section 51(xx) of the Australian Constitution, the corporations power. Why don't we start by opening the Constitution and looking at what section 51(xx) says. Parliament shall subject to the Constitution have power to make laws for the peace, order and good government of the Commonwealth with respect to foreign corporations and trading or financial corporations formed within the limits of the Commonwealth.
The power expressed in section 51(xx) then is the power to regulate some capacities of foreign corporations and trading in financial corporations formed within the limits of the Commonwealth. and to prescribe some conditions under which they may operate within Australia. But of course, to really understand what this means, we need to know what a corporation is.
So, what are corporations? A corporation is a legal creation. It's an artificial person created by law that has a different and distinct personality from its members and directors.
In the case of a limited liability company, for example, Directors and shareholders would not be personally liable for the debts of the company. Now, in colonial times, each colony would regulate and recognize their own corporations. But coming to the federation, this needed to change.
So the idea behind this provision was to create a uniform treatment of joint stock companies. And to create the possibility of the Commonwealth prescribing uniform law to trading corporations. The number of the provision then related to the status of corporations and joint stock companies in other colonies than that in which they had been constituted, as was once expressed in the Federal Council under the Act of 1885. However, today, this head of power has become more significant than it was maybe first intended by the framers of the Constitution back then.
Today, when we look at this head of power, There are two main issues that we have to tackle. What kinds of corporation does this power applies to? And what kind of corporate activities does the power apply to?
These are the two questions that we will look at for the remainder of this video. And in my next video, we will talk about one specific constitutional case that relates to the corporation power. If you don't want to miss it, make sure you subscribe to our channel and that you click the bell icon as well.
Okay, let's start with the first question. To what kind of corporations does section 51(xx) apply? The text of the provision says foreign corporations, trading corporations and financial corporations. Foreign corporations are corporations established beyond the limits of the Commonwealth, but that they still do operate in Australia.
That is, they were created or incorporated under a foreign law, but they are legally recognised and authorised by Australia to operate here. Trading corporations are those formed for the purposes of... Yeah, can you guess it? Trading! To trade is to buy, sell, exchange, bargain, transport goods, merchandise, etc.
A trading corporation then negotiates contracts and will exchange a number of different types of goods, including intangible goods like money, credit, etc. Financial corporations are... are those institutions that borrow money or receive deposits of money for investment. I should note here that in section 51.13 there is an appropriate head of power that gives the Commonwealth the power over banking and the incorporation of banks.
So here the provision is referring primarily to other institutions that are not banks. There is yet another aspect in the text of the provision that I wanted to highlight. Section 51.13 Section 120 says foreign corporations and trading and financial corporations formed within the limits of the Commonwealth.
Did you notice that the verb there is in the past tense? The High Court has interpreted that as a limitation of the Commonwealth's corporation power. The Commonwealth has no power of incorporation of companies, but it can regulate companies that have been formed before. Now let's move to the second question. What are the types of corporate activities that can be regulated under section 5120 of the corporation's power?
This question has today been settled by the High Court of Australia. However, before 2006, the High Court of Australia slowly progressed from a narrow view to a wider one. Initially, the High Court considered that the corporation's power could only be applied to those corporations that exercise those activities that could be qualified by the adjectives trading, financial or foreign.
So, only and specifically, Trading, financial and foreign corporations could be regulated under this head of power. Later, however, the High Court started to progressively adopt wider views, until its culmination in the Work Choices case. This case is today's authority in the understanding that Section 5120, the corporation's power, extends to any activity of a constitutional corporation.
As long as it interprets the law as falling within the scope and regulating a constitutional corporation, the High Court tends to accept the validity of the legislation under this head of power, the corporation's power of section 51. Again, this came particularly after the Work Choices case, and this will be the topic of our next video.