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Corporations (Aboriginal and Torres Strait Islander) Bill 2006

Part 6-6 Member approval needed for related party benefit

Division 284 Need for member approval

284-1   Need for member approval for financial benefit

             (1)  For an Aboriginal and Torres Strait Islander corporation, or an entity that the corporation controls, to give a financial benefit to a related party of the corporation:

                     (a)  the corporation or entity must:

                              (i)  obtain the approval of the corporation’s members in the way set out in Division 290; and

                             (ii)  give the benefit within 15 months after the approval; or

                     (b)  the giving of the benefit must fall within an exception set out in Division 287.

Note:          Section 293-1 defines related party , section 700-1 defines entity , section 689-25 defines control and section 293-5 affects the meaning of giving a financial benefit .

             (2)  If:

                     (a)  the giving of the benefit is required by a contract; and

                     (b)  the making of the contract was approved in accordance with subparagraph (1)(a)(i) as a financial benefit given to the related party; and

                     (c)  the contract was made:

                              (i)  within 15 months after that approval; or

                             (ii)  before that approval, if the contract was conditional on the approval being obtained;

member approval for the giving of the benefit is taken to have been given and the benefit need not be given within the 15 months.

284-5   Consequences of breach

             (1)  If the corporation or entity contravenes section 284-1:

                     (a)  the contravention does not affect the validity of any contract or transaction connected with the giving of the benefit; and

                     (b)  the corporation or entity does not commit an offence.

Note:          A Court may order an injunction to stop the corporation or entity giving the benefit to the related party (see section 576-25).

             (2)  A person contravenes this subsection if they are involved in a contravention of section 284-1 by a corporation or entity.

Note 1:       This subsection is a civil penalty provision (see section 386-1).

Note 2:       Section 694-55 defines involved in .

             (3)  A person commits an offence if they are involved in a contravention of section 284-1 by a corporation or entity and the involvement is dishonest.

Penalty:  2,000 penalty units or imprisonment for 5 years, or both.

284-10   Exemptions

                   An application may be made to exempt an Aboriginal and Torres Strait Islander corporation, or the directors of the corporation, from the requirements of this Part (see section 310-5).



 

Division 287 Exceptions to the requirement for member approval

287-1   Remuneration and reimbursement for officer or employee

Benefits that are reasonable remuneration to employees

             (1)  Member approval is not needed to give a financial benefit if:

                     (a)  the benefit is remuneration to a related party as an employee of the following:

                              (i)  the corporation;

                             (ii)  an entity that the corporation controls;

                            (iii)  an entity that controls the corporation;

                            (iv)  an entity that is controlled by an entity that controls the corporation; and

                     (b)  to give the remuneration would be reasonable given:

                              (i)  the circumstances of the corporation or entity giving the remuneration; and

                             (ii)  the related party’s circumstances (including the responsibilities involved in the employment, the employee’s experience and performance record and the employee’s length of service).

Remuneration of officers

             (2)  If an Aboriginal and Torres Strait Islander corporation’s constitution provides for the remuneration of officers, member approval is not needed to give a financial benefit if:

                     (a)  the benefit is remuneration to a related party as a director or officer of the following:

                              (i)  the corporation;

                             (ii)  an entity that the corporation controls;

                            (iii)  an entity that controls the corporation;

                            (iv)  an entity that is controlled by an entity that controls the corporation; and

                     (b)  to give the remuneration would be reasonable given:

                              (i)  the circumstances of the corporation or entity giving the remuneration; and

                             (ii)  the related party’s circumstances (including the responsibilities involved in the office, the officer’s experience and performance record and the officer’s length of service).

Benefits that are payments of expenses incurred

             (3)  Member approval is not needed to give a financial benefit if:

                     (a)  the benefit is payment of expenses incurred or to be incurred, or reimbursement for expenses incurred, by a related party in performing duties as an officer or employee of the following:

                              (i)  the corporation;

                             (ii)  an entity that the corporation controls;

                            (iii)  an entity that controls the corporation;

                            (iv)  an entity that is controlled by an entity that controls the corporation; and

                     (b)  to give the benefit would be reasonable in the circumstances of the corporation or entity giving the remuneration.

             (4)  For the purposes of this section:

                     (a)  a contribution made by an Aboriginal and Torres Strait Islander corporation or related body corporate to a fund for the purpose of making provision for, or obtaining, superannuation benefits for an officer of the corporation or related body corporate, or for dependants of an officer of the corporate or related body corporate, is remuneration provided by the body to the officer of the body; and

                     (b)  a financial benefit given to a person because of the person ceasing to hold an office or employment as an officer or employee of a body corporate is remuneration paid or provided to the person in a capacity as an officer of the body.

287-5   Benefit to or by closely-held subsidiary

             (1)  Member approval is not needed to give a financial benefit if the benefit is given:

                     (a)  by a body corporate to a closely-held subsidiary of the body; or

                     (b)  by a closely-held subsidiary of a body corporate to the body or an entity it controls.

             (2)  For the purposes of this section, a body corporate is a closely-held subsidiary of another body corporate if, and only if, no member of the first-mentioned body is a person other than:

                     (a)  the other body; or

                     (b)  a nominee of the other body; or

                     (c)  a body corporate that is a closely-held subsidiary of the other body because of any other application or applications of this subsection; or

                     (d)  a nominee of a body referred to in paragraph (c).

             (3)  For the purposes of subsection (2), disregard shares that are not voting shares.

287-10   Benefits to members that do not discriminate unfairly

                   Member approval is not needed to give a financial benefit if:

                     (a)  the benefit is given to the related party in the related party’s capacity as a member of the corporation; and

                     (b)  giving the benefit does not discriminate unfairly against the other members of the corporation.

287-12   Benefits given to comply with Native Title legislation obligations

                   Member approval is not needed to give a financial benefit if the benefit is given to the related party to comply with a Native Title legislation obligation.

287-15   Court order

                   Member approval is not needed to give a financial benefit under an order of a court.



 

Division 290 Procedure for obtaining member approval

290-1   Resolution may specify matters by class or kind

                   A resolution under this Division may specify anything either in particular or by reference to class or kind.

290-5   Corporation must lodge material that will be put to members with the Registrar

             (1)  At least 14 days before the notice convening the relevant meeting is given, the Aboriginal and Torres Strait Islander corporation must lodge:

                     (a)  a proposed notice of meeting setting out the text of the proposed resolution; and

                     (b)  a proposed explanatory statement satisfying section 290-10; and

                     (c)  any other document that is proposed to accompany the notice convening the meeting and that relates to the proposed resolution; and

                     (d)  any other document that any of the following proposes to give to members of the corporation before or at the meeting:

                              (i)  the corporation;

                             (ii)  a related party of the corporation to whom the proposed resolution would permit a financial benefit to be given;

                            (iii)  an associate of the corporation or of such a related party;

                            and can reasonably be expected to be material to a member in deciding how to vote on the proposed resolution.

Penalty:  5 penalty units.

             (2)  An offence against subsection (1) is an offence of strict liability.

Note:          For strict liability , see section 6.1 of the Criminal Cod e.

             (3)  If, when the notice convening the meeting is given, the Registrar:

                     (a)  has approved in writing a period of less than 14 days for the purposes of subsection (1); and

                     (b)  has not revoked the approval by written notice to the corporation;

subsection (1) applies as if the reference to 14 days were a reference to the approved period.

             (4)  An approval under subsection (3) is not a legislative instrument.

             (5)  The Registrar may give and revoke approvals for the purposes of subsection (3).

290-10   Requirements for explanatory statement to members

             (1)  The proposed explanatory statement lodged under section 290-5 must be in writing and set out:

                     (a)  the related parties to whom the proposed resolution would permit financial benefits to be given; and

                     (b)  the nature of the financial benefits; and

                     (c)  in relation to each director of the corporation:

                              (i)  if the director wanted to make a recommendation to members about the proposed resolution—the recommendation and his or her reasons for it; or

                             (ii)  if not—why not; or

                            (iii)  if the director was not available to consider the proposed resolution—why not; and

                     (d)  in relation to each such director:

                              (i)  whether the director had an interest in the outcome of the proposed resolution; and

                             (ii)  if so—what it was; and

                     (e)  all other information that:

                              (i)  is reasonably required by members in order to decide whether or not it is in the corporation’s interests to pass the proposed resolution; and

                             (ii)  is known to the corporation or to any of its directors.

             (2)  An example of the kind of information referred to in paragraph (1)(e) is information about what, from an economic and commercial point of view, are the true potential costs and detriments of, or resulting from, giving financial benefits as permitted by the proposed resolution, including (without limitation):

                     (a)  opportunity costs; and

                     (b)  taxation consequences (such as liability to fringe benefits tax); and

                     (c)  benefits forgone by whoever would give the benefits.

Note:          Sections 265-1 and 265-5 require an officer of a corporation to act honestly and to exercise care and diligence. These duties extend to preparing an explanatory statement under this section. Section 561-5 creates offences where false and misleading material relating to a corporation’s affairs is made available or furnished to members.

290-15   Registrar may comment on proposed resolution

             (1)  Within 14 days after the corporation lodges documents under section 290-5, the Registrar may give to the corporation written comments on those documents (other than comments about whether the proposed resolution is in the corporation’s best interests).

             (2)  Comments under subsection (1) are not legislative instruments.

             (3)  The Registrar must keep a copy of the written comments it gives to a corporation under subsection (1) and sections 421-1 and 421-5 apply to the copy as if it were a document lodged with the Registrar.

             (4)  The fact that the Registrar has given particular comments, or has declined to give comments, under subsection (1) does not in any way affect the performance or exercise of any of the Registrar’s functions and powers.

290-20   Requirements for notice of meeting

             (1)  The notice convening the meeting:

                     (a)  must be the same, in all material respects, as the proposed notice lodged under section 290-5; and

                     (b)  must be accompanied by an explanatory statement that is the same, in all material respects, as the proposed explanatory statement lodged under that section; and

                     (c)  must be accompanied by a document that is, or documents that are, the same, in all material respects, as the document or documents (if any) lodged under paragraph 290-5(1)(c); and

                     (d)  if the Registrar has given to the corporation, under section 290-15, comments on the documents lodged under section 290-5—must be accompanied by a copy of those comments; and

                     (e)  must not be accompanied by any other documents.

Penalty:  5 penalty units.

             (2)  An offence against subsection (1) is an offence of strict liability.

Note:          For strict liability , see section 6.1 of the Criminal Cod e.

290-25   Other material put to members

             (1)  Each document (if any) that:

                     (a)  did not accompany the notice convening the meeting; and

                     (b)  was given to members of the corporation before or at the meeting by:

                              (i)  the corporation; or

                             (ii)  a related party of the corporation to whom the proposed resolution would permit a financial benefit to be given; or

                            (iii)  an associate of the corporation or of such a related party; and

                     (c)  can reasonably be expected to have been material to a member in deciding how to vote on the proposed resolution;

must be the same, in all material respects, as a document lodged under paragraph 290-5(1)(d).

Penalty:  5 penalty units.

             (2)  An offence against subsection (1) is an offence of strict liability.

Note:          For strict liability , see section 6.1 of the Criminal Cod e.

290-30   Proposed resolution cannot be varied

                   The resolution must be the same as the proposed resolution set out in the proposed notice lodged under section 290-5.

290-35   Voting by or on behalf of related party interested in proposed resolution

             (1)  At a general meeting, a vote on a proposed resolution under this Division must not be cast (in any capacity) by or on behalf of:

                     (a)  a related party of the corporation to whom the resolution would permit a financial benefit to be given; or

                     (b)  an associate of such a related party.

             (2)  Subsection (1) does not prevent the casting of a vote if:

                     (a)  it is cast by a person as a proxy appointed by writing that specifies how the proxy is to vote on the proposed resolution; and

                     (b)  it is not cast on behalf of a related party or associate of a kind referred to in subsection (1).

             (3)  The regulations may prescribe cases where subsection (1) does not apply.

             (4)  The Registrar may by writing declare that:

                     (a)  subsection (1) does not apply to a specified proposed resolution; or

                     (b)  subsection (1) does not prevent the casting of a vote, on a specified proposed resolution, by a specified entity, or on behalf of a specified entity;

but may only do so if satisfied that the declaration will not cause unfair prejudice to the interests of any member of the corporation.

             (5)  A declaration in force under subsection (4) has effect accordingly.

             (6)  A declaration under subsection (4) is not a legislative instrument.

             (7)  If a vote is cast in contravention of subsection (1), the related party or associate, as the case may be, contravenes this subsection, whether or not the proposed resolution is passed.

Penalty:  200 penalty units or imprisonment for 5 years, or both.

             (8)  For the purposes of this section, a vote is cast on behalf of an entity if, and only if, it is cast:

                     (a)  as proxy for the entity; or

                     (b)  otherwise on behalf of the entity; or

                     (c)  in respect of a share in respect of which the entity has:

                              (i)  power to vote; or

                             (ii)  power to exercise, or control the exercise of, a right to vote.

             (9)  Subject to subsection 290-40(1), a contravention of this section does not affect the validity of a resolution.

           (10)  This section has effect despite:

                     (a)  anything else in:

                              (i)  this Act; or

                             (ii)  any other law (including the general law) of a State or Territory; or

                     (b)  anything in a body corporate’s constitution.

290-40   Voting on the resolution

             (1)  If any votes on the resolution are cast in contravention of subsection 290-35(1), it must be the case that the resolution would still be passed even if those votes were disregarded.

             (2)  If a poll was duly demanded on the question that the resolution be passed, subsections (3) and (4) apply in relation to voting on the poll.

             (3)  In relation to each member of the corporation who voted on the resolution in person, the corporation must record in writing:

                     (a)  the member’s name; and

                     (b)  how many votes the member cast for the resolution and how many against.

Penalty:  5 penalty units.

             (4)  In relation to each member of the corporation who voted on the resolution by proxy, or by a representative authorised under section 201-110, the corporation must record in writing:

                     (a)  the member’s name; and

                     (b)  in relation to each person who voted as proxy, or as such a representative, for the member:

                              (i)  the person’s name; and

                             (ii)  how many votes the person cast on the resolution as proxy, or as such a representative, for the member; and

                            (iii)  how many of those votes the person cast for the resolution and how many against.

Penalty:  5 penalty units.

             (5)  For 7 years after the day when a resolution under this Division is passed, the corporation must retain the records it made under this section in relation to the resolution.

Penalty:  5 penalty units.

             (6)  An offence against subsection (3), (4) or (5) is an offence of strict liability.

Note:          For strict liability , see section 6.1 of the Criminal Code .

290-45   Notice of resolution to be lodged

                   The corporation must lodge a notice setting out the text of the resolution within 28 days after the resolution is passed.

290-50   Declaration by court of substantial compliance

             (1)  The Court may declare that the conditions provided for in this Division have been satisfied if it finds that they have been substantially satisfied.

             (2)  A declaration may be made only on the application of an interested person.



 

Division 293 Related parties and financial benefits

293-1   Related parties

Controlling entities

             (1)  An entity that controls an Aboriginal and Torres Strait Islander corporation is a related party of the corporation.

Directors and their spouses

             (2)  The following persons are related parties of an Aboriginal and Torres Strait Islander corporation:

                     (a)  directors of the corporation;

                     (b)  directors (if any) of an entity that controls the corporation;

                     (c)  if the corporation is controlled by an entity that is not a body corporate—each of the persons making up the controlling entity;

                     (d)  spouses and de facto spouses of the persons referred to in paragraphs (a), (b) and (c).

Relatives of directors and spouses

             (3)  The following relatives of persons referred to in subsection (2) are related parties of the Aboriginal and Torres Strait Islander corporation:

                     (a)  parents;

                     (b)  children.

Entities controlled by other related parties

             (4)  An entity controlled by a related party referred to in subsection (1), (2) or (3) is a related party of the Aboriginal and Torres Strait Islander corporation unless the entity is also controlled by the corporation.

Related party in previous 6 months

             (5)  An entity is a related party of an Aboriginal and Torres Strait Islander corporation at a particular time if the entity was a related party of the corporation of a kind referred to in subsection (1), (2), (3) or (4) at any time within the previous 6 months.

Entity has reasonable grounds to believe it will become related party in future

             (6)  An entity is a related party of an Aboriginal and Torres Strait Islander corporation at a particular time if the entity believes or has reasonable grounds to believe that it is likely to become a related party of the corporation of a kind referred to in subsection (1), (2), (3) or (4) at any time in the future.

Acting in concert with related party

             (7)  An entity is a related party of an Aboriginal and Torres Strait Islander corporation if the entity acts in concert with a related party of the corporation on the understanding that the related party will receive a financial benefit if the corporation gives the entity a financial benefit.

293-5   Giving a financial benefit

             (1)  In determining what constitutes giving a financial benefit :

                     (a)  give a broad interpretation to financial benefits being given, even if criminal or civil penalties may be involved; and

                     (b)  the economic and commercial substance of conduct is to prevail over its legal form; and

                     (c)  disregard any consideration that is or may be given for the benefit, even if the consideration is adequate.

             (2)  Giving a financial benefit includes the following:

                     (a)  giving a financial benefit indirectly, for example, through 1 or more interposed entities;

                     (b)  giving a financial benefit by making an informal agreement, oral agreement or an agreement that has no binding force;

                     (c)  giving a financial benefit that does not involve paying money (for example by conferring a financial advantage).

             (3)  The following are examples of giving a financial benefit to a related party:

                     (a)  giving or providing the related party finance or property;

                     (b)  buying an asset from or selling an asset to the related party;

                     (c)  leasing an asset from or to the related party;

                     (d)  supplying services to or receiving services from the related party;

                     (e)  issuing securities or granting an option to the related party;

                      (f)  taking up or releasing an obligation of the related party.



 

Division 296 Interaction with other rules

296-1   General duties still apply

                   A director is not relieved from any of his or her duties under this Act (including sections 265-1 and 265-25), or his or her fiduciary duties, in connection with a transaction merely because the transaction is authorised by a provision of this Part or is approved by a resolution of members under a provision of this Part.