The Minister for Financial Services & Regulation, Joe Hockey, today hailed the passage by the Senate of the Corporate Law Economic Reform Program Bill as a major achievement in reforming Australia's corporate laws.
The Bill is a key part of the Government's program to modernise the regulation of business and financial markets.
"The reforms will ensure that Australia's corporate laws meet the challenges of the present and future market in a forward thinking, responsible and innovative way," the Minister said.
"The reforms are designed to encourage free enterprise for the benefit of all Australians."
This Bill is the first legislative piece of the Government's Corporate Law Economic Reform Program. CLERP aims to promote efficiency in the Australian economy while facilitating market integrity and protecting investors from fraud, negligence or abusive market conduct (see the attachment for a summary of the Bill's main points)
"CLERP is a key part in the Government's broader objective to boost Australia's international competitiveness and build Australia as a centre for global finance.
"This reform is a tremendous milestone that will send a clear message to the business community at home and abroad that we are serious about reform and serious about making Australia a leading financial centre.
"These are reforms which have been recognised by local business groups and international financial organisations as leading-edge world-class reforms.
"So I am truly mystified and disappointed by the Labor Party's continued opposition to the CLERP reforms - reforms which they know full well will greatly benefit Australia.
"The Democrats were once again very constructive in the debate and I would like to thank Senator Murray for his constructive approach to this matter. We didn't agree on all proposed amendments put forward by the Democrats but we worked together to make the Bill as user friendly as possible.
"In particular I will refer to the Parliamentary Joint Committee the mandatory bid rule. The Government will continue to pursue this important reform."
The Bill will now go back to the House of Representatives, for approval of the Senate's changes.
18 October 1999 49/99
Media Contact: Matthew Abbott, Minister's office, 02 6277 7230, 0413 076 21
Departmental contact: Phillip Lynch, Treasury, 02 6263 2853
The Minister's media releases and speeches are available on www.minfsr.treasury.gov.au
OUTLINE OF THE BILL
The Corporate Law Economic Reform Program Bill will legislatively implement key elements of the Governments Corporate Law Economic Reform Program (CLERP) in the areas of Directors Duties and Corporate Governance, Fundraising, Accounting Standards and Takeovers (CLERP Papers Nos. 1 to 4).
- In relation to Directors Duties and Corporate Governance, the Bill contains reforms designed to promote optimal corporate governance structures without compromising flexibility and innovation. A statutory form of business judgment rule is intended to protect the authority of directors in the exercise of their duties and to clarify their liability. The introduction of a statutory derivative action provides a new avenue of enforcement and action by shareholders where currently there is a gap. It is not intended to impose a new form of liability on directors. Other measures, for example, clarification of the directors duty of care and diligence, and of the ability of directors to delegate functions and to rely on the advice of experts when making decisions, will give directors the confidence to engage in entrepreneurial or informed decision making.
- In relation to fundraising, the bill contains reforms designed to minimise the costs of fundraising while improving investor protection. the purpose of the fundraising provisions is to promote the disclosure of information that investors reasonably require in order to make informed investment decisions. the reforms will promote the operation of informed markets and, by removing unnecessary impediments to fundraising, facilitate investment that is vital to Australias economic performance. the reforms also seek to ensure that the fundraising rules provide an appropriate, cost effective framework for capital raising by small, medium and large companies.
- The Accounting Standards provisions in the Bill provide for the establishment of new institutional arrangements for the Australian accounting standard setting process and for the adoption of new procedures that must be followed by the standard setter when it is making or formulating accounting standards.
- The Takeovers reforms contained in the Bill are designed to improve the efficiency of the market for corporate control while encouraging better management and enhancing investor protection. Takeovers, or the prospect of takeovers, provide benefits for shareholders, the corporate sector and the economy since they provide incentives for improved corporate efficiency and enhanced management discipline, leading ultimately to greater wealth creation. The reforms are aimed at ensuring that these incentives operate effectively.
Other reforms arising from the proposals in CLERP Paper No. 5 (Electronic Commerce - Cutting cybertape - building business) have been implemented in the Payment Systems and Netting Act 1998 and the Company Law Review Act 1998. In relation to CLERP Paper No. 6 (Financial Products, Service Providers and Markets An Integrated Framework), a consultation paper regarding reforms relating to financial markets, financial intermediaries and investment products was released on 3 March 1999. It is expected that draft legislation will be released by the end of 1999 for a period of public consultation.