Wednesday, 5 December 2018
Corporations (Aboriginal and Torres Strait Islander) Amendment (Strengthening Governance and Transparency) Bill 2018; Second Reading
I table the explanatory memorandum relating to the bill, and I move:
That this bill be now read a second time.
I seek leave to have the second reading speech incorporated in Hansard.
The speech read as follows—
CORPORATIONS (ABORIGINAL AND TORRES STRAIT ISLANDER) AMENDMENT (STRENGTHENING GOVERNANCE AND TRANSPARENCY) BILL 2018
The Corporations (Aboriginal and Torres Strait Islander) Amendment (Strengthening Governance and Transparency) Bill 2018 introduces a range of technical reforms that will improve and strengthen the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act). More than 3000 corporations, and the communities they serve, will benefit from these reforms.
Aboriginal and Torres Strait Islander corporations play a vital role in delivering services and supporting economic development in communities across Australia, particularly in regional and remote Australia. In 2015-16, the top 500 CATSI Act corporations had a collective income of $1.92 billion, more than double the overall income of Indigenous corporations since the CATSI Act commenced. The Bill will help those corporations serve their communities by cutting unnecessary red tape, and ensuring greater transparency and accountability of boards and senior executives.
Since it was enacted, the CATSI Act has improved the efficiency, sustainability and accountability of Aboriginal and Torres Strait Islander corporations. After eleven years of operation, it is important to update the Act so that it continues to be relevant to Aboriginal and Torres Strait corporations, particularly as they face new economic challenges.
In 2017, the Registrar of Aboriginal and Torres Strait Islander Corporations commissioned an independent technical review of the CATSI Act. The review was led by law firm DLA Piper and included a series of public consultations conducted by the Indigenous consultancy firms, Inside Policy and Winangali.
Following that review, in 2018, the Registrar and his office conducted further consultations across Australia on the proposed amendments, and feedback from these consultations has informed the amendments in the Bill. The amendments have had a high level of scrutiny and consultation, and stakeholders have welcomed the changes.
The Bill comes at a pivotal point in the economic development of Indigenous corporations. Under the Government's Indigenous Procurement Policy over $1 billion in Commonwealth contracts has been awarded to over a thousand Indigenous businesses since its introduction in July 2015 from the Commonwealth alone, a significant increase from 30 Indigenous businesses winning $6.2 million in 2012-13. More Indigenous service providers than ever are receiving funding under the Indigenous Advancement Strategy (IAS). This growing movement to tap into the extraordinary capabilities of Indigenous businesses and not-for-profits brings with it a need for increased scrutiny and stronger governance.
It is important that the regulatory framework keeps pace with the needs of Aboriginal and Torres Strait Islander corporations as well as the best modern regulatory practices. The new Bill aligns the size classifications, and more importantly, reporting obligations of CATSI corporations, with both the Australian Charities and Not-for-Profits Commission (ACNC), and companies limited by guarantee under the Corporations Act. This will mean minimal reporting for over 78 per cent of CATSI corporations which will be classified as small, and streamlined reporting obligations for the nearly 30 per cent of CATSI Corporations that are also registered with the ACNC.
The CATSI Act is a successful regulatory framework because it demands high standards of corporate governance, but at the same time recognises the specific cultural requirements of Aboriginal and Torres Strait Islander communities. Improvements to the internal governance framework of the Act will make it easier for members and directors to know and follow the internal governance rules, and be more engaged in the management of their corporations.
The Registrar will be better able to support corporations by providing model rule books that can be used off the shelf, or modified to suit the unique circumstances of the corporation. This will make it easier for corporations to register under the CATSI Act.
Modern business entities use a range of corporate structures to pursue economic enterprises, either on their own or jointly with others. This Bill removes a limitation in the current Act that prevents corporations from using these structures to their best advantage. By removing this barrier, the Bill reduces the cost of doing business and promotes the use of a variety modern corporate structures that can access the unique support and flexibility offered by registration under the CATSI Act.
Good governance does not happen by accident, and we need to strike a balance between putting the right protections in place, while not imposing unnecessary red tape. Meetings are an essential part of ensuring good corporate governance but many corporations struggle with the administration and cost associated with holding Annual General Meetings (AGMs).
In recognition of the unique circumstances of CATSI corporations, the Bill introduces measures designed to reduce some of the regulatory and administrative burden associated with holding AGMs. However, reducing red tape doesn't mean giving a blank slate to corporations. Annual reports will still be required to be lodged with the Registrar who has the power to direct a corporation to hold an AGM should it seem reasonable to do so.
For a corporation to work effectively, members must be both informed and engaged. The Bill allows corporations to harness the advantages of technology in managing and engaging with what is often a mobile and geographically dispersed membership, and dispenses with the outdated practice of publishing certain notices in print media.
A persistent theme to arise from consultations was a call for strong accountability and transparency of senior management arrangements. Just as phoenix activity is a menace in the mainstream corporate sector, so too are those unscrupulous carpetbaggers who move from one remote Indigenous corporation to the next, enriching themselves at the expense of the communities they are supposed to serve. In line with current trends across the corporate, public and not for profit sectors, the Bill will shine a light on senior management appointments and benefits, giving rogue operators no place to hide.
Aboriginal and Torres Strait Islander corporations are the lifeblood of many communities, and it is unsurprising that close kinship ties, and limited options for purchasing goods or services, can mean difficulty for corporations in meeting their regulatory requirements around issues like related party transactions. The Bill makes it easier for corporations to balance good governance with the desire to support Aboriginal and Torres Strait Islander business.
Unique to the CATSI Act, special administration is one of the most effective tools the Registrar has to support corporations at risk. Minor changes to the provisions around special administration will make it easier for the Registrar to provide this support. In the same way, minor changes will make it easier for corporations to voluntarily deregister when the community no longer requires the corporation instead of the more complex and costly process of winding up.
The need for a strong and active corporate regulator with a broad suite of powers is undeniable in the current environment. The introduction of fines and enforceable undertakings, as well as investigative powers modelled on those of ASIC, will improve the Registrar's ability to support corporations as well as maintain the integrity of the Indigenous corporate sector.
The Bill also addresses a range of other minor technical deficiencies or oversights in the current legislation, and makes minor changes that better support a modern risk based regulator.
This is the first time significant amendments have been made to the CATSI Act in its eleven year history. The Bill makes good legislation even better. It strikes the critical balance between strong governance and effective regulation on one hand, and removing red tape on the other, so that corporations don't experience unnecessary barriers in delivering for their members and communities. Ensuring that Aboriginal and Torres Strait Islander corporations are well governed is one key to meeting the challenge of reducing Indigenous disadvantage.