Controlled entities policy

Policy

Intent and objectives

This policy derives from the powers and responsibilities of RMIT Council to form, participate in the formation of, or be a member of controlled entities, set out in the RMIT University Act.

RMIT Group – The University and Controlled Entities

RMIT Council is responsible for approving strategic directions and monitoring performance of the RMIT Group. The Vice-Chancellor is responsible for managing performance of the RMIT Group. The RMIT Group consists of RMIT University and its controlled entities.

1. Definition of controlled entities

A controlled entity is one that satisfies the test of control in section 50AA of the Corporations Act 2001 and includes:

a. an entity which the University wholly owns (“wholly owned subsidiary”); or

b. an entity in which the University holds an interest of any kind (including a shareholding interest or membership interest) and the University has control of the entity.

2. Rationale for participation in controlled entities

The rationale for forming or participating in a controlled entity shall be when, in the judgment of Council;

1. The objects or activities of such an entity are consistent with and conducive to those of the University; and

2. The activities undertaken by the controlled entity can be performed more efficiently and/or usefully outside the operations of the University than within it.

This is consistent with the terms under which RMIT is empowered to establish or participate in the formation of controlled entities, as defined by the RMIT University Act.

3. Governance principles

a. Consistent with section 187 of the Corporations Act, directors of wholly owned subsidiaries of the University are taken to act in good faith in the best interests of the subsidiary if:

i the constitution of the subsidiary expressly authorises the director to act in the best interests of the University; and

ii the director acts in good faith in the best interests of the University; and

iii the subsidiary is not insolvent at the time the director acts and does not become insolvent because of the director’s act.

b. Controlled entities shall adopt a statement of governance principles consistent with National Governance Protocols for universities, review them annually and provide a copy to Council for information at the penultimate meeting of Council for the year.

4. Approval and review of controlled entities

a. Under S.39 of the RMIT Act, approval from Council is required for the University to form, take part in the formation of or be a member of a corporation, association or partnership ⁽⁵⁾. This requirement extends to the actions of its controlled entities, i.e. that the creation of controlled entities by controlled entities also requires Council approval.

b. Council will approve and monitor systems for control and accountability of controlled entities, including general overview of any controlled entity in accordance with this policy and shall take action as necessary in the event that the business affairs of a controlled entity are not carried out in accordance with this policy, including winding up or otherwise terminating its involvement in a controlled entity if appropriate.

5. The role of Council

a. Council is required to oversee governance and performance of controlled entities by taking reasonable steps to bring about the following:

i) ensuring that each controlled entity shall have a Constitution, which includes the objects of the entity, which establishes a connection with the University for particular purposes and the nature of the benefit the entity is to provide to the University.

ii) ensuring that the controlled entity’s board possesses the skills, knowledge and experience necessary to provide proper stewardship and control of the entity;

iii) appointing some directors to the board of the controlled entity who are not members of Council or officers or students of the University, where possible;

iv) ensuring that each board adopts and regularly evaluates a written statement of its own governance principles;

v) ensuring that the board documents a clear organisational strategy which reports on and updates annually the controlled entity’s long-term objectives and includes an annual business plan containing achievable and measurable performance targets and milestones; and

vi) establishing and documenting clear expectations of reporting to Council. This will include a draft business plan for consideration and approval before the commencement of each financial year and at least quarterly reports against the business plan. Business plans and quarterly reports will be submitted by boards of controlled entities to Council through the Vice-Chancellor.

b. Council delegates responsibility for advice on nominations and appointments to controlled entities to the Nominations and Governance Committee and other matters of oversight of controlled entities to the Planning and Finance Committee and Audit and Risk Management Committee.

6. Role of boards of controlled entities

a. Boards of controlled entities shall be responsible to the University for the controlled entity’s performance.

b. Further to sub-clause (a) the boards of controlled entities are required to oversee controlled entities by taking reasonable steps to bring about the following:

i. Documenting a clear organisational strategy which reports on and updates annually the controlled entity’s long-term objectives and includes an annual business plan containing achievable and measurable performance targets and milestones;

ii. Adopting a risk assessment and management policy in accordance with the standards required by the University and overseeing risk management and risk assessment;

iii. Approving and monitoring systems of control and accountability consistent with the requirements established by the Council;

iv. Regularly reviewing their own performance;

v. Adopting and annually evaluating a written statement of the controlled entity’s governance principles;

vi. Such other matters as the Council may determine from tine to time with respect to a particular controlled entity.

7. Composition of boards of controlled entities

a. The composition of boards of controlled entities will be determined by Council on the advice of the Nominations and Governance Committee of Council. Council will appoint and terminate the appointment of chairs of governing bodies of controlled entities. Council will agree to the duties and term of the chair.

b. The constituting documents of a controlled entity will provide for the appointment of members of the governing body by the Council in such proportion as may be desirable or necessary.

c. Boards of controlled entities will comprise an appropriate mix of:

i. external independent,
ii. external Council, and
iii. university management.

d. The chief executive officer of a controlled entity must not be a director (or equivalent title) of the entity’s governing body.

e. The chief executive officer will be appointed by the University on the recommendation of the board of the controlled entity.

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