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Final Report of the CATSI Act Review – proposed changes for indigenous corporations

Damian Roe, Jonathan Fulcher, and Elizabeth Harvey / 09 March 2021
7 min.
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Worthwhile read for: Aboriginal and Torres Strait Islander Corporations

The National Indigenous Australians Agency (NIAA) has recently released the Final Report from its comprehensive review of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act). 

We’ve previously written about the background to this review and to earlier reviews of the CATSI Act. 

The review considered a number of issues relevant to the governance of indigenous corporations, including:

  • whether the CATSI Act is meeting its objects and continues to be desirable as a special measure for the advancement and protection of indigenous people; 
  • whether the functions of and powers of the Registrar of Indigenous Corporations are appropriate, effective and adequate; and 
  • possible amendments to the CATSI Act to better support the regulation of CATSI corporations.

The Final Report makes 72 recommendations based on broad stakeholder consultation. We have summarised the key recommendations for you below. 

Powers and functions of the Registrar of Indigenous Corporations 

The Registrar of Indigenous Corporations has essentially the same role as the Australian Securities and Investments Commission (ASIC), but does not posses all of the regulatory powers of ASIC. Unfortunately, through the consultation process the NIAA heard of directors and executives who acted unconscionably in relation to the discharge of their duties. At the moment, the CATSI Act effectively offers an “all or nothing” regulatory approach, with criminal prosecution being the only remedy available for the Registrar in most circumstances, and no other ways to address situations where people in trusted positions do the wrong thing. 

The Final Report makes recommendations to expand the Registrar’s powers to regulate indigenous corporations, including:

  • the Registrar’s powers be expanded to issue penalty notices;
  • the Registrar’s powers be expanded to accept enforceable undertakings; and
  • aligning the Registrar’s investigative powers with ASIC’s, in requiring a person or entity to produce books relevant to a corporation’s affairs, and extending powers to a person who is, or has been, an officer or employee of the body corporate. 

Membership of CATSI Act corporations 

Membership applications 

The Final Report considered the power that boards have in accepting or rejecting membership applications. The NIAA recommends amendments to the CATSI Act to: 

  • require corporations to decide any membership applications within 6 months; and 
  • require corporations to include a dispute resolution process to deal with membership applications in their rule books. 

Member contact details

At present, CATSI Act corporations are not required to record alternative contact details in their register of members, and are not permitted to use these details in determining whether a member is non-contactable when deciding to cancel their membership.

The NIAA recommends that corporations be required to collect phone numbers and email addresses of members where available.

The NIAA recommends that provisions in the CATSI Act about when membership can be cancelled based on non-contact become a replaceable rule. 

Corporate structures 

To expand business opportunities for indigenous communities, NIAA recommended amendments to the CATSI Act to: 

  • make it easier for corporations to establish subsidiaries and joint ventures; and 
  • allow for the incorporation of two-member corporations where only one member is indigenous, as long as that member has the deciding vote.

Governance

Rule books 

All CATSI Act corporations are required to have a constitution, commonly known as a rule book. Not all rules that apply to the corporation are in the rule book, such as the “replaceable rules” in the CATSI Act, which apply to corporations unless modified or replaced by a corporation in its rule book. The NIAA has recommend that the CATSI Act require all replaceable rules, whether replaced or not, to be included in rule books. This is to ensure that all members and directors are aware of a corporation’s internal governance rules.

Annual General Meetings

Recommendations about the meeting process for corporations include:

  • that a corporation be able to access an automatic 30 day time extension to hold an Annual General Meeting (AGM), where it notifies the Registrar before the period to hold the AGM has expired that there is a death in the community, natural disaster, cultural activity or an unavoidable delay in the audit, and it has not notified the Registrar of an extension more than three years in a row;
  • allowing small corporations that generate little or no income from their operations to pass a resolution to not hold an AGM for up to two years; and
  • allowing directors to issue an updated notice of meeting and defer a meeting for up to 30 days in case of death, natural disaster and certain cultural activities in community. 

Officers of corporations

As part of the review, stakeholders expressed concerns regarding the transparency of corporations’ operations and the receipt and management of native title benefits. In response, the NIAA made recommendations for:

  • senior executive remuneration information to be included in reporting to the Registrar and laid before AGMs;
  • remuneration information of key personnel of associated entities to be reported in annual reports to the Registrar; 
  • corporations to report director sitting fees in their annual financial reports; and
  • ORIC to be notified within 28 days of a change in a corporation’s chief executive officer, chief financial officer and chief operating officer. 

Special administration 

Several changes are recommended to assist CATSI Act corporations facing financial difficulty. This includes recommendations that:

  • the current ground for appointing a special administrator (a corporation has traded at a loss for at least six of the last 12 months) be changed to an identification of an irregularity of management of a corporation’s financial affairs, 
  • a ‘show cause’ notice procedure is not required under the CATSI Act where a majority of directors have requested that a special administrator be appointed; and 
  • the CATSI Act be amended to remove the requirement for the Registrar to apply for leave of the court before making an application for winding up a corporation on the grounds of insolvency. 

Registered Native Title Bodies Corporate 

Chapter 7 of the Final Review is dedicated to Registered Native Title Bodies Corporates (RNTBCs) (commonly known as Prescribed Bodies Corporate). RNTBCs make up 6.8 percent of CATSI Act corporations, but more than 20 percent of complaints ORIC receives are in relation to RNTBCs, often relating to the management of native title benefits and membership. 

The Final Report includes recommendations to deal with the Native Title Act role of RNTBCs, including that a model rule book is created for RNTBCs and that a separate division of the CATSI Act is created that is dedicated to those provision specific to RNTBCs.

The NIAA elected not to make a recommendation amending the Native Title (Prescribed Bodies Corporate) Regulations to include decisions about native title benefits in the definition of ‘native title decision’, because of the additional financial and administrative burden associated with holding consultation meetings with common law holders. 

The NIAA has recommended further consultation around issues relevant to RNTBCs, including the viability of an economic vehicle status model and the creation of registered trusts. 

Role of the CATSI Act

A key focus of the review was the CATSI Act’s role as a special measure for the purposes of the Racial Discrimination Act, supporting and building the capacity of Aboriginal and Torres Strait Islander corporations. The NIAA heard criticism that the CATSI Act was paternalistic and that it provides insufficient flexibility for indigenous corporations. 

The NIAA recommends that the CATSI Act be retained as a special measure. It was also recommended that the CATSI Act is amended to include a provision requiring the review of the CATSI Act every seven years.

NIAA’s recommendations were made to strengthen and streamline the CATSI Act, agreeing with feedback that greater decision-making power is critical to indigenous self-determination, which fittingly is also the historical basis of the CATSI Act. 

Next steps

The Australian Government is considering the Final Report with a view to bringing forward a Bill to amend the CATSI Act in due course.

More information is available on the NIAA’s website.

For more information or discussion, please contact our Native Title and Cultural Heritage team.
 

Authors
Damian Roe
Partner
Damian is a Partner of our leading Resources, Energy and Projects practice.
Jonathan Fulcher
Partner
Jonathan is a Partner and the head of our leading Resources and Energy practice in Brisbane and is also the leader of our Native Title practice.
Elizabeth Harvey
Senior Associate
Elizabeth is a Senior Associate in our Resources and Energy practice.

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