Public Governance, Performance and Accountability (Relevant Company) Rule 2016

The central concept is “relevant company” as defined by the instrument for the purposes of subsection 85(2) of the PGPA Act. The PGPA Act itself uses the term “relevant company” in several places, but the exact scope is left to this legislative instrument. The main concept is operationalised through the table in section 5, which contains three columns: item number, kind of company, and the company’s objects or proposed activities. The kind of company is confined to two structural types under the Corporations Act: a company limited by shares, or a company limited by guarantee. Some items (items 1, 3, 6, 7, 9) specify only companies limited by shares; item 4 specifies only a company limited by guarantee; item 5 specifies either; and item 8 specifies only a company limited by guarantee. This means a proprietary company limited by shares could be captured if its objects match, but an unlimited company or a no‑liability company cannot be a relevant company under this rule, regardless of its activities.

The objects or proposed activities are drafted with varying degrees of specificity. Item 1 requires the objects to be “to conduct world‑leading quantum computing research” and then lists two specific sub‑objectives: developing and commercialising a prototype 10‑qubit silicon quantum integrated circuit, and developing and commercialising applications of that prototype including for a silicon‑based quantum computer and associated intellectual property. This is highly prescriptive. In contrast, item 5 is broad: “To assist with the performance of the functions, or the exercise of the powers, of an intelligence or security agency; or a listed law enforcement agency”. The term “assist” is not defined, and could include providing goods, services, personnel, or other support. Item 8 is also broad: “To strengthen the national education evidence base … including through collaborating, developing and implementing a national agenda, mobilising high‑quality resources, and supporting teaching and learning”. This level of generality could capture a wide range of education‑focused companies.

Another key concept is “proposed activities”. This phrase appears in section 5(b) in the alternative to “objects”. It means that a company that has not yet formally adopted objects that match the table could still be a relevant company if its proposed activities - as set out in a business plan, prospectus, or other document - match the description. This extends the reach of the rule to companies that are still in the formation stage, provided there is evidence of the proposed activities. Conversely, an existing company that changes its objects so that they no longer match any item would presumably cease to be a relevant company, but the instrument does not address transitional arrangements.

It is also important to note what the instrument does not contain. It does not define “world‑leading”, “sovereign”, “national security”, “listed law enforcement agency”, or any other evaluative term. These terms would have to be interpreted in context and may draw on definitions in other Commonwealth legislation. For example, “listed law enforcement agency” might refer to the list in the PGPA Act itself or in another instrument. The lack of definitions creates interpretive uncertainty, particularly for items 5 and 8. The instrument also does not include any mechanism for the relevant Minister to certify that a company meets the criteria; the classification is a question of fact based on the company’s constitution and actual activities. This could lead to disputes about whether a particular company is captured.

The instrument directly affects any company that falls within one of the eight item descriptions. In practical terms, these companies are almost exclusively Commonwealth‑owned or controlled entities, because the activities described - quantum computing research, defence shipbuilding, intelligence support, national security research, and so on - are areas in which the Commonwealth establishes wholly‑owned companies to perform public functions. The instrument does not require the Commonwealth to hold any shares or control, but the nature of the objects makes it highly likely that such companies will be Commonwealth companies under section 89 of the PGPA Act. Consequently, the directors and officers of those companies become accountable authorities under the PGPA Act and must perform duties such as governing the company properly, maintaining proper accounts, and preparing annual reports that comply with the PGPA Act and the PGPA Rule.

The portfolio departments that oversee these companies are also affected. For example, the Department of Defence would be involved with items 3, 4, 5, 6 and 9; the Department of Industry, Science and Resources with item 1; the Department of Communications with item 7; and the Department of Education with item 8. Those departments must ensure that their portfolio companies are aware of their PGPA obligations and that the companies’ objects are correctly aligned with the items if the Commonwealth intends them to be relevant companies. The instrument also affects auditors of these companies, because the PGPA Act imposes audit requirements on relevant companies, including audit of annual financial statements and performance statements. Audit firms that accept engagements for these companies must apply the auditing standards issued under the PGPA Act rather than solely the Corporations Act requirements, which may involve different procedures and additional reporting to the Auditor‑General or the responsible Minister.

Third parties dealing with relevant companies may be indirectly affected. For instance, a contractor supplying goods to a relevant company may find that the company is subject to more stringent procurement rules under the PGPA Act, such as the Commonwealth Procurement Rules, if the company is treated as a Commonwealth entity for those purposes. However, the instrument does not itself impose any obligations on third parties. The practical effect is limited to those who are already interacting with the Commonwealth’s corporate vehicles. Companies that are privately owned and whose objects happen to match an item (for example, an entirely private education research company with objects that track item 8) would technically be relevant companies and thus subject to the PGPA Act. In reality, the Commonwealth would likely be unaware of such companies, but the legislative text makes no exception. This creates a risk that a private company could inadvertently become subject to federal public governance obligations without realising it.

The instrument imposes no duties or rights directly. It is a definitional instrument. All duties that flow from being a relevant company are found in the PGPA Act. Because the full text of the PGPA Act is not provided, only general observations can be made based on the structure and purpose of the instrument. Section 85(2) of the PGPA Act, for which this instrument provides the definition, likely makes certain provisions of the PGPA Act apply to relevant companies as if they were Commonwealth entities. The key duties that typically apply to a relevant company include the duty of the accountable authority (the board or the chief executive) to govern the company in a manner that promotes the proper use and management of public resources; the duty to keep the responsible Minister informed; the duty to prepare and present annual reports that comply with the PGPA Act; and the duty to prepare annual financial statements that are audited. The PGPA Act also imposes a duty to establish and maintain an audit committee, and a duty to comply with any rules or determinations made under the Act, such as the PGPA Rule 2014 which covers reporting deadlines and content. There may also be duties relating to the management of public resources, including the requirement to use resources efficiently, effectively, ethically and economically.

Rights are limited. A relevant company has the right to receive funding from the Commonwealth as appropriated, and to hold and manage Commonwealth assets subject to the PGPA Act. The company also has the right to have its accountable authority’s decisions respected by portfolio departments, provided they are within the law. The instrument itself does not confer any additional rights, such as the right to borrow, to sue, or to exercise statutory powers. Those will depend on the company’s constitution and any other applicable laws.

Because the instrument is silent on duties, a company that believes it is a relevant company must turn to the PGPA Act to ascertain its obligations. This creates a significant compliance burden for any legal advisor trying to determine the full scope of duties. The instrument does not cross‑reference the relevant PGPA Act sections, so a reader is forced to consult the Act independently. The instrument also does not provide any transitional provisions or grandfathering for companies that were already in existence before it commenced.

The instrument contains no penalties. It is purely definitional. Enforcement consequences arise from the PGPA Act for breaches of duties that the Act imposes on relevant companies and their accountable authorities. For example, if the accountable authority of a relevant company fails to govern properly, resulting in a breach of the duty to use public resources economically, the PGPA Act may impose civil penalties, criminal penalties, or other remedies such as recovery of money or removal of the officer. The instrument itself cannot be enforced; rather, it serves as a threshold element that must be proved in any enforcement action: the prosecution or applicant must first establish that the company is a relevant company under this rule before the PGPA Act duties apply. If the company does not match any item in the table, then the PGPA Act duties do not apply via this definition, though the company might still be a Commonwealth company under section 89 of the PGPA Act and subject to other provisions.

Enforcement of PGPA Act obligations against relevant companies is typically handled through the court system, with the Commonwealth Director of Public Prosecutions bringing criminal matters, and civil penalty proceedings brought by the Commonwealth itself. The Auditor‑General also has powers to audit relevant companies and to report breaches to the Minister or the Parliament. The instrument does not create any specific enforcement mechanism or liability. In practice, the risk of enforcement is probably low for most relevant companies because they are Commonwealth‑controlled and compliance is monitored internally by the portfolio department. However, if a company inadvertently became a relevant company without realising it, it could be in breach of PGPA Act duties and face enforcement action, even without intent.

The instrument’s lack of penalties means that litigation is unlikely to arise from the instrument itself. Any dispute would be about whether a particular company’s objects or activities match the table. That is a factual question that would be decided by a court interpreting the company’s constitution and the ordinary meaning of the phrases in the table. There are no cases cited in the instrument, and no administrative decisions or guidance are referenced. The enforcement environment is therefore determined entirely by the PGPA Act, which is outside the source provided.

The instrument is made under the PGPA Act and operates as part of a broader legislative framework. Its primary interaction is with the PGPA Act itself, particularly subsection 85(2). It also interacts with the PGPA Rule 2014, which sets out detailed requirements for financial reporting, record‑keeping, and other matters for Commonwealth entities and relevant companies. For example, the PGPA Rule 2014 may prescribe the form and content of annual reports for relevant companies, and this instrument determines which companies must comply with those rules. The instrument also interacts with the Corporations Act 2001. Relevant companies are still companies governed by the Corporations Act; they have shareholders (if limited by shares), directors’ duties, and reporting obligations under that Act. The PGPA Act adds an additional layer of public governance obligations, some of which may overlap or conflict. For example, both acts require financial reporting, but the PGPA Act may require additional performance reporting. The instrument does not resolve any such conflicts; they must be managed by the company’s directors in practice.

For companies described in item 5 (assisting intelligence or security agencies or listed law enforcement agencies), there may be interactions with the Intelligence Services Act 2001, the Australian Security Intelligence Organisation Act 1979, or the Australian Federal Police Act 1979. Those laws may impose secrecy or security requirements that affect the company’s ability to disclose information in its annual report under the PGPA Act. The instrument does not provide any exemption from those requirements, so the company would need to negotiate with the portfolio department about classified reporting.

The instrument may also interact with other legislative instruments made under the PGPA Act, such as portfolio determinations that prescribe accountability arrangements for particular entities. Because the instrument does not list specific companies, it may overlap with other rules that list companies by name for different purposes. For instance, the PGPA Act also has provisions for “subsidiaries of a Commonwealth entity” that may capture the same companies. The instrument does not coordinate with those provisions, which could lead to a company being classified as a relevant company under this rule and also as a Commonwealth company under section 89, leading to dual application of the PGPA Act.

Finally, the instrument does not affect state or territory laws. It operates within Commonwealth legislative power, presumably relying on the incidental power to support the executive government’s management of public resources. It does not purport to override or modify any state law. However, a company that is a relevant company and also operates in a state jurisdiction must still comply with state laws, such as workers’ compensation, payroll tax, and environmental regulations. The instrument creates no exemption from those.

The instrument as provided does not contain any amendment history. It appears to be the version as originally made in 2016. There is no preamble or explanatory statement showing amendments. The table includes item numbers 1, 3, 4, 5, 6, 7, 8 and 9, with no item 2. This suggests that item 2 may have been omitted by a previous amendment, but the instrument does not disclose this. Legislative instruments are often amended by later instruments, but the source text does not show any such amendments. A user relying on this instrument must check the Federal Register of Legislation for the current compilation. The instrument’s commencement date is not stated in the source but, as a legislative instrument under the PGPA Act, it would have commenced on the day after registration unless otherwise specified. The absence of amendment history means the instrument may have been in force unchanged since 2016, or it may have been amended and this text is merely a standalone extract. Because the source is limited, no definitive statement about amendment history can be made beyond noting the missing item 2.

The instrument does not mention any litigation history. No cases are cited, and no judicial decisions are referred to in the text. Because the instrument is a definitional rule, it is unlikely to have been the subject of direct litigation. Any litigation would probably involve the interpretation of the PGPA Act or the application of the instrument to a particular company, but no such cases are recorded in the source. The instrument is not a primary statute and is rarely challenged in court. There may be Administrative Appeals Tribunal or Federal Court decisions dealing with the classification of companies under the PGPA Act, but they are not referenced here. A practitioner would need to conduct independent legal research to find any relevant case law. The source is silent on this point, and therefore any litigation history is absent.

The instrument contains several traps for the unwary. First, the descriptions in column 3 are not exhaustive. The phrase “including through” in items 1 and 8 signals that the listed sub‑objectives are examples, not a closed list. This means a company whose objects match the general description but differ in the sub‑objectives could still be a relevant company. For example, a company limited by shares formed to conduct “world‑leading quantum computing research” that focuses on 50‑qubit systems rather than 10‑qubit systems would arguably still satisfy item 1 because the core object is the same. The lack of exclusive language expands the scope.

Second, the absence of a definition for “world‑leading” invites subjective interpretation. A company might argue it is not world‑leading and therefore not captured, but the Commonwealth might take a different view. This creates uncertainty until the matter is tested. Similarly, “sovereign ship design and construction capabilities” in item 6 is not defined; it could cover a company that merely consults on ship design without building anything.

Third, the instrument covers “proposed activities”. This means a company that is not yet operating but has a business plan matching an item is a relevant company from the moment the proposed activities exist. The company could become subject to PGPA Act obligations before it has any revenue or assets, creating a compliance burden at formation stage. Conversely, a company that changes its activities without changing its objects may fall outside the description. The instrument does not require the company to notify anyone of such changes.

Fourth, item 5 is extremely broad. “Assist with the performance of the functions … of an intelligence or security agency” could include a company that provides IT support, catering, or cleaning services to such an agency. The company type is limited to companies limited by shares or guarantee, but the object is very general. Many contractors to ASIO or the Australian Signals Directorate could inadvertently be relevant companies. They would need to review their constitutional objects carefully.

Fifth, the instrument does not list any of the well‑known Commonwealth companies by name, such as ASC Pty Ltd or NBN Co Limited. A reader might assume that those companies are not relevant companies because their objects are not exactly as stated. But NBN Co’s objects - connecting Australians to the National Broadband Network - do not match item 7 (which is limited to a specific cable system connecting Sydney, Port Moresby and Honiara). NBN Co may be a Commonwealth company under other provisions, but not under this rule. The narrowness of item 7 suggests that the instrument was intended to capture specific, often newly created, companies rather than the entire suite of Commonwealth commercial entities.

Sixth, the instrument has no mechanism for the Commonwealth to certify that a company is a relevant company. It is a self‑executing definition. A company must assess itself, but the Commonwealth may later disagree. This risk is heightened for items that rely on evaluative terms.

Compliance with this instrument is indirect. The instrument itself does not require any action; rather, it triggers compliance obligations under the PGPA Act. Therefore, “how to comply” means how to ensure that if you are a relevant company, you meet the PGPA Act requirements. The first step is to determine whether your company is captured. Conduct a careful review of the company’s constitution (or proposed constitution) and compare the objects to each item in the table. Pay particular attention to the phrases that are not exhaustive; if the core object matches, the company is likely captured even if some sub‑elements differ. If the company has not yet been incorporated but has proposed activities (e.g., in a business plan or a cabinet submission), those proposed activities must also be compared.

If the company falls within any item, then the accountable authority (typically the board of directors or the CEO) must take steps to comply with the PGPA Act. This includes: (a) ensuring that the company’s governance framework aligns with the PGPA Act’s requirements for proper use of public resources; (b) maintaining proper accounts and records in accordance with the PGPA Rule 2014; (c) preparing annual financial statements and performance statements that comply with the PGPA Act; (d) having those statements audited by an approved auditor; (e) preparing an annual report that meets the content and timing requirements of the PGPA Act; (f) establishing an audit committee if required; (g) reporting to the responsible Minister as needed; and (h) complying with any applicable portfolio determinations.

Because the instrument does not list specific companies, it is prudent to seek written confirmation from the portfolio department or the Department of Finance that the company is indeed a relevant company and what specific PGPA Act obligations apply. This can reduce the risk of inadvertent non‑compliance. If the company’s objects change, the analysis must be repeated; if the company no longer matches any item, it should notify the portfolio department and seek confirmation that PGPA Act obligations cease.

Companies that are not Commonwealth‑controlled but whose objects accidentally match an item should consider amending their constitution to remove or narrow the objects to avoid being captured. This is particularly relevant for companies limited by guarantee in the education research sector (item 8) or companies that provide services to intelligence agencies (item 5). If amendment is not possible, the company should treat itself as bound by the PGPA Act and comply accordingly, including seeking an exemption from the responsible Minister if available under the PGPA Act. The instrument itself provides no exemption power, so any relief would have to be obtained through the Act.

Finally, maintain records of the analysis that leads to the conclusion that the company is or is not a relevant company. This documentation will be important in the event of an audit or dispute. Because the instrument has no penalties, the real risk is not compliance with the instrument but failure to comply with the PGPA Act duties that flow from being a relevant company. Those duties carry significant consequences, including civil penalties and loss of funding. Therefore, careful attention to classification is the foundation of compliance.