Corporate Governance Policy (Australia)

A Corporate Governance Policy in Australia is a legally binding written instrument.

Corporate governance is broadly understood as the system by which companies are directed and controlled. It encompasses the relationship between the board, management, shareholders, and other parties, and the mechanisms through which the company's objectives are set, monitored, and achieved. Good corporate governance reduces the risk of misconduct and fraud, builds investor confidence, supports access to capital, and supports long-term sustainable value creation.

The ASX CGC Principles set out eight principles that define a sound governance framework: laying solid management foundations; structuring the board effectively; acting lawfully, ethically, and responsibly; safeguarding corporate reporting integrity; timely and balanced disclosure; respecting security holder rights; recognising and managing risk; and fair remuneration. For ASX-listed entities, compliance with the Recommendations under each Principle is required on an 'if not, why not' basis — entities must explain any departures in their Annual Report and corporate governance statement.

Statutory director duties under ss 180-184 of the Corporations Act underpin the entire governance framework. These duties — care and diligence, good faith, proper use of position and information — apply to all Australian company directors, listed or otherwise, and their breach can result in significant civil penalties, disqualification orders, and criminal prosecution.

The Australia Corporate Governance Policy (Australia) Corporate Governance Policy is designed to be adopted by the board by resolution and reviewed at least annually, creating a living governance document that reflects the company's evolving circumstances, regulatory environment, and stakeholder expectations.

The legal framework governing the Corporate Governance Policy (Australia) in Australia draws on several key statutes and regulatory bodies. Under the Corporations Act 2001 (Cth), the Australian Securities and Investments Commission (ASIC) regulates companies and financial services. Section 127 of the Corporations Act 2001 governs company execution of documents. The Australian Competition and Consumer Commission (ACCC) enforces the Competition and Consumer Act 2010 (Cth). The Australian Taxation Office (ATO) administers the Goods and Services Tax under the A New Tax System (Goods and Services Tax) Act 1999. The Federal Court of Australia and Supreme Courts of each state have jurisdiction over corporate disputes. Parties executing a Corporate Governance Policy (Australia) in Australia should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Corporations Act 2001 (Cth) sets the foundational requirements.

A Corporate Governance Policy is needed or strongly recommended in the following situations.

ASX listing and compliance: ASX-listed entities must disclose their governance practices against the ASX CGC Principles and Recommendations (4th Ed) in their Annual Report under ASX Listing Rule 4.10.3. A formal Corporate Governance Policy provides the documentary basis for those disclosures and demonstrates to shareholders and the market that the company takes governance seriously.

Initial public offering (IPO): A company preparing for an ASX listing must have its governance framework in place before the prospectus is lodged. A Corporate Governance Policy — together with committee charters, a code of conduct, and a whistleblower policy — is a standard requirement of the IPO due diligence process and the ASX listing admission checklist.

Governance review and reform: Companies that have experienced governance failures — such as related-party transactions that were not properly disclosed, remuneration disputes, or compliance breaches — often commission a governance review and adopt a refreshed Corporate Governance Policy as part of remediation.

Large proprietary companies: While large proprietary companies are not subject to the ASX CGC Principles, they face significant governance obligations under the Corporations Act, including mandatory financial reporting under s 285, auditing requirements, and director duty obligations. Adopting a Corporate Governance Policy on a voluntary basis provides a structured governance framework that reduces the risk of regulatory breach.

Board renewal and succession: When a company is refreshing its board — through the appointment of new directors or the establishment of new committees — a Corporate Governance Policy provides clarity on role expectations, independence requirements, committee mandates, and conduct standards.

Parties in Australia should prepare a Corporate Governance Policy (Australia) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under the Corporations Act 2001 (Cth), the Australian Securities and Investments Commission (ASIC) regulates companies and financial services. Section 127 of the Corporations Act 2001 governs company execution of documents. The Australian Competition and Consumer Commission (ACCC) enforces the Competition and Consumer Act 2010 (Cth). The Australian Taxation Office (ATO) administers the Goods and Services Tax under the A New Tax System (Goods and Services Tax) Act 1999. The Federal Court of Australia and Supreme Courts of each state have jurisdiction over corporate disputes. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.

A well-drafted Australian Corporate Governance Policy should address the following key elements.

Board structure and composition: The policy should specify the minimum and maximum number of directors, the requirements for independent non-executive directors (aligned with ASX CGC Recommendation 2.4), the role and independence of the chair (ASX CGC Recommendation 2.5), and the process for assessing director independence annually. A board skills matrix (ASX CGC Recommendation 2.2) should be maintained and disclosed.

Director duties and conduct: The policy must address each of the statutory duties in ss 180-184 of the Corporations Act — the duty of care and diligence (including the business judgment rule), the duty of good faith, the duty not to improperly use position or information, and the conflict of interest disclosure and voting restriction regime under ss 191-195. The policy should also address director induction and ongoing education requirements.

Board committees: The policy should establish and define the scope of the key board committees: the Audit and Risk Committee (ASX CGC Recommendation 4.1), responsible for financial reporting integrity, auditor independence, and risk management; the Remuneration Committee (ASX CGC Recommendation 8.1), responsible for the director and executive remuneration framework and the remuneration report; and the Nomination Committee (ASX CGC Recommendation 2.1), responsible for board composition and succession.

Integrity and accountability: The policy must include a code of conduct (ASX CGC Recommendation 3.1), a whistleblower policy compliant with Part 9.4AAA of the Corporations Act, and for listed entities, a continuous disclosure policy aligned with s 674 of the Corporations Act and ASX Listing Rule 3.1. A securities trading policy governing director and employee trading in the company's securities is also essential for listed entities.

Risk management: The policy should establish the board's role in setting risk appetite and overseeing the risk management framework (ASX CGC Recommendation 7.1), require at least annual review of the framework's effectiveness (ASX CGC Recommendation 7.2), and identify the key risk categories relevant to the company's operations.

Additional compliance elements for a Corporate Governance Policy (Australia) used in Australia include: Under the Corporations Act 2001 (Cth), the Australian Securities and Investments Commission (ASIC) regulates companies and financial services. Section 127 of the Corporations Act 2001 governs company execution of documents. The Australian Competition and Consumer Commission (ACCC) enforces the Competition and Consumer Act 2010 (Cth). The Australian Taxation Office (ATO) administers the Goods and Services Tax under the A New Tax System (Goods and Services Tax) Act 1999. The Federal Court of Australia and Supreme Courts of each state have jurisdiction over corporate disputes. Forms-legal.com provides this template as a starting point for Australia-compliant documentation.