On 19 August the Assistant Treasurer, Josh Frydenberg, advised the outcomes of the consulting on the requirement that all superannuation funds have at least one-third independent directors.
In June, the Australian federal government released exposure draft legislation proposing changes to strengthen the governance arrangements for all Australian Prudential Regulation Authority (APRA) regulated superannuation funds.
The government’s intent and draft legislation caused much consternation among Industry superannuation funds whereby power is balanced between non-independent union and employer representatives.
Consistent with both the 2010 Cooper Review and the Financial System Inquiry, the government’s proposed reforms will include a requirement that all APRA-regulated superannuation funds have a minimum of one-third independent directors on their trustee board and an independent chair.
Following consultation, the government has agreed to make several amendments to the draft legislation, including:
- more detail on the definition of ‘independent’ in the law, rather than in APRA’s prudential standards, to provide greater certainty around the legal obligations of trustee boards;
- ensuring the new requirements and transition period both commence from Royal Assent so existing funds have a full three-year transition period;
- providing greater flexibility during the transition period by clarifying that neither the current equal representation rules nor the new independence requirements will apply where an APRA compliant transition plan is in place;
- clarifying that the independent chair can be included in the one-third independent directors;
- extending the period for filling a trustee vacancy from 90 days to 120 days; and
- clarifying that the Bill overrides both governing rules and the constitution of a corporate trustee.
The government will also include in the explanatory materials:
- guidance on how to fulfil the requirement to report on an ‘if not, why not’ basis, consistent with ASX best practice principles, where a majority of directors are not independent; and
- clarification that boards can appoint an independent chair at any time between the date of Royal Assent and the end of the transition period.