Governing rules taken to contain covenants
(1) If the governing rules of a registrable superannuation entity of which a trustee is a body corporate do not contain covenants to the effect of the covenants set out in subsection (2), those governing rules are taken to contain covenants to that effect.
Note: There are civil and criminal consequences for contravening a covenant: see sections 54B, 54C, 55 and 202. Civil consequences may arise from an act or omission resulting in a contravention of a covenant regardless of whether or not the act or omission was intentional. Criminal consequences under section 202 require proof of dishonesty or intention in relation to a contravention of a covenant.
(2) The covenants referred to in subsection (1) are the following covenants by each director of a corporate trustee of the entity:
(a) to act honestly in all matters concerning the entity;
(b) to exercise, in relation to all matters affecting the entity, the same degree of care, skill and diligence as a prudent superannuation entity director would exercise in relation to an entity where he or she is a director of the trustee of the entity and that trustee makes investments on behalf of the entity's beneficiaries;
(c) to perform the director's duties and exercise the director's powers as director of the corporate trustee in the best financial interests of the beneficiaries;
(d) where there is a conflict between the duties of the director to the beneficiaries, or the interests of the beneficiaries, and the duties of the director to any other person or the interests of the director, the corporate trustee or an associate of the director or corporate trustee:
(i) to give priority to the duties to and interests of the beneficiaries over the duties to and interests of other persons; and
(ii) to ensure that the duties to the beneficiaries are met despite the conflict; and
(iii) to ensure that the interests of the beneficiaries are not adversely affected by the conflict; and
(iv) to comply with the prudential standards in relation to conflicts;
(e) not to enter into any contract, or do anything else, that would:
(i) prevent the director from, or hinder the director in, properly performing or exercising the director's functions and powers as director of the corporate trustee; or
(ii) prevent the corporate trustee from, or hinder the corporate trustee in, properly performing or exercising the corporate trustee's functions and powers as trustee of the entity;
(f) to exercise a reasonable degree of care and diligence for the purposes of ensuring that the corporate trustee carries out the covenants referred to in section 52.
Payments to third parties must be in best financial interests of beneficiaries
(2A) To avoid doubt, the obligations of the director under paragraph (2)(c) apply in respect of payments to a third party by, or on behalf of, the entity.
Obligations to beneficiaries override obligations under certain other Acts
(3) The obligations of the director under paragraph (2)(d) override any conflicting obligations the director has under:
(a) Part 2D.1 of the Corporations Act 2001 ; or
(b) Subdivision A of Division 3 of Part 2-2 of the Public Governance, Performance and Accountability Act 2013 (which deals with general duties of officials) or any rules made for the purposes of that Subdivision.
Director not prevented from engaging or authorising persons to act on behalf of the trustee
(4) A covenant referred to in paragraph (2)(e) does not prevent the director from engaging or authorising persons to do acts or things on behalf of the trustee.
Using reasonable care and diligence to ensure compliance by corporate trustee
(5) The reference in paragraph (2)(f) to a reasonable degree of care and diligence is a reference to the degree of care and diligence that a superannuation entity director would exercise in the circumstances of the corporate trustee.
Covenants operate as if director party to the governing rules
(6) A covenant referred to in subsection (2) operates as if the director were a party to the governing rules.
Superannuation entity director
(7) A superannuation entity director is a person whose profession, business or employment is or includes acting as director of a corporate trustee of a superannuation entity and investing money on behalf of beneficiaries of the superannuation entity.