This policy (PCY376) outlines our commitment to conducts business in accordance with the Water Corporations Act 1995, our Code of Conduct, Conflicts of Interest Policy and the principles of good governance.
This is a Board approved Policy.
In order to ensure that the Corporation conducts its business in accordance with the Water Corporations Act 1995, its Code of Conduct, the Conflicts of Interest Policy and the principles of good governance, the Corporation’s policy is that:
- all Related Party Transactions should be conducted on an arm’s length basis;
- the process surrounding those transactions must be transparent and fully documented; and
- Board approval must be obtained for all Related Party Transactions and payments recognising that the Board can delegate this approval in respect of a class of transactions and on such terms and conditions as the Board sees fit.
The purpose of this policy is to:
- specify transactions that the Corporation is prohibited from entering into (Prohibited Transactions);
- define Related Party Transactions and provide Key Personnel and Staff with guidance around identifying matters that may fall within this definition; and
- set out the protocol for entering into Related Party Transactions.
This policy applies to all persons and entities that are Related Parties of the Corporation, and includes Key Personnel and Staff.
The duty to avoid and disclose Related Party Transactions are also incorporated into employment contracts by virtue of the fact that these require adherence to the Code of Conduct and impose an obligation to perform duties faithfully.
- Key Personnel means: those persons having authority and responsibility for planning, directing and controlling the activities of the Corporation directly or indirectly, including the Corporation’s directors and members of senior management.
- Staff means: all employees of the Water Corporation, consultants and contractors of the Water Corporation.
Pursuant to the Water Corporations Act 1995, the Corporation is prohibited from making loans and providing securities and guarantees in connection with loans to directors, their families, partners and dependants.
For the purpose of this Policy:
- the Corporation must not enter into any Prohibited Transaction; and
- Prohibited Transaction means any transaction that involves the making of a loan to a Related Party.
A Related Party Transaction is any transfer of resources, services, obligations or transaction (other than a Prohibited Transaction) between the Corporation and a Related Party, regardless of whether a price is charged.
The term Related Party Transaction, as used in this policy, is very broad and encompasses virtually all transactions or arrangements under which the Corporation provides a financial benefit to a Related Party.
In determining whether a transaction is a Related Party Transaction, a broad interpretation should be given to who is a Related Party and to the types of transactions which may be caught.
The following should be considered in assessing whether a transaction is a Related Party Transaction:
- Is the transaction or arrangement with a Related Party?
- Is there a financial benefit being received by the Related Party?
For the purpose of this policy, the following persons are considered Related Parties of the Corporation:
- a member of Key Personnel or member of Staff, including the spouse, de facto spouse, parents, children and dependents of the Key Personnel or member of Staff that he/she exercises control over;
- entities controlled by Key Personnel or member of Staff, their spouses, de facto spouses, parents or children;
- any person or entity that has control, joint control or significant influence over the Corporation; and
- a person who has been a Related Party (as listed above) in the last 6 months or who is expected to become a Related Party (as listed above) in the future.
The concept of ‘financial benefit’ is very wide and extends to advantages and benefits given indirectly through other entities, informal and non-binding arrangements and benefits other than for cash.
For the purpose of this policy, transactions between the Corporation and a Related Party for which reasonable remuneration has been approved in accordance with this Policy (see below) is excluded from the definition of ‘financial benefit’.
For the purpose of this policy, a financial benefit includes (but is not limited to) the following:
- a party providing finance or property to a Related Party;
- buying or leasing an asset from or selling an asset to a Related Party;
- supplying or receiving services from the Related Party;
- taking up or releasing an obligation of the Related Party; and
- provision of a direct or indirect benefit to the Related Party.
Where the Corporation proposes to enter into a transaction which may be considered to confer a Financial Benefit on a Related Party, the following procedure applies:
- the relevant responsible officer must inform the Corporation’s Company Secretary about the proposed transaction, including the proposed parties and how they are related, details of the proposed transaction and where arm’s length terms may be evidenced;
- the Corporation’s Company Secretary will review the transaction, and may take external legal advice where appropriate in considering the transaction;
- the Corporation’s Company Secretary will inform and advise the Board of the proposed transaction and obtain the relevant Approval for the Corporation to undertake the transaction. Where the transaction is considered not to be at arm’s length, the relevant Approver will determine whether an Exemption applies so as to permit the Related Party Transaction to proceed, and together with the Corporation’s Company Secretary, ensure that if the transaction is proceeded with, it is carried out in a manner that is compliant with the Water Corporations Act 1995, the Corporation’s Code of conduct and all relevant policies;
- the Corporation’s Company Secretary will maintain a Register of Related Party Transactions; and
- where Approval is obtained, the transaction must proceed in accordance with any procedures and conditions outlined by the Board.
All proposed Related Party Transactions will require Approval, unless an Exemption applies to that transaction.
The relevant Approvers must determine whether the proposed Related Party Transaction meets the conditions for Approval and, where those conditions are not met, whether an Exemption applies to that transaction.
For the purpose of this policy, the relevant Approvers are:
- the Chief Executive Officer for transactions with a value of up to (but not including) $10million;
- the Board for transactions with a value that is equal to or greater than $10million but less than $25million; and
- the Minister for transactions equal to or greater than $25million.
The relevant Approver (as specified above) may approve a proposed Transaction where they determine that the transaction meets all of the following criteria:
- the transaction is at arm’s length;
- the transaction is in the best interests of the Corporation;
- the transaction is assessed by the Chief Financial Officer not to carry any significant risk issues (commercial or reputational) for the Corporation;
- the transaction is in the ordinary course of the Corporation’s business; and
- if publicly disclosed, there is not anticipated to be any material criticism or adverse comment in respect of that transaction.
In order for the relevant Approver to Approve the Corporation enter into a proposed Related Party Transaction, that transaction must be conducted on terms that would be reasonable in the circumstances if the parties were dealing at arm’s length.
A transaction is at arm’s length if the relevant parties (i.e. the Corporation and the relevant Related Party) have dealt with each other as parties normally do when they are not related, so that the outcome of their dealing is a matter of genuine bargaining, and although not necessarily technically an open market price, the terms might reasonably have been agreed between un-related parties.
The relevant Approver (as specified above) may approve a proposed Transaction where they determine that an Exemption applies to the proposed Related Party Transaction.
For the purpose of this policy, an Exemption applies where one or more of the following conditions apply to the proposed Related Party Transaction, as determined by the relevant Approver:
- the transaction involves conferring a Financial Benefit that constitutes reasonable remuneration for expenses;
- the transaction is comprised of payment to a Related Party of less than $5000 in the aggregate in any financial year in exchange for goods, service or works required in the ordinary course of the Corporation’s business;
- the transaction is comprised of conferring benefits that are provided to all members of the same category of Key Personnel or member of Staff (by reference to level of seniority or nature of appointment, as appropriate); and
- the transaction is comprised of providing Financial Benefit to a Related Party under a Court order.
The Water Corporations Act 1995 specifies a range of consequences, including penalties, for directors’ breach of obligations owed to the Corporation.
These include the director’s fiduciary obligations, obligations not to make improper use of information acquired by virtue of the director’s position and not to make improper use of the director’s position to gain an advantage, whether that advantage is for the director or other person.
These obligations are relevant to Related Party Transactions, and are by extension, relevant to the matters set out in this policy.