Introduction to the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI)

Terri Janke and Company, Lawyers and Consultants, have teamed up with the Australian Institute of Company Directors to take a look at the Corporations (Aboriginal and Torres Strait Islander) Act 2006, the rationale for cultural governance and some of the considerations an Indigenous entrepreneur may want to take into account when deciding to incorporate.

Defining a CATSI Corporation and the role of ORIC

The CATSI Act was passed in 2006 to provide a governance structure specifically adapted to the needs of Indigenous corporations. It also established the Office of the Registrar of Indigenous Corporations (ORIC) as the regulator for entities registered under the Act.

ORIC offers a number of support resources to CATSI corporations including the Healthy Corporation checklist, and links to free services such as LawHelp pro bono legal services and Independentdirectory, a website matching skilled directors with Indigenous corporations.

Registration under the CATSI Act is mostly voluntary, although native title groups are required to register as CATSI corporations. Further, only CATSI corporations can receive funding over $500,000 from the Indigenous Advancement Strategy.

The name of an Indigenous corporation must include the words “Aboriginal Corporation” or “Torres Strait Islander Corporation” or some combination of the two. And if the corporation is a native title body, the name must include the words “registered native title body corporate”.

In most cases, Indigenous entrepreneurs wanting to start a company, may choose between incorporating under the Corporations Act or the CATSI Act.

In this new edition of our AICD podcast series DirectorCast, Terri Janke shares some expert insights into the workings of the CATSI Act.

The rationale for cultural governance

The intention of the CATSI Act is to advance and protect Indigenous entrepreneurs and their businesses. As a result, there are some key differences between Indigenous corporations registered under the CATSI Act and Indigenous companies registered under the Corporations Act.

The CATSI Act is designed to safeguard Indigenous ownership and control. For example, the majority of members and directors must be Aboriginal or Torres Strait Islander.

The majority of directors of a CATSI corporation must also be members. This facilitates participation in the corporation and means that the people who govern the corporation, have direct investment in its success, through their own membership.

Under the Corporations Act a company can have one member. Whilst you can seek the consent of the Registrar of Indigenous Corporations to have one member CATSI corporations, generally an Indigenous corporation under the CATSI Act must have at least 5 members. Members can can be as young as 15 years of age. These provisions demonstrate an expectation that an Indigenous corporation will have a large number of members, and that governance will be collaborative. This model is particularly suited to businesses with a community, cultural or charitable focus. such as language centres, arts and cultural organisations, for example, the Kimberley Aboriginal Law and Cultural Centre.

Also, under the CATSI Act, the Registrar can appoint examiners to go into Indigenous corporations to conduct “healthy corporation checks”. The idea behind this is to identify any financial or governance issues at an early stage.

In this video, Terri Janke outlines some further details about how the CATSI Act works.

The Contents of the Rule Book

Under the CATSI Act, an Indigenous corporation is required to consolidate its governing documents, and applicable laws into a Rule Book. The Rule Book includes:

• the Constitution of the Corporation,
• any replaceable rules from the CATSI Act that have not been replaced, and
• any rules under the CATSI Act that cannot be replaced.

Most Aboriginal Corporations set these rules when they first register; updating them from time to time as the Corporation grows and changes. The Rules take effect once ORIC has approved them and publishes a copy on their website. It is important to have an up-to-date Rule Book that is easily accessible to every member. In addition, a copy should always be kept at the Corporation’s registered office or document access address.

The Rule Book should set out the rules for any members meetings including how often to hold them, how to give notice of an upcoming meeting, and any voting rules. Most of the rules in the CATSI Act on members meetings are replaceable allowing the corporation flexibility to make rules according to the needs of the organisation.

Directors Duties under the CATSI Act, are very similar to their duties under the Corporations Act including duties of care and diligence, good faith, use of position and use of information. The main difference is in the availability of an additional defence for directors of native title bodies. A director of a native title body who breaches of these duties can defend their breach if they can show that they acted in good faith and in the belief that their action was necessary to comply with native title legislation.

Factors affecting the decision to incorporate

So, now we have outlined some of the similarities and differences between the CATSI Act and the Corporations Act, we can consider some factors an Indigenous entrepreneur might take into account when deciding which act to incorporate under.

Some of the pros of setting up a CATSI corporation include:

• no registration fees and no on-going costs to maintain registration,
• high level regulatory support,
• it provides protection of Indigenous ownership and control,
• high level access to regulatory support, and
• requires ORIC to take into account the culture and unique circumstances of Indigenous people when administering the CATSI Act.

One difference between the Corporations Act and the CATSI Act is that the Indigenous corporation is not able to issue shares. This may be a limitation on the way the Corporation can raise capital to grow and expand the business. In addition, the Act alters the way profits are distributed to members rather than dividends. Although that limitation is ameliorated by the fact that members can include rules in the Rule Book about how any profits will be shared.

Nevertheless, CATSI Corporations are still a popular form of incorporation for many Indigenous enterprises large and small including many registered native title bodies and community organisations for whom close community engagement is a priority and additional governance support is an advantage.