Indigenous Law Bulletin
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by Laura Beacroft and Sayuri Piper
The Office of the Registrar of Aboriginal and Torres Strait Islander Corporations (‘ORATSIC’) administers the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (‘CATSI Act’). The Registrar is an independent statutory office holder appointed by the Minister for Indigenous Affairs, and the Office supports the Registrar’s work.
ORATSIC is a corporate regulator for Indigenous groups throughout Australia and therefore has powers similar to the Australian Securities and Investments Commission (‘ASIC’). The Registrar’s role remains a special measure[1] and enables ORATSIC to deliver a tailored service that responds to the special needs of Indigenous groups and corporations. ORATSIC strives for national and international best practice in corporate governance.
On 1 July 2007 the CATSI Act repealed and replaced the Aboriginal Councils and Associations Act 1976 (Cth) (‘ACA Act’). The ACA Act was a simpler statute for incorporation based on equivalent state and territory law of the time. As the corporations law environment changed over the past 30 years this statute became increasingly outdated both in Australia and internationally. An independent review of the ACA Act in 2001-02 recommended that it could be made more consistent with the Corporations Act 2001 (Cth), which responded to international trends in corporations law. Many of the recommendations were subsequently reflected in the CATSI Act.[2]
There are differences that set the CATSI Act apart from other incorporation regimes across the Commonwealth, states and territories of Australia. The main differences can be found in ORATSIC’s comparative table of incorporation statutes, which is available online at <http://www.oratsic.gov.au/start_corporation/options/default.aspx> .
Corporations that were previously registered under the ACA Act are now automatically registered under the CATSI Act (these corporations will hereafter be referred to as ‘CATSI corporations’). They will need to make changes to their rules before 30 June 2009 to transition to the CATSI Act and learn more about how the law has changed.
This article identifies the aspects of the CATSI Act that set it apart from other incorporation statutes, and the technical matters that form the backdrop for them.
The CATSI Act is a special measure and is enacted under the race power of the Australian Constitution. This power allows parliament to ‘make laws for the peace, order, and good government of the Commonwealth with respect to … the people of any race for whom it is deemed necessary to make special laws’.[3] ORATSIC performs its work in a way that takes account of the special needs, requirements and risks of Indigenous corporations, consistent with the race power and the Racial Discrimination Act 1975 (Cth).
In addition to regulatory powers similar to other corporate regulators in Australia, the CATSI Act also gives the Registrar explicit functions and powers in the areas of advice, assistance, education, research, policy and public information.[4]
All corporations registering under the CATSI Act must meet the Indigeneity requirement.[5] This means that at least 51 per cent of members and directors must be Aboriginal and/or Torres Strait Islander people.
The CATSI Act allows non-Indigenous people to be members with the same member rights as Indigenous members, provided that the Indigeneity requirement is met. It is also possible for CATSI corporations to set out in their rule book that they require higher thresholds (that is, more than 51 per cent) of Indigenous membership. However a corporation’s rule book cannot lower the 51 per cent threshold.
A person has to be at least 15-years-of-age to be a member of an Aboriginal or Torres Strait Islander corporation,[6] and at least 18-years-of-age to be a director.[7] This minimum age applies unless a corporation’s rule book specifies an older age requirement – the rule book cannot specify a younger age requirement than 15-years. If a corporation’s rule book allows, a corporation can have observers under section 158-5 of the CATSI Act. Observers may attend a general meeting of the corporation but they are not members of the corporation.[8]
Directors can now be appointed or elected.[9] This allows corporations, for example health services, to appoint a non-Indigenous doctor or other professional to be on their board, provided that at least a majority of the directors are Indigenous people.
Generally, ultimate power of a corporation resides in the members in a general meeting – because it is the members who own the corporation. Members have more rights under the CATSI Act.
Members can now seek a court order if oppressive conduct is occurring,[10] or bring or intervene in proceedings on behalf of a corporation.[11] Members can also apply to a court to inspect the books of a corporation.[12] The term ‘books’ has a very wide definition,[13] and can include a register, a document, financial reports or records, or any other record of information.
Obviously, corporations should avoid disputes with members and this involves giving members access to records and explaining corporation matters to them without the need for court intervention.
New transparency and accountability mechanisms have been built into the CATSI Act to minimise dishonest benefits being given by corporations to other parties. The provisions are called the related party transactions provisions.
They require a corporation to obtain member approval when benefits such as finance or property are given to related parties, which may include directors, spouses of directors, parents and children of directors, or another group that controls the corporation. The member approval must be lodged with the Registrar.[14] There are some exceptions – for example, when the benefit is wages for employees[15] or is given to meet a native title legislation obligation.[16]
All CATSI corporations will be classified into small, medium and large corporations. This will depend on the corporation’s consolidated gross operating income (‘CGOI’), consolidated gross assets (‘CGA’) and number of employees.[17]
Depending on a corporation’s size and its income, it will have different reporting obligations. Small corporations with a CGOI of less than $100,000 will only have to submit a general report. Other corporations may have to submit an audited financial report or a director’s report. Exemptions may be available.[18]
In some circumstances, corporations will be able to submit their funding body reports, which will avoid duplication of financial reporting. This will only be available to corporations whose CGOI is 90 per cent or more provided by a funding body.[19]
The rule book and design of a corporation is the key to its success. Transitioning corporations will need to spend time over the next two years updating their rule book in accordance with the CATSI Act, with support from ORATSIC.
The rule book makes up the internal governance framework of an Aboriginal and Torres Strait Islander corporation. It consists of common law rules that the courts have decided on, rules in the CATSI Act that cannot be replaced, rules in the CATSI Act that can be changed if the members agree and rules in the corporation’s constitution that are special for that corporation, for example who can be a member.[20] The internal governance rules are listed at section 57-5 of the CATSI Act.
Common law rules are precedents set by the courts. The rules in the CATSI Act that cannot be replaced include duties of directors and officers, which are discussed in more detail below. It also includes provisions such as the Indigeneity requirement. The replaceable rules are identified in the CATSI Act.[21] These include rules such as those relating to a quorum for general meetings, and processes for giving notice of general meeting to members, officers and observers.
The internal governance framework and particularly the replaceable rules are designed to allow for maximum flexibility in corporate design. The intention is that corporations can respond to cultural and local considerations in their rule book. For example, a corporation might want a representative structure on its board of directors, so the rule book may specify that a male and female member from each of six family or clan groups must make up the directors. The flexibility also works at a ground level, to take account of the differing sizes and intents of Aboriginal and Torres Strait Islander corporations – for example, some operate in remote areas, some operate in capital cities, some have small amounts of public funding, others generate significant private income, and they have different purposes ranging from art centres to land holding to essential services.
A corporation’s rule book must have a process for dealing with disputes in the corporation.[22] This encourages transparent dispute resolution processes, which is a key aim of the CATSI Act.[23]
ORATSIC also offers help when disputes arise. Although the office does not arbitrate between disputes, it can issue advisory opinions and make referrals to mediation services. The requirement that corporations registered under the CATSI Act have a dispute resolution process aims to provide a settled and clear process, agreed upon before a dispute arises, which can then be used for resolving disputes within the corporation between members, individual directors, the board, staff and community people.
Duties of directors and officers have been clarified and are based on the general law and the Corporations Act 2001 (Cth).
The following duties apply to directors of CATSI corporations and their officers (which include corporation secretaries, special administrators and generally those people that make decisions affecting the business of the corporation):[24]
The CATSI Act creates a new range of penalties and offences that are consistent with the Corporations Act 2001 (Cth).
There are strict liability offences – these are offences that are committed regardless of whether the person intends to commit the offence, or was reckless or negligent in doing so. Strict liability offences include failing to lodge documents with the Registrar within specified time periods or not maintaining proper records such as a register of members. Penalties for the strict liability offences are fines starting from $110.
There are also a range of civil penalty provisions and criminal offences under the CATSI Act. Breaches of these provisions can result in disqualification from managing corporations, financial penalties, compensation, fines, or in very serious cases, terms of imprisonment. The consequences depend on the circumstances of the breach.
Some people who make disclosures about a suspected breach of the CATSI Act can be protected. Such people may include officers, contact persons, employees, or people who have a contract for the supply of goods and services to the corporation, or their employees.
For the disclosure to be protected, it must be made to the Registrar, the auditor (or member of their team), a director, secretary, senior manager or any other person authorised by the corporation to receive disclosures of that kind.[30] The CATSI Act makes it an offence to victimise the discloser.[31]
If the disclosure is made to an officer, employee, auditor or a member of the audit team, it is a criminal offence for the person to whom the disclosure is made to not keep that information confidential. The penalty for not maintaining confidentiality is up to six months’ imprisonment, up to a $2,750 fine, or both.
It is not an offence for the person to whom the disclosure is made to report the matter to the Registrar, ASIC, the Australian Prudential Regulation Authority, or the police. It can also be made to someone else with the consent of the disclosure.[32]
The CATSI Act has a number of specific provisions that ensure that native title legislation does not conflict with it. This is a particular benefit for prescribed bodies corporate, who are required by the Native Title (Prescribed Bodies Corporate) Regulations 1999 (Cth) to register with ORATSIC. An example of this is that if directors act to meet native title legislation obligations, they are protected from breach under some of the duties of directors and officers provisions.[33]
ORATSIC will support corporations during their transition from the ACA Act to the CATSI Act. A tool has been developed to help corporations change their rules so that they comply with the CATSI Act. This tool is available on the website or as a printed copy.
If you would like to search the Public Register of Aboriginal and Torres Strait Islander corporations, go to our home page and scroll to the bottom of the page for our corporation search function. ORATSIC encourages you to visit the website at <www.oratsic.gov.au>, email the office on <info@oratsic.gov.au> or call the office toll free on 1800 622 431 (not free from mobiles).
Laura Beacroft’s term as the Registrar of Aboriginal and Torres Strait Islander Corporations finished on 30 September 2007. Ms Beacroft joined ORATSIC in 2002, or ORAC (Office of the Registrar of Aboriginal Corporations) as it was then. In that time, she oversaw the development of the new Corporations (Aboriginal and Torres Strait Islander) Act 2006. Ms Beacroft was replaced on 1 October 2007 by Anthony Beven from the Australian Securities and Investments Commission.
Sayuri Piper is a lawyer and has been a Senior Legislation and Policy Officer at ORATSIC since December 2006. Ms Piper has been involved in transition to and implementation of the CATSI Act within ORATSIC and for client corporations. She has provided advice to ORATSIC and key stakeholders as well as assisting corporations to make the transition to the CATSI Act.
[1] In accordance with the Racial Discrimination Act 1975 (Cth) and supporting international law.
[2] There were four recommendations that were not implemented: that membership should be limited to Indigenous people and their dependants; that corporate membership should not be allowed; that the Registrar’s power to appoint an administrator be removed; and that the Registrar should no longer play a role in approving the constitution of corporations. For more information about why these recommendations were not reflected in the CATSI Act, see our fact sheet on the Act and the review at <http://www.oratsic.gov.au/publications/review_of_the_act/factsheet_the-bill-and-the-review_feb2006.aspx> .
[3] Commonwealth of Australia Constitution Act (Cth) s 51(xxvi).
[4] Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (‘CATSI Act’) s 658-1.
[5] CATSI Act s 29-5. The percentage prescribed in this provision is 51 per cent (see Corporations (Aboriginal and Torres Strait Islander) Regulations 2006 (Cth) (‘CATSI Regulations’) reg 29-5.01).
[6] CATSI Act s 141-15.
[7] CATSI Act s 246-1(1).
[8] CATSI Act s 158-5(2).
[9] Before the start of the CATSI Act, directors were called governing committee members and were only able to be elected from the membership of the corporation. The CATSI Act now enables a corporation to appoint a person as a director by passing a resolution in a general meeting. This is a replaceable rule: CATSI Act s 246-15.
[10] CATSI Act Division 166.
[11] CATSI Act s 169-1.
[12] CATSI Act s 175-1.
[13] CATSI Act s 700-1.
[14] CATSI Act Division 290. This Division identifies how to obtain member approval for related party transactions. The corporation must lodge the documents that will be put to the members with the Registrar. This includes the proposed notice of meeting (which has the text of the proposed resolution), an explanatory statement in accordance with section 290-10 and any other accompanying documentation. The Registrar can comment on the proposed resolution: section 290-15.
[15] CATSI Act s 287-1(2).
[16] CATSI Act s 287-12.
[17] The Registrar registers Aboriginal and Torres Strait Islander corporations as small, medium or large under section 37-1 of the CATSI Act. Under section 37-20 of the CATSI Act, the thresholds are deferred to the CATSI Regulations at Division 29. This is to enable the thresholds to be more easily changed if they are not appropriate.
[18] The Registrar has the power to grant exemptions from reporting requirements either on application or by the Registrar’s own initiative. Exemptions in relation to reporting are in Division 353 of the CATSI Act.
[19] ‘Funding body’ includes Commonwealth, state and territories and some body corporations established by a law of the Commonwealth, state or territory: CATSI Regulations subdivision 333-B.
[20] CATSI Act s 57-1.
[21] CATSI Act s 57-5.
[22] CATSI Act s 66-1(3A): ‘The corporation’s constitution must provide for the resolution of disputes internal to the operation of the corporation.’
[23] See note 5.99 of the Explanatory Memoranda for the Corporations (Aboriginal and Torres Strait Islander) Bill 2006 (Cth).
[24] See the definition of officer the CATSI Act s 683-1: ‘A person is an officer of an Aboriginal and Torres Strait Islander corporation if: (a) the person is a director or secretary of the corporation; or (b) a person (i) makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or (ii) has the capacity to affect significantly the corporation’s financial standing; or…’ and so on.
[25] CATSI Act s 265-1: note that this civil obligation is subject to the business judgment rule, which is defined at section 265-1(3).
[26] CATSI Act ss 265-5 and 265-25.
[27] CATSI Act ss 265-10, 265-15, 265-25.
[28] CATSI Act s 268-1.
[29] CATSI Act Division 531.
[30] CATSI Act ss 466-1(b).
[31] CATSI Act ss 469-5.
[32] CATSI Act ss 472-1(2).
[33] CATSI Act s 268-5.
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URL: http://www.austlii.edu.au/au/journals/IndigLawB/2007/54.html