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2022
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
NATIONAL RECONSTRUCTION FUND CORPORATION BILL 2022
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Industry and Science, the Hon Ed Husic MP)
GLOSSARY
|
Abbreviation |
Definition |
|
Acts Interpretation Act |
Acts Interpretation Act 1901 |
|
AUSTRAC |
Australian Transaction Reports and Analysis Centre |
|
Bill |
The National Reconstruction Fund Corporation Bill 2022 |
|
CEO |
Chief Executive Officer |
|
Corporation |
The National Reconstruction Fund Corporation |
|
ICCPR |
International Covenant on Civil and Political Rights |
|
Legislation Act |
Legislation Act 2003 |
|
Ministers |
The Minister for Industry and Science, and the Minister for Finance. |
|
Nominated Minister |
The Minister for Industry and Science |
|
PGPA Act |
Public Governance, Performance and Accountability Act 2013 |
|
PGPA Rule |
Public Governance, Performance and Accountability Rule 2014 |
|
Remuneration Tribunal Act |
Remuneration Tribunal Act 1973 |
|
Special Account |
National Reconstruction Fund Corporation Special Account |
NATIONAL RECONSTRUCTION FUND CORPORATION BILL 2022
OUTLINE
The National Reconstruction Fund Corporation Bill 2022 (the Bill) gives effect to the Government’s commitment to establish the National Reconstruction Fund Corporation (the Corporation). The Government is providing the Corporation with $15 billion to enable it to invest in priority areas of the Australian economy.
The Corporation will invest to support, diversify and transform Australia’s industry and economy to secure future prosperity and drive sustainable economic growth. It will provide finance to projects across priority areas of the economy to leverage Australia’s natural and competitive strengths, supporting the growth of a vibrant and modern economy, better positioning industry to be successful in a net zero economy and more resilient against supply chain vulnerabilities.
The finance provided by the Corporation will encourage private investment,making it easier for industry to commercialise innovation and technology, supporting the development of our national sovereign capabilities and driving regional economic diversification and development.
The Corporation will assist Australian industry to seize new growth opportunities by providing finance for projects that add value, improve productivity and support transformation, rather than enabling expansion of business as usual. Investment in these activities will help create secure, high value jobs for Australians and strengthen our future prosperity.
The Bill:
· establishes the Corporation as a new corporate Commonwealth entity;
· describes the Corporation’s functions and powers, including its investment functions and powers and its powers in relation to engaging staff and consultants;
· establishes the Corporation’s Board and its functions including: membership, appointments, terms and conditions of appointment, and meetings and committees of the Board;
· provides for the appointment of the Chief Executive Officer (CEO) and their functions and powers, remuneration, and other terms and conditions;
· establishes the Corporation’s financial and funding arrangements, including the establishment of a special account, the process to request payment by the Commonwealth from the Special Account, and management of surplus funds and borrowing by the Corporation;
· sets out the Corporation’s investment functions, which are:
o to provide financial accommodation for purposes relating to any of the priority areas of the Australian economy; and
o to acquire equity interests in entities that carry on activities in a priority area of the Australian economy.
· establishes the power for Ministers to issue the Investment Mandate as a non-disallowable legislative instrument and declare the priority areas of the Australian economy in a disallowable legislative instrument;
·
sets out the Corporation’s reporting obligations, powers to
disclose information and requirements for periodic reviews of the
operation of the Bill;
· outlines other functions and powers of the Ministers, including who appoints the Corporation’s Board and who approves payments to the Corporation.
FINANCIAL IMPACT STATEMENT
A total of $15 billion will be made available for the purposes of the Corporation with $5 billion available from commencement. The remaining $10 billion will be made available by 2 July 2029 in instalments as determined by the Ministers. The Corporation is expected to generate revenue from its investments, which will be available for reinvestment.
CONSULTATION
The following Government stakeholders were consulted in relation to this Bill:
Austrade; the Attorney-General’s Department; the Australian Government Solicitor; the Department of Agriculture, Fisheries and Forestry; the Department of Climate Change, Energy, the Environment and Water; the Department of Defence; the Department of Education; the Department of Employment and Workplace Relations; the Department of Finance; the Department of Foreign Affairs and Trade; the Department of Health and Aged Care; the Department of Infrastructure, Transport, Regional Development, Communications and the Arts; Industry, Innovation and Science Australia; the National Intelligence Community; the Department of the Prime Minister and Cabinet; the Department of the Treasury.
The following non-Government stakeholders were consulted in relation to the Bill:
The Australian Banking Association; the Australian Council of Superannuation Investors; the Australian Council of Trade Unions; the Australian Investment Council; Industry Super Australia; Law Council of Australia.
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
The National Reconstruction Fund Corporation Bill 2022
This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Bill
The National Reconstruction Fund Corporation Bill 2022 (the Bill) gives effect to the Government’s commitment to establish the National Reconstruction Fund Corporation (the Corporation). The Government is providing the Corporation with $15 billion to enable it to invest in priority areas of the Australian economy.
The Corporation will invest to support, diversify and transform Australia’s industry and economy to secure future prosperity and drive sustainable economic growth. It will provide finance to projects across priority areas to leverage Australia’s natural and competitive strengths, supporting the growth of a vibrant and modern economy and better positioning industry to be successful in a net zero economy and more resilient against supply chain vulnerabilities.
The finance provided by the Corporation will encourage private investment, making it easier for industry to commercialise innovation and technology, supporting the development of our national sovereign capabilities and driving regional economic diversification and development.
The Corporation will assist Australian industry to seize new growth opportunities by providing finance for projects that add value, improve productivity and support transformation, rather than enabling expansion of business as usual. Investment in these activities will help create secure, high value jobs for Australians and strengthen our future prosperity.
Human rights implications
The right to freedom of expression as set out in Article 19 of the International Covenant on Civil and Political Rights (the ICCPR) includes the freedom to seek, receive and impart information and ideas of all kinds. The ICCPR recognises that the exercise of these rights may be subject to certain restrictions set out in Article 19(3).
Clause 73 (Board to be consulted on Investment Mandate) places restrictions on the publication of national security information or sensitive financial intelligence information which is necessary for the protection of national security and sensitive Australian Transaction Reports and Analysis Centre (AUSTRAC) information. The restriction is appropriately confined to information the publication of which is likely to prejudice national security, or information of AUSTRAC the disclosure of which is inherently prejudicial in character due to its sensitivity. This sort of information is typically subject to secrecy laws under other Commonwealth legislation primarily due to the negative impact disclosure would have on the ability of agencies with national security functions to perform those functions.
Clause 83 (Publication of reports etc.) places some restrictions on the disclosure of commercially sensitive information. These restrictions are necessary to protect the rights or reputations of persons with whom the Corporation deals, who may provide sensitive commercial information with the expectation that it will be held in confidence. Clause 83 also places restrictions on the disclosure of national security information or sensitive financial intelligence information which is necessary for the protection of national security and sensitive AUSTRAC information. The restriction is appropriately confined to information the disclosure of which is likely to prejudice national security, or information of AUSTRAC the disclosure of which is inherently prejudicial in character due to its sensitivity. This sort of information is typically subject to secrecy laws under other Commonwealth legislation primarily due to the negative impact disclosure would have on the ability of agencies with national security functions to perform those functions.
Clause 85 (Disclosure of official information) provides that officials of the Corporation may disclose official information to certain recipients for the purposes of facilitating the performance of the Corporation’s investment functions or any other function or power. It further provides that officials can disclose national security information or sensitive financial intelligence information to certain recipients for the purposes of facilitating the performance of the Corporation’s investment functions or to enable or assist the exercise of any function or power of the recipient or the recipient’s national security agency. This clause authorises the kind of information that can be disclosed, to whom it can be disclosed and for what purpose to protect the rights of those who disclose information to the Corporation, protect national security and other sensitive information, while enabling agencies with national security functions to effectively perform their functions.
Conclusion
The Bill is compatible with human rights. To the extent that it may limit human rights, those limitations are reasonable, necessary and proportionate.
NATIONAL RECONSTRUCTION FUND CORPORATION BILL 2022
NOTES ON CLAUSES
Part 1 - Pre liminary
Clause 1: Short title
1.1 This clause provides that the Bill, when enacted, may be cited as the National Reconstruction Fund Corporation Act 2022.
Clause 2: Commencement
1.2 This clause provides for the commencement of the Bill.
1.3 The Bill will commence on a date fixed by a proclamation issued by the Governor-General, or six months and one day after Royal Assent if no proclamation is made.
1.4 The commencement by proclamation will allow statutory appointments and administrative arrangements to be put in place in order to effect the operation of the legislative framework from commencement.
1.5 No provisions in this Bill will apply retrospectively.
Clause 3: Object
1.6 This clause sets out the object of the Bill, which is to establish the National Reconstruction Fund Corporation in order to facilitate increased flows of finance into priority areas of the Australian economy. The Corporation will support, diversify and transform Australia’s industry and economy through targeted investments, crowding in private co-investment in projects supported by the Corporation’s finance.
1.7 The priority areas of the Australian economy will be declared in a disallowable legislative instrument under clause 6.
Clause 4: Simplified outline of this Act
1.8 The simplified outline of the Bill is included to assist readers in understanding the substantive provisions. It is not intended to be comprehensive and readers should rely on the substantive provisions.
Clause 5: Definitions
1.9 This clause defines the key terms used in this Bill.
1.10 Although the definitions are largely self-explanatory, the following points should be noted:
· The definition of constitutionally supported activities references the constitutional bases for the Corporation’s investment powers, referring to the Parliament’s power to legislate in relation to the matters outlined in the definition. For further information see the notes to clause 63.
· The definition of equity interest covers shares in a company, units in a trust or an interest in a partnership. To recognise that ownership interests may take a number of different and potentially novel forms, including interests in unincorporated arrangements, additional types of interests may be specified in the rules. The rules may also specify that a particular interest is not an equity interest for the purposes of this Bill. The intention of this rule making power is to enable investments which could otherwise be considered financial accommodation (for example, potentially certain types of shares) to be excluded from the definition of equity interest and therefore treated as financial accommodation.
· Financial accommodation is defined to mean financial accommodation in the form of a loan, letter of credit, purchase of bonds or other debt securities, guarantee or other form. This definition is intended to be broadly applied to cover any form of monetary commitment supporting the performance of an obligation (for example guarantees, letters of credit, underwriting agreements) or any type of direct provision of finance that might ordinarily be considered “financial accommodation”. Financial accommodation does not include:
o the acquisition of an equity interest;
o Or a monetary grant that is (or may reasonably be regarded as, the equivalent of a gift). For further information see the notes to clause 63.
Clause 6: Priority areas of the Australian economy
1.11 This clause sets out that the priority areas of the Australian economy will be declared by the Ministers, in a disallowable legislative instrument.
1.12 Declaring the priority areas in a legislative instrument allows for timely changes to the Corporation’s investment focus in the event priority areas change, for example because of significant technological or other unforeseen developments that require immediate or prompt changes to the Corporation’s investment focus.
Clause 7: Crown to be bound
1.13 Subclause 7(1) makes clear that the Crown is bound in all its capacities by the Bill.
1.14 Subclause 7(2) provides an exemption stating that the Bill does not make the Crown liable to a pecuniary penalty or to be prosecuted for an offence.
Clause 8: Extension to external territories
1.15 This clause ensures that the Bill applies in all external Territories.
Clause 9: Extra-territorial application
1.16
This clause ensures that the Bill applies both within and outside
of Australia. While the Corporation will invest in projects that
are solely or mainly Australian-based, there may be aspects of the
Corporation’s activities which take place outside Australia.
This provision ensures any such activities are captured by the
Bill.
Part 2 - National Reconstruction Fund Corporation
Clause 10: Simplified outline of this Part
2.1 This Part establishes the Corporation and sets out its functions. The simplified outline of the Part is included to assist readers in understanding the substantive provisions. It is not intended to be comprehensive and readers should rely on the substantive provisions.
Clause 11: Establishment
2.2 This clause establishes the Corporation as a body corporate with a seal that can acquire and dispose of assets. The Corporation can sue and be sued.
2.3 The Corporation is a corporate Commonwealth entity and as the note to subclause 11(2) states is subject to the Public Governance, Performance and Accountability Act 2013 (PGPA Act). The PGPA Act imposes various duties on corporate Commonwealth entities and their officers including in relation to use of information and position, the management of funds, the operations of subsidiaries, and reporting requirements.
Clause 12: Corporation’s functions
2.4 This clause sets out the functions of the Corporation. Its main function, as outlined in clause 63, is to invest in projects in priority areas of the Australian economy through the provision of financial accommodation and acquisition of equity interests.
2.5 The Corporation may make investments itself or through its subsidiaries.
2.6 The Corporation may liaise with relevant bodies, including Commonwealth organisations and State and Territory governments for the purpose of facilitating its investment.
2.7 The Corporation must act in a proper, efficient and effective manner in the performance of its functions.
C lause 13: Corporation’s powers
2.8 This clause gives the Corporation the power to do all things necessary or convenient to be done for or in connection with the performance of its functions. These powers may be exercised within or outside Australia.
Clause 14: Corporation does not have privileges and immunities of the Crown
2.9 This clause provides that the Corporation does not enjoy the privileges and immunities of the Crown in right of the Commonwealth.
Part 3 - Board of Corporation
Division 1 - Simplified Outline
Clause 15: Simplified outline of this Part
3.1 This Part establishes the Board and its functions. The simplified outline of the Part is included to assist readers in understanding the substantive provisions. It is not intended to be comprehensive and readers should rely on the substantive provisions.
Division 2 - Establishment and functions
Clause 16: Establishment
3.2 This clause establishes the Board of the Corporation, and the remainder of the Division sets out the Board’s functions, membership and operational requirements.
Clause 17: Functions of the Board
3.3 This clause sets out the functions of the Board.
3.4 The Board must develop strategies and policies to be followed by the Corporation and to ensure the proper, efficient and effective performance of the Corporation’s functions.
3.5 The Board’s function includes oversight of the Corporation’s investment function to invest in priority areas of the Australian economy (see Part 6).
3.6 The Board has the power to do all things necessary or convenient to be done for or in connection with the performance of its functions.
3.7 The Board’s functions and powers include any function or power conferred on the Corporation. Subclause 17(3) clarifies this, and that acts done with the authority of the Board can also be taken to have been done by the Corporation.
Division 3 - Board members
Clause 18: Membership
3.8 The Board is to consist of a Chair and at least 4, and no more than 6, other members.
Clause 19: Appointment of Board members
3.9 This clause provides that Board members are to be appointed by the Ministers by written instrument, on a part-time basis.
3.10 Given the expected quantum of funds under the Board’s management and the complexity involved in operating across different priority areas of the economy, it is important to have Board members who are well-qualified. Consequently, a person cannot be appointed as a Board member unless the Ministers are satisfied that they are qualified for appointment because of their reputation in and knowledge of, or experience in, one or more of the areas listed in paragraphs 19(2)(c) - (k), or another field that the Ministers consider appropriate under paragraph 19(2)(l).
3.11 Commonwealth employees and holders of full-time office under a Commonwealth law are not eligible for Board appointments. This provision is designed so that the Corporation operates, and is seen to operate, independently from the Government.
Clause 20: Chair
3.12 The Chair must be appointed by the Ministers, by written instrument, from amongst the Board members. This means the Chair is subject to the same qualification requirements as other Board members under subclauses 19(2) and (3).
Clause 21: Term of appointment
3.13 A member holds office for the period specified in their instrument of appointment. This period cannot exceed five years. Five years is considered appropriate to ensure continuity of management and appropriate retention of corporate knowledge, but the Ministers have discretion to appoint for a shorter period where appropriate. For example, to ensure that not all members’ appointments expire at the same time.
3.14 Section 33AA of the Acts Interpretation Act 1901 (Acts Interpretation Act) provides that in any Act ‘appoint’ includes ‘re-appoint’. A Board member is therefore able to be re-appointed for further periods of up to five years. With reappointment, a member’s total period of membership may exceed five years.
Clause 22: Acting appointments
3.15 The Ministers are empowered to appoint an existing Board member, by written instrument, to act as the Chair during:
· a vacancy in the office of Chair;
· any or all periods when the Chair is absent from duty or from Australia; or
· a period where the Chair is, for any reason, unable to perform the duties of the office.
3.16 This clause allows Ministers to ensure that there is always a Chair presiding over Board meetings, and the Board has a Chair at all other material times.
3.17 The Ministers are also empowered to appoint a person to act as a Board member (other than as Chair) during a vacancy in the office of a member or during any period when a member is absent from duty or from Australia or is, for any reason, unable to perform the duties of the office.
3.18 Appointees for acting Board members are subject to the same eligibility requirements as full time Board members as outlined in clause 19.
3.19 A note to subclause 22(2) states that sections 33AB and 33A of the Acts Interpretation Act have rules that apply to acting appointments. These rules are relevant to acting appointments made under clause 22 and relate to the terms and conditions, period of acting, the exercise of functions and powers, validity of actions and resignation.
Clause 23: Remuneration
3.20 This clause deals with remuneration of Board members. Remuneration will be determined by the Remuneration Tribunal. If no determination has been provided, then the remuneration for Board members can be prescribed in rules.
3.21 This clause also provides for allowances of Board members to be prescribed by rules. While the Remuneration Tribunal’s determination may include annual allowances and travelling allowances, the Tribunal is not required to make additional determinations on any other allowances. As such, this clause allows for these to be prescribed in rules.
3.22 Subclause 23(3) specifies that this clause has effect subject to the Remuneration Tribunal Act 1973 (Remuneration Tribunal Act), which establishes the Remuneration Tribunal and sets out the rules for the making of determinations by the Tribunal.
Clause 24: Leave of absence
3.23 The nominated Minister may determine the terms and conditions for granting a leave of absence to the Chair.
3.24 The Chair may in turn determine the terms and conditions for granting a leave of absence to a Board member.
3.25 The Chair must notify the Ministers if the Chair grants a Board member a leave of absence for a period that exceeds 3 months.
Clause 25: Resignation of Board members
3.26 This clause sets out the resignation procedure for Board members, which must be in writing and takes effect on the day it is received by the Ministers unless the resignation specifies a later day.
Clause 26: Termination of appointment of Board members
3.27 This clause sets out the procedures and grounds for the termination of appointment of Board members. The Ministers have the discretion to terminate the appointment of a Board member on the grounds of misbehaviour or physical or mental incapacity if the Board member is unable to perform the duties of their office.
3.28 The Ministers may also terminate the appointment of a Board member where:
· the member becomes bankrupt, applies to take the benefit of any law for the relief of bankrupt or insolvent debtors, compounds with the member’s creditors or makes an assignment of the member’s remuneration for the benefit of their creditors; or
· the member does not attend three consecutive meetings of the Board and is not on a leave of absence during that time.
3.29 The appointment of a Board member may also be terminated under section 30 of the PGPA Act, which provides that an appointer (i.e. the Ministers) may terminate the appointment of another person if they contravene their general duties (outlined in Subdivision A of the PGPA Act). The grounds of termination in this clause are intended to act in addition to those set out in the PGPA Act.
Clause 27: Other terms and conditions of Board members
3.30 The Ministers may determine other terms and conditions for Board members in addition to matters already covered by the Bill. Any additional terms and conditions must not conflict with the provisions of the Bill.
Division 4 - Meetings of the Board
Clause 28: Convening meetings
3.31 This clause gives the Chair power to call meetings and sets an overriding requirement on the Board to hold meetings as necessary for the efficient performance of its functions and requires that at least 6 meetings are held each calendar year.
3.32 To ensure that Board members other than Chair are able to require the Board to meet, there is an obligation on the Chair to call a meeting if requested to do so by a Board member.
3.33 Under section 33B of the Acts Interpretation Act, the Board may permit any or all members to participate in a meeting by telephone, closed-circuit television or any other means of communication and these members are taken to be present at the meeting and to form part of any quorum for the meeting.
3.34 Where permission has been granted to participate in meetings by telephone, closed-circuit television or any other means of communication, a meeting may be held at two or more places at the same time.
Clause 29: Presiding at meetings
3.35 The Chair must preside at all meetings of the Board that they attend. However, if the Chair is absent, the other Board members present must appoint one of themselves to preside over the meeting. There is no restriction on which Board members are eligible to preside at meetings in this instance. The term ‘Chair’ includes a person acting as Chair. This clause ensures that there is always a Chair presiding over a Board meeting.
Clause 30: Quorum
3.36 For a meeting of the Board a quorum is constituted by:
· 4 Board members if there are 6 or more Board members; and
· 3 Board members if there are only 5 Board members.
This provision has the effect of requiring a majority of the Board to be present to constitute a quorum.
3.37 Under section 29 of the PGPA Act Board members have a duty to disclose material personal interests that relate to the affairs of the Corporation. Where a Board member has disclosed such an interest they must not be present while the matter is being considered at a meeting or vote on the matter unless the Minister declares or the Board decides that they may in accordance with rule 15 of the Public Governance, Performance and Accountability Rule 2014 (PGPA Rule).
3.38 If the Board member’s absence on this ground would result in a quorum no longer being present, the remaining Board members at the meeting will constitute a quorum for the purpose of any deliberation or decision with respect to that matter. This clause ensures that decisions can still be taken by the Board while also protecting the integrity of the Board’s decisions from conflicts of interest.
Clause 31: Voting at meetings
3.39 This clause deals with the process for voting at Board meetings. Questions at meetings are to be decided by a majority of the votes of the members present and able to vote. The person presiding at a meeting, which could be the Chair or another member under clause 29, has a deliberative vote and, where there is an equality of votes, a casting vote.
3.40 Under section 29 of the PGPA Act Board members have a duty to disclose material personal interests that relate to the affairs of the entity. Where a Board member has disclosed such an interest they must not vote on the matter unless the Minister declares or the Board decides that they may in accordance with rule 15 of the PGPA Rule.
Clause 32: Conduct of meetings
3.41 The Board has discretion to regulate proceedings at its meetings as it considers appropriate.
Clause 33: Minutes
3.42 The Board must keep minutes of its meetings.
Clause 34: Decisions without meetings
3.43 To ensure that the Board can operate efficiently and flexibly, clause 34 sets out a procedure by which the Board can determine that certain kinds of decisions may be made without a meeting and the method by which members can indicate their agreement. For example, the Board could make decisions by email provided that they have determined a method for doing so, which might include the time that Board members would have to respond.
3.44 Where such a determination has been made, a decision is taken to have been made at a meeting of the Board if:
· without a meeting of the Board, a majority of members entitled to vote on the proposed decision indicate their support of the resolution in accordance with the method determined by the Board; and
· all members were informed of the proposed resolution, or reasonable efforts had been made to inform them of it.
3.45 A Board member is not entitled to vote on a proposed decision if they would not have been entitled to vote on the proposal if the matter was discussed at a meeting. This is to ensure that the same rules regarding conflicts of interest are applied regardless of the method by which a decision is made.
3.46 The Board is required to keep a record of resolutions that are made without a meeting in accordance with this clause.
Part 4 - Chief Executive Officer, staff and consultants and committees
Division 1 - Simplified outline
Clause 35: Simplified outline of this Part
4.1 This Part establishes the role of the CEO and sets out the CEO’s responsibilities and powers. This Part also deals with the engagement of staff and consultants. The simplified outline of the Part is included to assist readers in understanding the substantive provisions. It is not intended to be comprehensive and readers should rely on the substantive provisions.
Division 2 - Chief Executive Officer of Corporation
Clause 36: Establishment
4.2 This clause establishes the office of CEO of the Corporation.
Clause 37: Functions of the CEO
4.3 This clause provides that the CEO is responsible for the day-to-day administration of the Corporation and has the power to do all things necessary or convenient to be done for or in connection with the performance of the CEO’s duties.
4.4 In order to ensure appropriate governance and oversight by the Board, the clause requires the CEO to act in accordance with Board policies and directions.
4.5 Subclause 37(6) clarifies that a direction from the Board is not a legislative instrument within the meaning of subsection 8(4) of the Legislation Act. This is because such a direction is administrative in nature.
Clause 38: Appointment
4.6 This clause gives the Board the power to appoint the CEO after consultation with the Ministers. The requirement of consultation with Ministers reflects the importance of the CEO’s role in managing the day-to-day administration of the Corporation. The Ministers can prescribe requirements for the consultation in the rules.
4.7 The CEO is to be appointed by the Board by written instrument on a full-time basis.
4.8 The Board must not appoint a Board member as the CEO of the Corporation. This ensures the separation of the role of the CEO from the Board.
4.9 The Board must appoint the first substantive CEO within 6 months of the commencement of this provision. There is no period specified for the Board to appoint a CEO in the event that the office becomes vacant, however the Board would be expected to do so in a reasonable time to ensure the efficient operation of the Corporation.
Clause 39: CEO holds office during Board’s pleasure
4.10 Reflecting the fact that the CEO is accountable to the Board for the effective administration of the Corporation, this clause provides that the CEO holds office during the Board’s pleasure. The Board may only terminate the CEO’s appointment after the Chair has consulted with the Ministers. The Ministers can prescribe requirements for the consultation in the rules. If the Board terminates the CEO’s appointment, the Chair must notify the Ministers.
Clause 40: Acting appointments
4.11 This clause provides for the Board to appoint a person other than a Board member to act as the CEO during a vacancy in the office of the CEO or during any period, or during all periods, when the CEO is absent from duty or from Australia or is, for any reason, unable to perform the duties of the office. This appointment must be by written instrument and after consultation with the Ministers.
4.12 This clause ensures that at all times the Corporation will have a CEO to oversee its daily operations.
Clause 41: Remuneration of CEO
4.14 This clause establishes remuneration arrangements for the CEO. Remuneration will be determined by the Remuneration Tribunal. If no determination is in operation the remuneration for the CEO can be prescribed in the rules.
4.15 Allowances for the CEO may be prescribed by the rules. While the Remuneration Tribunal’s determination may include annual allowances and travelling allowances, the Tribunal is not required to make additional determinations on any other allowances. As such, this clause allows for these to be prescribed in rules.
4.16 This clause has effect subject to the Remuneration Tribunal Act which establishes the Remuneration Tribunal and sets out the rules for the making of determinations by the Tribunal.
Clause 42: Outside employment
4.17 As the CEO is appointed on a full-time basis this clause requires that the CEO must not engage in paid employment outside the duties of the office without the Chair’s approval. This provision is intended to ensure the CEO does not engage in paid employment that conflicts or could be seen to conflict with the proper performance of their duties.
4.18 If the Chair gives approval for the CEO to engage in outside employment, the Chair has a duty to notify the Ministers.
Clause 43: Other terms and conditions
4.19 This clause allows the Board to determine other terms and conditions for the CEO in addition to those covered by this Bill. Any additional terms and conditions must not conflict with the provisions of the Bill.
Clause 44: Disclosure of interests
4.20 This clause requires that the CEO’s declaration under section 29 of the PGPA Act must be made to the Board. This is intended to ensure that the Board is aware of any interests which may potentially conflict with the performance of the CEO’s responsibilities. Subclause 44(2) clarifies that the obligation for the CEO to make disclosures to the Board is in addition to any other rules made for the purpose of section 29 of the PGPA Act.
Clause 45: Resignation
4.21 This clause sets out the procedures the CEO must follow when resigning. It provides that the CEO may resign from their appointment by writing to the Chair, and for this resignation to take effect on the day it is received by the Chair unless a later day is specified in the resignation. The Chair is required by this clause to inform the Ministers of the CEO’s resignation as soon as practicable after it is received by the Chair.
Division 3 - Staff and consultants
Clause 46: Staff
4.22 Clause 46 provides for the Corporation to employ staff on terms and conditions the Corporation determines in writing for the performance of its functions and exercise of its powers.
4.23 Subclauses 46(3) and 46(4) provide for the Corporation to arrange with:
· an Agency Head;
· a public purpose body established by a law of the Commonwealth; or
· an appropriate State or Territory authority
for the services of officers or employees to be made available to the Corporation.
4.24 These provisions are intended to provide the Corporation with flexibility in its staff resourcing arrangements.
Clause 47: Consultants
4.25 Clause 47 empowers the Corporation to engage consultants if necessary to assist in the performance of its functions of the Corporation and on the terms and conditions determined by the Corporation.
Division 4 - Committees
Clause 48: Committees
4.26 Clause 48 provides that the Board may establish committees either wholly constituted by Board members, non-Board members or a combination of the two, to advise on or assist in the performance of the Board’s or the Corporation’s functions. The Board may specify the terms of reference, terms and conditions of appointment and procedures for a committee.
4.27 These committees will help provide expertise to the Corporation to support the Board’s decision making.
Clause 49: Remuneration and allowances
4.28 This clause makes provision for the remuneration of committee members. The clause:
· provides a mechanism for payment of board members for subcommittee work only in certain circumstances (where the Board decides such payment is to be made). Where a Remuneration Tribunal determination provides for additional remuneration in these circumstances, remuneration would be paid in accordance with that determination. In the event there is no Remuneration Tribunal determination applicable, the remuneration is to be prescribed by the Ministers in the rules. Allowances for committee members who are also Board members can also be prescribed by the rules; and
· provides that Committee members who are not Board members are to be paid remuneration and allowances set by the Corporation.
4.29
It is expected that the Board will only determine that Board
members should be paid additional remuneration for committee work
where the workload is beyond that which would normally be expected
of a Board member in the course of their duties.
Part 5 - Financial arrangements
Division 1 - Simplified outline
Clause 50: Simplified outline of this Part
5.1 Part 5 establishes the National Reconstruction Fund Corporation Special Account (Special Account) and sets out the purpose of the Special Account and the way it is to operate. The simplified outline of the Part is included to assist readers in understanding the substantive provisions. It is not intended to be comprehensive and readers should rely on the substantive provisions.
Division 2 — National Reconstruction Fund Corporation Special Account
Subdivision A — Establishment of Account
Clause 51: Establishment of Account
5.2 Clause 51 establishes the Special Account which will be a special account for the purposes of the PGPA Act.
5.3 It is intended that returns on investments will be credited into the Special Account via the mechanism in clause 58 and made available for future investments by the Corporation. This will support the Corporation’s long-term financial sustainability and independence.
5.4 The financial arrangements set out in Part 5 will ensure money is managed prudently while ensuring the Corporation’s access to capital to undertake investments.
Subdivision B — Credits
Clause 52: Credits to the Account
5.5 Clause 52 provides three pathways for amounts to be credited to the Special Account:
(1) The Special Account must be credited with $5 billion on the day on which the clause commences under subclause 52(1).
(2) A further $10 billion must be credited to the Special Account via a statutory credit mechanism before 2 July 2029 under subclauses 52(2) and (4). The $10 billion is to be credited in such instalments and at such times as determined in writing by the Ministers.
(3) Additional amounts may be credited to the Special Account through appropriations by the Parliament for the purposes of the Special Account at any time (under subclause 52(3)).
5.6 A determination made under subclause 52(4) will not be disallowable. Given that Parliamentary approval of this Bill will constitute approval of the total $15 billion appropriation provided for by subclauses 52(1) and (2), it is not necessary to provide for further parliamentary scrutiny of the timing of particular transfers to the Special Account.
5.7 This clause is intended to provide certainty about the funding available to the Corporation in its initial years of operation. Any amounts credited in a particular year will continue to be available in future years if the amounts are not invested in that year.
5.8 Legislating the Corporation’s access to ongoing funding (rather than funding that is only available within particular financial years) will give the Corporation the certainty and credibility it needs to ensure the private sector has the confidence it needs to co-invest with the Corporation.
Subdivision C — Debits
Clause 53: Purposes of the Account
This clause sets out the purposes of the Special Account. The Special Account can only be used to make payments to the Corporation as authorised by the nominated Minister.
Clause 54: Corporation’s request for a payment for itself
5.9 This clause sets out the procedures for the Corporation’s request for a payment.
5.10 The Corporation may, in writing, request a specific payment by the Commonwealth to meet the liabilities or expenses of the Corporation that are due or will (or are expected to) become due; or to maintain at least the operating balance in the Corporation’s bank account. The amount of the operating balance is to be agreed between the nominated Minister and the Corporation under paragraph 56(c).
5.11 This clause allows the Corporation to make commitments, and anticipate expenses and then draw down the funds as required. For example, the Corporation could set an investment strategy in which it intends to invest an amount over a defined period, and therefore expect that liabilities would become due in that period.
5.12 Maintaining an operating balance in the Corporation’s bank account allows for efficient operation of the Corporation’s functions and minimises the administrative burden on the Commonwealth.
5.13 Liabilities and expenses include, but are not limited to, loan disbursements, equity investments, staff payments, rent and other operating costs required for the Corporation to perform its functions.
5.14 Subclause 54(3) makes clear that the Corporation must not request a payment that would exceed the uncommitted balance of the Special Account at the time the request is made.
Clause 55: Nominated Minister’s authorisation of payment to Corporation
5.15 This clause requires the Minister to (as soon as practicable) authorise payments to the Special Account where a request has been made in accordance with clause 56. Where a payment has been authorised, subclause 55(2) requires the Commonwealth to pay the Corporation the authorised amount, by debiting the Special Account, as soon as practicable.
5.16 The Minister is only able to refuse to make a payment requested by the Corporation if the request does not meet the formal criteria established in the agreement made under clause 56.
5.17 The intention of this clause is to provide funding certainty to the Corporation.
5.18 Subclause 55(3) is included to assist readers. It clarifies that an authorisation by the nominated Minister is not a legislative instrument within the meaning of section 8 of the Legislation Act as it is administrative in nature.
Clause 56: Agreement between nominated Minister and Corporation
5.19 This clause requires the nominated Minister and the Corporation to come to an agreement on how requests are to be made, including the form of the request and who the request is to be given to; the time period the request can refer to and the appropriate amount of the Corporation’s operating balance. It is intended that the nominated Minister and Corporation will agree on the listed matters to encourage efficient administration of payments.
Division 3 — The Corporation’s money
Clause 57: Application of the Corporation’s money
5.20 This clause defines the Corporation’s money as money paid to the Corporation that has been authorised by the nominated Minister and any other money received by the Corporation, including earnings from investments and gifts.
5.21 The clause places limits on how the Corporation spends the Corporation’s money in the performance of its functions and exercise of its investment powers, making payments authorised by the Bill, or making payments to the Commonwealth pursuant to clause 28.
5.22 Subclause 57(3) is intended to clarify that the limits placed on spending by subclause 57(2) do not limit investment of funds not immediately required for the purposes of the Corporation authorised by section 59 of the PGPA Act. For example, the Corporation could place its funds in an interest earning account until such time as the money is needed to make investments under clause 63 or for the operational costs of the Corporation.
5.23 This clause is a standard clause intended to ensure that the Corporation’s funds are not used inappropriately.
Clause 58: Managing surplus money
5.24 It is envisaged the Corporation will invest using commercial principles and return a profit. Should the Corporation invest in a successful project or projects, resulting in significant profits, this clause provides the Ministers the ability to direct the Corporation to return surplus money of the Corporation and its wholly-owned subsidiaries to the Commonwealth. Money returned under this clause will be returned to the Special Account and is available for reuse by the Corporation in due course, provided that the Corporation follows the procedure for requesting a payment from the Special Account.
5.25 The initial threshold for when the Minister can direct that surplus money be paid to the Commonwealth is when the surplus money exceeds $20 million; however, this may be changed in the rules if another value is more appropriate. The Corporation holding surplus money above the threshold does not necessarily mean that the Corporation will be required to repay the money to the Commonwealth. Rather, the Ministers’ power to direct that money be paid to the Commonwealth is a discretionary one, and when exercised can be in relation to all or part of the surplus above the threshold amount.
Clause 59: Borrowing
5.26 Subclause 59(2) limits borrowing by the Corporation to circumstances where:
· it is necessary to cover settlement of a transaction in connection with the Corporation’s functions;
· at the time the decision to enter into the transaction was made it was likely that the borrowing would not be needed; and
· the borrowing period is not longer than 7 days.
5.27 Rules may also be made to specify circumstances in which it is considered appropriate for the Board to be able to borrow.
5.28 The Corporation should only be investing within the money available to them but this subclause is intended to provide some flexibility to cover unforeseen events or changes in the investment environment.
5.29 Section 57 of the PGPA Act also allows the Corporation to borrow money if authorised by the Finance Minister in writing or by rules made under the PGPA Act.
5.30 Subclause 59(5) allows a wholly-owned subsidiary of the Corporation to borrow money from the Corporation without the limits imposed on the Corporation by subclauses 59(2) or 59(3).
5.31 Subclause 59(6) expressly displaces the application of section 86 of the PGPA Act which would otherwise require the Board of the Corporation to ensure that a Corporation subsidiary does not do anything that the Corporation does not have the power to do. This section has been excluded from applying to borrowings by subsidiaries authorised under subclause 59(5) to ensure that subclause 59(5) is given its full effect.
Clause 60: Receipt of gifts
5.32 Clause 60 allows the Corporation, with the written approval of the nominated Minister, to accept gifts of money or equity interests. For the Corporation to accept equity interests they must have been able to have been acquired by the Corporation in accordance with paragraph 63(1)(c).
Clause 61: Taxation
5.33 To avoid any doubt, subclause 61(1) makes the income of the Corporation exempt from income tax under the Income Tax Assessment Act 1997 . This is consistent with the general principle that Government entities are not subject to income tax.
5.34 Subclause 61(2) clarifies that the Board is not subject to tax under a law of a State or Territory, such as stamp duty, if the Commonwealth is not subject to the tax.
Division 1 — Simplified outline of this Part
Clause 62: Simplified outline of this Part
6.1 Part 6 sets out the Corporation’s investment functions and related matters. The simplified outline of the Part is included to assist readers in understanding the substantive provisions. It is not intended to be comprehensive and readers should rely on the substantive provisions.
Division 2 — Investment functions and powers
Clause 63: Investment functions
6.2 This clause sets out the investment functions of the Corporation.
6.3 The clause describes the Corporation’s investment functions as:
· providing financial accommodation to constitutional corporations where the financial accommodation is for purposes relating to any of the priority areas determined under clause 6 (priority areas), and assists the constitutional corporation in carrying out its activities.
· providing financial accommodation to individuals or entities other than constitutional corporations, States or Territories where the financial accommodation is for purposes relating to any of the priority areas and assists the individual or entity in carrying out constitutionally-supported activities.
· acquiring equity interests in entities where any of the activities are in a priority area, and all of the entity’s activities are constitutionally-supported activities.
· providing financial accommodation to the States and Territories where the financial accommodation is for purposes relating to any of the priority areas and is provided by way of a grant of financial assistance to the State or Territory. Financial assistance to a State must be of a kind supported by section 96 of the Constitution, and financial assistance to a Territory must be of a kind supported by section 122 of the Constitution.
6.4 Financial accommodation is defined in clause 5 and is intended to be broadly applied to cover any form of monetary commitment supporting the performance of an obligation or any type of direct provision of finance that might ordinarily be considered ‘financial accommodation’. This allows the Corporation to use a wide range of financial instruments, including new and innovative forms of financing, to respond flexibly to market conditions and industry investment needs.
6.5 Financial accommodation does not include an equity interest or a grant that may reasonably be regarded as the equivalent of a gift.
6.6 The intention of this clause is to ensure that the Corporation is able to make use a broad range of investment tools with counterparties who may adopt different legal structures.
Clause 64: Terms and conditions of financial accommodation provided to a constitutional corporation
6.7 When providing financial accommodation to constitutional corporations, the Corporation must set out in a written agreement the terms and conditions on which that financial accommodation is provided. In some situations there may be a number of agreements which together set out the terms and conditions. This clause requires the constitutional corporation to comply with the terms and conditions, in addition to any obligation the constitutional corporation otherwise has (eg. under contract law).
Clause 65: Terms and conditions of financial accommodation provided to an entity (other than a constitutional corporation, a State or a Territory) or an individual
6.8 When providing financial accommodation to individuals or entities other than constitutional corporations, States or Territories, the Corporation must set out in a written agreement the terms and conditions on which that financial accommodation is provided. In some situations there may be a number of agreements which together set out the terms and conditions. This clause requires the entity to comply with the terms and conditions, in addition to any obligation the entity otherwise has (e.g. under contract law).
Clause 66: Terms and conditions of financial accommodation provided to a State or Territory
6.9 Where financial accommodation is provided to a State or Territory there must be a written agreement setting out the terms and conditions on which the financial accommodation will be provided. In some situations there may be a number of agreements which together set out the terms and conditions.
Clause 67: A Corporation body may realise, or otherwise deal with, investments
6.10 The Corporation may realise, or otherwise deal, with investments. This includes securitising assets, exercising rights of redemption or prepayment, granting security over assets, terminating a contract, selling, disposing of or otherwise transferring an interest in an investment. This clause is included to make clear that the Corporation’s investment functions and powers allow it to realise or otherwise deal with an investment where that is appropriate.
Clause 68: A Corporation body must realise equity interests in certain circumstances
6.11 If the Corporation becomes aware of the fact that it holds one or more equity interests in an entity that is engaging in activities that are not constitutionally-supported activities as defined in clause 5, then it must realise those equity interests as soon as reasonably practicable. The concept of what is ‘reasonably practicable’ is intended to encompass practical and commercial considerations involved in realising an investment. For example, it is to be expected that the Corporation will need to identify and negotiate with prospective buyers, prepare and review written agreements and seek advice as needed to ensure it acts prudently and realises the equity interests at a reasonable price. Steps of this kind would take time but would nonetheless be necessary before it can be ‘reasonably practicable’ to realise an equity interest. It is expected that the Corporation would require any entity in which it had acquired an interest to ensure that its activities are constitutionally-supported activities.
Clause 69: Investments of Corporation bodies to be solely or mainly Australian-based
6.12 This clause imposes a duty on the Board to take all reasonable steps to ensure that all investments of Corporation bodies are, at all times, solely or mainly Australian-based, and requires the Board to inform the Minister, and propose remedial action, where it becomes aware that an investment does not meet the requirement of being solely or mainly Australian-based.
6.13 Subclause 69(3) sets out the procedures the Ministers may take if they are satisfied that the investment no longer is, or never was, solely or mainly Australian-based, allowing them to direct the Board as to any action that should be taken.
6.14 Subclause 69(5) provides an investment continues to remain valid, even if the investment has ceased to be, or never was, solely or mainly Australian based. This allows both the Corporation and any counterparties certainty on the legal status of the investment. The provision provides the Corporation and the Ministers with some flexibility as to their response to the issue. For example, the Ministers and Corporation may consider it prudent to wait until market conditions are favourable before divesting or realising the asset.
6.15 Subclause 69(6) is included to assist readers. It clarifies that a direction from the Ministers is not a legislative instrument within the meaning of section 8 of the Legislation Act as it is administrative in nature.
Clause 70: When an investment of a Corporation body is solely or mainly Australian-based
6.16 The Board must issue guidelines setting out its requirements for satisfaction that a given investment is solely or mainly Australian based. The guidelines issued under clause 70 must be consistent with the Investment Mandate, and the Board must publish these guidelines on the Corporation’s website.
6.17 The Board has the ability to determine the circumstances, conditions and other relevant matters to determine whether an investment is solely or mainly Australian-based.
6.18 The concept of solely or mainly Australian based is intended to be flexible. It is not intended to preclude financial accommodation to, or investments in, entities which are incorporated or operate from within Australia but whose activities touch upon matters outside Australia. For instance, an investment in an Australian manufacturing company whose products may be exported, could still be solely or mainly Australian-based depending on the content of the guidelines made by the Board.
6.19 Subclause 70(5) is included to assist readers. It clarifies that the Board’s guidelines are not legislative instruments within the meaning of section 8 of the Legislation Act as they are administrative in nature.
Division 3 — Performance of investment functions etc.
Clause 71: Investment Mandate
6.20 This clause establishes a framework for the Government to give guidance to the Board while preserving the Board’s role in making investment decisions independently from Government. It is appropriate that the Government, as manager of the economy, have a mechanism for articulating its broad expectations for how the Corporation’s funds are invested and managed by the Board.
6.21 Under subclause 71(1), the Ministers have the power to give the Board written directions about the performance of its investment functions and the exercise of its investment powers. These directions make up the Investment Mandate.
6.22 The Ministers must give at least one direction under this clause, to ensure the Board has clarity as to the Government’s expectations.
6.23 Subclause 71(3) sets out a non-exhaustive list of matters the Investment Mandate may cover. In setting an Investment Mandate, the Ministers are to have regard to the object of this Act, and any other matters the Ministers consider relevant.
6.24 Paragraph 44(2)(b) of the Legislation Act establishes that a legislative instrument is not subject to disallowance where it is prescribed by regulation. Section 9 of the Legislation (Exemptions and Other Matters) Regulation 2015 prescribes classes of legislative instruments that are not subject to disallowance under section 42 of the Legislation Act. The Investment Mandate is not subject to disallowance as it is an instrument that is a direction by a Minister to any person or body under item 2.
6.25 It is appropriate for the Investment Mandate to not be subject to disallowance. Making the instrument subject to disallowance would introduce significant operational uncertainty for the Corporation and would be inconsistent with like instruments for other entities, including the Clean Energy Finance Corporation and the Northern Australia Infrastructure Facility.
Clause 72: Limits on Investment Mandate
6.26 The Ministers must not issue a direction that has the direct or indirect effect of requiring the Corporation or its subsidiaries to make, or not to make, a particular investment or is otherwise inconsistent with the Bill. The intention of this clause is to ensure that the Corporation has the freedom to make investment decisions independently of the Government, while still allowing the Government to provide broad parameters for the exercise of the Corporation’s investment functions and powers.
6.27 The Investment Mandate will not include instructions prohibiting or requiring a particular investment, but it may include (among other things) limits on the types of investments or counterparties, which may in effect, exclude some projects or counterparties.
Clause 73: Board to be consulted on Investment Mandate
6.28 The Ministers are required to consult the Board on the Investment Mandate before it is issued. This is achieved by the Ministers sending a draft of the direction to the Board and inviting the Board to make a submission within a reasonable time limit.
6.29 What constitutes a reasonable time limit will be determined on a case-by-case basis with regard to relevant circumstances and priorities at the time. It may be the case that urgent changes are required in the national interest. In this situation, it would be reasonable for the Board to be asked to consider the draft direction quickly. However, where there is less urgency, or the change in the Investment Mandate is quite substantial, it would be reasonable to provide the Board with more time to consider the draft direction.
6.30 In practice, it is likely there would be discussions between the departments of the Ministers, the Board and the CEO of the Corporation before Ministers propose changes or additions to the Investment Mandate.
6.31 Any submission received by the Ministers from the Board must be tabled in the Parliament (with national security information and sensitive financial intelligence information removed) with the Investment Mandate. In this way the Board will be able to ensure that its views on the expected impact on its ability to maximise returns are publicly known.
Clause 74: Compliance with Investment Mandate
6.32 The Board is responsible for taking all reasonable steps to ensure that all policies and decisions regarding the investment and operations of the Corporation and its subsidiaries are in accordance with the Investment Mandate issued by the Ministers.
6.33 Since the Investment Mandate is intended to provide broad guidance to the Board it may contain directions that require the Board to apply its judgement on whether or not the Corporation and its subsidiaries is complying with the Investment Mandate.
6.34 If the Board becomes aware of a failure to comply with the Investment Mandate it must inform the Ministers in writing as soon as practicable, including the proposed action the Board will take to ensure the Corporation or subsidiary complies with the Investment Mandate.
6.35 Similarly, if the Ministers determine that the Corporation or one of its subsidiaries has not complied with the Investment Mandate, the Ministers can issue written directions to the Board to give a written explanation and take action to remedy the non-compliance. Subclause 74(4) requires the Board to comply with any such directions.
6.36 If the Board enters into a transaction which is not consistent with the Investment Mandate or the direction to the Board under subclause 74(3), the transaction is still a valid transaction (subclause 74(5)). This allows both the Corporation and any counterparties certainty on the legal status of the investment. The provision provides the Corporation and the Ministers with some flexibility as to their response to the issue. For example, the Ministers and the Corporation may consider it prudent to wait until market conditions are favourable before divesting or realising the asset.
6.37 Subclause 74(6) is included to assist readers. It clarifies that a direction from the Ministers is not a legislative instrument within the meaning of section 8 of the Legislation Act as it is administrative in nature.
Clause 75: Investment policies
6.38 The Board is required to publish policies on its investment activities that are to be complied with by the Corporation. Subclause 75(1) sets out the matters that the Board must develop and publish a policy on.
6.39 Under subsection 33(3) of the Acts Interpretation Act, the Board is able to repeal, rescind, revoke, amend, or vary any such policies.
6.40 The policies that the Board develops must not be incompatible with the Investment Mandate.
6.41 The Board must publish the first set of policies on the Corporation’s website as soon as is practicable after the commencement of the clause.
6.42 The Board must conduct reviews of these policies periodically and when the Ministers change the Investment Mandate. If the review resulted in any changes to the policies, the updated policies are to be published on the Corporation’s website.
6.43 If the Board enters into a transaction which is not consistent with a policy that it has formulated under subclause 75(1), the transaction is still a valid transaction. This takes into account the developing nature of projects and policies such as benchmarks and standards for assessing performance. As such, investments are valid transactions in the event that standards change, and projects no longer meet the new benchmarks. This ensures those dealing with the Corporation have commercial certainty with regard to decisions made by the Corporation.
6.44 Subclause 75(9) is included to assist readers. It clarifies that an investment policy published by the Board is not a legislative instrument within the meaning of section 8 of the Legislation Act as it is administrative in nature.
Clause 76: Guarantees
6.45 To ensure the Corporation invests its funds prudently, it is appropriate to limit the guarantees the Corporation can provide to the amount of the uncommitted balance of the Special Account. If the Corporation purports to give a guarantee that exceeds the uncommitted balance of the Special Account less any liabilities of the Corporation that are not in respect of guarantees, the entire guarantee will be void.
Clause 77: Derivatives
6.46 This clause provides for the Board to make use of derivatives as a risk management tool and to indirectly achieve exposure to financial assets other than derivatives. The Board may also use derivatives to reduce the transaction cost of achieving required exposures. However, the Board may not use derivatives for speculative purposes or for leverage.
6.47 The Board must formulate a policy on its investment strategy and take all reasonable steps to comply with this policy under clause 75. The acquisition of derivatives under clause 77 cannot be inconsistent with the investment strategy policy.
Clause 78: Simplified outline of this Part
7.1 This Part deals with miscellaneous matters. The simplified outline of the Part is included to assist readers in understanding the substantive provisions. It is not intended to be comprehensive and readers should rely on the substantive provisions.
Clause 79: Incorporation of formation of subsidiaries
7.2 The Corporation has the ability to exercise its functions through subsidiaries, and therefore may form a subsidiary where it is necessary or convenient to do so. However, the Corporation’s subsidiaries must not be incorporated or formed outside of Australia. This ensures that the Corporation’s subsidiaries are regulated via Australian law.
Clause 80: Responsibilities of designated subsidiaries
7.3 A subsidiary of the Corporation which the Corporation has created to make an investment is subject to the Investment Mandate, the Corporation’s investment policies and the rules on the acquisition of derivatives under clause 77.
7.4 Such a subsidiary must only provide financial accommodation or acquire an equity interest if the financial accommodation or equity interest could have also been provided or acquired by the Corporation in accordance with subclause 63(1).
7.5 The intention of this clause is to ensure that all investment by the Corporation (including via subsidiaries) complies with the restrictions and limits imposed by the Bill.
Clause 81: Corporation body may charge fees
7.6 The Corporation and its subsidiaries may charge a fee in relation to anything done in performing the Corporation’s function. For example, it may charge a fee when it enters into a guarantee, or for certain steps in a loan process or application process.
Clause 82: Publication of investment reports
7.7 Subclause 82(1) sets out the matters that the investment report must address.
7.8 The Corporation is required to report on investments made by itself and its subsidiaries, as the performance of the Corporation’s investment function includes investments made by subsidiaries
7.9 The requirement to publish an investment report every quarter on its website is designed to ensure transparency in the Corporation’s investment operations, to assure the Government and the community that the Corporation is managing money prudently and to keep market participants fully informed. These reports do not need to be tabled in the Parliament as publication on the internet is the most appropriate way to provide transparency of the Corporation’s performance of its functions. This is common practice for similar Government entities.
Clause 83: Publication of reports etc.
7.10 Under subclause 83(1), the Ministers may publish a report, document or information given to either Minister by the Board. The Ministers may choose to publish this material on the internet, or any other way they consider appropriate, including tabling in the Parliament. The Ministers, when exercising their powers to require information from the Corporation, will be best placed to determine whether it is appropriate for that information to be published and how it will be published.
7.11 Clause 83(3) sets out the matters the Board must be satisfied about in order for information to be deemed commercial-in confidence and omitted from the published material.
7.12 Subclauses 83 (2) and (4) require the Ministers to omit information that the Board is satisfied is commercial-in-confidence as well as national security information and sensitive financial intelligence information before the Ministers publish material provided to them under subclause 83(1).
7.13 In practice, the Board is likely to report through the Corporation’s annual or investment reports. This clause is included to allow the Ministers to publish information from the Corporation that is not an annual or investment report.
Clause 84: Extra matters to be included in annual report
7.14 Under section 46 of the PGPA Act, the Corporation is required to prepare an annual report for the Ministers. The annual report must be provided to the Ministers for presentation to the Parliament. In addition to the PGPA Act requirements, the Corporation’s annual report must set out details of:
· the realisation of any investments of the Corporation or a designated subsidiary in the period;
· any procurement contracts to which the Corporation or a designated subsidiary is party that were in force during the period, and were greater than $80,000, or the higher amount prescribed by the rules;
· any amount paid to the Corporation under subclause 55(2) in the period;
· any amount paid by the Corporation under clause 58 in the period; and
· anything else prescribed by the rules.
7.15 Subclause 84(2) also requires the Corporation to report on investments made by its subsidiaries in its annual report.
7.16 Reporting on these matters ensures transparency and accountability on the part of the Corporation. These provisions aim to assure the Government and the community that the Corporation is managing money prudently, and to keep market participants fully informed.
Clause 85: Disclosure of official information
7.17 This clause authorises the disclosure of official information in certain circumstances. Given the special position of national security information and sensitive financial intelligence information, a separate disclosure arrangement has been provided for in relation to that information.
7.18 This clause will facilitate the sharing of information between the Corporation and certain agencies, bodies or persons.
7.19 This information sharing is for the purpose of enabling or assisting the Corporation, or any of the listed agencies, bodies or persons, to perform or exercise any of their functions or powers.
7.20 Subclause 85(3) provides that national security information or sensitive financial intelligence information, may only be disclosed by Corporation officials to the people identified in subclause 85(4). These subclauses protects the sensitive information the Corporation receives by limiting disclosure to appropriate recipients who have a need-to-know and are subject to stringent national security obligations.
7.21 This clause is intended to facilitate and authorise, rather than limit, official, national security and sensitive financial intelligence information sharing by the Corporation to particular people in particular circumstances. It intends to strike a balance between the protection of information provided to the Corporation and the benefit of sharing information across governments, taking account of the different treatment required for different types of information, including personal, national security and sensitive financial intelligence information.
Clause 86: Nominated Minister
7.22 The Minister administering this Act is the nominated Minister unless the Ministers determine in writing that the nominated Minister is the Finance Minister.
7.23 Subclause 86(3) is included to assist readers. It clarifies that a determination by the Ministers is not a legislative instrument within the meaning of section 8 of the Legislation Act as it is administrative in nature.
7.24 Subclause 86(4) is included to promote the effective and efficient flow of information between Ministers. It allows the nominated Minister to keep the other Minister informed.
Clause 87: Delegation by nominated Minister
7.25 To enable timely administration, the nominated Minister may, in writing, delegate the function of authorising payment under subclause 55(1) to the Corporation to the Secretary of the Department of the nominated Minister. Subclause 87(2) requires the delegate to comply with any directions made by the Minister in relation to the performance of the function.
Clause 88: Delegation by Corporation
7.26 The Corporation may delegate any of its powers and functions to the CEO. This will promote the efficient operation of the Corporation.
7.27 Subclause 88(2) requires the delegate to comply with any directions made by the Corporation when exercising powers or performing functions that have been delegated.
7.28 The decision-maker for delegating any of the Corporation’s functions or powers is the Board.
Clause 89: Delegation by Board
7.29 This clause enables the Board to delegate any of its powers and functions to a Board member or the CEO. This will promote flexibility and the efficient operation of the Corporation.
7.30 Subclause 89(2) requires the delegate to comply with any directions made by the Board when exercising powers or performing functions that have been delegated.
Clause 90: Delegation and subdelegation by CEO
7.31 The CEO may delegate any of their powers or functions, including any powers or functions delegated to the CEO by the Board or Corporation, to staff members.
7.32 Allowing the CEO to delegate or subdelegate their powers or functions to staff, who would undertake the tasks concerned is a normal administrative arrangement. While some powers (for example, large spending decisions, recruitment decisions etc.) would be limited to executive level staff, it is important to make the power unfettered to ensure administrative efficiency so that, for example, executive staff are not required to authorise every grant of leave to staff members or the expenditure of small sums of money on routine tasks.
7.33 The CEO remains accountable to the Board for the performance of their duties which includes managing and monitoring the activities of those officials who perform the tasks under delegation.
7.34 Delegates must comply with any directions given by the CEO when exercising powers under a delegation or subdelegation. Subdelegates will also be required to comply with the directions of the Corporation or the Board to the CEO. This ensures that appropriate oversight and limits can be placed on any delegated or subdelegated powers.
Clause 91: Periodic reviews of the operation of this Act
7.35 The nominated Minister must arrange for a review of the operation of this Act to be undertaken within 5 years after the commencement of the Act. Each subsequent review must then be completed within 5 years after the completion of the previous review.
7.36 Subclauses 91(2)-(4) provide that any such review must involve public consultation, the person undertaking the review must give the nominated Minister a written report and the nominated Minister must ensure copies of the report are tabled in each House of the Parliament within 15 sitting days of receiving the report.
7.37 This provision is to ensure transparency, accountability and to maintain the effectiveness of the Corporation.
Clause 92: Rules
7.38 The Ministers may make rules under clause 92 covering matters required to be prescribed in the Bill, or matters that it would be necessary or convenient to prescribe for the purposes of this Bill.
7.39 Subclause 92(2) clarifies that the rules will not cover a number of specific matters that are ordinarily expected to be done only through Parliamentary enactment.
7.40 There are a number of matters throughout this Bill that may require the creation of rules. This is desirable to allow the Ministers to ensure the longevity of the organisation, and allow flexibility in the administration of this Bill.