AWU Seeks ASIC Investigation of Queensland Nickel's Political Donations
Thursday 28 January 2016 @ 10.39 a.m. | Corporate & Regulatory | Crime | Industrial Law | Legal Research
The Australian Workers Union (AWU) has asked the Australian Securities and Investment Commission (ASIC), as the corporate regulator, to investigate whether Queensland Nickel, a company linked to Federal Member of Parliament Mr Clive Palmer and his Palmer United Party (PUP), has broken any laws, specifically the Corporations Act 2001 (Cth) (the Corporations Act), before its recent mass sacking of 237 workers and its going into voluntary liquidation.
In particular, ASIC is being asked by the AWU to look into the "propriety" of Queensland Nickel's decision to donate a reported $288,516 to Mr Palmer's PUP. A donation said by the AWU to be one of many donations made over a period of two years totaling $20 million.
The matter looks set to raise questions around the corporate laws relating to "political donations by corporations" - as well as issue relating to the protection of workers entitlements and benefits by corporations and the duties and liabilities of directors in such matters.
The Contested Donation(s)
It is reported that the Electoral Commission (Qld) has given the relevant date of the contested donation as 31 December 2015, just two weeks before hundreds of workers at the company's refinery near Townsville were made redundant and since that date the company has gone into voluntary administration. Mr Palmer has been reported as saying that the date in question was not the day the donation was made but merely the day when it was lodged with the electoral commission.
The AWU, through its secretary Mr Ben Swan, is reported as pointing out that Mr Palmer's nephew Mr Clive Mensink was the sole director of Queensland Nickel, and, as such, had legal responsibilities for such matters:
"It's an open question - was it a proper discharge of that director's duties at that time to make that donation, knowing the state of affairs the company was in, . . ." .
The AWU also questions Mr Palmer's distance from the transactions and is reported as saying:
"We've asked ASIC to undertake an investigation into whether there may have been any breach of the corporations law and whether Mr Palmer, as sole shareholder of Queensland Nickel, may himself have been acting in the capacity of a shadow director."
ASIC's Response So Far
ASIC is reported as saying it had held discussions with Queensland Nickel's administrators, as required under the Corporations Act, following on from the administrators' obligations to make inquiries and report back to the creditors and ASIC. A spokesperson for ASIC is quoted as saying that possible legal breaches were also being considered:
"The investigations undertaken by voluntary administrators include examining whether there have been possible contraventions of the law by directors who owe duties to the companies they manage."
Key Points - Legal Position under the Corporations Law
In an article entitled "Political Donations by Australian Companies" at Section IV, an excellent and more detailed overview of the corporations law relating to political donations is given, following are some points from that article which appear to be the most relevant.
To begin with is the fact that the corporations law is far from specific on the question of "political donations by companies":
"In Australia, there is no single legislative provision governing corporate political donations. The Corporations Act 2001 (Cth) . . . contains no provision dealing expressly with donations, although s 19(a) of the old 'uniform' Companies Acts gave companies power 'to make donations for patriotic or for charitable purposes'."
There are said to be no provisions in the Corporations Act specifically aimed at the disclosure of political donations by companies. There is, however, said to be the proposition that a corporate political donation may fall within a general disclosure rule relating to directors, thus:
"If a director has a material personal interest in a proposed political donation by the company, the director must disclose to the other directors as soon as practicable the nature and extent of the interest and the relation of the interest to the affairs of the company (see Corporations Act s 191). If it is a public company, the interested director is not allowed to be present while the donation is being considered by the board, and is not allowed to vote on the matter at the board meeting.(see Corporations Act s 195(1))".
If a company is a public company or is controlled by a public company, provisions
called the "related party provisions" apply (see Corporations Act Chapter 2E) which allow a public company to give a financial benefit to
a "related party" of the public company only if:
- the public company's shareholders approve in advance – after full disclosure; or
- the giving of the benefit falls within an exception set out in Chapter 2E.
"Related party" includes not only the directors of the public company, but also spouses, parents and children. It also includes an entity which acts in concert with a related party on the understanding that it will receive a financial benefit if the public company gives the entity a financial benefit (see Corporations Act s 228).
Further, if the Director of a public company is also an office bearer of a political party, or has some involvement with an organisation that supports a political party, any financial benefit given by the company to the party or the supporting organisation would fall within Chapter 2E if an "acting in concert' test is satisfied.
Giving a financial benefit is defined very broadly and would catch not only straightforward donations but also, for example, supplying services, forgiving a loan or leasing property to the political party or supporting organisation (see Corporations Act s 229)
In the present case, Mr Palmer's association with the company even after his departure as a director and indeed from business to enter politics may still be considered by ASIC in its investigation, and he may well be cast as a "related party" and may still be caught by the operation of the Corporations Act. No doubt more will follow on this matter once ASIC fully responds and it will be interesting to see how it plays out not only for Mr Palmer's business affairs but also for his political fortunes.
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