person until after the end of the year; and
6  Subparagraph 300A(1)(e)(iv)
Repeal the subparagraph, substitute:
	(iv)	if options granted to the person as part of their remuneration lapse during the financial year—the number of those options, and the year in which those options were granted; and
7  Subparagraph 300A(1)(e)(vi)
Repeal the subparagraph.
8  After paragraph 300A(1)(e)
Insert:
	(ea)	for each person referred to in paragraph (c):
	(i)	details of the benefits to be given by the company or a related body corporate to the person in connection with the person’s retirement from an office or position of employment in the company, if a failure to give the benefit would constitute a contravention of a law in force in Australia or elsewhere (otherwise than because of a breach of contract or a breach of trust); and
	(ii)	details of the benefits to be given by the company or a related body corporate to the person in connection with the person’s retirement from an office or position of employment in the company, if subparagraph (i) does not apply to the benefit; and
	(iii)	details of any other benefits to be given to the person, or arrangements entered into or to be entered into with the person, by the company or a related body corporate, that relate or that will relate to a period beginning after the person’s retirement from an office or position of employment with the company (whether or not the benefit is required to be given or the arrangement required to be entered into under a contract or in accordance with any law); and
Note:	See subsection (5) for the meaning of expressions used in paragraph (1)(ea).
9  At the end of subsection 300A(1)
Add:
	; and (i)	if the company becomes aware during the financial year of a material misstatement or omission in the financial statements in relation to the company in any of the previous 3 financial years—for each person referred to in paragraph (c):
	(i)	the details of any reduction, repayment, or other alteration of the person’s remuneration made, or to be made, because of the misstatement or omission; or
	(ii)	if a reduction, repayment or alteration of the person’s remuneration has not been made, and will not be made, because of the misstatement or omission—an explanation of why.
10  Subsection 300A(2)
Omit “disclosing entity”, substitute “listed disclosing entity”.
11  At the end of section 300A
Add:
	(5)	For the purposes of paragraph (1)(ea), a reference to a benefit given in connection with a person’s retirement from an office or position of employment with a company has the same meaning as in section 200A.
12  After subsection 327A(1)
Insert:
	(1A)	Subsection (1) does not apply in relation to a company if:
	(a)	the directors reasonably believe that subsection 301(3) will apply to the company’s financial reports; or
	(b)	the company is a small company limited by guarantee.
13  After subsection 327B(1)
Insert:
	(1A)	Subsection (1) does not apply in relation to a company if:
	(a)	subsection 301(3) applies to the company’s financial reports; or
	(b)	the company is a small company limited by guarantee.
14  At the end of subsection 327C(1)
Add:
Note:	Certain public companies are not required to appoint an auditor: see subsections 327A(1A) and 327B(1A).

Part 2—Application provisions
15  At the end of Chapter 10
Add:
Part 10.21B—Transitional provisions relating to the Corporations Legislation Amendment (Remuneration Disclosures and Other Measures) Act 2012
  
1538C  Definition
		In this Part:
amending Act means the Corporations Legislation Amendment (Remuneration Disclosures and Other Measures) Act 2012.
1538D  Application of amendments relating to directors’ reports
		The amendments made by items 1 and 4 to 11 of Schedule 1 to the amending Act apply in relation to directors’ reports for financial years starting on or after 1 July 2013.
1538E  Application of amendments relating to dividends
	(1)	This section applies if:
	(a)	before the commencement of item 3 of Schedule 1 to the amending Act, a company declares a dividend; and
	(b)	as at the commencement of that item, the dividend has not been paid.
	(2)	Despite the amendment made by that item, section 254T continues to apply, in relation to the dividend, as if the amendment had not been made.

Schedule 2—Amendment of the Australian Securities and Investments Commission Act 2001
Part 1—Amendments
1  Subsection 235A(2)
Repeal the subsection.
2  After section 235A
Insert:
235AA  Terms and conditions of appointment of FRC members
Remuneration and allowances
	(1)	A member of the FRC is to be paid the remuneration that is determined by the Remuneration Tribunal. If no determination of that remuneration by the Tribunal is in operation, the member is to be paid such remuneration as the Minister determines in writing.
	(2)	A member of the FRC is to be paid such allowances as the Minister determines in writing.
	(3)	Subsections (1) and (2) have effect subject to the Remuneration Tribunal Act 1973.
Leave—full‑time members
	(4)	A full‑time member of the FRC has the recreation leave entitlements that are determined by the Remuneration Tribunal.
	(5)	The Minister may grant a full‑time member of the FRC leave of absence, other than recreation leave, on such terms and conditions as to remuneration or otherwise as the Minister determines.
Other terms and conditions
	(6)	A member of the FRC holds office on the terms and conditions (if any) in relation to matters not covered by this Act as the Minister determines in writing.
3  Subsection 236B(6)
Repeal the subsection.
4  After section 236B
Insert:
236BA  Terms and conditions of appointment of the Chair of the AASB
Remuneration and allowances
	(1)	The Chair of the AASB is to be paid the remuneration that is determined by the Remuneration Tribunal. If no determination of that remuneration by the Tribunal is in operation, the Chair is to be paid such remuneration as the Minister determines in writing.
	(2)	The Chair of the AASB is to be paid such allowances as the Minister determines in writing.
	(3)	Subsections (1) and (2) have effect subject to the Remuneration Tribunal Act 1973.
Leave—full‑time Chair
	(4)	A full‑time Chair of the AASB has the recreation leave entitlements that are determined by the Remuneration Tribunal.
	(5)	The Minister may grant a full‑time Chair of the AASB leave of absence, other than recreation leave, on such terms and conditions as to remuneration or otherwise as the Minister determines.
Other terms and conditions
	(6)	The Chair of the AASB holds office on such terms and conditions (if any) in relation to matters not covered by this Act as the Minister determines in writing.
236BB  Terms and conditions of appointment of other members of the AASB
Application
	(1)	This section applies to a member of the AASB other than the Chair.
Remuneration and allowances
	(2)	A member of the AASB is to be paid the remuneration that is determined by the Remuneration Tribunal. If no determination of that remuneration by the Tribunal is in operation, the member is to be paid such remuneration as the FRC determines in writing.
	(3)	A member of the AASB is to be paid such allowances as the FRC determines in writing.
	(4)	Subsections (2) and (3) have effect subject to the Remuneration Tribunal Act 1973.
Leave—full‑time member
	(5)	A full‑time member of the AASB has the recreation leave entitlements that are determined by the Remuneration Tribunal.
	(6)	The FRC may grant a full‑time member of the AASB leave of absence, other than recreation leave, on the terms and conditions as to remuneration or otherwise that the FRC determines.
Other terms and conditions
	(7)	A member of the AASB holds office on such terms and conditions (if any) in relation to matters not covered by this Act as the FRC determines in writing.
5  Subsections 236F(8) and (9)
Repeal the subsections.
6  After section 236F
Insert:
236FA  Terms and conditions of appointment of the Chair of the AUASB
Remuneration and allowances
	(1)	The Chair of the AUASB is to be paid the remuneration that is determined by the Remuneration Tribunal. If no determination of that remuneration by the Tribunal is in operation, the Chair is to be paid such remuneration as the Minister determines in writing.
	(2)	The Chair of the AUASB is to be paid such allowances as the Minister determines in writing.
	(3)	Subsections (1) and (2) have effect subject to the Remuneration Tribunal Act 1973.
Leave—full‑time Chair
	(4)	A full‑time Chair of the AUASB has the recreation leave entitlements that are determined by the Remuneration Tribunal.
	(5)	The Minister may grant a full‑time Chair of the AUASB leave of absence, other than recreation leave, on such terms and conditions as to remuneration or otherwise as the Minister determines.
Other terms and conditions
	(6)	The Chair of the AUASB holds office on such terms and conditions (if any) in relation to matters not covered by this Act as the Minister determines in writing.
236FB  Terms and conditions of appointment of other members of the AUASB
Application
	(1)	This section applies to a member of the AUASB other than the Chair.
Remuneration and allowances
	(2)	A member of the AUASB is to be paid the remuneration that is determined by the Remuneration Tribunal. If no determination of that remuneration by the Tribunal is in operation, the member is to be paid such remuneration as the FRC determines in writing.
	(3)	A member of the AUASB is to be paid such allowances as the FRC determines in writing.
	(4)	Subsections (2) and (3) have effect subject to the Remuneration Tribunal Act 1973.
Leave—full‑time member
	(5)	A full‑time member of the AUASB has the recreation leave entitlements that are determined by the Remuneration Tribunal.
	(6)	The FRC may grant a full‑time member of the AUASB leave of absence, other than recreation leave, on the terms and conditions as to remuneration or otherwise that the FRC determines.
Other terms and conditions
	(7)	A member of the AUASB holds office on such terms and conditions (if any) in relation to matters not covered by this Act as the FRC determines in writing.

Part 2—Application provisions
7  At the end of the Act
Add:
Part 20—Transitional provisions relating to the Corporations Legislation Amendment (Remuneration Disclosures and Other Measures) Act 2012
  
295  Definitions
		In this Part:
amending Act means the Corporations Legislation Amendment (Remuneration Disclosures and Other Measures) Act 2012.
commencement means the commencement of Schedule 2 to the amending Act.
296  FRC members
	(1)	If:
	(a)	immediately before commencement, a person is a member of the FRC; or
	(b)	a person is appointed as a member of the FRC during the transition period;
this Act applies to the member, during the transition period, as if the amendments made by Schedule 2 to the amending Act had not been made.
	(2)	For the purposes of this section, transition period means the period:
	(a)	beginning on commencement; and
	(b)	ending when the Remuneration Tribunal makes a determination under subsection 235AA(1) as inserted by the amending Act.
297  AASB members
	(1)	If:
	(a)	immediately before commencement, a person is a member of the AASB; or
	(b)	a person is appointed as a member of the AASB during the transition period;
this Act applies to the member, during the transition period, as if the amendments made by Schedule 2 to the amending Act had not been made.
	(2)	For the purposes of this section, transition period means the period:
	(a)	beginning on commencement; and
	(b)	ending:
	(i)	if the member is the Chair of the AASB—when the Remuneration Tribunal makes a determination under subsection 236BA(1) as inserted by the amending Act; or
	(ii)	otherwise—when the Remuneration Tribunal makes a determination under subsection 236BB(2) as inserted by the amending Act.
298  AUASB members
	(1)	If:
	(a)	immediately before commencement, a person is a member of the AUASB; or
	(b)	a person is appointed as a member of the AUASB during the transition period;
this Act applies to the member, during the transition period, as if the amendments made by Schedule 2 to the amending Act had not been made.
	(2)	For the purposes of this section, transition period means the period:
	(a)	beginning on commencement; and
	(b)	ending:
	(i)	if the member is the Chair of the AUASB—when the Remuneration Tribunal makes a determination under subsection 236FA(1) as inserted by the amending Act; or
	(ii)	otherwise—when the Remuneration Tribunal makes a determination under subsection 236FB(2) as inserted by the amending Act.

Schedule 3—Consequential amendments
  
Financial Sector (Business Transfer and Group Restructure) Act 1999
1  Subsection 36G(2) (note 2)
Repeal the note, substitute:
Note 2:	Section 254T of that Act sets out the circumstances in which a dividend may be declared or paid.