Indigenous Law Bulletin
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by Peter McKerrow
The Corporations (Aboriginal and Torres Strait Islander) Bill 2005 (‘the Bill’) is arguably the most significant item of Indigenous affairs legislation since the Native Title Act 1993 (Cth). The Bill replaces the Aboriginal Councils and Associations Act 1976 (Cth) (‘ACA Act’) under which some 2600[1] incorporated Indigenous community associations are registered.
The Bill has a commencement date of 1 July 2006.[2] A second Bill, the Corporations (Aboriginal and Torres Strait Islander) Consequential, Transitional and Other Measures Bill,[3] will provide for the transition of ACA Act corporations to the new regime. Drafting of this Bill is not yet complete.
It is tempting to call the Bill ‘revolutionary’ although the Parliamentary Secretary in the second reading speech preferred to describe it as ‘an important contribution at a fundamental turning point in Indigenous affairs’.[4] For many Indigenous community associations, however, the Bill will require a fundamental review of the way in which they conduct their affairs.
Whether revolutionary or not, the Bill is big. For legislative statisticians, the Bill is 560 pages, comprises 17 Chapters and includes a ‘dictionary’ of nearly 200 defined terms and expressions.
The Bill is replete with references to the making of regulations and determinations which may have general or specific application to corporations. Corporations, their officers and advisers will need to refer both to the Bill and these legislative instruments to determine their legal duties.
To add to this complexity, the Bill incorporates provisions of the Corporations Act 2001 (Cth) by reference. For example, clause 531-1 applies the ‘insolvent trading’ provisions of ‘Divisions 3, 4, 5 and 6 of Part 5.7B of the Corporations Act’ to corporations under the Bill.
The Bill’s preamble describes it as ‘a special measure for the advancement and protection of Aboriginal peoples and Torres Strait Islanders’ for the purposes of the Racial Discrimination Act 1975 (Cth) and paragraph 4 of Article 1 of the International Convention on the Elimination of All Forms of Racial Discrimination.
The Bill also includes special provisions for registered native title bodies corporate (‘RNTBCs’). If the duties imposed on a RNTBC or its officers under Native Title legislation conflict with those imposed by the Bill, the RNTBC or officers do not breach the Bill if they act in good faith with the belief that the action is necessary to ensure the corporation complies with Native Title legislation.[5]
The Bill institutes new legislative standards of ‘corporate governance’ for Indigenous Australia. The ‘backbone of the bill’, according to the Parliamentary Secretary, ‘is the application of the mainstream Corporations Law to [ACA] Act corporations – for example, it largely replicates modern standards of duties for officers, directors and employees that exist in the Corporations Act’.[6]
Legal practitioners advising corporations and their directors will have to be familiar with the Corporations Act and its case law to appreciate the context and meaning of many of the Bills provisions.
Inadequate or poorly drafted rules can lead to confusion and conflict within organisations. The Bill addresses this by providing for a system of ‘replaceable rules’ that a corporation can adopt in whole or in part.[7] The Bill also stipulates the matters for which the corporation must provide in its constitution. Rules must be ‘internally consistent’, ‘adequate and workable’ and consistent with the Bill.[8] Rules must also provide for internal dispute resolution processes.[9]
A body must have a minimum number of members and meet the ‘Indigeneity requirement’.[10] An applicant for membership must be at least 15 years of age.[11] All applications for membership must be in writing.[12] The Bill provides for various forms of notice and procedural safeguards before a corporation can cancel an individual’s membership.[13]
The Bill also gives members rights to challenge directors’ or a corporation’s decisions which are ‘contrary to the interests of the members as a whole’ or ‘oppressive to, unfairly prejudicial to or unfairly discriminatory against, a member or members...’[14]
The proposed duties of directors of corporations will now virtually mirror those of directors of Corporations Act entities. Part 6-4 of the Bill provides for duties of care, honesty and disclosure, and a duty to avoid conflicts of interest. One of the most significant duties is the duty not to ‘trade while insolvent’ which the Bill provides for by incorporating relevant provisions of the Corporations Act in Part 11-6. [15]
A director in breach of these and other duties may be subject to a pecuniary penalty of up to $200,000[16] and may be ordered to compensate the corporation for damage it has suffered.[17]
The Bill requires corporations to maintain a range of records and provide reports on their general and financial operations. Special emphasis is given to accurate membership records by provision for a ‘register of members’ which must contain a member’s name (including all names by which the member is known), address and date on which the member was entered in the register.[18] A register of ‘former members’ must also be kept for seven years.[19] The register of members is open for inspection by ‘any person’ and may be copied.[20] Penalties apply for contravention of these requirements.
All corporations must keep proper accounts and other financial records and retain them for seven years.[21] A corporation must also prepare a ‘general report’ at the end of its financial year listing its members’ and directors’ names and addresses and other contact information and lodge it with the Registrar. Failure to lodge a general report is an offence.[22]
The Bill also provides for regulations to be made requiring the preparation and lodgement of other reports including financial reports, directors’ reports and auditors’ reports.[23] The Registrar has indicated that ‘small’ corporations may only be required to prepare and lodge a general report.[24] Copies of financial and audit reports must be given to each member and penalties apply for non-compliance. [25] Directors who fail ‘to take all reasonable steps to comply with, or secure compliance with’ record keeping and reporting requirements may be liable to a civil penalty.[26]
Part 10-5 of the Bill provides for immunity and protection from victimisation for employees and officers of the corporation and persons doing business with the corporation who report a breach of the legislation by the corporation or an officer or employee of the corporation.
The Bill gives the Registrar substantial powers to intervene in the affairs of corporations and require the provision of information and reports. The Registrar may in relevant circumstances change the constitution of a corporation,[27] disqualify a person from managing a corporation,[28] convene meetings,[29] give notices requiring compliance with the corporations constitution or the legislation,[30] examine the books of a corporation[31] and appoint an administrator or receiver.[32]
The Bill provides that certain important decisions of the Registrar are reviewable by the Administrative Appeals Tribunal and notice of the right to have a decision reviewed must be given.[33]
While there is some flexibility to relieve smaller corporations from some of its requirements, the Bill is otherwise extremely complex. It assumes a high degree of literacy and legal and financial sophistication.
While large companies can afford professional advice and insure their directors from legal risks, Indigenous corporations in rural and remote Australia have limited access to this support. Without that support the Bill may effectively deter the participation and involvement of Indigenous people in local corporations.
The Parliamentary Secretary has indicated that ‘support and training’ will be provided by the Registrar to help Indigenous organisations adapt to the legislation.[34] The Registrar is also preparing detailed guidance material for corporations.
Despite these initiatives, it is difficult to see how the information and advice needs of Indigenous corporations, particularly those in remote regions, will be easily satisfied. Staff turnover and changes in directors and loss of corporate memory affect Indigenous organisations as much as other groups.
The Senate Legal and Constitutional Legislation Committee (‘the Committee’) is considering the Bill. It is due to report on 7 February 2006. Copies of the Bill, explanatory memorandum, second reading speech, submissions to the Committee and transcripts of hearings into the Bill are all available from the Committee’s webpage on the Australian Parliament website at <http://www.aph.gov.au> .
Peter McKerrow is a Legal Officer at the Western Australian Department of Indigenous Affairs. The opinions expressed are solely those of the author and do not necessarily reflect the views of the Department or the State of Western Australia.
[1] According to the explanatory memorandum, 60 per cent of these associations are located in ‘remote or very remote’ areas of Australia.
[2] The Corporations (Aboriginal and Torres Strait Islander) Bill 2005 (Cth), cl 1-5.
[3] Submission of the Registrar of Aboriginal Corporations to the Senate Legal and Constitutional Legislation Committee, Australia, Parliament of Australia, (2005) Parliament of Australia <http://www.aph.gov.au/Senate/committee/legcon_cttee/corporations/submissions/sub11.pdf> at 12 December 2005.
[4] Commonwealth, Parliamentary Debates, House of Representatives, 23 June 2005, 13 (Warren Entsch, Parliamentary Secretary to the Minister for Industry, Tourism and Resources).
[5] Above n 2, cl 265-20.
[6] Commonwealth, Parliamentary Debates, House of Representatives, 23 June 2005, 13 (Warren Entsch, Parliamentary Secretary to the Minister for Industry, Tourism and Resources).
[7] Above n 2, cl 60-1.
[8] Ibid, cl 66-1 (5).
[9] Ibid, cl 150-5.
[10] Ibid, cl 29-5.
[11] Ibid, cl 29-10.
[12] Ibid, cl 144-5.
[13] Ibid, subdivision 150-C.
[14] Ibid, cl 166-1(1)(d) and (e).
[15] Ibid, cl 531-1.
[16] Ibid, cl 386-10.
[17] Ibid, cl 386-15.
[18] Ibid, cl 180-1, 180-5.
[19] Ibid, cl 180-15.
[20] Ibid, cl 180-20, 180-25.
[21] Ibid, cl 322-10.
[22] Ibid, cl 330-1, 330-05, 330-10.
[23] Ibid, 333-5.
[24] Clause 37-10 of the Bill provides for the classification of corporations as ‘small’, ‘medium’ or ‘large’. The criteria for determining which category applies to a particular corporation will be prescribed in regulations.
[25] Above n 2, cl 342-5.
[26] Ibid, cl 363-1.
[27] Ibid, cl 69-35.
[28] Ibid, cl 279-30; this provision is an addition to the automatic disqualification under cl 279-5.
[29] Ibid, cl 439-10.
[30] Ibid, cl 439-20.
[31] Ibid, cl 453-1.
[32] Ibid, cl 11 provides for the ‘external administration’ of a corporation.
[33] Ibid, cl 617-1, 617-10.
[34] Commonwealth, Parliamentary Debates, House of Representatives, 23 June 2005, 14 (Warren Entsch, Parliamentary Secretary to the Minister for Industry, Tourism and Resources).
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URL: http://www.austlii.edu.au/au/journals/IndigLawB/2005/63.html