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The Aboriginal Councils and Associations Act 1976 (Cth) (‘the ACA Act’) is one of the major legal vehicles for political association and economic self–management within indigenous Australian communities. In 1981, only about 100 corporations were registered under Part IV of the Act. By 1995–96 this number had grown to 2,654.[1] Within the same period, the ACA Act has evolved from a simple system for incorporation and regulation of indigenous groups to a more complex system modelled on the Corporations Law. The appropriateness of such a system has generated considerable controversy. This came to a head in 1994–95 with the Australian Parliament’s bi–partisan attempt to introduce the Aboriginal Councils and Associations Legislation Amendment Bill 1994 and the Prime Minister and Cabinet (Miscellaneous Provisions) Bill 1995. Both Bills, however, proved to be too politically sensitive and were allowed to lapse. A full scale review of the ACA Act followed in their wake.
In 1995, the Aboriginal and Torres Strait Islander Commission (ATSIC) commissioned the Australian Institute of Aboriginal and Torres Strait Islander Studies (AIATSIS) to conduct the review. An interdisciplinary team of consultants under the leadership of Dr Jim Fingleton completed the Review in August 1996. It has been produced by AIATSIS in two volumes under the title, The Final Report—Review of the Aboriginal Councils and Associations Act 1976 (Cth). Volume 1 contains the main report and recommendations. Volume 2 contains a number of case studies and special issues papers. In this article, I shall refer to the main report (Volume 1) as ‘the Report’ and reserve the term ‘Review’ for the entire publication. The distinction is necessary due to the divergence between the views expressed in the Report and some of the views expressed by the case study rapporteurs in Volume 2 of the Review. At the time of writing, ATSIC is considering its response to the document.
This article consists of two Parts, the second of which is to be published in the next edition of the Indigenous Law Bulletin — October 1997 (Vol 4) Issue 6. In Part 1, I trace the evolution of the ACA Act from a simple and flexible vehicle for the incorporation of indigenous groups to the controversial reforms which occurred between 1992 and 1995. These reforms expanded the powers of the Registrar and pushed the Act towards Corporations Law–style regulation. Part 1 also outlines the Report’s main recommendations.
In Part 2, I engage the Report in a more critical fashion. The Report is an important document which has improved the state of public knowledge on indigenous corporations and the administration of the ACA Act. It has also highlighted the undeniable necessity of a fundamental reform of the ACA Act. But I argue that the Report’s own utility as a vehicle for law reform is compromised by its superficial treatment of most of the important corporate law issues facing indigenous corporations, in particular its response to problems of corporate governance in a cross cultural context. This is disappointing, as the Report does not appear to have effectively utilised the excellent body of empirical case studies compiled by the members of the Review Team. Part 2 also suggests the premises of an alternative model of corporate regulation which would reduce the current ACA Act’s reliance on the mainstream legal model of corporate governance. These are tentative suggestions in the direction of a ‘tiered’ model of regulation in which regulation would be proportionate to the functions and activities of the indigenous corporation, whether these be land–holding, service provision or mixed enterprise and other political and cultural functions.
The term ‘indigenous corporations’ may be used as an umbrella term to denote bodies corporate owned or controlled by indigenous Australians. An umbrella term is necessary because such organisations take a variety of legal forms. Some are specifically designed for indigenous incorporators. Others are available to any incorporator. Broadly speaking, the incorporation of an indigenous corporation may occur under:
The ACA Act originated in the Northern Territory land rights context. It was a response to the recommendation of the Woodward Aboriginal Land Rights Commission[2] that provision be made for incorporation of groups claiming land under proposed land rights legislation.[3] But the Woodward recommendations moved beyond the land–holding context. Woodward’s First Report was critical of the haphazard and inappropriate use of companies, unincorporated associations, co–operatives and trustee arrangements for Aboriginal community purposes. It called for a general incorporation statute which would be ‘sufficiently flexible’ to permit the incorporation not only of local and regional land–owning bodies, but also of town councils exercising local government functions and business enterprises owned by the community or groups within the community.[4]
Woodward recommended legislation that would be simple, flexible and that would allow for ‘a good deal of administrative discretion’.[4] In a departure from corporate law orthodoxy, he recommended that precise definition of corporate membership not be required in all cases, that board appointment procedures not be prescriptive, and that there be few ‘detailed rules’ defining members’ individual rights. The new legislation ‘should, so far as possible, make provision for Aboriginal methods of decision–making by achieving consensus rather than by majority vote’. The Woodward Report also highlighted the need for regulatory intervention in moments of crisis by recommending ‘simple provisions for control of the situation if things go wrong within an organisation through corruption, inefficiency, outside influences or for other reasons’.[4]
The ACA Act reflected these aspirations. Indeed, its Second Reading Speech is often cited in support of the view that one of the main goals of the legislation was the facilitation of ‘culturally appropriate’ incorporation:
‘What is so important about this measure is that it will recognise cultural differences between Aboriginal and non–Aboriginal societies and enable Aboriginal communities to develop legally recognisable bodies which reflect their own culture and do not require them to subjugate this culture to overriding Western European legal concepts’.[4]
Incorporation under the ACA Act may occur under either Part III or Part IV. Part III establishes a regime for the incorporation and management of Aboriginal Councils. It has never been used—the reasons for its non–use have become part of the controversy surrounding the Act and relate to its potential to provide a legal form for indigenous self–
government.[8] Part IV establishes a regime for the incorporation and management of ‘Aboriginal Associations’.[9] It also creates the Office of the Registrar of Aboriginal Corporations, vesting it with wide regulatory powers.
This discussion is concerned only with incorporations under Part IV of the ACA Act. Part IV defines eligibility for membership of a corporation and sets out an incorporation procedure. Membership is restricted to Aboriginal persons or their spouses. Other persons may be given more restricted (non–voting) membership rights by a special resolution of the members of the corporation.[10] Like the States and Territories associations legislation, the incorporation procedure presupposes a group of incorporators—an unincorporated ‘association’—which comes forth to register as a corporation. Where the corporation is formed for business or land–owning purposes, there is a minimum requirement of 5 members; for other purposes it is 25 members.[11]
The liability of members is left to definition by the corporation’s Rules (ie its Articles of Association). This makes limited liability an optional feature of the legal form. Corporations must make provisions for the sharing of pecuniary profits amongst their members. The corporation has the capacity to borrow money and give security over its assets. Provisions relating to the management, regulation and termination of corporations are addressed below.
Throughout the late 1970s and 1980s, ACA Act corporations were subject to a very basic accountability regime:[12]
In 1992, the reporting requirements were extended in response to the recommendations of the Report to the Registrar of Aboriginal Corporations on the Review of the Aboriginal Councils and Associations Act 1976—the ‘Neate Report’.[15] Governing Committee members are now subject to duties of honesty, diligence and disclosure of interests which reflect the duties imposed on directors under the Corporations Law.[16] The range of documents to be submitted for audit inspection now go beyond the balance sheet and include full income and expenditure statements. The auditor must report on compliance with the Act, regulations and the corporation’s Rules. The Registrar may, at any time, appoint an additional auditor.
The 1992 amendments also enhanced the Registrar’s regulatory powers, particularly in respect to investigations and the appointment of administrators. As the ACA Act now stands, the Registrar has the power to grant or refuse an application for incorporation. In exercising this power, the Registrar may consider the proposed Rules of Association. The Registrar’s practice is to recommend Rules which reflect the Office’s Model Rules of Association. These represent a simplified version of the basic rules one would find in the Corporation Law’s ‘Table A’ which consists of a set of rules which, coming after other things, divide corporate power and its exercise between the general meeting and the board of directors.[17] Once the corporation comes into existence, alterations to the Rules or changes of name must be filed with and approved by the Registrar. The Registrar may appoint an Administrator to a corporation in trouble, request the Court to wind up the corporation, and investigate any irregularity or failure to comply with the ACA Act. The Registrar may also compel the appearance of any person, and has powers of entry, search and seizure. Appeals from the decisions of the Registrar or complaints against the Registrar are heard by the Federal Court. The decisions of Administrators appointed under the Act may be reviewed by the Administrative Appeals Tribunal.
The successive amendments to the ACA Act indicate a steady movement towards a style of corporate regulation similar to that imposed on Corporations Law corporations. The appropriate scope of corporate disclosure and administrative power in a regulatory regime for corporations is always a matter of dispute. It is nevertheless useful to compare the current ACA Act reporting requirements against some of the requirements of other Australian incorporation regimes:
Non–profit associations: Under State and Territory law, incorporated associations (except in Victoria) must keep proper accounting records. In some of these jurisdictions, financial statements have to be submitted to the regulator; in others there is no such requirement. Auditors’ reports are only obligatory in the Northern Territory, Queensland, South Australia and Tasmania.[18] Directors’ duties are interpreted on the basis of the statutory provisions or on the basis of the general law,[19] as it is informed by the jurisprudence of the Corporations Law. Many ACA Act corporations are comparable to corporations regulated under these regimes as they do not trade or carry on a business for gain.
Corporations Law corporations: These corporations are required to keep proper accounting records which correctly explain their transactions and financial position in a manner which will enable true and fair accounts to be prepared from time to time and to be audited. But small proprietary companies[20] are generally excused from the preparation of a profit and loss accounts, balance sheets and other documents required for a set of financial statements unless the Australian Securities Commission (the ASC) requires their production. Small proprietary companies are also not required to appoint an auditor unless requested by the ASC.[21] Most ACA Act corporations would fall within the definition of a small proprietary company on the basis of their low annual gross operating revenue and consolidated gross assets.[22]
Under both systems of incorporation, the regulator has power over the process of incorporation and may intervene at critical junctures in the corporation’s life: eg the alteration of the corporate constitution (‘Rules’, Memorandum of Association and Articles), insolvency, administration and winding up. The regulators’ powers differ across the State and Territory systems.
In some areas of regulation such as the procedures for creditors’ meetings and winding up, avenues have been provided for the adoption of Corporations Law procedures.[23] The Registrar’s powers are also beginning to resemble those of the Australian Securities Commission, the Corporations Law regulator. Indeed, in the case of annual financial statements and audits, more is asked of ACA Act corporations than of most Corporations Law corporations.
The main impetus for the introduction of the Aboriginal Councils and Associations Legislation Amendment Bill 1994 (‘ACALAB 1994’) and the Prime Minister and Cabinet (Miscellaneous Provisions) Bill 1995 was the Commonwealth government’s concern for public accountability. The Explanatory Memorandum to the latter Bill noted that:
‘All audits and reviews of the Registrar’s office have found serious deficiencies in the operation, administration and, legislative framework within which the Registrar operates and a high level of non–compliance with the Act’.[24]The Bills attempted to consolidate the basic structure of regulation by upgrading the reporting requirements, further expanding the Registrar’s powers and granting the Registrar’s Office independence from ATSIC. A flavour of the proposed amendments may be gained from the following clauses of the 1994 Bill which may be compared to their functional equivalents in the Corporations Law:
The Review has revealed deep deficiencies in the administration of the ACA Act. Its main strengths lie in its account of the Registrar’s practices regarding corporate membership and incorporation and in its collection of empirical data on corporate practices in indigenous Australia. Thirty–two case studies of indigenous organisations were collected by the Review team. This collection represents the largest body of empirical work on indigenous corporations ever conducted in this country. The case studies span an area from the Kimberley country to Cape York to North Western New South Wales, covering bodies that range from unincorporated committee structures to service–providers and enterprises. The information on the functions of these organisations, the reasons for their choice of form, corporate governance practices, financing and membership, provides an extraordinarily valuable resource for policy–makers and researchers of the indigenous corporation. This alone is a remarkable achievement.
The Report issuing from the Review has recommended that the ACA Act be amended to ‘make the Act a Federal version of the State and Territory Association Incorporations Acts’.[33] It rejects proposals to ‘strengthen’ its accountability mechanisms and rejects suggestions that the Act be repealed or amended to provide for incorporation under different categories according to the corporation’s function. Its main recommendations are that:[34]
In such circumstances, there is a danger that the fundamental tension in the policy underlying the ACA Act, that is, the use of the legal form of the corporation to render key corporate actors accountable while ensuring that the form is appropriate to the cultural context, might be forgotten. Support for Corporations Law style regulation[36] ignores the special cultural context which necessitated the enactment of a separate non–mainstream incorporation statute for indigenous corporations in the first place.
But there is also a sense in which the Report’s findings and recommendations commit the reverse error, in that they seem to emphasise ‘culturally appropriate’ incorporation, at the expense of an adequate consideration of those issues of corporate law which become relevant to a corporation after its creation. These include whether a model of corporate governance based on the fiduciary obligation is capable of cross–cultural application; whether ‘tradition’ is a non–contestable source of associational rules; and the circumstances and incidence of corporate fraud, winding up and administration.
In Part 2 of this article, I will expand on my concerns about the Report and, as noted in the Context and Overview to this article, will attempt to suggest another way of thinking beyond the current structure of the ACA Act.
* I wish to thank Jennifer Clarke for detailed discussion of many of the issues traversed in this paper. I also wish to thank Mark Aronson, Toni Bauman, David Martin, Peta Spender and several anonymous reviewers for their comments on an earlier version of this paper. Responsibility for opinions and any possible errors contained in this article resides with me.
Part 2 of Beyond the Aboriginal Councils and Associations Act? will be published in the October issue of the Indigenous Law Bulletin (Volume 4, Issue 6) alongside a response by Dr Jim Fingleton, who headed the Review team. Christos Mantziaris will reply.
[2] Aboriginal Land Rights Commission First Report, AGPS, Canberra, July 1973; Aboriginal Land Rights Commission Second Report, AGPS, Canberra, April 1974.
[3] Later enacted as the Aboriginal Land Rights (NT) Act 1976 (Cth).
[4 Aboriginal Land Rights Commission First Report, paras 165–169]
[5 ]Aboriginal Land Rights Commission Second Report, paras 331–332.
[6 Aboriginal Land Rights Commission Second Report, para 332.]
[7] Commonwealth of Australia, Parliamentary Debates—House of Representatives, 3 June 1976, Mr I Viner (Minister for Aboriginal Affairs), p 2946.
[8 D Dalrymple, ‘The forgotten option—Part III of the ]Aboriginal Councils and Associations Act 1976’, Vol 2, 32 Aboriginal Law Bulletin 11, pp 11–13; The Review,Vol 1, pp 97–110.
[9] Unless otherwise indicated, references to ‘corporations’ in this article are to Aboriginal Associations incorporated under Part IV of the ACA Act.
[10] ACA Act ss49 and 49A respectively. Membership of non–Aboriginal persons became possible in 1984: Statute Law (Miscellaneous Provisions) Act (No. 2) Cth, No. 165 of 1984.
[11] ACA Act, s45(3A). Under incorporated associations legislation there is a requirement of 5 members in NSW, ACT and Victoria, 6 members in Western Australia and 7 members in Queensland. There is no minimum size requirement in South Australia, Tasmania or the Northern Territory, or for a Corporations Law corporation: Associations Incorporation Act 1984 (NSW), s7; Associations Incorporation Act 1991 (ACT), s14(1)(a); Associations Incorporation Act 1981 (Vic), s3(1); Associations Incorporation Act 1987 (WA), s4(1); Associations Incorporation Act 1991 (Qld) s7(1)(a); Corporations Law s114(1).
[12Aboriginal Councils and Associations Act 1976], No. 186 of 1976 Cth, ss58–9, as they stood on assent at 15 December 1976.
[13 ACA Act], s59A.
[14] Registrar of Aboriginal Corporations, Annual Report 1995–96, p 28.
[15] G Neate, Report to the Registrar of Aboriginal Corporations on the Review of the Aboriginal Councils and Associations Act 1976, 1989.
[16] Corporations Law ss232(2) and (4), s231(1).
[17] Registrar of Aboriginal Corporations, Annual Report 1995–96, p 19.
[18] For a summary of the position, see S Sievers, Associations and Clubs Law in Australia and New Zealand (2nd ed), Federation Press, 1996, pp 138–40.
[19] That is, common law and equity.
[20] Under Corporations Law, s45A, a company is a small proprietary company in respect of a financial year if two out of the three following criteria are satisfied:
(a) The consolidated gross operating revenue for the financial year of the company and the entities it controls (if any) are less than $10 million;
(b) The value of the consolidated gross assets at the end of the financial year of the company and the entities it controls (if any) are less than $5 million;
(c) The company and the entities it controls (if any) have fewer than 50 employees at the end of the
financial year.
[21] Corporations Law, ss289, 283C, 283B, 317.
[22] See note 20.
[23] ACA Act, ss62 and 67.
[24] Parliament, Commonwealth of Australia, Explanatory Memorandum to the Aboriginal Councils and Associations Legislation Amendment Bill 1994, para 4.
[25] Aboriginal Councils and Associations Legislation Amendment Bill 1994 (‘ACALAB 1994’), cl 6. Cf. the Australian Securities Commission, which is established as an independent body corporate under the ASC Law, Pt 2.
[26] ACALAB 1994, cl 43 and Explanatory Memorandum para 6. It is unclear whether AAS or AASB standards were intended. Cf. Corporations Law, Pt 3.6 passim.
[27] ACALAB 1994, cl 10. See also the explicit acknowledgement of the harmonisation of this provision with the ASC Law in the Explanatory Memorandum to ACALAB 1994, paras 82 and 98.
[28] ACALAB 1994, cls18–20 cf Corporations Law ss224, 229(3) or orders under ss 230, 599 and 600.
[29] ACALAB 1994, cl 37. Cf ‘officers’ under the Corporations Law are subject to directors’ duties: s232(1). Under the Corporations Law, no specific provision is made for theft or misuse of corporate property by members other than the insider trading provisions: Pt 7.11 Div 2A.
[30] ACALAB 1994, cl 37. Cf. Corporations Law, Pt 3.5.
[31] ACALAB 1994, cls 34–6, esp. cl 36(a) which proposed the express application of Corporations Law Pts 5.4, 5.4A, 5.4B, 5.5, 5.6, 5.7B. 5.8and 5.9.
[32] The Review, Vol 1, pp 1–2.
[33] The Review, Vol 1, p 143.
[34] The Review. Vol 1, Ch 8, esp, pp141–8.
[35] See the anticipation of the Review’s recommendations in the ‘Registrar’s Report’, Registrar of Aboriginal Corporations, Annual Report 1995–96, p 1.
[36] Ibid.
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