It is big, dense and almost incomprehensible, but it rules many parts of our lives.
From your superannuation to getting advice on investments, the Corporations Act affects most of the financial decisions Australians make.
And further away from daily reality, its rules lay down how the corporations that pay our wages, and the people who run them, are supposed to behave.
Since 2001, when the act became law, it has become bigger and bigger as parliament bolted on bits and pieces – from basics such as licence standards for financial advisers through to slightly more exotic areas like managed investment schemes.
Now, as it celebrates its 20th birthday, the tome has grown so vast that even some of the lawyers who earn billable hours from the volume’s immense complexity reckon too much is too much.
An overhaul of the act with a view to simplifying it was one of the recommendations made by former high court judge Kenneth Hayne in 2019, as part of a final report of a royal commission that laid bare just how badly, and baldly, financial institutions were breaking the existing law.
Now, Hayne is helping the Australian Law Reform Commission with a review of the brick-like volume that’s set to run for another two years.
Sarah Derrington, the federal court judge who runs the ALRC, is under no illusions about the task.
“It’s more a Besser block than a brick these days,” she says of the act.
Both a brick and something of an onion, it turns out.
“I think the overarching problems, or the high-level problems, that have been identified thus far is that it’s overly complex, that you can’t find all the law in one place, because there’s layer upon layer of primary legislation, regulation, orders and the like,” Derrington says.
“So it’s very difficult to navigate your way through the actual obligations that are owed by people. And this creates a rule of law problem, because people actually cannot find the law that applies to them.”
She also says that the commission’s “biggest concern at the moment” is that a lot of law is being made by the regulator, the Australian Securities and Investments Commission, through its ability to issue orders, rather than by parliament through the words in the act.
It is something that fits snugly with the current agenda of the treasurer, Josh Frydenberg, who has let it be known that he wants Asic to stop making policy and stick to enforcing what’s already on the books.
But Andrew Godwin, a legal academic who has joined the ALRC as special counsel on the project, insists the commission is not arguing that delegating powers to Asic in the first place was a bad decision.
“Not surprisingly, as provisions have been added, modified, it’s become less easy to navigate,” he says. “And what we’ve ended up with really is a morass of rules.
“So if you look at things like directors’ duties, for example, the intention originally was to identify high-level principles, but subsequently safe harbours were added.
“The rules became more complex, reflecting the increasing sophistication of financial markets, financial products and services. And so we have now, I guess, a very overweight and ungainly piece of legislation that I think is ripe for an overhaul.”
Even as the review kicks off, Frydenberg is in the process of adding to the weight of the bill by adding new protections for company directors – a proposal that has deeply upset investors.
But this kind of political consideration is beyond the ALRC’s brief.
“It’s a technical inquiry,” Derrington says. “We’re not to go behind the policy of the statute. But we are concerned to make it more consumer friendly by making it clearer, simpler and more transparent.”
On a practical level, trying to cut through the thickets of the act will no doubt be controversial with lawyers who fear their clients will somehow lose out if the magic words in the big book are changed even slightly.
The act is replete with passages that to a layperson make little sense.
Section 912A? That’s the bit that says financial advisers, and others with a licence, need to provide their services “efficiently, honestly and fairly” – an obligation often honoured in the breach. And why is the word “efficiently” in a paragraph that’s supposed to be about protecting consumers? The answer is lost in the mists of time, but it might have something to do with the fact that the provision was introduced by the Howard government, with its love of all things markety and econocratic.
Then there’s the act’s famously enigmatic definition of insolvency, one of the crucial questions confronting any businessman – am I broke? “A person who is not solvent is insolvent,” section 95A unhelpfully declares.
All of this is incredibly unimportant to most people until the day they get ripped off by their adviser or their small business hits the wall, when it becomes incredibly important.
And in the finance industry, provisions such as these are always key business decisions.
But despite the high stakes Derrington says she’s optimistic that any proposals “won’t be too contested if all we are doing is making it easier for people to navigate the legislation”.
A series of reports are due between November this year and November 2023.
But once the ALRC does make its recommendations, that’s only the start of the process. It will take some time for any changes to flow through to the laws that govern how we interact with the world of finance.
“Whatever we recommend it’s going to take close to a decade, if not more … for Treasury to in fact implement the recommendations,” Derrington says.