DIMIA Annual Report 2004-05
Attachment 1-Summary of the Registrar's regulatory powers under the Aboriginal Councils and Associations Act 1976
Request updated list of members-subsection 58(4)
The Registrar can at any time request the board of a corporation to provide an updated copy of the register of members of the corporation. The board must comply within 14 days or such other time as specified by the Registrar. Failure to comply results in a fine of $200 for each board member, unless the board member can prove they were not knowingly involved in the contravention, and did not contribute to it. Keeping the members' register up-to-date is extremely important, in particular for clarifying voting rights at meetings.
Call and conduct a special general meeting-subsections 58B(3), (4), (5)
The Registrar has the power to call and/or conduct special general meetings in three different circumstances:
- where a special general meeting was not held within 14 days of the date advertised by the corporation's board
- where a meeting is requested by the greater of five or more members or 10 per cent of the members of a corporation
- at any time, if, in the opinion of the Registrar, a meeting is needed.
Examination of documents-section 60
The Registrar may authorise a person under section 60 to examine the documents of a corporation, and report on any irregularities in financial affairs. This is a very broad discretionary power that does not require any specific grounds for its exercise. It can therefore be used to perform spot checks on corporations.
ORAC has initiated a program of rolling examinations of corporations. These will be conducted on all corporations over a number of years and more frequently on corporations at risk of breaching the ACA Act, where breaches could have serious consequences for the community concerned. A corporation's risk level is assessed against a range of criteria, including size, purpose, and time since last examination, compliance status and history of member or other complaints.
Issue compliance notice-section 60A
Where the Registrar suspects on reasonable grounds that a corporation has failed to comply with the ACA Act, the regulations or the corporation's constitution, or that there has been an irregularity in the corporation's financial affairs, the Registrar may issue a compliance notice. The compliance notice can require the board to take specified action, within specified timeframes, to remedy the suspected breach or irregularity.
Issue injunction show cause notice-subsections 61(2), (3)
Where the Registrar believes that the board of a corporation is not complying with the ACA Act, the regulations or the corporation's constitution, the Registrar may issue a 'show cause' notice. This requires the board to show cause, within a specified reasonable period, why the Registrar should not seek an injunction to prevent their breaching action.
Injunction application-subsections 61(2), (3)
After considering a board's response to an injunction 'show cause' notice, the Registrar may apply to the court for an injunction. The court may then grant an injunction to require the board to not breach, or cease from breaching, the ACA Act, regulations or constitution.
Winding-up application (liquidation)-sections 62A, 63, 65
The Registrar may apply to the court to wind up a corporation if this is recommended by an administrator, or if the Registrar believes that this would be in the public interests or the interests of the members of the corporation.
The Registrar may apply for winding up on any of a number of grounds, including:
- that the corporation has not commenced business within one year of incorporation, or has suspended its operation for a continuous period of one year
- that there are fewer than five members of the corporation
- that the corporation is unable to pay its debts (that is, it is insolvent)
- that board members have acted in their own interests rather than the interests of the members, or in any other manner that is unfair or unjust to other members
- that the complexity or magnitude of the activities of the corporation is such that incorporation under the ACA Act is inappropriate
- that it is just and equitable to wind up the corporation.
If satisfied, the court appoints a liquidator to take over control of the corporation's affairs and discharge its liabilities in preparation for its eventual deregistration. This will typically involve selling off the corporation's assets to pay its debts.
If there are any surplus assets after the debts have been paid, these must be distributed in accordance with the corporation's constitution. If there are no specific rules in the constitution, or the court considers the rules unjust, then the court must make orders for the distribution of the assets, having regard to the objects of the corporation.
Investigation-sections 68, 69, 70
The Registrar is given very broad powers to investigate the affairs of a corporation under the ACA Act. The Registrar can investigate a corporation where the Registrar suspects on reasonable grounds that the corporation has failed to comply with the ACA Act, the regulations or its constitution, or that there has been an irregularity in the corporation's financial affairs.
Under the investigation powers, the Registrar can:
- require any person who the Registrar believes to have knowledge of the affairs of a corporation to attend before the Registrar, answer questions, and produce documents to which the person has access and which the Registrar requires
- enter onto land or premises occupied by the corporation, and examine, take or copy any books on the premises relating to the affairs of the corporation.
Failure to attend, answer a question or produce a document results in a penalty of $200. Knowingly making false or misleading responses, and hindering or obstructing the Registrar's access to premises and books, carry fines of $1500.
Issue administration 'show cause notice'-subsection 71(1)
If the Registrar considers there may be grounds for appointment of an administrator, the Registrar may serve a notice on the public officer of a corporation calling on the corporation to show cause, within a specified time, why an administrator should not be appointed.
Appointment of administrator-sections 71-77E
Following the issue of an administration 'show cause' notice, the Registrar can appoint an administrator to take over and manage the affairs of a corporation. Administrators are often positively received because they offer an alternative to winding up, and aim to achieve turnaround for a struggling corporation.
An administrator can only be appointed where the Registrar is satisfied that any of certain grounds have been established, including:
- that the corporation has been trading at a loss for at least six of the previous 12 months
- that the board has failed to comply with the ACA Act, the regulations or the constitution, and has failed to give a satisfactory explanation for the failure
- that board members have acted in their own interests rather than the interests of the members, or in any other manner that is unfair or unjust to other members
- that the appointment is required in the interests of members and creditors
- that the appointment is otherwise required in the public interest.
The approval of the minister is required before the appointment of an administrator.
Upon the appointment of an administrator, the board is dismissed. The administrator takes control of the affairs of the corporation, has the functions and duties of the public officer, and has an express power to cancel or vary contracts of employment. The administrator must report to the Registrar from time to time, as required.
Upon termination of the administration, the Registrar must conduct an election for a new board.
The Registrar can also determine the administrator's remuneration, and who should pay it.
Deregistration-section 82, regulation 18
Deregistration is the cancellation of a corporation's registration, so that it will cease to exist as a corporation. It is intended to be used for corporations which are 'defunct' and essentially non-operational, but without debts (if a corporation had debts, winding up would be required).
The process for deregistration operates under provisions of the Corporations Act 2001, imported through Regulation 18 of the Aboriginal Councils and Associations Regulations. Under those provisions, the Registrar may deregister a corporation if the following three conditions are met:
- the annual report is at least six months overdue
- no other documents have been lodged in the previous 18 months
- the Registrar has no reason to believe that the corporation is carrying on business.
On deregistration, any property of the corporation vests in the Registrar.
Deregistration is also the end result of a winding up (liquidation).