Taxes are not the only way the government brings in money. Bringing in revenue and being a commercial success are the main focuses of a statutory corporation. As a result, they are very similar to any other company. What makes them distinct, however, is how they are made and how they are governed. This article outlines exactly what a statutory corporation is, with reference to NSW legislation. In addition, the article will examine how they are made and what they can do. As they are a corporation, you may be wondering how the Corporations Act 2001 (Cth) affects them. This article covers that too.
What is a Statutory Corporation?
A corporation made by an act of parliament is a statutory corporation (‘statutory SOC’). Consequently, a statutory SOC acts as both a statutory body and a body corporate. As a result, a statutory SOC operates very similar to a normal corporation. They have a board of directors and have to submit annual financial reports. However, they only have two shareholders; the appointed minister and the treasurer. Furthermore, unlike other statutory bodies, SOCs are not primarily concerned with public service. The objective of a statutory SOC is commercial success. However, this does not prevent them from participating in non-commercial activities. Although, the relevant minister and treasurer must approve of the activity.
How is a Statutory Corporation made?
In NSW, a statutory SOC is made when its name is inserted into the State Owned Corporations Act 1989 (NSW) sch 5 (‘SOC Act‘) by another statute. For example, the Energy Services Corporations Act 1995 (NSW) (‘ESC Act‘) created the corporation Essential Energy. The ESC Act s 4, 6A, 7 amends the SOC Act sch 5 to include Essential Energy. As a result, Essential Energy becomes a statutory SOC. In addition, another statute is the only thing that can remove a statutory SOC from schedule 5 of the SOC Act.
Furthermore, statutory corporations include entities created by the Public Governance, Performance and Accountability Act 2013 (Cth) s 87.
What Can They Do?
A statutory SOC is a separate legal entity from the government and has the powers of a natural person. They can enter into contracts and can charge for the goods or services they supply. A statutory SOC does all this through their officers, including the director, chief executive officer or employees. Furthermore, the statutory SOC may have special powers granted by the act that created them. However, they do not have unlimited freedom. They are still subject to any restrictions outlined in the act that made them. In addition, they are also subject to their required constitution and the statements of their corporate intent. Furthermore, although they do not have to pay taxes, they must occasionally pay the treasurer an amount as if they did have to.
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Can a Company Become a Statutory Corporation?
A pre-existing company cannot become a statutory SOC. However, the government can own companies but separate laws apply. For more information on company SOCs in NSW, please refer to the SOC Act pt 2.
Examples of a Statutory Corporation
In NSW, there are currently 8 statutory SOCs. Those SOCs are:
- Essential Energy
- Hunter Water Corporation
- Landcom
- Newcastle Port Corporation
- Water NSW
- Sydney Water Corporation
- Forestry Corporation
- Transport Asset Holding Entity of New South Wales
Corporations Act 2001 (Cth)
Not all corporations are subject to the Corporations Act 2001 (Cth). There are a couple of exceptions. The SOC Act exempts statutory SOCs from almost the entirety of the Corporations Act 2001 (Cth).
Conclusion
A statutory corporation (‘statutory SOC’) is a body corporate created by statute. Although they share many similarities with a regular corporation, they are subject to different laws. They are not liable to taxes and are mostly exempt from the Corporations Act 2001 (Cth). However, they still possess many of the qualities of a corporation with the powers of a natural person. They can enter into contracts and mostly operate like regular companies.
