Governance Framework for Controlled Entities Policy

Document Number000863
Date Approved28 November 2008
Date Last Amended22 May 2009
 

1.      Introduction

The University of Newcastle Act 1989 (NSW) provides for the University Council to establish controlled entities to undertake activities that are consistent with the University’s objects and functions. This Policy establishes the governance framework for the University’s controlled entities.

The University has a number of controlled entities. These are subsidiary companies of the University. Each is a separate legal body to the University, governed by its own Board of Directors, but each is also connected to the University legally, financially and operationally.

The Policy should be read in conjunction with the University’s Commercial Activities – Guideline 000554, the Controlled Entity Reporting Requirements Schedule and University Policy and Procedure documents on Conflicts of Interest.

The Policy and any Procedures or Guidelines established to support it should be read subject to the following: where there is a challenge to the interests or actions of a controlled entity which is a wholly-owned subsidiary of the University, different considerations will arise and alternative governance principles and procedures may apply.

 

2.      Policy Intent

The Policy establishes a controlled entities governance framework that is consistent with the University’s strategic goals, governance and risk management practices, to assist Council to discharge its responsibilities effectively in relation to controlled entities.

 

3.      Definitions

In the context of this Policy:

Board means the Board of a University controlled entity;

Company means a controlled entity;

Constitution means the company Constitution of the controlled entity;

controlled entity means a company of which the University or Council has control, as defined in the Australian Accounting Standards, through having the capacity to dominate the decision-making, directly or indirectly, in relation to the financial and operational policies of the company, so as to enable the company to operate with the University in pursuing the objectives of the University;

entity means the controlled entity, which is a separate legal body to the University;

external in relation to Board members of a controlled entity means not being a staff member or student of the University or a member of the University Council.

 

4.      Legislative Background

The University of Newcastle Act, the Corporations Act and the Controlled Entities

4.1.     The Council approves the establishment or participation by the University in controlled entities.

4.2.     Section 16A of the University of Newcastle Act 1989 (‘the Act’) requires that the Council must ensure:

4.2.1.   that a controlled entity does not exercise any function or engage in activity that the University itself is not authorised by the Act to undertake and

4.2.2.   as far as is reasonably practicable:

  1. that the governing bodies of controlled entities:
    1. possess the expertise and experience necessary to provide proper stewardship and control, and
    2. comprise, where possible, at least some members who are not members of the Council or members of staff, or students, of the University, and
    3. adopt and evaluate their own governance principles, and
    4. document, and keep updated, a corporate or business strategy containing achievable and measurable performance targets, and
  2. that a protocol is established regarding reporting by governing bodies of controlled entities to the Council.

4.3.     Each controlled entity has a Board of Directors, which is responsible for guiding, monitoring and having the stewardship of the business of the company.

 

4.4.     The duty of a Director is to serve the best interests of the company, which means that the Director must have regard to the interests of the shareholders or members of the company.

4.5.     Section 187 of the Corporations Act 2000 provides that a director of a company which is a “subsidiary” (in this Policy referred to as “controlled entity”) acts in good faith in the best interests of the controlled entity if:

  1. the constitution of the controlled entity expressly authorises the director to act in the best interests of the University; and
  2. the director acts in good faith in the best interests of the University; and
  3. the controlled entity is not insolvent at the time the director acts and does not become insolvent because of the director’s act.

4.6.     Each controlled entity has a company Constitution, which includes:

4.6.1.    the objects of the company, which establish a connection with the University for particular purposes and the nature of the benefit the company is to provide to the University;

4.6.2.   the means by which the University  dominates the company’s decision-making, directly or indirectly, being through controlling one or more of the following, as set out in the Corporations Act:

(i)         the composition of the company’s board;

(ii)        more than half of the votes which may be cast at a general meeting;

(iii)       more than half of the share capital (for a company which has share capital);

4.6.3.   a requirement for the Council of the University to approve any amendments to the company’s Constitution before those amendments can take effect.

 

5.      Policy Principles

5.1.     The University Council is responsible for establishing or authorising the participation by the University in controlled entities.

5.2.     The Council is responsible for the monitoring and oversight of the activities of the controlled entities.

5.3.     The controlled entities are required by the Council to provide regular reports to the Council in a format approved by the Council, including but not limited to reports on performance against the approved business strategy and performance targets for the entity.

6.      Establishment

6.1.     The Council must approve the establishment or acquisition of a controlled entity.

6.2.     The Vice-Chancellor will provide to the Council a preliminary proposal on the potential establishment or acquisition of a controlled entity.

6.3.     If the Council endorses the preliminary proposal, the Vice-Chancellor will then provide a full proposal, with draft business plan and draft company Constitution for consideration by the Finance and Capital Development Committee of the Council and a draft recommendation for approval by the Council.

6.4.     The Finance and Capital Development Committee may seek advice from other committees of Council or relevant senior University officers, as appropriate, in relation to risk management, the constitutional provisions or other legal or financial elements of the business plan or constitution.

6.5.     In the event that the Finance and Capital Development Committee is satisfied with the proposal, the draft business plan and draft company Constitution, it will:

  1. forward a recommendation to the Council, with those documents, for the Council to approve the establishment or acquisition of the controlled entity and
  2. request the Nominations and Legislation Committee to make recommendations to the Council on any Council nominees required for the Board.

 

7.      Reporting, Governance Statement and Review

7.1.     The Council will advise the Board of the controlled entity of Council’s reporting requirements for University controlled entities.

7.2.     In addition to reporting requirements of the Council, the Board of the controlled entity must immediately advise the University, through the Vice-Chancellor or General Counsel, of any threatened or potential legal action involving the controlled entity.

7.3.     Where the University is the sole shareholder or sole voting member of a controlled entity, the Council is the body which acts as the shareholder or member for the purpose of annual or general meetings of the entity, but the Council may appoint the Vice-Chancellor or other senior University officer as its corporate representative at any or all of those meetings.

7.4.     Where the University is a shareholder or a voting member of a controlled entity, where there is more than one shareholder or voting member respectively, the Council will appoint its corporate representative to represent the University at meetings of the shareholders or members.

7.5.     The Board is responsible for ensuring that the controlled entity complies with the Council reporting requirements for controlled entities.

7.6.     The Board of the controlled entity is required to have and to provide to the Council a statement of its governance principles.

7.7.     The Board of the controlled entity will annually review and, where necessary, amend its statement of governance principles and will provide any amended statements to the Council.

 

8.      Amendments to the Constitution of the Controlled Entity

8.1.     The Constitution of the controlled entity will only be amended in accordance with the requirements of the entity’s Constitution.

8.2.     The Constitution of each controlled entity of the University provides that no amendment to the Constitution is effective until approved by the Council.

 

9.      Review and Amendment of the Business Plan and Performance of the Controlled Entity

9.1.     An initial business plan for a controlled entity must be approved by the Council prior to the establishment or acquisition of the entity.

9.2.     The controlled entity will review its business plan and performance against the business plan as required by the Council and report to the Council on the outcomes of those reviews.

9.3.     Where a controlled entity wishes to amend or replace the initial business plan approved by the Council, it will advise the Council in advance of the proposed amendments or replacement plan and will seek the approval of the Council.

 

 

10.      The Board of the Controlled Entity

10.1.     The Council will ensure that the Constitution of the controlled entity provides  that at least some Board members are external.

10.2.     Appointments to the Board of the controlled entity will be made in accordance with the Constitution of the entity.

10.3.     Where the Council is required to nominate persons for appointment to the Board of a University controlled entity, the Council will seek the recommendation of the Nominations and Legislation Committee, including in relation to the appropriate skills and experience required for the particular Board positions.

10.4.     The Boards of University controlled entities will be provided by the Council with training programs in the duties and responsibilities of directors and any other training in corporate governance which the Council or the Board considers is required.

10.5.     In addition to the duties of directors of a company under the law, the Board of the controlled entity is responsible for:

10.5.1.   approving the business plan, annual budget, strategic plan and operational plans of the company;

10.5.2.   monitoring performance against the annual budget and strategic plan;

10.5.3.   ensuring adequate control and accountability systems are in place including frameworks for delegations, risk management and legislative compliance;

10.5.4.   oversight of internal and external audit plans including monitoring of matters arising from the audits;

10.5.5.   approving the entry into agreements, including with the University;

10.5.6.   approving policies and procedures for the company, consistent with the objects and functions of the University and the company;

10.5.7.   establishing, in conjunction with the Council, a program of induction and training for Board members;

10.5.8.   ensuring policies and procedures are in place to govern disclosures of interest by Directors and disclosures and management of conflicts of interest, including in relation to Directors who are University staff, students or members of the University Council;

10.5.9.   compliance with Council reporting requirements as set out in the schedule, Controlled Entity Reporting Requirements Schedule or any variation of the Schedule approved by the Council from time to time;

10.5.10.   regular review of its own performance in relation to the objects in the company’s Constitution, the company business plan, strategic plan, operational plans and budget;

10.5.11.   ensuring that any uses of the University name, logo and brand are in accordance with relevant University consents and policies;

10.5.12.   ensuring that the company’s insurances, whether through University insurance policies or the company’s own insurances or through a combination of the two, provide adequate coverage, at a level acceptable to the University.

 

11.      Service Agreement

11.1.     The University will have a Service Agreement with each controlled entity, which will set out:

(i) the services to be provided by the company to the University;

(ii) the services to be provided by the University to the company;

(iii) the service standards and targets for the company and the University in relation to the other; and

(iv) any other conditions and arrangements agreed in relation to the provision of services by one to the other.

11.2.     The Service Agreement will provide that the protocol for communications between University staff and the controlled entity in relation to the day-to-day operations of the controlled entity will be through the chief executive officer of the entity.

 

12.      Winding up and Distribution of Assets

12.1.     A controlled entity will only be wound up in accordance with the company Constitution provisions on winding up.

12.2.     On the winding up of a controlled entity, the assets of the entity will be distributed in accordance with the provisions of the company Constitution.

 

 

13.      Essential Supporting Documents

University of Newcastle Act 1989

Controlled Entity Reporting Requirements Schedule - 000903 

Conflicts of Interest Policy – 000934

Commercial Activities Guideline - 000554

 

14.      Related Documents

            Business Development Framework (under development)

            Service Level Agreements

           

 

Approval AuthorityCouncil
Date Approved28 November 2008
Date Last Amended22 May 2009
Date for Review28 November 2011
Policy SponsorVice-Chancellor
Policy OwnerUniversity Secretary
Policy ContactUniversity Secretary
Amendment History

6 July 2011 - Updated list of Essential Supporting Documents due to a number of policies being replaced by the new Conflicts of Interest Policy - 000934 (which was approved by Council 18 March 2011)

Updated to be consistent with revised Schedule