The Government proposes to introduce and pass the Superannuation Legislation Amendment (Governance) Bill in the Spring sittings commencing 7 September 2015. The key change to superannuation governance is to require all Australian Prudential Regulation Authority regulated superannuation funds to have a minimum of one third independent directors on their board, and an independent chair. Background.

The Bill, if passed, will also remove the current requirement for equal representation of employers and members on the boards of employer-sponsored funds.

UPDATE: The Bill was introduced into the House of Representatives on 16 September 2015.

The Assistant Treasurer has announced that the Government has agreed to make several amendments to the draft legislation, including:

• more detail on the definition of ‘independent’ in the law, rather than in APRA’s prudential standards, to provide greater certainty around the legal obligations of trustee boards;
• ensuring the new requirements and transition period both commence from Royal Assent so existing funds have a full three-year transition period;
• providing greater flexibility during the transition period by clarifying that neither the current equal representation rules nor the new independence requirements will apply where an APRA compliant transition plan is in place;
• clarifying that the independent chair can be included in the one-third independent directors;
• extending the period for filling a trustee vacancy from 90 days to 120 days; and
• clarifying that the Bill overrides both governing rules and the constitution of a corporate trustee.

Funds will be required to report on an ‘if not, why not’ basis, consistent with ASX principles, when a majority of directors are not independent.

APRA superannuation governance standards
The Australian Prudential Regulation Authority (APRA) has released a consultation package on governance arrangements for APRA-regulated superannuation trustees.

APRA’s package proposes:

• amendments to Prudential Standard SPS 510 Governance and to Prudential Practice Guide SPG 510 Governance; and
• new draft Prudential Standard SPS 512 Governance Transition and Prudential Practice Guide SPG 512 Governance Transition.

The drafts introduce the concept of a formal governance framework (including detailed requirements relating to the nomination, appointment and removal of directors) and enhance requirements relating to key board committees in light of the proposed changes to board composition.

APRA will release the final prudential standards and PPGs once the legislation has passed.