Queensland local governments once again find themselves grappling with significant changes to their enabling legislation. However, the changes affecting corporate structuring, legal status and business enterprises appear to simplify local government business dealings.
Consistent with the LNP Government's "Empowering Local Government" election platform, the Local Government Act 2009 (Qld) and the City of Brisbane Act 2009 (Qld) have recently undergone a series of amendments (The Local Government and Other Legislation Amendment Act 2012 received assent on 22 November 2012).
Additionally, there is a new Local Government Regulation 2012 (Qld) and City of Brisbane Regulation 2012 (Qld), replacing the three regulations that formerly existed under the Local Government Act and the City of Brisbane Act.
While many of the amendments to the legislation took effect on 22 November 2012, a number of the changes are yet to commence. The new regulations commenced on 14 December 2012.
In this article, we discuss the amendments dealing with:
- the restoration of body corporate status to Queensland local governments;
- the more flexible beneficial enterprise powers and the repeal of many of the statutory pre-conditions and restrictions upon the exercise of those powers; and
- the repeal of the concept of a "local government owned corporation" or "corporate entity", corporatised under the local government legislation, and the move towards incorporation by registration under the Corporations Act 2001 (Cth).
Renewed body corporate status
Historically, local governments in Queensland (including Brisbane City Council) were constituted as bodies corporate with perpetual succession. In 2008, the Local Government Act 1993 was amended and local governments other than Brisbane City Council were effectively "de-corporatised" in order to ensure that they were not subject to the Federal industrial relations jurisdiction. The amending legislation provided that a local government was constituted by its councillors.
An unintended consequence of this change in the legal status of local government was illustrated by the Industrial Court of Queensland's decision in Robert Fitzsimmons v Sunshine Coast Regional Council ((C/2009/55), 16 March 2010). In that case, the Sunshine Coast Regional Council, not being a body corporate at the relevant time, was sentenced as an individual and therefore, received a lower penalty than it would otherwise have received had it remained constituted as a body corporate. This anomaly was subsequently recognised in the drafting of enabling legislation for similar statutory bodies and a deeming provision was enacted to circumvent what appeared to be an otherwise inequitable outcome (ie. given the nature, size and resources of local government compared to an individual).1
At an October 2012 Local Government Budget Estimates hearing, the Minister for Local Government, David Crisafulli, explained that the reasons for the proposed restoration of body corporate status for Queensland local governments were firstly, to provide certainty for councils when they are entering into a contract (including clarification around stamp duty relief under the Duties Act 2001 (Qld) where, for example, councils are embarking on a corporate reconstruction)2 and secondly, to provide protection to councillors (eg. by limiting exposure to personal liability).
Because of lingering issues around the need to ensure that local governments who are bodies corporate fall under the State industrial relations system, it was suggested that an amendment to the relevant industrial relations legislation is required. Accordingly, the amendments that will ultimately restore body corporate status to Queensland local governments will not commence until industrial relations amendments and associated declarations have taken effect.
Increased autonomy and flexibility in beneficial enterprises
The beneficial enterprise powers under both the Local Government Act and the City of Brisbane Act have been amended3 by:
- Providing local governments with an express power to conduct beneficial enterprises;
- Repealing the mandatory requirements with respect to consultation with all employees who may be directly affected by the beneficial enterprise (or an industrial association representing the employees) and the passing of a resolution to conduct the beneficial enterprise;
- Repealing the requirement that a local government, when conducting a beneficial enterprise, must apply sound financial principles and comply with the Local Government Acts (as defined);
- No longer requiring that a register of beneficial enterprises is established and maintained by local governments and, instead, providing that a local government's annual report for each financial year must contain a list of all beneficial enterprises conducted during the relevant year; and
- Repealing the provisions which imposed obligations with respect to planning beneficial enterprises with the private sector.
The amendments make significant inroads into simplifying what has long been a complex legislative regime for local governments seeking to engage in a beneficial enterprise. The exercise of the beneficial enterprise powers has historically been subject to strict controls and limits and under the predecessor legislation, it involved a complicated exercise of determining whether a proposed enterprise was a "declared exempt enterprise".
A desire to clarify the interaction between the beneficial enterprise powers and the operation of the Statutory Bodies Financial Arrangements Act 1982 (Qld) (SBFA Act) was one of the reasons cited in support of the amendments to the enterprise provisions. Specifically, the amendments are intended to clarify that local governments are not relieved from having to obtain the Treasurer's approval under the SBFA Act for particular financial arrangements.
Corporations Act to apply to corporatised business activities
Queensland local governments (including Brisbane City Council) no longer have the ability to corporatise a business activity under the Local Government Act (or in the case of Brisbane City Council, under the City of Brisbane Act).
There were only ever two corporate entities established under the Local Government Act, one of which is soon to be wound up and its business is to be transitioned back to its council shareholder as a commercialised business unit. These entities generally have suffered from their peculiar corporate identity and the governance framework under which they have been required to operate. 4
Therefore, to address these issues and remove unnecessary regulatory duplication, a local government wishing to corporatise an activity may now do so under the ordinary corporatisation provisions in the Corporations Act. The new Local Government Regulation and City of Brisbane Regulation introduce a new concept of "corporatised business entity" which is defined in terms of a company registered under the Corporations Act that is owned or controlled by a local government.
Having regard to the underlying policy objectives and the push to empower local governments, and simultaneously, reduce red tape, the recent amendments to the Local Government Act and City of Brisbane Act are not, of themselves, surprising.
What is surprising perhaps is that Queensland local governments once again find themselves grappling with significant changes to their enabling legislation. While the extent of the practical impacts of these changes on local government administration and operations remains to be seen, at first glance, the changes appeal to common sense and suggest that business dealings by, and with, local government may be made somewhat easier as a result.
1 The deeming provision provides that the relevant entity (not being a body corporate) is taken to be a corporation for the Penalties and Sentences Act 1992. [go back]
2 According to Hansard, Ipswich City Council was involved in a transaction in which stamp duty liability was in the order of $164,000. [go back]
3 Complementary amendments to the regulations under both Acts have also been made. [go back]
4 The Local Government and Other Legislation Amendment Act 2012 effectively omitted from the Local Government Act, Chapter 3, Part 2, Divisions 3 and 4 (being the legislative provisions governing corporate entities). However, section 297 of the Local Government Act, as amended, is a transitional provision designed to ensure the continuation of the "corporate entity" provisions (including those that existed in the now repealed regulations with respect to corporate entities). [go back]
Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.