A new law for Indigenous corporations

Intheblack, Jul 2007 by Beacroft, Laura

Indigenous corporations: THE CORPORATIONS (ABORIGINAL AND TORRES STRAIT ISLANDER) ACT INTRODUCES A STRONG BUT FLEXIBLE FRAMEWORK, WRITES LAURA BEACROFT

ON 1 JULY 2007 A NEW LAW FOR THE incorporation of Indigenous groups will begin. It is the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act), replacing the Aboriginal Councils and Associations Act 1976 (ACA Act).

It introduces a strong but flexible legislative framework that aligns with the Corporations Act 2001 where possible, but accommodates the particular needs and circumstances of individual localities and groups. Recognising that most corporations are located In remote areas and may provide essential services or hold key assets such as land, the Act also offers additional safeguards through the registrar's unique regulatory powers.

Since the ACA Act began in 1976, it has become a significant vehicle for incorporating a broad range of Aboriginal and Torres Straight Islander corporations, from holding land to delivering essential services.

However, an independent review of the ACA Act in 2001-02 identified a number of shortcomings, such as inadequate protection for members, rigidity of corporate design and insufficient third-party protection, including protection for funding agencies.

The CATSI Act was drafted in response to the review's recommendations, and offers a special incorporation statute to meet the needs of Aboriginal and Torres Strait Islander people.

The ACA Act is administered by the registrar of Aboriginal corporations, who is supported by staff within the Department of Families, Community Services and Indigenous Affairs (referred to as the Office of the Registrar of Aboriginal Corporations or ORAC).

The CATSI Act, passed by the Australian parliament on 18 October 2006, will also be administered by the registrar (who will then become the registrar of Aboriginal and Torres Strait Islander corporations).

All corporations registered under the ACA Act will be deemed to be corporations under the CATSI Act on its commencement on 1 July 2007.

Transitional arrangements setting out the process for moving from the ACA Act to the CATSI Act are In the Corporations (Aboriginal and Torres Strait Islander) Consequential, Transitional and Other Measures Act 2006.

The registrar will stream corporations into small, medium and large, depending on their income, assets and number of employees. This will happen over time. Corporations that are already registered under the ACA Act will start off as medium until they are assessed In terms of size.

The new Act is aligned with the Corporations Act in some important ways, bringing the regime into line with modern standards of corporate governance. For example, the CATSI Act clarifies the statutory duties required of directors and other senior staff by aligning them with those required of the officers of mainstream corporations under the Corporations Act. This is particularly appropriate given that the powers are delegated to management and staff to conduct the day-to-day affairs of the corporation.

Like the Corporations Act, the new Act also has a system of replaceable rules, so that corporations can design their constitutions to fit their needs and circumstances more closely.

The CATSI Act establishes a Register of Disqualified Officers from managing corporations. This will align with ASIC's register of disqualified officers so that if someone is disqualified under one, they will automatically be disqualified under the other.

The CATSI Act allows corporate membership so that peak bodies can become members of relevant corporations.

However, the CATSI Act also Introduces some important differences to mainstream corporations law. For example, many of the provisions covering meetings, members and officers have been modified to recognise the special circumstances of Indigenous corporations. For Instance, the Act provides for a document access address rather than a registered office for small and medium corporations that may not have the resources to maintain a registered office.

It also allows a great deal of flexibility in reporting. But all corporations must file a general report each year that contains all its basic details. This will allow the registrar to maintain more accurate registers that are widely used by corporations and the general public.

In contrast to other regulators, ORAC can provide a high level of assistance to corporations. This can include help with the drafting of rules. It might also include providing information and training about how meetings should be conducted, and the duties and responsibilities of a corporation's directors and officers.

Such assistance makes the ACA Act or the CATSI Act particularly suited to:

* developing sectors such as the indigenous arts industry

* organisations that require "prudential" or active regulation such as essential service providers or those that hold essential assets

* organisations where membership or clients are disempowered, such as childcare centres, aged care facilities and schools