The Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007 when passed will make amendments to the Corporations Act to:
· allow public companies to give small financial benefits to related parties without seeking member approval in certain circumstances;
· allow delegation to ASIC of the function of consenting to grant a particular company name notwithstanding it is identical to another name or otherwise unacceptable; and
· remove the requirement for companies exempted from using ‘limited’ in their name to seek ministerial approval for changes to their constitutions, and replace it with a requirement to notify ASIC of any changes.
Related party approval thresholds
The related party transactions provisions in Part 2E.1 of the Corporations Act require that public companies obtain member approval before they can give any financial benefit to a related party (such as a director, a director’s spouse, a controlling entity, or entities controlled by mutual entities), unless the benefit fits within certain exceptions.
The Bill will insert a provision into the Corporations Act to provide that member approval is not required for giving a financial benefit to a related party which is at or below a prescribed amount aggregated over a financial year. [Schedule 1, Part 2, item 190]. This would avoid
the need for member approval of what could be considered minor transactions.
It is expected that the amount initially prescribed will be $5,000.
The new provision will repeal and replace the current section 213 and absorb its effect. The current provision allows payments at or below $2,000 to related parties who are directors or directors’ spouses to be made without member approval. Under the new provision, member approval will not be required for giving a financial benefit to these related parties (ie directors or directors’ spouses), which is at or below the prescribed level aggregated over a financial year.
By referring to ‘amounts or values’, the provision contemplates both monetary and non-monetary financial benefits. It is intended that non-monetary financial benefits will be valued by reference to ordinary valuation concepts.
The new section 213 will not interfere with the requirements on directors or officers to exercise their powers and discharge their duties in accordance with other provisions of the Corporations Act, including the duties in Part 2D.1 and rules under the general law.
The amendments regarding
related party transactions apply to financial years commencing on or
after 1 July 2007.
Company names
The Bill will allow delegation to ASIC of
certain administrative functions regarding identical or unacceptable
company names, and approval of changes to certain corporate constitutions.
The amendments allowing delegation of administrative
functions to ASIC will commence on 1 July 2007.
