Express law No. 71

2 June 2008

Significant changes to accountability and governance
arrangements for Commonwealth authorities and companies

Amendments to the Commonwealth Authorities and Companies
Act 1997 (the CAC Act) that are primarily intended to improve
accountability and governance arrangements for Commonwealth
authorities and Commonwealth companies have recently been
enacted. The main purpose of the amendments is to introduce
more efficient and transparent administrative arrangements,
align provisions and penalties with equivalent provisions
and penalties in the Corporations Act 2001, and clarify
clauses to avoid inappropriate or unintended governance

The amendments are effected by the Commonwealth Authorities
and Companies Amendment Act 2008
(the Amendment Act), which
was enacted on 26 May 2008. Most of the provisions of the
Amendment Act will commence on 1 July 2008. The Amendment
Act makes the most significant set of changes to the CAC
Act since that Act commenced on 1 January 1998.

This Express law outlines the most significant of the

Commonwealth authorities and wholly-owned Commonwealth
companies to comply with General Policy Orders: sections
28, 43 and 48A

Currently, the CAC Act provides that Ministers can notify
directors of Commonwealth authorities (s 28) and wholly-owned
Commonwealth companies (s 43) of general policies of the
Government that are to apply to the body.

The Amendment Act substitutes new ss 28 and 43 to require
directors of a Commonwealth authority and a wholly-owned
Commonwealth company to ensure that the authority or company
complies with a 'General Policy Order' (GPO) to the extent
that the GPO is applicable to it. The Amendment Act also
inserts s 48A to enable the Finance Minister to issue these
GPOs and to prescribe the regime under which they will
become applicable to a Commonwealth authority or wholly-owned
Commonwealth company.

The GPO regime is not intended to increase the power that
the Government has under current ss 28 and 43 to require
Commonwealth authorities and wholly-owned Commonwealth
companies to comply with Government policy. Rather, the
GPO regime is designed to be a more effective and transparent
means of applying relevant Government policies to these
entities and, in particular, of ensuring that the Commonwealth
authorities and wholly-owned Commonwealth companies are
aware of which Government policies apply to them. In this
respect, the GPOs will be legislative instruments and will
therefore be listed on the Federal
Register of Legislative Instruments

Changes to definition of 'Commonwealth company':
section 34:

Currently, the definition of 'Commonwealth company' in
s 34 focuses on whether the Commonwealth has a 'controlling
interest' in the company and this in turn has been interpreted,
in accordance with common law concepts, as depending on
whether the Commonwealth is able to control a majority
of votes at a general meeting of members.

The Amendment Act substitutes a new s 34 to provide that
a 'Commonwealth company' means 'a Corporations Act company
that the Commonwealth controls'. Under the new provision,
the Commonwealth 'controls' a company if it:

  • controls the composition of the company's board
  • is in a position to cast, or control the casting of,
    more than one-half of the maximum number of votes that
    might be cast at a general meeting of the company,
  • holds more than one-half of the issued share capital
    of the company (excluding any part of that issued share
    capital that carries no right to participate beyond
    a specified amount in a distribution of either profits
    or capital).

Use of credit cards and credit vouchers by Commonwealth
authorities: sections 28A and 28B

Currently, the CAC Act does not provide Commonwealth authorities
with a general borrowing power. Unless the enabling legislation
of an authority contains a clear clause about borrowing,
there is uncertainty about the power of some authorities
to use credit cards or credit vouchers, such as taxi vouchers,
to obtain cash, goods or services.

The Amendment Act inserts s 28A to provide that Commonwealth
authorities may obtain cash, goods or services on credit
from any person by the use of a credit card and goods or
services on credit from any person by the use of a credit
voucher. Section 28A will apply to the extent that the
enabling legislation of an authority does not already provide
the power to borrow or to use credit cards. It also enables
the Finance Minister to make regulations to set exclusions
or conditions on the use of the credit card facility by
those authorities that do not have an explicit borrowing

Reliance on information or advice provided by others:
section 27D:

Currently, s 27D provides that a director of a Commonwealth
authority may prima facie rely on information or advice
provided by others in specified circumstances provided
that the reliance occurs 'after making proper inquiry
if the circumstances indicated the need for inquiry'.
The Amendment Act amends s 27D to align it with the Corporations
Act to provide that the director's reliance must
result from 'making an independent assessment of the information
or advice, having regard to the director's knowledge
of the authority and the complexity of the structure and
operations of the authority'.

Compliance with statutory duties by officers of Commonwealth
authorities: section 27A

Section 27A currently protects all officers of Commonwealth
authorities, in specified situations, from a contravention
of the civil penalty provisions in ss 23 to 25 (covering
duties on good faith, use of position and use of information)
and from breaching the corresponding criminal offence in
s 26. Specifically, s 27A(1) generally protects an officer
who does something he or she is required to do under a
section of the CAC Act (s 27A(1)), and s 27A(2) protects
Australian Public Service (APS) employees where they are
appointed to the board of a Commonwealth authority in cases
where their duties as an officer of the authority and as
a public servant may conflict.

The Amendment Act amends s 27A to:

  • specify that the protection extends to both general
    law duties and statutory duties
  • remove the exemption to the criminal penalty under
    s 26, and restrict it to protection against contravention
    of the civil penalty clauses
  • clarify that s 27A(1) provides a defence for a contravention
    of ss 23 to 25, or their equivalent duties at common
    law or in equity
  • make clear that s 27A(2) applies to Agency Heads and
    APS employees as defined in the Public Service Act
    1999 who are appointed from within Departments of State,
    Agencies or Statutory Agencies other than the Commonwealth
    authority itself, to provide for protection where there
    is a conflict between a person's duty as an APS
    employee and an officer of the authority.

New definition of 'senior manager': section 5

The Amendment Act inserts a definition of 'senior
manager'. The term is currently undefined but is
referred to in ss 32 and 44, relating to the functions
of audit committees. The new definition is consistent with
how the same term is defined in the Corporations Act. The
definition is intended to refer to senior managerial employees
of a Commonwealth authority or company and specifically
excludes directors and company secretaries, Ministers,
and APS employees engaged by another agency.

The definition of 'senior officer' is significant primarily
because the definition of 'officer' is also amended to
provide that an officer is a director or a senior manager
of a Commonwealth authority. Currently, the definition
of 'officer' is 'a director of the authority or any other
person who is concerned in, or takes part in, the management
of the authority'.

Directors must prepare annual report: section 9

Section 9 is amended by the Amendment Act to align the
process of annual reporting by Commonwealth authorities
with the processes for submission of periodic reports to
Parliament set out in s 34C of the Acts Interpretation
Act 1901. Specifically, the deadline will now be the 15th
day of the fourth month after the end of the financial
year or the end of such further period granted by the responsible
Minister under s 34C(5) of the Acts Interpretation Act.

All Commonwealth companies to submit annual reports: section

Section 36(1) is amended by the Amendment Act to clarify
that all Commonwealth companies (including proprietary
companies) are required to provide annual reports. The
clause is designed to ensure that all Commonwealth companies
have a consistent basic level of reporting and accountability,
through the responsible Minister, to the Government and
the Parliament.

Reporting obligations in relation to subsidiaries: sections
12(3) and 37(3)

Currently ss 12(3) and 37(3) require the Auditor-General
to give copies to the responsible Minister of the financial
statements and audit report of a subsidiary of a Commonwealth
authority, or Commonwealth company, respectively. The Amendment
Act amends these sections to transfer this responsibility
to the directors of the Commonwealth authority or Commonwealth

Penalties: sections 11, 20, 26, 27F, 27J 27N, 30 and 36

The Amendment Act amends ss 11, 20, 26, 27F, 27J 27N,
30 and 36 to more closely align the offences and penalties
that apply to Commonwealth authorities and their officers
with equivalent provisions in the Corporations Act.

For further information please contact:

Guy Aitken
Special Counsel
T 02 6253 7084 F 02 6253 7304

Alexandra Hall
Senior Lawyer
T 02 6253 7122 F 02 6253 7316

Important: The material in Express law is
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information only, and further analysis on the matter
may be prepared by AGS. The material should not be
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