Payments to directors

Whether to pay directors for their service is a decision for each corporation to make. 

Remuneration

The CATSI Act says that directors cannot be paid a director remuneration unless a corporation’s rule book says they can. Remuneration is payments for directors’ time (eg sitting fees), service and/or effort. It also includes allowances, bonuses, commissions and non‑cash benefits.

The CATSI Act says if a corporation’s rule book allows directors to be paid director remuneration, members need to decide the amount of remuneration to be paid by resolution in a general meeting. The resolution should cover what remuneration is paid for and how much it will be. For example, a corporation's members may approve a yearly payment to cover all the director's work for the year or a separate payment for each meeting. 

For remuneration regarding directors’ meeting attendance, resolutions should also set out the number of meetings for which sitting fees will be paid. 

Resolutions should not seek member approval for remuneration over multiple years. The exception is where a corporation has an AGM exemption and it would be impractical for members to meet annually just to agree on the amount of any directors’ remuneration payable for attending meetings. 

The Registrar will not register a rule book that specifies an amount of remuneration to be paid to directors. The amount of remuneration payable and the maximum number of meetings where remuneration is payable should be set by resolution at each AGM.

Director remuneration does not include travel and other expenses related to corporation business. Corporations may reimburse out-of-pocket expenses for coming to meetings or carrying out corporation business eg. photocopying.

Payments to a director for goods or services provided by the director under contract to the corporation is a related party benefit. Related party benefits must be approved by the members.

If a director is also an employee, they can receive their employee remuneration as an employee without the need for member approval. The CATSI Act says that the majority of a corporation’s directors cannot be employees. 

The Registrar has low tolerance for directors who do not respect these requirements. 

Expenses

The CATSI Act says that corporations may pay or reimburse directors’ expenses if they are ‘properly incurred’ to attend meetings or are in connection with the corporation’s business. The CATSI Act says that member approval is not required for expense reimbursements or payments. Corporations cannot change these rules. 
Examples of expenses that can be paid or reimbursed include costs to travel to meetings or photocopying. Expenses do not include directors’ time to attend meetings (sitting fees) – this is director remuneration and requires member approval.

Corporations should have a policy about the payment and reimbursement of directors’ expenses. The policy should outline the types of expenses that will be paid for directors and specify any conditions. For example, the policy may say the corporation will not pay directors’ travel expenses above amounts specified in the Australian Taxation Office’s annual travel determination.

An expense policy provides a clear guideline, protects against potential misuse of money and supports transparency within the corporation. An expense policy also provides clarity on what is a director expense as opposed to director remuneration, and helps to avoid confusion and avoidable conflicts.

The Registrar can take regulatory action where a corporation deliberately or otherwise treats director remuneration or related party benefits as expenses.

Members can request remuneration and expense information

Members can ask directors to tell them the remuneration and expenses paid to each director of the corporation, a subsidiary or an entity controlled by the corporation. A minimum number of members needs to make this request. The minimum number is for corporations:

• between 2 and 10 members – 1 member
• between 11 and 29 members – 3 members 
• with 30 or more members – 10% of the membership.

If directors receive a request from the required number of members for remuneration and expense payment information, they have to tell members all the payments made to directors. This includes both remuneration and expenses paid to the directors. It also includes payments made to directors in their role as a director as well as any payments to directors in another capacity – for example, if a director is paid as both a director and as an employee, the corporation has to show all the payments made to the director whether they were made for being a director or being an employee.

The Registrar can direct corporations to disclose remuneration and expense information

The Registrar can also direct a corporation to tell its members how much has been paid for directors’ expenses and remuneration. This includes directors of the corporation, a subsidiary or an entity it controls.  

If the Registrar directs a corporation to tell members about payments to directors then it needs to provide audited payment information to all members who are entitled to receive a general meeting notice. The corporation needs to send the audited information to the Registrar too.

The audited information will be for the financial year before the direction is given and includes a statement of remuneration and payments for each director.

The Registrar may publish the direction to the corporation to disclose payment information as well as the audited payment information provided by the corporation on the public Register of Aboriginal and Torres Strait Islander Corporations. 

Regulatory action

ORIC will consider regulatory action if directors:

• make remuneration payments to themselves without member approval 
• pay director remuneration or third party benefits as expenses 
• do not seek member approval for payments to directors under contract for goods or services delivered as a related party benefit
• do not disclose directors’ remuneration and expense information to members if requested by the required number of members or directed by the Registrar
• do not disclose directors’ expense payments and remuneration to the Registrar if directed.