• The boards and directors of all Victorian State business corporations and State bodies.
• The Treasurer and relevant Minister, who exercise approval and direction powers over SBCs.
• State owned companies incorporated under the Corporations Act.
• Statutory corporations undergoing reorganisation under Part 2.
• The public, as beneficiaries of the Act's accountability framework for government enterprises.

Part 2: Reorganising bodies and State bodies

Reorganising body process (sections 7-13): Where a statutory corporation is declared a reorganising body, the Treasurer may direct the board to undertake a reorganisation. The reorganisation may include establishing successor entities, vesting property and transferring liabilities. Decisions on initial capital and dividend policy apply to the resulting entities.

State bodies (section 14): The Governor in Council establishes State bodies by Order, which must specify the body's purpose, functions and powers. A State body is a body corporate with full corporate capacity. The board may receive directions from the Treasurer or relevant Minister under section 16C.

Part 3: State business corporations

Objective (section 18): Each SBC must perform its functions for the public benefit by operating as efficiently as possible consistent with prudent commercial practice and by maximising its contribution to the Victorian economy.

Functions and powers (sections 19, 20): SBCs have the functions conferred by their constituting Act and this Act, and have all powers necessary or convenient to perform those functions.

Directors' duties (section 36):

• Directors must act honestly at all times in performing their functions (section 36(1)).
• Directors must exercise a reasonable degree of care and diligence (section 36(2)).
• Directors and former directors must not make improper use of information to gain personal advantage or cause detriment to the corporation (section 36(3)).
• Directors must not make improper use of their position for personal advantage (section 36(4)).

The duties in section 36 apply in addition to, and not in derogation of, any other Act or law relating to director liability.

No loans to directors (section 38): An SBC's powers do not include making loans to directors, their spouses or relatives, or providing guarantees in connection with such loans. An exception applies where the agreement is on the same terms as the SBC offers to the general public.

No indemnity for directors (section 39): An SBC's powers do not include exempting directors from liability or providing indemnities (including by paying insurance premiums) except in specified circumstances.

Corporate plan obligations (sections 41-44): The board must prepare a corporate plan and comply with it. The plan sets the corporation's objectives, strategies and targets. Departures from the corporate plan are not void merely because of non-compliance (section 44).

Non-commercial functions (section 45): The relevant Minister may, after consultation with the Treasurer, direct an SBC to perform non-commercial functions. Compensation is payable.

Reporting obligations:

• Annual reports to the Treasurer (section 53).
• Immediate notification to the relevant Minister and Treasurer of significant affecting events (section 54).
• Half-yearly financial reports to the Treasurer (section 55).

Dividend policy (section 49): SBCs must pay dividends to the State as determined by the Treasurer after consultation with the board and relevant Minister.

Part 4 and 5: Conversion to State owned companies

Part 4 provides a pathway for converting a statutory corporation to a State owned company under the Corporations Act. Part 5 governs the ongoing operation of State owned companies, including their formation, operation and accountability to the Crown as sole shareholder.

Part 6: Special investigations

The Treasurer may order a special investigation of a prescribed body (Part 6). Investigators have powers to obtain information and documents.

Treasurer's direction power (section 16C): The Treasurer or relevant Minister may, at any time, by written notice to a State body's board, give such directions as they think fit.

Minister may bring proceedings for director breach (section 37): If a director breaches section 36, the relevant Minister may bring proceedings in the corporation's name to recover the profits made or loss caused.

Governor in Council powers (sections 8, 14, 17, 59): Governor in Council Orders are used to declare reorganising bodies, establish State bodies, declare SBCs and declare converting bodies. These Orders are legislative instruments published in the Government Gazette.

Treasurer's Corporations Act exemption powers: Under Part 5, the Treasurer may give directions regarding State owned companies' compliance with Corporations Act requirements.

The Act does not create general criminal offences. However:

• Breach of director duties under section 36 gives the relevant Minister the right to bring civil proceedings to recover profits or losses (section 37).
• Failure to comply with Treasurer or Ministerial directions may be subject to consequences under the broader government accountability framework.
• Contraventions by State owned companies of Corporations Act obligations that apply through Part 5 may attract Corporations Act penalties.

Tax equivalent obligations (section 88): State owned enterprises must make payments to the Consolidated Fund equivalent to the Commonwealth taxes they would pay if they were subject to those laws. This is the "tax equivalent regime."

| Obligation | Timeframe | |---|---| | Half-yearly report to Treasurer (section 55) | January or February each year, or at time approved by Minister | | Notification of significant affecting events (section 54) | Immediately on forming opinion | | Corporate plan review and agreement | Annually |

Corporations Act 2001 (Cth): State owned companies under Part 5 are companies incorporated under the Corporations Act. The Act modifies certain Corporations Act requirements as they apply to State owned companies. Section 38 cross-references the Corporations Act definition of "relative."

Borrowing and Investment Powers Act 1987 (Vic): Section 14A specifies that State bodies have borrowing and investment powers as specified under the Borrowing and Investment Powers Act 1987.

Environment Protection and Biodiversity Conservation Act 1999 (Cth): The Friends of Leadbeater's Possum litigation established that VicForests (established under section 14 of this Act) is a body corporate that must comply with EPBC Act obligations when carrying out forestry operations.

Audit Act 1994 (Vic): State owned enterprises are subject to audit by the Victorian Auditor-General's Office.

State bodies and SBCs have different governance regimes: A State body established under section 14 is subject to the general State body provisions (Divisions 1 and 2 of Part 2). An SBC declared under section 17 is subject to the more detailed Part 3 regime, including the corporate plan requirements and director duties in sections 36-39. Entities that are only State bodies, not SBCs, do not have the section 36 director duties framework.

Director duties under section 36 are additional to, not substitutes for, general law: Section 36(5) confirms that the duties apply "in addition to, and not in derogation of, any Act or law relating to the criminal or civil liability of a member of the governing body of a corporation." A director who contravenes section 36 may also be liable under general law of equity or under the Corporations Act if that Act applies.

Non-commercial function directions must be compensated: Under section 45, if the relevant Minister directs an SBC to perform a non-commercial function (that would otherwise reduce its efficiency or contribution to the Victorian economy), the Minister must ensure the corporation is compensated. Failure to compensate for non-commercial function directions is not the corporation's legal problem but creates Ministerial accountability.

Corporate plan non-compliance does not void transactions (section 44): Section 44 provides that nothing is void merely because of non-compliance with a corporate plan. However, non-compliance is a governance failure that may trigger reporting obligations under section 54 and Ministerial oversight.

Example 1 (establishment of a State body): The Governor in Council establishes a new State body by Order in Council published in the Government Gazette. The Order specifies the body's purpose (eg, managing regional transport infrastructure), its functions and powers, the constitution of its board, and designates the relevant Minister. The State body immediately becomes a body corporate under section 14(3).

Example 2 (director breach - improper use of information): A director of a Victorian State business corporation learns in the course of a board meeting that the corporation is about to sign a major contract that will significantly increase its revenue. Before the contract is announced, the director purchases shares in one of the corporation's suppliers. Under section 36(3), this constitutes improper use of information to gain an advantage. The relevant Minister may bring proceedings under section 37 to recover the director's profit.

Example 3 (non-commercial function): The relevant Minister directs an SBC to maintain rail services on a loss-making regional line for public benefit reasons. This is a non-commercial function under section 45. The Minister must ensure the corporation is compensated for the commercial detriment of operating the service, so that the principal objective in section 18 is not undermined.

Example 4 (VicForests and EPBC Act): VicForests is established under section 14 as a State body and carries out timber harvesting operations in Victorian State forests. As the Friends of Leadbeater's Possum litigation confirmed, the fact that VicForests is established under this Act does not exempt it from Commonwealth environmental obligations. VicForests must comply with the EPBC Act (including requirements to avoid significant impact on threatened species) regardless of its status as a Victorian State body.