The Secretary to the Treasury has forwarded the following memorandum asking for advice:

Under regulation 2 of the War Precautions (Companies, Firms and Businesses) Regulations, it is an offence for any person without the written consent of the Treasury to apply for the registration of any company or firm or of any society club or association having for its object or one of its objects the pecuniary profit or gain of its members.

2. By virtue of this regulation, it is considered that Treasury consent is required to the registration as a foreign company or firm under any State law of any company or firm already registered-(a) in any other State of the Commonwealth, or (b) outside of the Commonwealth. The view is also taken that the regulation confers power on the Treasury to refuse consent to and thereby prohibit the registration of such companies or firms under State law.
3. In one or two instances the legal advisers of certain applicants have contended that the regulation referred to only authorises the Treasury to control the original registration of companies and firms and does not apply to existing companies or firms registered either within or beyond Australia.
4. The Registrar-General in each State has so far refused to permit such companies or firms to obtain registration until the written consent of the Treasurer to registration is produced.
5. In connection with the consent issued by the Treasury on 19 February 1918, to the registration in New South Wales as a foreign company of the Osaka Shosen Kabushiki Kaisha (Osaka Mercantile Steamship Company Limited) a company incorporated in Japan, the Prime Minister directed on 12.3.18 that no further permits were to be granted to foreign companies without his approval.
6. On an application submitted for the registration in Australia of another Japanese company (the Yokohama Fire Marine Transit and Fidelity Insurance Co. Ltd) the Cabinet decided in May last, not to reverse the Prime Minister's decision in his absence relative to the registration of foreign companies.
7. As a result of the above, applications for the consent of the Treasury to the registration in Australia of the following foreign companies and firms are now in abeyance: (Then follow the names of a number of companies which have applied for registration.).
8. In each case the applicants have been informed that consent to registration cannot be granted at present, and in a number of cases the Registrar-General of the State in which registration is required has been advised of the position taken up by the Treasury in the matter. A statement is attached showing the nature of the communication sent to the Registrars-General in this connection.
9. It will be observed that the restriction has so far operated against companies of American, Danish, French and Japanese nationality, but mainly against the last named.
10. Since the armistice, strong representations have been made by the Australian representatives of certain of the companies and firms concerned (especially the American and French) for a removal of the Treasury embargo on registration or at least for some advice as to when consent to registration is likely to be allowed.
11. It is stated that these concerns have incurred expense in establishing their businesses in the Commonwealth and require to secure proper legal status by registration.
12. It has been decided in connection with the foregoing applications and any others of a similar nature that may be received to withhold a decision until peace has been established.
13. I am desired by the Treasurer to request that the Acting Attorney-General will be good enough to consider and advise as to the constitutional powers of the Commonwealth Parliament under section 51 (xx) of the Constitution or otherwise to make a law continuing the authority now exercised under regulation 2 of the War Precautions (Companies, Firms and Businesses) Regulations over the registration in Australia of companies or firms incorporated either within the Commonwealth or abroad especially those registered in foreign countries.

Since advice was asked for in this case the War Precautions (Companies, Firms and Businesses) Regulations have been amended, and the material regulations now in force dealing with the question of control of companies, are the following:

2. If any person, without the consent in writing of the Treasurer of the Commonwealth, makes application for, or takes any steps to secure, the registration of-
1. any private or proprietary company;
2. the name of any private or proprietary company;
3. the change of name or constitution of any private or proprietary company;
4. any firm;
5. the name of any firm; or
6. the change of name or constitution of any firm,

any of the shareholders, partners or members of which are not natural-born British subjects, he shall be guilty of an offence.

3. If any person, without the consent in writing of the Treasurer, takes or continues to take any steps towards the registration in any State-

1. of any foreign company or firm;
2. of any company or firm any of the capital of which has been subscribed by or on behalf of any person or body of persons ordinarily residing or carrying on business outside of the British Empire; or
3. of any company or firm whose principal object is the carrying on of manufacturing, mining, or other industrial operations outside the Commonwealth and any territory of or under the control of the Commonwealth;

he shall be guilty of an offence.

5 If any person, company or firm, without the consent in writing of the Treasurer of the Commonwealth,

1. makes an issue of capital; or
2. transfers or disposes of the shares or assets (other than stock in trade) of any company or firm incorporated or registered in the Commonwealth,

to-

1. any person or body of persons, or
2. the nominee or representative of any person or body of persons

ordinarily residing or carrying on business outside of the British Empire, such person, or such company or firm, as the case may be, shall be guilty of an offence.

5A Any person who, without the consent of the Treasurer, takes or continues to take any steps towards the removal of the place of registration of a company from Australia to another country shall be guilty of an offence.

Section 51 (xx) of the Constitution empowers the Parliament of the Commonwealth to make laws for the peace, order and good government of the Commonwealth with respect, inter alia, to foreign corporations.

The scope of the power was discussed by the High Court in the case of Huddart Parker & Co. Pty Ltd v. Moorehead 8 C.L.R. 330. The decision in the case in question was by a majority of four Justices to one but the interpretation placed by the Justices upon the provisions of paragraph (xx) varied somewhat.

Griffith C.J. was of opinion (p. 349) that-

. . . the meaning of pi. (xx) is that in the case, as well of trading and financial corporations formed within the Commonwealth, as of foreign corporations the Commonwealth must take them as it finds them, and may make such laws with respect to their operations as are otherwise within its competence.

He thought further (p. 354) that-

... pi. xx empowers the Commonwealth to prohibit a trading or financial corporation formed within the Commonwealth from entering into any field of operation, but does not empower the Commonwealth to control the operations of a corporation which lawfully enters upon a field of operation, the control of which is exclusively reserved to the States.

In his judgment, Barton J. did not express his views as to the exact scope of pi. (xx).

O'Connor J. thought (p. 371) that-

... the field of legislation marked out for the Commonwealth Parliament extends no further than the regulation of the conditions on which corporations of the class described shall be recognised, and permitted to carry on business throughout the Commonwealth.

He then proceeds to deal with the nature of the conditions which may be imposed, and at p. 373 concludes that-

It is unnecessary here, even if it were possible, to make a comprehensive statement of the matters which might be the subject of such conditions, but it may be stated generally that Parliament is empowered to enact any law it deems necessary for regulating the recognition throughout Australia of the corporations described in the section, and may, as part of such law, impose any conditions it thinks fit, so long as those laws and the conditions embodied in them have relation only to the circumstances under which the corporation will be granted recognition as a legal entity in Australia. It may, for instance, prohibit altogether the recognition of corporations whose constitutions do not provide certain safeguards and securities for payment of their creditors. It may impose conditions on recognition to attain the same ends. As a preliminary to recognition it may insist upon compliance with any conditions it deems expedient for safeguarding those dealing with the corporation. In the effecting of objects within these limits it must have the right to encroach on State powers to such an extent as it may deem necessary. But when once recognition has been granted-when once the corporation has, in Australia, the status of a legal entity-the limit of the power conferred by the sub-section is reached. The corporation then becomes a legal entity within the Commonwealth, subject to the laws of the Commonwealth and of the States in the same way as any other legal entity. In respect of trade carried on entirely within the limits of any one State it is within the cognisance of State laws and State administration in the same way and to the same extent as any other legal entity within the State would be in the like circumstances . . . For these reasons I am of opinion that the power conferred by sub-sec. (xx) must be construed as being limited to the making of laws with respect to the recognition of corporations as legal entities within the Commonwealth, and that its provisions do not justify the making of laws for regulating and controlling the business of a corporation coming within the section when once the corporation has been recognised as a legal entity within the Commonwealth, and is exercising its corporate functions in carrying on its business within Australia.

Higgins J., while not attempting any final or exhaustive definition of pl.(xx), advised (p. 412) that the Parliament of the Commonwealth-

. . . can regulate such companies as to their status, and as to the powers which they may exercise within Australia, and as to the conditions under which they shall be permitted to carry on business. It is well established that each country has a right to prevent a foreign corporation from carrying on business within its limits, either absolutely, or except upon certain conditions: Hooper v. California; and this principle seems to be at the basis of sub-sec. (xx). The Federal Parliament can, in my opinion, prescribe what capital must be paid up, probably even how it must have been paid up (in cash or for value, and how the value is to be ascertained), what returns must be made, what publicity must be given, what auditing must be done, what securities must be deposited.

The Federal Parliament controls as it were the entrance gates, the tickets of admission, the right to do business and to continue to do business in Australia; the State Parliaments dictate what acts may be done, or may not be done, within the enclosure, prescribe laws with respect to the contracts and business within the scope of the permitted powers.

On the authority of this case I am of opinion that the Parliament of the Commonwealth can refuse permission to foreign corporations to engage in trade in Australia, or can prescribe the conditions relating to the circumstances under which such corporations will be granted recognition as legal entities in Australia.

These conditions may, in my opinion, include such matters as the following: provisions requiring the consent of a Commonwealth authority to the name under which a foreign corporation may trade, or to any alteration in the articles of association of the corporation; provisions in the nature of safeguards and securities for the payment of creditors, or otherwise for the protection of persons dealing with the corporation; provisions prohibiting the registration in Australia of a foreign corporation whose articles of association permit of the issue of share warrants to bearer; provisions empowering the punishment by deregistration or otherwise of a corporation which has failed to comply with the conditions upon which registration was granted.

The question whether power exists as a condition of registration to limit the scope of the transactions which the corporation may undertake is not without doubt, but on the whole I incline to the view that such power exists.

It may be mentioned, in passing, that the words 'foreign corporations' in placitum (xx) include any corporation formed outside Australia, whether within or without the British Empire. They do not, however, include trading and financial corporations formed in Australia with foreign capital, but power to legislate as to these is conferred by the same placitum. While that power does not include power to prevent their formation, it may include power to limit the scope of the transactions which the corporation may undertake.

I may add that placitum (xx) does not give any power in relation to firms. Nor does any other provision of the Constitution specifically confer that power. Firms may be controlled in relation to interstate or foreign commerce, and if proposed to be composed wholly or partly of aliens they may possibly be affected by legislation passed in relation to aliens. However, if a definite statement as to the nature of the legislation which it is desired to pass in relation to firms consisting of partners some or all of whom are aliens or persons resident in a foreign country is given, advice will be given on the specific questions which are raised.

[Vol. 16, p. 419]