Corporate governance in Commonwealth companies

The Commonwealth Authorities and Companies Amendment Bill 2008 (Bill) has been introduced into Parliament. The Bill proposes substantive amendments to the Commonwealth Authorities and Companies Act 1997 (CAC Act) to align it with the Corporations Act in terms of corporate governance.

Subsection 34(1) of the CAC Act currently defines a Commonwealth company as “a Corporations Act company in which the Commonwealth has a controlling interest”. The definition expressly excludes companies in which the Commonwealth has a controlling interest through one or more interposed authorities or Commonwealth companies. The expression “controlling interest” has been interpreted at common law to mean the ability of the Commonwealth to control a majority of votes at a meeting of members (in particular, at an annual general meeting).

The proposed amendment would broaden coverage for determining control of companies under the CAC Act. This would allow for greater accountability to the Australian Government and the Parliament. It will also improve the alignment between the CAC Act test for control and the tests in the Corporations Act.

Other amendments proposed by the Bill include:

• aligning the penalty for a breach of director's duties involving dishonesty or recklessness to those imposed by  the Corporations Act (ie 2,000 penalty units, imprisonment for 5 years, or both).
• imposing a penalty for a failure to disclose material personal interests.
• creating an offence if directors are present or vote on matters in which they have a material personal interest.