Thursday, 2 September 2021
Corporations (Aboriginal and Torres Strait Islander) Amendment Bill 2021; Second Reading
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—
The Corporations (Aboriginal and Torres Strait Islander) Amendment Bill 2021 will improve and modernise the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act). More than 3300 corporations, and the communities they serve, will benefit from these reforms.
'Strong corporations, strong people, strong communities'—that's the vision statement of the Office of the Registrar of Indigenous Corporations (ORIC). This simple statement reflects the unique role that Aboriginal and Torres Strait Islander corporations play within their communities, delivering critical services like health, housing and municipal services. In the case of native title corporations, registered native title bodies corporate (or RNTBCs) have the important role of managing native title rights and interest on behalf of the determined native title holders. Often, these corporations deliver services in the most remote parts of Australia, including to homelands and outstations.
Strong well-governed corporations inspire trust in the sector, and provide effective and vital services to build and maintain strong communities. Without their corporations, many communities, particularly those in remote areas, would not receive the services they need to continue to exist. This Bill will modernise the Act and make it more useful and relevant for Aboriginal and Torres Strait Islander peoples as they form and operate corporations that build strong communities.
There is an expectation that the CATSI Act will continue to support the evolving needs of Aboriginal and Torres Strait Islander peoples including as a driver for the continued growth of the Indigenous sector, and the increasing economic independence of its population. It is also vital that the CATSI Act continue to work in partnership with the Native Title Act1993 to ensure a strong governance framework for the growing number of RNTBCs.
The CATSI Act has delivered outcomes for Indigenous Australians for the 14 years it has been in operation, and it is time to refresh and renew the Act for the future. In December 2019, I announced a comprehensive review of the CATSI Act, which was to build on a number of previous reviews. This announcement was a direct response to feedback calling for a broad ranging review of the CATSI Act including whether it was achieving its objects, particularly as a special measure under the Racial Discrimination Act 1975.
One of the most important questions explored during this comprehensive review was whether the CATSI Act is actually doing what it was established to do. Special measures are important tools for building pathways out of disadvantage, but they should not continue once they have achieved their objectives. The review found that a very substantial majority of stakeholders agreed that the CATSI Act is necessary to ensure Aboriginal and Torres Strait Islander corporations receive targeted support and members can run their corporations in a way that reflects their cultural practices. Importantly this Bill will provide for regular review of the CATSI Act in the future to ensure it continues to support self-determination and be relevant and useful to Aboriginal and Torres Strait Islander peoples.
The Bill comes at a time when public expectations of corporate governance have never been higher. More registered native title bodies corporate are established each year as native title claims are determined. More Indigenous corporations are focussing on economic development as their primary purpose, be they registered native title bodies corporate, or corporations supported by the Indigenous Procurement Policy. As the Indigenous corporate sector grows and evolves, it is vital that regulation of the sector provide an adequate level of scrutiny balanced with the flexibility to feed innovation and expansion.
A modern regulator needs a broad suite of powers to ensure a proportionate response to non-compliance. The Bill's provisions for the introduction of fines and enforceable undertakings, as well as investigative powers as extensive as those of ASIC, will improve the Registrar's ability to support corporations and react effectively and decisively when required.
Corporations are most effective when their members are informed and engaged. The Bill introduces a range of measures that will allow corporations to take advantage of the benefits provided by advancements in technology, particularly through the use of electronic communications and virtual meetings, helping to manage what is often a mobile and geographically dispersed membership.
At the same time, the Bill will see additional protections for members and former members by allowing them to redact their contact information from Member Registers without having to justify why, and ensuring that third parties have a proper purpose in order to inspect or copy Registers.
Membership confers benefits, sometimes of a financial nature, so it is important that applications are decided in a timely manner. The Bill will require corporations to deal with membership applications within a specific timeframe, unless exempted by the Registrar, and allow corporations that are not RNTBCs to have rules specific to their circumstances, in relation to the process for considering membership applications. The Bill will also provide corporations with greater flexibility by allowing non-RNTBC corporations to include rules that better suit their own conditions for cancelling membership.
Since its commencement, the CATSI Act has performed a key role in developing the Indigenous economic and corporate sector. Today that sector provides vitally important services such as health, education, housing and employment to Aboriginal and Torres Strait Islander peoples.
We have seen the sector mature, adapt, and innovate, blending tradition and culture with entrepreneurship to create sustainable and economically viable industries. However, there are unintended limitations in the current Act that make it difficult for CATSI corporations to take advantage of the full range of corporate structures available to other companies, without stepping outside of the protections provided by the CATSI Act. By removing this barrier, the Bill reduces the cost of doing business and promotes the use of a variety of modern corporate structures.
The diversity of size and function of CATSI corporations reflects the broad needs of the communities they service, as well as the enterprise and industry of those who form corporations.
Classifying corporations by size is important to ensure that the level of regulatory oversight is proportionate to the revenue and activity of the corporation.
The Bill aligns the size classifications, and more importantly reporting obligations, of CATSI corporations, with the Australian Charities and Not-for-profits Commission or the ACNC.
Over 64 per cent of CATSI corporations will be classified as small under this regime resulting in minimal reporting for those corporations. As well, the Government is reducing the reporting burden for medium sized corporations which will be able to elect to have a review of financial statements rather than an audit.
In recognition of the unique circumstances of many CATSI corporations, the Bill introduces measures designed to reduce some of the administrative burden associated with holding meetings, in particular Annual General Meetings or AGMs. Small corporations with little or no revenue that are not registered with the ACNC will be able to choose not to hold an AGM for up to two years, as long as 75 per cent of members voting agree.
However reducing red tape doesn't mean reducing transparency. 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.
All corporations will be able to access automatic extensions of time to hold an AGM or lodge reports when unforeseen events such as a death in the community, or natural disaster occur. Although many corporations currently do so as part of good governance, the Bill will require any reports lodged with the Registrar to be laid before the AGM so that members are provided information without having to ask for it.
The Bill recognises the unpredictable environments within which many CATSI corporations operate by making it easier to hold virtual meetings, or change the date, time or place of a meeting after a notice of meeting has been sent, or even cancel a general meeting.
The CATSI Act demands high standards of corporate governance, but at the same time recognises the special incorporation needs of Aboriginal and Torres Strait Islander peoples. By improving the way rule books operate, the Bill will make it easier for members and directors to know and follow internal governance rules, and be more engaged in the management of their corporations.
Special administrators often make changes to rule books to improve governance in struggling corporations. The Bill supports the Registrar to keep these arrangements in place, unless the conditions no longer exist to require such rules.
Transparency and accountability of remuneration arrangements for senior executives and directors remains a significant issue for members, common law holders and communities. Maintaining the delicate balance of enabling effective scrutiny whilst safeguarding individuals' rights to privacy, the Bill also provides a much needed mechanism to support corporations to make informed remuneration decisions. This transparency will also extend to director remuneration and that of senior executives of related entities, shining light into what can often be the dark corners of the corporate world.
The original drafters of the CATSI Act felt there was a need to hold CATSI corporations to a very high standard of governance around related party transactions because of the essential relationship of many CATSI corporations to the communities they serve, the high rate of government funding and to protect the interests of members.
While there is a need to prevent misuse of corporation assets and funds, the current standards and processes around related parties are disproportionately burdensome for CATSI corporations, particularly small and remote ones. Amendments proposed in the Bill are aimed at reducing that burden, without increasing risk, and supporting corporations that are the lifeblood of many communities to be able to operate effectively without needless red tape.
Changes to a number of different restrictions around directors are designed to better meet the needs of Aboriginal and Torres Strait Islander corporations. In particular, allowing corporations to appoint independent directors without having to first change their rule book is seen as being of real value for CATSI corporations.
After nearly fourteen years of operation, the review of the CATSI Act identified a clear need to make changes which modernise and update the legislation. The Bill will allow Indigenous corporations to harness the advantages offered by modern technology, electronic communication channels and storage facilities, and contemporary systems and processes.
The CATSI Act differentiates itself from the Corporations Act because it takes account of the traditions and circumstances of Aboriginal and Torres Strait Islander peoples.
However, it is also important to ensure a level of consistency across Commonwealth regulators, and make sure that beneficial advances in other corporate legislation are made available to CATSI corporations.
Changes to the Corporations Act, which were designed to provide a higher level of protection for whistleblowers, will be made available through the Bill, which will also align some penalty provisions, and ensure qualified privilege for auditors.
Creditors, funding bodies, business partners and others will take a keen interest in the activities of the regulator, particularly when those activities involve a corporation with which they have a relationship.
It is important that corporations are able to demonstrate a positive outcome following an examination or rectification of all issues following receipt of a compliance notice. The Bill will formalise this process by requiring the Registrar to issue a notice to a corporation if he or she is satisfied that the actions specified in a compliance notice have been taken by that corporation, or to notify a corporation at the conclusion of an examination that he or she will take no further action.
One of the very positive outcomes of this Bill will be the establishment of the Aboriginal and Torres Strait Islander Assets Protection Special Account. The funds for this account will be taken from the existing Aboriginal and Torres Strait Islander Unclaimed Money Account, rather than being returned to the Consolidated Revenue Fund, ensuring that Aboriginal and Torres Strait Islander money is used to protect and maintain Indigenous assets.
Unique to the CATSI Act, special administration is one of the most effective tools the Registrar has to support corporations at risk. Minor but important changes to the provisions around special administration will make it easier for the Registrar to provide this support.
Rapid access to help can be important when corporations are in difficulty, so removing the need for the Registrar to send a show cause notice when a majority of directors request a special administrator be appointed will be valuable.
In the same way, other 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 Bill also introduces some rebuttable presumptions of insolvency that the Court can rely on for the purposes of finding a corporation insolvent, but still allow a corporation to prove it is not.
The Bill addresses a range of other minor technical deficiencies or oversights in the current legislation, including a small amendment to the Native Title Act 1993, and makes minor changes that better support a modern risk based regulator.
This is the first time extensive amendments have been made to the CATSI Act in its fourteen year history. The Bill brings the CATSI Act up to date in line with the expectations of Aboriginal and Torres Strait Islander peoples. It strikes the critical balance between strong governance and effective regulation on one hand, and removing red tape on the other, so that corporations do not experience unnecessary barriers in delivering for their members and communities. Ensuring that Aboriginal and Torres Strait Islander corporations are well governed is a cornerstone to supporting self-determination and closing the gap.