- Date:
- 13 Oct 2022
Introduction to statutory corporations
Statutory corporations are bodies corporate established by legislation. This Bulletin explores how statutory corporations are established, what they can do and how they are regulated.
What are statutory corporations?
Statutory corporations are bodies corporate that are established by legislation.
Generally, in Victoria, statutory corporations are created expressly by a provision establishing a body as a 'body corporate'.
However, this is not always the end of the matter because:
- it is also possible for a body to have a legal entity distinct from the natural persons that compose it, even if it is not expressly designated as a corporation, where legislation confers the incidents of legal personality on it
- statutes can also confer some incidents of legal personality without necessarily creating the office or body as a separate body corporate.
What types of statutory corporations are there?
Statutory corporations can take many forms.
Commonly, in Victoria the forms include:
- Corporations sole, where a pre-existing office (most commonly, a Secretary of a Department) is incorporated into a statutory corporation.
- Single member corporations. It is common in Victoria to create a statutory corporation with a sole member (or 'incorporator'). This is distinct from a corporation sole, in that a separate entity is established, to which a member is appointed.
- Multi-member corporations. Most statutory corporations in Victoria are constituted by multiple members, ordinarily organised as a board. For multi-member corporations, the enabling statute will contain provisions governing how the members may make decisions for the entity.
What is the relationship between statutory corporations and the State?
The State or 'Crown' can mean different things in different contexts.
One of those things is that the Crown is taken to be a legal person. The executive government of the State, through its Ministers and Secretaries, can exercise the Crown's powers as a legal person. This is generally what is occurring when, for example, a Minister enters into contracts; the contracts bind the Crown as a legal person.
Statutory corporations are distinct legal persons from the Crown in that sense.1 For example, a statutory corporation enters into contracts in its own name. The Crown will not be liable in respect of contracts entered into by such statutory corporations.2
A statutory corporation may, however, form part of the State for some other purposes. It may have the privileges and immunities of the Crown,3 or it may be part of the State for certain constitutional purposes. For certain purposes, whether a statutory corporation is part of or represents the Crown can depend on various factors (including the terms of its constituting statute, the degree of control exercised by the State in relation to the corporation, and whether it is subject to Ministerial direction).
What governance obligations apply to statutory corporations?
The enabling legislation of a statutory corporation will establish its system of governance. An Act may include how the governing body is constituted, its decision-making processes and particular board/director duties (including the need to avoid and manage conflicts of interest) and the extent to which it must account to the relevant Minister.
Statutory corporations will generally also be subject to other public sector governance and accountability legislation (for example, they may be a 'public entity' for the purposes of the Public Administration Act 2004 and/or a 'public body' for the purposes of the Financial Management Act 1994, etc).
Depending on how a corporation is established and, in some cases, its relationship to the State, its directors may also have particular duties under the Public Administration Act 2004 and be subject to various policies — both those policies of the statutory corporation which may be required to be made by the board and other whole of government policies.
State bodies corporate can also be created and regulated under the State Owned Enterprises Act 1992 and, in some cases, the Corporations Act 2001 (Cth).
What can a statutory corporation do?
Limits on statutory corporations' powers
A statutory corporation's powers will be limited by its establishing Act. That is, a statutory corporation can only do those things that its establishing Act contemplates that it does.4
All things a statutory corporation does must be for its statutory purposes and objects and consistent with its functions. Even where a statutory corporation's powers are not expressly confined by reference to its purposes or objects, its powers will be impliedly confined by those purposes.5
Similarly, the list of the corporation's functions in its enabling Act determines the limits of its powers (i.e. it cannot do anything that does not relate to its statutory functions).6
Anything that a statutory corporation purports to do, that is not contemplated by its enabling Act, is beyond power (ultra vires) and generally invalid.
Types of powers
To understand what types of things a statutory corporation can do, for its purposes, the starting point is the express powers in its enabling Act. That Act is the source of a statutory corporation's authority and capacity.7
Importantly, there are two main types of express power that a statutory corporation may be given by their enabling Act.
- Statutory corporations are given powers or capacities shared by any natural or legal person. For example, a provision creating a statutory corporation will often provide that it has the capacity to do all things that a body corporate may by law do. These general statements of power are often supplemented by a (non-exhaustive) list of the corporation's specific capacities. For example, the list might include the power to enter into agreements or contracts, or the power to own land, or to acquire an interest in another body.
- There may also be provisions conferring a power to do a particular thing, which requires statutory power to do or which are given a particular statutory effect (for example, to compulsorily acquire or enter land, or to grant a particular type of statutory permission). Any provision empowering an act that would affect the rights of individuals will be in that class.8
Statutory corporations may be also be given an express ancillary power to do all things necessary or convenient to perform its functions and/or duties. This kind of power may appear broad but is, in fact, ancillary, and still depends on the relevant activity being 'necessary' or 'convenient' for the performance of a relevant function or duty.9
Certain incidental powers may also be implied from the express provisions of the enabling Act. For example, where an entity has the power to enter into a contract or arrangement, it will also have the power to implement, enforce and administer that contract or arrangement.10
Role of functions
As set out above, the principal role of a statutory corporation's functions is to determine the purposes for which it can act.
Generally, functions provision will not usually create a duty or an obligation. Rather, it is generally up to the corporation's discretion as to when and how it performs its functions.11 That said, in rare cases, a statutory function may give rise to an obligation or duty, which is a question of statutory interpretation.12
Can statutory corporations employ people?
Some statutory corporations have an express or implied power to employ persons.
Otherwise, the establishing Act may create an arrangement where staff may be employed under the Public Administration Act 2004, where those staff may be made available to a corporation.
How do statutory corporations act through others?
Like other corporations, statutory corporations can only act through natural persons.
There are a number of ways in which natural persons can act for a statutory corporation 'within the scope of authority granted to them' under the statutory corporation's establishing Act.13 The principal mechanisms include:
- The constituting member or board of a statutory corporation can exercise all of its powers directly. Boards will generally be only to make decisions for the corporation in a particular way, as set out in the enabling Act.
- Statutory corporations will generally have an express power of delegation (and may have supplementary implied powers to authorise another person to exercise certain types of statutory powers).14
- Statutory corporations are also generally able to act through employees and agents.15 Under the general law of agency, a principal may authorise an agent to act on behalf of the principal expressly or by implication.
Whether and how a particular power can be exercised is often a complex question. As a general rule:
- statutory powers to do a particular thing should be exercised by the corporation through its controlling board or member, or a properly authorised delegate under an express power of delegation.
- Powers or capacities that a corporation shares with natural persons may be exercised more flexibly through properly authorised employees and agents through the ordinary rules of agency.
Financial authorisations
Statutory corporations generally need to comply with the financial management rules in the Financial Management Act 1994 and the Minister's Standing Directions issued under that Act. These rules require public bodies to establish and maintain a range of financial management controls, including a system of authorisations for the creation of financial liabilities for statutory authorities.
The Standing Directions contain detailed guidance and are available through the website of the Department of Treasury and Finance.
How do statutory corporations execute instruments?
At common law, a non-trading corporation should execute instruments or documents under seal.
Victorian legislation establishing a corporation will generally provide that it has a seal which should be affixed as authorised by its board. In more modern legislation, the term 'official seal' is generally used. Where an Act requires a corporation to have a seal, it is generally good practice for the corporation to execute important instruments under seal. Things done by delegates, or other properly authorised agents, will not need to be done under seal.
A statutory corporation's statute will generally provide that things done under seal are presumed to have been validly done. This presumption is useful if there is the prospect of litigation in relation to the document or instrument.
Execution requirements for a statutory corporation in relation to specific instruments are set out below.
- Deeds: A statutory corporation can only enter into a deed under seal (i.e. using its official or common seal), unless this requirement is modified by legislation.
- Contracts: The common law has also historically provided that a contract of a corporation, subject to recognised exceptions, is not enforceable unless it is made under seal.16 However, section 31A of the Instruments Act 1958 specifically provides that a statutory corporation can execute contracts through others without using its official seal.
- Other documents: At common law, acts other than executing contracts (for example, appointments of agents) were also often required to be executed under a statutory corporation's seal.17 In some cases, the terms of express statutory power of delegation may displace that common law rule (e.g. a provision enabling delegation by resolution of a board).18 Where there is no such provision, it remains safest that an instrument documenting a decision made by the members of a corporation is executed under seal. For example, a Full Federal Court has indicated that a provision in an Act providing for a common seal suggests a statutory intention that documents executed by the entity be executed only under the official seal.19
To be clear, delegates or agents who are acting for a statutory corporation 'within the scope of the authority granted to them'20 do not generally need to affix a seal.
Electronic execution of deeds, contracts and other instruments in Victoria is generally permitted through the operation of the Electronic Transactions Act 2000. However, it is unlikely that this Act allows statutory corporations to create and execute deeds in electronic form.21
What other legislation affects statutory corporations' powers?
Statutory corporations' powers may also be limited by other generally applicable legislation relating to matters such as public sector decision-making, integrity, information-handling, equal opportunity and discrimination, and industrial relations. Whether statutory corporations have the power to borrow or invest money will often depend on whether the Borrowing and Investment Powers Act 1987 applies to them.