Treasury has released exposure draft legislation to amend the Superannuation Industry (Supervision) Act 1993 (Cth) to change APRA-regulated superannuation fund governance arrangements.

Currently the SIS Act requires employer-sponsored superannuation fund trustee boards to have an equal number of employer representative members and member representative directors.

The amendments in the exposure draft legislation will not apply to SMSF’s.

The changes propose that:

• all Australian Prudential Regulation Authority regulated superannuation funds be required to have a minimum of one third independent directors on their trustee board, and an independent chair;
• the definition of ‘independent’ is to include persons who do not have a substantial holding in the trustee or do not have (or have not had within
  the last three years) a material relationship with the trustee, including through their employer; and
• trustees of funds that do not have a majority of independent directors be required to report on an ‘if not, why not basis.

The Government has indicated that the legislative changes are expected to take effect on 1 July 2016. but a three year transition period will apply to existing funds.

APRA has also released a letter proposing amendments to Prudential Standard SPS 510 Governance and the introduction of a new standard, Prudential Standard SPS 512 Governance Transition.

APRA proposes to amend SPS 510 to:

• require that a majority of both the Board Audit Committee and Board Remuneration Committee be independent directors;
• require the chair of the Board Audit Committee and Board Remuneration Committee to be independent;
• permit the chair of the board to also be the chair of the Board Remuneration Committee; and
• remove the existing provision which allows the chair of the board to also chair the Board Audit Committee where the chair is the only independent
  director on the board.

APRA’s revised guidance will particularly address APRA’s view of good practice in areas such as:

• the size of RSE licensee boards;
• renewal and appointment processes;
• setting director tenure limits;
• the management of conflicts of interest, particularly where multiple directorships are held; and
• the role of board committees, in particular nomination and risk committees.

All new RSE licensees which are licenced on or after 1 July 2016 will be required to meet the independence requirements upon commencement of their business operations. All existing RSE licensees, however, will be granted transition relief for three years, and so will have until the end of the transition period to fully meet the revised requirements.