1 April 2021
What you need to know
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The passage of the Native Title Legislation Amendment Bill 2020 (Cth) has continued to enhance the governance landscape for native title holders and prescribed body corporates established under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth).
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Further substantial changes are likely to flow from the NIAA's review of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth). The NIAA's final report was published in February 2021 and legislative amendments are slated for mid-2021.
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The NIAA's final report highlights a number of the key issues relating to RNTBC/PBC governance including greater transparency on accounting for native title monies, a new regulatory role for ORIC, a potential new benefits management structure and greater transparency regarding executive remuneration.
What you need to do
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Familiarise yourself with the important governance changes enacted under the Native Title Legislation Amendment Act 2021 (Cth), and the changes recommended under the NIAA's final report in its review of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth).
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Take part in the phase 3 consultation process in the NIAA's review.
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Await the Australian Government's response to the NIAA's review including the tabling of any Bill later in 2021 (or beyond) adopting some or all of its recommendations.
Native Title Act amendments relating to PBC governance
When native title is determined to exist, a registered native title body corporate (RNTBC) – more commonly referred to as a prescribed body corporate (PBC) – must either hold the interests in trust for the common law holders of native title or manage it as their agent. These PBCs are invariably corporations under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (CATSI Act).
There are now hundreds of PBCs around Australia, putting the post-determination landscape in sharp focus.
One of the biggest challenges has been managing the relationship between common law holders and the PBC that holds the native title on their behalf. In particular, some common law holders raise concerns about PBC rules (including those relating to PBC membership) and whether the rules properly reflect the determination of native title. Native title holders have long called for legislative amendments to resolve this.
The Native Title Legislation Amendment Act 2021 (Cth) goes some of the way to address this issue, through the following amendments:
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a new function for the National Native Title Tribunal to assist PBCs and common law holders of native title to promote agreement about native title issues and the operation of the Native Title Act 1993 (Cth);
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a new dispute resolution pathway to be included in a PBC's rule book (amendments to the CATSI Act contained in the Amendments); and
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a new power for the ORIC Registrar to appoint a special administrator to a PBC when there is a serious failure by the PBC to comply with its native title legislation obligations (new subsection 487-5(1)(ca) CATSI Act).
The National Native Title Tribunal's focus over the last 20 years has been on the resolution of native title claims. It is hoped that this new role to work with PBCs and common law holders post-determination, will assist in the resolution of these matters, given the considerable mediation expertise and experience of the NNTT and its Members.
Fiduciary duties addressed in the recent amendments to the Native Title Act
In our 2018 Year in Review article Further developments on governance and misappropriation of funds under native title agreements, we wrote about the Federal Government's response to Gebadi v Woosup [2017] FCA 1467, in which a native title applicant was ordered to repay hundreds of thousands of dollars to the claim group for misappropriated funds. Gebadi confirmed that the native title applicant owes fiduciary duties to, and must act in the best interest of, the claim group in exercising the powers and responsibilities conferred upon them.
The Federal Government proposed amendments to confirm this position, which were finally enacted in February 2021 (see our article Native Title Reforms Finally Enacted).
The Native Title Legislation Amendment Act 2021 (Cth) inserted new section 62B in the Native Title Act confirming that any obligation of the applicant under the Native Title Act does not relieve or detract from the operation of their duties at common law or in equity to the native title or compensation claim group.
Comprehensive review into the CATSI Act
In December 2019, the Minister for Indigenous Australians announced a comprehensive review of the CATSI Act. The National Indigenous Australians Agency (NIAA) published the CATSI Act Review survey – Summary Report in June 2020, which identified governance as the most important issue for respondents.
As part of the second phase of the review, NIAA released the CATSI Act Review: Draft Report on 31 July 2020 which outlined suggested changes to the CATSI Act. Public consultation on the Draft Report closed in October 2020 and the CATSI Act Review: Final Report was published in February 2021 (Final Report) as part of the third phase of the review.
The Final Report highlights a number of the key issues with RNTBCs/PBCs with respect to governance, and related matters like the handling of funds and non-monetary benefits derived from native title agreements. These are discussed in more detail below.
Greater transparency regarding use of native title monies
The most common feedback received by NIAA about PBCs was the need for greater transparency in decision-making and recording of, and reporting about, the receipt and expenditure of native title monies.
As a practical step towards providing more transparency in this space, the Final Report recommended that the Native Title (Prescribed Bodies Corporate) Regulations 1999 (Cth) be amended to require reporting to common law holders on the management and use of native title monies and non-monetary benefits held on trust. It was also recommended that the ORIC Registrar consider reflecting consistent reporting requirements in section 336-5 of the CATSI Act.
Regulatory role of ORIC regarding use of native title benefits
While PBCs represent only 6.5 per cent of CATSI Act corporations, they generate 22 per cent of complaints received by the Office of the Registrar of Indigenous Corporations (ORIC). Many of these complaints concern governance shortcomings, including the use of native title benefits. This highlights the need for improved regulatory infrastructure that supports the transparent and accountable management of monies derived from native title.
Giving ORIC a clear regulatory role in relation to decision-making and reporting about native title benefits aims to achieve increased clarity and transparency for common law holders about the management of those benefits, so that they can more adequately participate in the administration of their benefits.
To assist RNTBCs with understanding their new compliance and reporting obligations following the CATSI Review, the Final Report recommended that NIAA consult with ORIC and stakeholders to develop guidance material on best-practice benefit management structures to support the good governance of native title benefits. It is also recommended that these parties develop and deliver education and information resources outlining the proposed obligations.
Potential new benefits management structure
Proposed benefits management corporate and trust structures are aimed at providing transparency and accountability to common law holders about the use of their native title monies, reducing costs of benefits management administration, maximising tax effectiveness, and simplifying regulatory arrangements.
To address these issues, the Final Report recommended that the current benefits management structures (including for example the use of charitable trusts and discretionary trusts) undergo further review to identify any opportunities to better support economic development for common law holders.
The Final Report also considered the proposal put forth by two institutional stakeholders for a new type of benefit management structure to be created by regulation, namely the "PBC Economic Vehicle Status" proposal (PBC EVS), which would allow PBC's to seek an additional statutory designation where the corporation would itself qualify as an appropriate "economic vehicle" to manage native title monies. The suggested design of that PBC EVS would mean that PBC's would be able to 'more directly and effectively utilise their native title monies to support economic development' and would have 'more stringent funds management and reporting obligations'. The Final Report recommended that NIAA consider this option further and consult with the Department of Finance, Treasury, Australian Taxation Office and Australian Charities and Not-for-profits Commission regarding the feasibility of this alternative benefit management structure.
Greater transparency regarding executive remuneration
During consultation by the NIAA, issues were raised in relation to the relative lack of transparency surrounding the remuneration of executives of corporations registered under the CATSI Act. The majority of stakeholders argued that 'there may be a public interest in reporting senior executive remuneration to members, common law holders and other stakeholders', similar to the disclosure requirements for publicly listed companies under the Corporations Act 2001 (Cth).
Some stakeholders argued that such a requirement may impinge on individual employees' privacy. However, as CATSI Act corporations are often either publicly funded through government grants or resourced through native title benefits, the Final Report notes there may be a degree of public interest in better reporting on officer remuneration. Accordingly, the Final Report made the following recommendations with a view to improving public trust and confidence in the sector:
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including senior executive remuneration information in annual reporting to the ORIC Registrar and having this information available during Annual General Meetings;
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reporting remuneration information of key personnel of associated entities in annual reports to the ORIC Registrar; and
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reporting the amount directors are paid in sitting fees in annual financial reports lodged with the ORIC Registrar.
Next steps
In addition to the actions arising from the recommendations discussed above, it is expected that phase three of the CATSI Act Review – which kicked off with the release of the Final Report – will involve further consultation with stakeholders to address the concerns raised during phase two. The Final Report forecasts that, subject to the outcome of this further consultation, a Bill will be brought before Parliament and would take effect from 1 July 2021.
It is clear in light of the Native Title Act amendments, the comprehensive NIAA Final Report into the CATSI Act and the other reviews into the CATSI Act in recent years, that substantial reform to the PBC governance regime is upon us – particularly with regards to the management of native title benefits and associated reporting.
For further information, please contact:
Clare Lawrence, Partner, Ashurst
clare.lawrence@ashurst.com
