The increasing availability of ‘data fumes’ (Thatcher, 2014) – data produced as a byproduct of people’s use of technological devices and services – has both political and practical implications for the way people are seen and treated by the state and by the private sector. Yet the data revolution is so far primarily a technical one: the power of data to sort, categorise and intervene has not yet been explicitly connected to a social justice agenda. In fact, while data-driven discrimination is advancing at exactly the same pace as data processing technologies, awareness and mechanisms for combating it are not. This paper posits that just as an idea of justice is needed in order to establish the rule of law, an idea of data justice is necessary to determine ethical paths through a datafying world. The paper will analyse the existing work on data justice and argue for a framework in which it can be brought together into a single framing for further research and debate.
23 February 2017
'What Is Data Justice? The Case for Connecting Digital Rights and Freedoms on the Global Level' by Linnet Taylor argues
'Playing with Real Property Inside Augmented Reality: Pokémon Go, Trespass, and Law’s Limitations' by Donald J Kochan in (2017) 38 Whittier Law Review uses
the popular game Pokémon Go as a case study for evaluating conflicts that arise when augmented reality is layered over the real property of non-consenting owners. It focuses on the challenges augmented reality technologies pose to the meaning and enforcement of formal and informal trespass norms, first examining physical trespass issues (and enforcement difficulties) associated with game players who sometimes break physical property boundaries.
The essay then undertakes a thought experiment regarding possible recognition of a new, different type of trespass – one to augmented space. Pollock and Maitland called trespass the ‘fertile mother of all actions’, often breeding new or enlarged doctrines across the common law. Perhaps trespass has new breeding to do, providing the genetic material upon which the common law can birth new doctrines that preserve our private property values while adapting to technological advances. We could imagine allocating rights such that owners of physical real property are empowered to exclude others from augmented layering of their property. Only if property owners have ‘opted in’ would any gaming company be permitted to make another’s property an integral part of its augmented reality game. Financial incentives could emerge to make it beneficial for many property owners to choose inclusion of augmented layering. The number of willing properties opting-in might then make the game manageable without the need for layering over the properties of non-consenting owners.
Hypothetical or experimental legal innovations aside, the essay concludes with a focus on the evolution of informal norms furthering trespass avoidance. Trespass is an ideal case study of a type of action that already is more often deterred by informal social norms than by law. This the essay concludes by explaining why these informal norms and an appeal to civility may be the best ways to control unwanted augmented-world interference with real property in the real world.
'Book-Smart, Not Street-Smart: Blockchain-Based Smart Contracts and The Social Workings of Law' by Karen E C Levy in (2017) 3 Engaging Science, Technology, and Society 1-15 critiques
blockchain-based “smart contracts,” which aim to automatically and securely execute obligations without reliance on a centralized enforcement authority. Though smart contracts do have some features that might serve the goals of social justice and fairness, I suggest that they are based on a thin conception of what law does, and how it does it. Smart contracts focus on the technical form of contract to the exclusion of the social contexts within which contracts operate, and the complex ways in which people use them. In the real world, contractual obligations are enforced through all kinds of social mechanisms other than formal adjudication—and contracts serve many functions that are not explicitly legal in nature, or even designed to be formally enforced. I describe three categories of contracting practices in which people engage (the inclusion of facially unenforceable terms, the inclusion of purposefully underspecified terms, and willful nonenforcement of enforceable terms) to illustrate how contracts actually “work.” The technology of smart contracts neglects the fact that people use contracts as social resources to manage their relations. The inflexibility that they introduce, by design, might short-circuit a number of social uses to which law is routinely put. Therefore, I suggest that attention to the social and relational contexts of contracting are essential considerations for the discussion, development, and deployment of smart contracts.
21 February 2017
'When and How Corporations Became Persons under the Criminal Law, and Why It Matters Now' by W. Robert Thomas comments
The [US] Supreme Court concluded in 1909 that a corporation, like an individual, can be held criminally responsible for its misconduct. Yet even now, corporate-criminal liability has yet to overcome the same skeptical argument it faced then — and, for that matter, for centuries prior. The skeptic’s challenge appears as simple as it is persistent: Lacking a mind distinct and independent from its constitutive stakeholders, a corporation cannot produce the sorts of intentional attitudes needed to satisfy the law’s mens rea component. In other words, a corporation is straightforwardly incapable of satisfying one of criminal law’s most basic requirements. Accordingly, to the skeptic the very idea of corporate-criminal liability is, and always has been, pure nonsense.
Though it presents as a simple, common-sense challenge to a corporation’s ability to intend — criminally or otherwise — unpacking the skeptic’s critique quickly implicates profound considerations regarding the nature of personhood and proper methods of attribution. Animating the dispute between skeptics and proponents of corporate-criminal liability is a disagreement over how to evaluate personhood, and further how one’s conception of personhood licenses attributions of actions, attitudes, and ultimately responsibility to the entity in question. This brand of disagreement is nothing new: These themes recur throughout Western thought and extend far beyond corporate law, from Plato’s Phaedo to Boethius and Bartolus of Sassoferato, from Thomas Hobbes to John Locke. Given the intellectual lineage behind what is otherwise an ordinary policy disagreement, perhaps it should not be terribly surprising that skepticism about corporate-criminal liability was never put to rest.
I don’t expect that we can break this conceptual stalemate all at once, if at all, to solve the challenge facing corporate crime. More to the point, we don’t need to. As it turns out, in taking up this very dispute at the turn of the 20th century, courts and legislature sided with the proponents of corporate crime in a way that the skeptic cannot, or at least should not want to, unwind. The proponents of corporate-criminal liability did not just win the policy fight; they did so in a way that rendered the skeptic’s position incompatible with broader theoretical commitments that are now instrumental to the modern corporation.
This Article offers two contributions to the debate over corporate-criminal liability: one conceptual, and one practical. First, the same argument embraced by today’s skeptics was tried but rejected in the late 1800s, when the practice of holding corporations responsible first developed. Courts previously receptive to the skeptic’s reasoning abandoned the view — and more importantly, the relationship between personhood and attribution underwriting it — as increasingly untenable amidst a changing economic environment in which commercial corporations transformed from tiny, narrowly constrained, quasi-state entities to sprawling, sophisticated, dominant participants in the national marketplace. Meanwhile, the gradual embrace of corporate liability, both in tort and crime, is intimately connected to the simultaneous demotion of corporate law as a regulatory tool. The turn towards corporate-criminal liability thus reflects a broader abandonment both of a long-dominant conception of personhood and of an approach to corporate regulation rendered ineffective by the development of what has become the basis for our modern corporate law. In a slogan, corporations today are persons under the criminal law not because they have always been eligible, but rather because they became eligible.
Second, a clear theoretical understanding of how and why courts first held corporations criminally responsible has profound consequences for how and why we continue to hold them responsible today. Most directly, recognizing the conditions under which corporations became persons for the purposes of criminal law removes from contemporary debates one complaint with modern practice, and does so without having to resolve some deep metaphysical truth about the ultimate nature of personhood. Today’s skeptic of corporate capacities presupposes an outdated premise about how capacities should be attributed to a person, the abandonment of which is pivotal to creating and maintaining modern corporate law and today’s commercial corporation. Taking seriously the skeptic’s position, on this discovery, threatens to undermine the conceptual foundation integral to a regulatory framework making commercial corporations what they are today. In addition, taking seriously courts’ actual reasoning in holding corporations criminally responsible unearths both a method and rationale for continuing to do so, which is rooted in a constellation of fairness considerations towards individuals that, although mostly lost to history, nevertheless applies more strongly today than ever before. Commitment to this qualified anti-discrimination norm applies at least as powerfully today as it did a century ago: Far from being a once-excusably incoherent, now-superfluous practice, corporate-criminal liability has as much reason to exist today as it did upon inception.
17 February 2017
'Property and (Intellectual) Ownership of Consumers’ Information: A New Taxonomy for Personal Data' by Gianclaudio Malgieri in (2016) 4 Privacy in Germany – PinG 133 comments
This article proposes a new personal data taxonomy in order to determine more clearly ownership and control rights on different kinds of information related to consumers. In an information society, personal data is no longer a mere expression of personality but a strong economic element in the relationships between companies and customers. As a consequence, the new General Data Protection Regulation recognises different levels of control rights to consumers in accordance with a ‘proprietorial’ approach to personal data. Moreover, existing data taxonomies (based on a subject matter approach) are anachronistic. In an IoT world, the information industry is interested in any data related to consumers: not only their commercial preferences or habits, but also their health conditions, their family and financial status, their sports habits, friendships, and so on. At the same time, there exists a great conflict between privacy concerns and IP interests of companies regarding customer data processing.
This article proposes to change the perspective on personal data taxonomy and to classify personal information in accordance with its ‘relationship’ to the data subject and to reality, and with intellectual activity of businesses in acquiring and processing such data. Three categories are identifiable in this respect: strong relationship data (data provided directly by customers), intermediate relationship data (data observed or inferred and related to the present life of consumers), and weak relationship data (predictive data). Each category reflects different individuals’ rights under the EU General Data Protection Regulation. Data portability is provided just for strong relationship data, whereas no control rights are provided by weak relationship data. At the same time, other rights rebalance information asymmetries between consumers and enterprises (right to information, right not to be subjected to automated profiling, etc.). Therefore, the best balancing approach in order to both respect the IP rights of companies and the information privacy rights of consumers is to distinguish ‘control rights’ (access, portability, oblivion) from ‘reaction rights’ (right to information, opposition to automated profiling, etc).
16 February 2017
This week's report of the Senate Select Committee on the Exposure Draft of the Marriage Amendment (Same-Sex Marriage) Bill notes
The committee embarked on this task cognisant of the deeply held beliefs and aspirations of people engaged in this national debate, regardless of how they view the institution of marriage. Debate surrounding previous bills introduced, and associated inquiries undertaken, into the issue of same-sex marriage have drawn on advice and evidence garnered from key stakeholders and the broader Australian community and have been informed by legal cases and legislative changes across the world. Often this evidence was presented in the context of a contested debate, with stakeholders expounding and defending their positions rather than seeking to engage in a balanced and respectful exploration of the issues at hand.
The committee considers that this inquiry into the Exposure Draft (released by the Attorney-General for consultation alongside the proposed legislation for a same-sex marriage plebiscite) provides an opportunity to consider much of this evidence in a more collegiate and coordinated manner and to identify where there may be areas of agreement, and to better understand and narrow those areas where there are differences of approach.
It is a matter of record that the enabling legislation for a plebiscite was voted down in the Senate. Despite this, the associated Exposure Draft released by the Attorney-General as part of the preparatory work for a proposed plebiscite, was deemed to be a useful vehicle to seek consensus on agreed elements of the proposal, and to better identify the substantive issues that remain contested as a result of people's varying political or philosophical perspectives. It is the hope and intention of the committee that this body of evidence will prove a valuable and instructive foundation, identifying the scope of issues to be addressed by a parliament considering legislative changes to the definition of marriage in this area.
The issues discussed below, and expanded on in the report, have been developed from provisions in the Exposure Draft, from the evidence received through the written submission process, and from the committee's three public hearings. With regard to the evidence, the committee is grateful for the quality of the written submissions and the constructive engagement of all witnesses over the course of the public hearings, despite the very short time frame available to all parties.
In the event that the Parliament passed the Plebiscite Bill, the Government proposed the establishment of a Joint Select Committee to review and report on the Exposure Draft.
The composition of that committee would be as agreed by the Government, the Opposition, and Crossbench parties.
Areas of consensus
There was broad agreement that any future legislation to amend the Marriage Act should ensure religious freedoms are appropriately protected when considering changes that extend access to marriage to all adult couples. In addition, such legislation should exercise caution around the terminology it employs.
The committee notes from evidence from witnesses that if care is taken in describing groups of people and legislative concepts, then opposition to different parts of any future legislation can be more easily avoided.
Two notable examples raised during the inquiry were the terms 'same-sex' in the Short Title of the Exposure Draft and the description of provisions to allow ministers of religion and others to opt out of solemnising same-sex weddings as exemptions.
• In the first example, same-sex couples are unnecessarily singled out, by providing exemptions for situations that are 'not the union of a man and a woman'. For those in support of same-sex marriage, this was seen to increase the perception that this group of people were being discriminated against. For others, this narrow definitional approach failed to protect all aspects of their religious and doctrinal view of marriage.
• In the second example, many submitters voiced concern that the right to have and exercise religious freedom is sometimes considered as an 'exemption'. This labelling of a fundamental right as in some way a departure from the norm concerned many who offered the term 'protection' as more appropriate terminology. Supporters of same-sex marriage generally recognised this concern and agreed that amendments could be made to more positively frame the expression of this right.
In a similar vein, careful drafting to clarify the definitional boundaries of some of the key concepts would go a long way to dispelling some concerns about scope and intent. 'Religious body or religious organisation', as well as 'reasonably incidental to', should be clearly defined as this will determine the providers and the types of goods and services where discrimination will be permitted. Many witnesses held the term 'conscientious belief' lacked definition and could potentially have an unlimited scope. Similarly, the use of the expression ' persons' will enable the inclusion of persons of any sex or gender.
On a general note, the committee observed considerable consensus for a continuation of exemptions for ministers of religion, and for religious celebrants involved in the solemnisation of same-sex marriages.
Areas for further discussion
There were also a number of areas where views differed. These concerned matters contained in the detail of the Exposure Draft and particularly in respect to how competing rights should be balanced in Australian law.
Balancing these rights is the central task for a Parliament's consideration of this legislation. As one witness surmised, 'balancing' does not mean that one right is crushed under the weight of the other. The right to marry; the right to freedom of thought, conscience and religion; the right to equality; and the right to freedom from discrimination are all rights engaged in this debate. The committee heard contrasting views on how these competing rights could be respected. There was broad acknowledgement throughout the inquiry of the importance of striking an appropriate balance between these rights in any future legislative proposal so as to minimise any concerns that may exist in the community. The essential nature of marriage and its role in society is a philosophical discussion and goes to the core of one's identity. This was explored by a number of submitters and witnesses. These different perspectives were practically illustrated in evidence on whether the right to choose to provide services only for the marriages between a man and a woman on the grounds of a religious or conscientious belief is available to individuals as well as members of recognised religious groups. The committee heard evidence from a range of contributors on possible remedies on how these issues could be addressed.
As discussed above, there was consensus in the evidence received that the right to religious freedom should be positively protected. The nature of possible protections will continue to be debated. The committee heard of various potential remedies to this issue, such as an anti-detriment provision or a distinct legislative instrument to protect religious freedom.
Many witnesses submitted that the introduction into the Australian legal context of a protection for freedom of religion was regarded as being most appropriately placed within anti-discrimination legislation. Necessarily, this would require consideration of any future anti-discrimination laws interactions with existing state and territory provisions.
It is however clear that should legislation be enacted to change the definition of marriage, careful attention is required to understand and deliver a balanced outcome that respects the human rights of all Australians if the nation is to continue to be a tolerant and plural society where a diversity of views is not only legal but valued.The Committee summarises 'issues requiring careful consideration' -
Definition of 'marriage'
The committee supports the use of ' people' as an appropriate term to facilitate access to marriage for all Australian adults. An Explanatory Memorandum should confirm that inclusion of this term in the definition of 'marriage' is intended to encompass transgender and intersex persons. This inclusive approach should be reflected also in the title of a bill.
Exemption for ministers of religion
Based on the evidence presented, the committee acknowledges that there is broad agreement for ministers of religion to have a right to refuse to solemnise a marriage that is not in accordance with their religion.
However, the committee notes that some submitters and witnesses did not support legislative exemptions based on a marriage not being the union of a man and woman. The committee considers that such grounds would explicitly discriminate against same-sex couples, while limiting also the doctrinal reasons for discrimination. At the same time, some submitters highlighted that such a provision would effectively limit the current protection for ministers of religion. The committee recognises that section 47 of the Marriage Act 1961 (Cth) (Marriage Act) provides the broadest and strongest protection of religious freedom for ministers of religion. This provision, for example, already allows ministers of religion to refuse to marry people who are divorced, or who have undergone gender transition and legally changed their sex. The committee heard that there are inconsistencies between proposed exemptions in the Exposure Draft and exemptions in the Sex Discrimination Act 1984 (Cth) (SexDiscrimination Act). In particular, proposed new paragraphs 47(3)(b) and 47B(1)(a) would not be consistent with section 37 of the Sex Discrimination Act. The committee considers that the intersection of laws is a complex matter that requires further expert consideration beyond the ambit of the Exposure Draft.
Exemption for marriage celebrants
The committee notes that there is some confusion about marriage celebrants and their current ability to refuse to solemnise a marriage. In addition, the committee acknowledges that Part IV of the Marriage Act is structured in a complex fashion, including in relation to the marriage celebrants category (Subdivision C of Division 1). The committee heard that there are two classes of celebrant within this category, who should be clearly distinguished as civil celebrants or as independent religious celebrants. In particular, the committee proposes the creation of a new Subdivision D (Religious Marriage Celebrants) to accommodate independent religious celebrants.
Having found support for protecting the religious freedom of ministers of religion, the committee believes this principle should be extended to independent religious celebrants in new Subdivision D (Religious Marriage Celebrants) of Division 1 in Part IV of the Marriage Act.
The committee notes that there are a range of views about whether the Marriage Act should provide civil celebrants in general with a right to refuse to solemnise a marriage. The committee considers that such celebrants perform a function on behalf of the state and should be required to uphold Commonwealth law (including anti-discrimination laws). That said, the committee heard that some civil celebrants would feel compromised at having to solemnise a same-sex marriage, if the law were changed. The committee respects this position and proposes the inclusion of these celebrants in new Subdivision D (Religious Marriage Celebrants) of Division 1 in Part IV of the Marriage Act.
Exemption for a religious body or organisation
The committee recognises that there is a range of views on whether a 'religious body or a religious organisation' should have a right to refuse to provide facilities, goods or services for, or 'reasonably incidental to', same-sex marriages. The committee suggests that some of these broad terms should be defined, to properly set out the scope of a protection. For example, would commercial entities owned by religious organisations be entitled to protection? In this regard, the committee notes that the phrase 'reasonably incidental to' needs to connect the provision of goods or services to a marriage ceremony.
The committee notes also that some submitters were of the view that the reference to 'a man and a woman' in proposed paragraph 47B(1)(a) may not be necessary, as paragraph 37(1)(d) of the Sex Discrimination Act already provides an exemption for religious bodies.
International jurisprudence on the introduction of same-sex marriage
The committee notes that evidence presented to the inquiry consistently recognises that, under current human rights instruments and jurisprudence, there have been no decisions that oblige Australia to legislate for same-sex marriage. That said, there has been no suggestion that there are any legal impediments to doing so.
Goods and services
The committee notes that Commonwealth law already allows organisations established for religious purposes to discriminate in the delivery of goods and services, including marriage related services and the hiring of facilities, where this discrimination accords with religious doctrine, tenets or beliefs or is necessary to avoid injury to the susceptibilities of adherents to their religion. However the committee also notes that Australia's obligations under international human rights law apply to individuals as well as groups.
The International Covenant on Civil and Political Rights, the traveaux préparatoires, the Siracusa Principles and United Nations General Comment together require that there are circumstances where broader considerations can be taken into account.
Whether this principle could be applied to achieve an appropriate balance of rights is worthy of further consideration.
A right to refuse on the grounds of a conscientious belief
The committee notes that providing ministers of religion and civil celebrants with a right to refuse to solemnise a marriage based on 'conscientious belief' was controversial, including due to a lack of precedent under Australian law.
The committee is guided by the limited legal usage of 'conscientious belief' but observes that it would be unprecedented to allow 'conscientious belief' to be used to discriminate against a class of persons. The committee is not inclined to disturb established anti-discrimination law and practice. Overall, the weight of evidence suggests that there are philosophical questions that go to the very definition of religion, marriage, and a democratic society that require full consideration.
In human rights law, the freedom to thought or conscience, or to have a religion or belief, are protected unconditionally, but the manifestation of religion or belief are subject to some limitations under the International Covenant on Civil and Political Rights. Extending protections in the context of same-sex marriage on conscientious grounds would introduce the complex question of whether the manifestation of a non-religious conscientious belief has the same level of protection as religious belief under international human rights law in this specific area.
The committee notes international authority that equal protection is afforded to conscience, and any attempt to differentiate on the rights of an individual based on conscience vs religion may be contested (noting that as far as the committee is aware, this has been considered in the courts). However the weight of evidence received in this inquiry suggests there are schools of thought that go to the very definition of religion, marriage, and a democratic society that require full consideration.
A broader protection of the right to freedom of conscience and religion
The committee is cognisant of previous attempts to reform federal anti-discrimination law. Such reforms are unavoidably complex, requiring expert consideration of international human rights obligations and federal, state and territory laws, as well as relevant jurisprudence. While the Australian Government has progressed some reform on a case-by-case basis, the committee considers that broader reform should be reconsidered to advance protections for religious freedom.
In the short term, the evidence supported the need to enhance current protections for religious freedom. The committee suggests that this could most appropriately be achieved through the inclusion of 'religious belief' as a protected attribute in federal anti-discrimination law. However, in future, the committee considers that the concept of a 'no detriment' clause could be further examined.
13 February 2017
The Treasury Department has released a consultation paper regarding the beneficial ownership and control of companies.
As part of Australia's first Open Government National Action Plan the Government committed to improve transparency of information on beneficial ownership and control of companies available to relevant authorities. A key milestone for this commitment was the release of a public consultation paper seeking views on the details, scope and implementation of a beneficial ownership register for companies.The consultation paper states
Companies play an essential role in both the Australian and the global economy. They are a vehicle to facilitate private sector investment and growth.
At times these vehicles can be used to disguise the identity of those involved in illicit activities, including tax evasion, money laundering, bribery, corruption and terrorism financing. This is achieved through mechanisms such as the use of shell companies, the use of complex ownership and control structures, the use of bearer shares and share warrants and of nominee shareholders where the nominator is not disclosed. The exploitation of these vehicles results in gains for criminals and financial losses to the Australian economy. It may also affect public confidence and the perceived legitimacy and validity of business and company regulatory processes and requirements. It also risks confidence in the tax system.
To ensure compliance with the relevant laws against such illicit activities, relevant authorities (including law enforcement and prosecutorial authorities, supervisory authorities, tax authorities and financial intelligence unit) need to be able to identify the entities and individuals that can control and benefit from the financial activities of a company and how those individuals and entities are connected to each other. This objective is inhibited by deficient information collected on the beneficial ownership of companies, and as a result the individuals involved in such illicit activities are able to disguise the true source or use of funds or property behind company structures.
Improving the collection and utilisation of beneficial ownership information will significantly contribute to authorities’ efforts to combat and prevent these activities. This, in turn, will promote greater integrity and transparency within the domestic and global financial system. Internationally, there is a focus on increasing transparency of beneficial ownership information within the global financial system.
International bodies such as the G20 view transparency as playing a key role in combating illegal activities such as money laundering, bribery and corruption, insider dealings, tax fraud and terrorism financing. This was reflected in the G20 High-Level Principles on Beneficial Ownership Transparency (the G20 Principles), the development of which was a key outcome for the Australian G20 Presidency in 2014. Other international organisations such as, the Financial Action Task Force (FATF), the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes and the World Bank also have a strong interest in progressing work towards increasing beneficial ownership transparency.
In 2016, international focus on the availability of beneficial ownership information of entities and legal arrangements (for example, trusts) increased following the leaks of incriminating data in April from a large law firm. In May 2016 beneficial ownership transparency was a key issue for discussion at the Anti-Corruption Summit in London, where several countries including Australia made commitments to increase the transparency of beneficial ownership.It goes on
Legal and Beneficial Ownership Information for Companies which is currently available
Australian companies currently collect some legal and beneficial ownership information, with much of it provided to the Australian Securities and Investments Commission (ASIC). There is, however, scope to increase the transparency of beneficial ownership, because while shares are often held non-beneficially in Australia there is no legal obligation for all companies to collect and report shares held in this manner or the identity of the beneficial owners to ASIC. The following section discusses how information on legal ownership and beneficial ownership is currently recorded and disclosed in Australia.
A company’s share register
Under the Corporations Act 2001 (the Corporations Act), companies are required to establish and maintain a register of members. The register of company members must record for each member the member’s name and address, the date on which the entry of the member’s name in the register is made, and if a company has share capital, the specific details of the shares held by each member. All companies other than listed companies must record if shares are beneficially held or not. The identity of the beneficial owner is not required to be recorded.
The register must be kept within Australia – either at the company’s registered office, its principal place of business or another place approved by ASIC.
A member of the public can access this register either by:
• inspecting it at the company’s registered office (or other place it is kept); or
• making an application to be given a copy of the register or part of the register.
A fee may apply for both types of access. In applying for a copy of the register the applicant must state each purpose for which they are accessing a copy and access will not be permitted where it is a for an improper purpose.
Information given to ASIC and kept on the ASIC register
Although the details of company members must be lodged with ASIC by all companies on registration of the company only proprietary companies must report to ASIC any subsequent changes to member details. If a proprietary company has more than 20 members the company must inform ASIC of changes affecting the top 20 members in each class of share, including any change as to whether the shares are held beneficially by the legal owner or not. If the shares are non-beneficially held, there is no requirement to disclose the beneficial owner to ASIC.
These documents which have been lodged with ASIC are then stored on the ASIC register. A company extract setting out current and historical information on membership, and each separate document notifying of changes, may be obtained by the public for a fee.
Certain disclosure obligations apply to beneficial owners of shares in listed companies under Chapter 6C of the Corporations Act.
A person must notify a listed company if the person has, or ceases to have, a ‘substantial holding’ in the company, and any change in their substantial holding of more than 1 per cent. This means they or their associates have a relevant interest in 5 per cent or more of the total number of votes attached to voting shares in the body. The concept of ‘association’ is used to group together interests which are aligned and should be treated as forming a single voting bloc.
A person or their associates who holds a relevant interest can be:
• holders of securities; or
• persons with the power to exercise, or control the exercise of, a right to vote attached to the securities; or
• persons with the power to dispose of, or control the exercise of a power to dispose of, the securities.
For the purpose of identifying which persons have relevant interests, ‘power to exercise’ and ‘control the exercise of’ include where the power or control is indirect, or can be exercised as a result of a trust, agreement or practice. The concept is discussed in further detail in ASIC Regulatory Guide 5 Relevant interests and substantial holding notices (RG 5).
The person(s) with the substantial holding must also give the relevant information to each relevant financial market operator, such as the ASX. In the case of ASX, this form is made publicly available through the market announcements platform and can be accessed on the ASX’s public website. This information is also provided to ASIC and is available to the public from the ASIC register for a fee.
Under the ASX listing rules, companies must also include in an annual report which they provide to the ASX information about the substantial holdings of the company as disclosed in substantial holding notices given to the company. This provides an account of all of the substantial holders of the company as at the date of the annual report and is also available to the general public at no cost via the ASX website.
Operation of Tracing Provisions For Listed Companies
For listed companies there is an additional process which can increase the transparency of ownership information. ASIC has the power to trace ownership information for listed companies by issuing a person with a tracing notice. Listed companies themselves can also issue tracing notices. This notice requires the person who receives it to disclose details about the ‘relevant interest’ they have in certain securities, the relevant interests of any other persons as well as details of persons who have given them instructions in relation to the holding. Notices can be issued either to a registered member of the company or a person who has been named in a prior tracing notice relating to those shares. The current tracing notice regime requires disclosure of all relevant interests, whether or not the beneficial owner has a holding of five per cent or more.
Disclosure in response to a tracing notice must be made within two days. Where a listed company receives beneficial ownership information in response to a tracing notice they are required to include those details in a register maintained by the company which is available and accessible to the general public (a fee may apply). A member of the public can either inspect the register where it is held or request a copy. This information is not stored on the ASIC register.
Other Requirements to Collect Beneficial Ownership Information
Anti-Money Laundering and Counter-Terrorism Rules
Under Australia’s Anti-Money Laundering and Counter-Terrorism Financing legal framework reporting entities must collect and take reasonable measures to verify beneficial ownership information in relation to certain customers as part of their customer due diligence obligations, unless certain exemptions apply. Reporting entities are financial, remittance, gaming and bullion businesses that provide designated services as prescribed in the legislation. These obligations could potentially apply to all types of Australian companies.
The beneficial owner of a customer is an individual who ultimately owns or controls (directly or indirectly) the customer. Ownership will only be made out where more than 25 per cent of that customer is owned by the individual. This information can be requested by AUSTRAC, law enforcement and regulatory agencies.
These requirements contribute towards Australia’s implementation of Principle 7 of the G20 Principles and FATF Recommendation 10 which relates to countries requiring financial institutions to identify and take reasonable measures to verify the beneficial ownership of their customers.
Common Reporting Standard (CRS)
The CRS is a single global standard for the automatic exchange of financial account information (including beneficial ownership information) on account holders who are foreign tax residents. It includes requirements for reporting of that information to the financial institution’s tax authorities and the exchange of that information with the foreign residents’ home tax authorities.
The beneficial ownership information required to be collected includes the name, address, jurisdiction(s) of residence, tax identification number (for jurisdictions that allow tax identification numbers to be collected) and date and place of birth of each foreign resident controlling person (beneficial owner).Treasury asks the following questions
1. Should listed companies be exempt from any new requirements to report on its beneficial owners in light of existing obligations on such companies? If so, should an exemption apply to companies listed on all exchanges or only to specific exchanges?
2. Does the existing ownership information collected for listed companies allow for timely access to adequate and accurate information by relevant authorities?
3. How should a beneficial owner who has a controlling ownership interest in a company be defined?
4. In light of these examples given by the FATF, the tests adopted by the UK (see Part 3.2 above) and the tests applied under the AML/CTF framework and the Corporations Act, what tests or threshold do you think Australia should adopt to determine which beneficial owners have controlling ownership interest in a company such that information needs to be collected to meet the Government’s objective? a. Should there be a test based on ownership of, or otherwise having (together with any associates) a ‘relevant interest’ in a certain percentage of shares? What percentage would be appropriate? b. Alternative to the percentage ownership test, or in addition to, should there be tests based on control that is exerted via means other than owning or having interests in shares, or by a position held in the company? If so, how would those types of control be defined?
5. How would the natural persons exercising indirect control or ownership (that is, not through share ownership or voting rights) be identified (other than through self-reporting) and how could such an obligation be enforced?
6. Should the process for identification of beneficial owners operate in such a way that reporting must occur on all entities through to and including the ultimate beneficial owner?
7. Do there need to be special provisions regarding instances where the relevant information on a beneficial owner is held by an individual who is overseas or in the records of an overseas company and cannot be identified or obtained?
8. Should there be exemptions from beneficial ownership requirements in some circumstances? What should those circumstances be and why?
9. What details should be collected and reported for each natural person identified as a beneficial owner who has a controlling ownership interest in a company?
10. What details should be collected and reported for each other legal persons identified as such beneficial owners?
11. In the case of foreign individuals and bodies corporate, what information is necessary to enable these persons to be appropriately identified by users of the information?
12. What obligations should there be on a company to make enquiries to ascertain who their beneficial owners are and collect the required information? What obligations should there be on the beneficial owners themselves?
13. Should each company maintain their own register?
14. How could individual registers being maintained by each company provide relevant authorities with timely access to adequate and accurate information? What would be an appropriate time period in which companies would have to comply with a request from a relevant authority to provide information?
15. Should a central register of beneficial ownership information also be established?
16. What do you see as the advantages and/or disadvantages of a central register compared with individual registers being maintained by companies?
17. In particular, what do you see as the relative compliance impact costs of the two options?
18. Who would be best placed to operate and maintain a central register of beneficial ownership? Why?
19. What should the scope of the register operator’s role be (collect, verify, ensure information is up to date)?
20. Who should have an obligation to report information to the central register? Should it be the company only or also the persons who meet the test of being a relevant ‘beneficial owner’?
21. Should new companies provide this information to a central registry operator as part of their application to register their company?
22. Through what mechanism should existing companies, and/or relevant beneficial owners, report?
23. Within what time period (how many days) should any changes to previously submitted beneficial ownership information have to be reported to a company (where registers are maintained by each company) or the registry operator (where there is a central register)?
24. If reporting to a central register is required, should this information be included in the annual statement which ASIC sends to companies for confirmation with an obligation to review and update it annually?
25. What steps should be undertaken to verify the information provided to a central register by companies or their relevant beneficial owners? Who should have responsibility for undertaking such steps?
26. Should beneficial ownership information be provided to one relevant domestic authority and then shared with any other relevant domestic authorities? Please explain why you agree or disagree.
27. Should beneficial ownership information be automatically exchanged with relevant authorities in other jurisdictions? Please explain why you agree or disagree.
28. What sanctions should apply to companies or beneficial owners which fail to comply with any new requirements to disclose and keep up to date beneficial ownership information?
29. How long should existing companies have from when the legislation commences to report on their beneficial owners? What would be an appropriate transition period?
30. Do you foresee any practical implementation issues which companies or beneficial owners may face in collecting and reporting additional information?
31. What types of compliance costs would your business incur in meeting any new requirements for record-keeping and reporting of beneficial ownership information?
32. If you are already required to comply with AML/CTF obligations, how do you see any new requirements to collect beneficial ownership interacting with those existing obligations?
33. If companies had access to the additional beneficial ownership information collected, could this reduce companies’ compliance costs by making it easier for them to comply with other existing reporting obligations such as those under the AML/CTF legal framework?
34. Could any changes be made to streamline or merge existing reporting requirements in order to reduce the compliance costs for businesses?
35. In order to improve and incentivise compliance with the tracing notice regime should ASIC have the ability to make an order imposing restrictions on shares the subject of a notice until the notice has been complied with?
36. What other changes could be made to improve the operation of these provisions?
37. Who uses nominee shareholding arrangements, and for what purpose?
38. How often are nominee shareholding arrangements used?
39. What do you see as the benefits of nominee shareholding arrangements? Are there any negative aspects of their use?
40. Should further obligations be introduced in order to increase the transparency of the beneficial owners of shares held by nominee shareholders?
41. Are you aware of practical obstacles which would make increased reporting in respect of shares held by nominee shareholders problematic?
42. Who uses bearers share warrants, and for what purpose?
43. How often are bearer share warrants used?
44. What do you see as the benefits of bearer share warrants? Are there any negative aspects of their use?
45. Should a ban be introduced on bearer share warrants?