The Superannuation Legislation Amendment (Trustee Governance) Bill 2015 (Cth) (Bill) was introduced to Parliament on 16 September 2015. The Bill is designed to improve the governance of trustees of registered superannuation entities, in particular by imposing greater independence requirements on the trustees.
At present, the Bill remains before the Australian Senate and will not now be passed (with or without any amendments) until 2016. The sticking point with the Senate has been the obligation imposed by the Bill for one third of the directors to be independent which is at the heart of the Bill as discussed below.
Many of the Bill’s provisions were recommended by two major independent reviews in Australia’s financial systems, namely the Murray Financial Systems Inquiry released 7 December 2014 and the Cooper Review on Governance, Efficiency, Structure and Operation of Australia’s Superannuation System released back on 5 July 2010.
In a number of respects, the Bill is bringing the boards of directors of superannuation funds into the 21st century, introducing similar requirements to those that already apply to boards of other entities such as APRA-regulated and ASX-listed entities. In any event, it is well accepted that it is best practice for boards to have a proportion of independent directors to create a strong governance framework.
It is clear that the Bill, when enacted, will substantially change the superannuation governance framework. Given the introduction of a more technical approach to who is an independent director and the lack of any materiality concept, boards of RSE licensees should already be addressing what they will need to do.
This will include thinking about whether it is necessary to review policies and procedures for the appointment, resignation and ongoing review of the independence of directors, and a review of the position of existing directors.
Our review of the situation discusses the full implications of the Bill, noting that the requirements in relation to directors of a registrable superannuation entity licensee may also apply to a group of individual trustees.