Life Insurance (prudential standard) determination No. 3 of 2010 - Prudential Standard LPS 510 - Governance
Board compositionBoard composition
Start here
Get a plain-English read of Board composition
Turn the raw legal text into a practical explanation grounded in Life Insurance (prudential standard) determination No. 3 of 2010 - Prudential Standard LPS 510 - Governance.
Board composition
-
The Board of a regulated institution must have a minimum of five directors at all times.
-
The Board must have a majority of independent directors at all times. For regulated institutions that are subsidiaries[4] of other APRA-regulated institutions or overseas equivalents,[5] exceptions may apply as set out at paragraphs 24 to 26. For regulated institutions that are subsidiaries of a parent company that is not prudentially regulated, exceptions may apply as set out at paragraph 27.
-
The chairperson of the Board must be an independent director of the regulated institution.
-
A majority of directors present and eligible to vote at all Board meetings must be non-executives.
-
The chairperson of the Board cannot have been the Chief Executive Officer (CEO) of the regulated institution at any time during the previous three years. If the position of the CEO is unexpectedly vacated, the chairperson may serve as an interim CEO. After a period of 90 days, approval must be sought from APRA to allow this arrangement to continue.
-
The chairperson must be available to meet with APRA on request.
-
For locally-owned and incorporated regulated institutions, a majority of directors must be ordinarily resident in Australia.
-
For foreign-owned locally incorporated regulated institutions, at least two of the directors must be ordinarily resident in Australia, at least one of whom must also be independent.
-
Board representation must be consistent with a regulated institution’s shareholding. Where a shareholding constitutes not more than 15 percent of a regulated institution’s voting shares, there should be not more than one Board member who is an associate of the shareholder where the Board has up to six directors, and not more than two Board members who are associates of the shareholder where the Board has seven or more directors. A director is taken to be an associate of a shareholder for the purposes of this clause if the director is an associate of the shareholder, or the shareholder is an associate of the director, according to the definition of associate in clause 4 of Schedule 1 of the Financial Sector (Shareholdings) Act 1998 (FSS Act). That definition is to be applied for the purposes of this clause as if subparagraph (1)(l) of that definition were omitted.
-
Where an individual shareholding is greater than 15 percent, as approved under the FSS Act, the Board representation of that shareholding can be greater than allowed in paragraph 22, although it must still be broadly proportionate to the shareholding concerned.