ESTABLISHMENT AND OPERATION OF INCORPORATED BODIES

The University recognises the important contribution incorporated entities can make to achieving its overall mission, and the close relationship of incorporated entities to research. This policy is designed to:

1. provide a mechanism for the establishment and management of incorporated entities within the University;

2. encourage staff to make their expertise or services available to the community through the use of incorporated entities owned in whole or in part by the University;

3. provide for proper risk management of all commercial activities undertaken by the University;

4. limit the University’s liability in respect of incorporated entities;

5. ensure accountability of University incorporated entities; and

6. ensure the University meets its legal obligations with respect to incorporated entities.

"incorporated entity" means a legal entity registered under law as an association or company. It may include some staff and student clubs and societies.

"association" means a society, club, institute or entity formed and registered under the Associations Incorporation Act 1987 (WA). An association cannot be established for the purposes of trading or securing profit, though it can trade and make a profit provided this is ancillary to its principal purpose.

"company" means an entity formed and registered under the national Corporations Law for economic purposes and trading as a business for profit. A company can be limited (i.e. if it becomes insolvent, the shareholders’ contribution to the company’s debts are limited) by shares or guarantee or both, or be an unlimited company, or a no liability company.

"University company" means an entity incorporated under this policy and approved by the Senate.

"Private company" means an entity incorporated by a staff member for remuneration or other consideration in her or his private capacity or partnership, association, trust, or any similar entity.

"University entity" means a University company or association.

"University association" means an association organised under this policy and approved by the Senate.

"staff" means all full time and part time academic and general staff who are permanent or with a contract of one year or more, plus visiting fellows and research fellows.

"Divisional Head" means the Executive Dean of an academic Division and the Pro Vice Chancellor or Deputy Vice Chancellor in charge of an administrative Division.

1. No incorporated entity or association, having any of the attributes listed in this Clause, shall be organised by the University, or by or on behalf of any staff, without the approval of the Senate, following recommendation from the Vice Chancellor. This Clause shall apply to any incorporated entity or any association having any of the following attributes:

1. the University is intended to own a shareholding interest, partnership interest, or other legal or beneficial interest of any kind, in such a entity or association; or

2. the University’s name, logo, or any other intellectual property rights, are intended to be used by such incorporated entity or association; or

3. the University is intended to guarantee or indemnify any person or entity for the liabilities or default of such incorporated entity or association, or such incorporated entity or association intends to represent in any way its association with the University.

2. Only upon receipt of the approvals provided in this policy in respect of an incorporated entity or association of the type described in Clause 1, shall such incorporated entity or association become a University company or University association, as the case may be.

3. The University Company Secretary shall be responsible for executing the incorporation or organisation of all University entities and shall be responsible for the entity’s corporate administration.

4. University entities may compete on a professional basis with services offered by commercial or other agencies. The University notes the requirement under the Trade Practices Act (Cth) that all activities of University entities must be charged on a full-fee recovery basis. The University entity cannot use the subsidised costs arising from its connection with the University to operate anti-competitively by undercutting other members in the market.

5. Where the Senate resolves to approve incorporation or other form of registration of a University entity, the University Company Secretary will advise the Divisional Head in writing of the decision of Senate as soon as possible. This advice is to include requirements as set out under sections 13-19 of this policy.

6. The University name and logo can be used by a University entity in its advertising material only after Senate approval of its incorporation, and then only in accordance with any conditions or limitations set out in such approval. Any such use requires the explicit approval of the Vice Chancellor, and must be in accordance with the University style guide.

7. University staff are expressly forbidden to incorporate a University entity until:

1. the procedures set in this policy have been complied with; and

2. the Senate has approved incorporation of the proposed entity.

8. Staff are reminded that incorporation or organisation of Private companies and associations are subject to the terms of the University’s policy on Private Consultancies, and staff proposing any such incorporation or organisation are referred to such policy.

9. Members of staff acting contrary to this policy are liable to be dealt with in accordance with the University’s disciplinary procedures.

10. In the case of cooperative arrangements with external agencies, the Senate may approve an incorporation that does not conform to this policy in all respects.

11. Where the terms of this policy statement are inconsistent with Enterprise Bargaining Agreements or other industrial instruments with University staff, then those agreements prevail.

12. Breaches of this policy may constitute not solely breaches of University policy, but also of State and Federal laws.

13. Any proposal to incorporate a University entity shall take account of:

1. the resource implications;

2. the taxation implications including consideration of requirements in relation to income tax, goods and services tax (GST), fringe benefits tax, stamp duty, capital gains tax and any other taxes that may be applicable to the entity;

3. the requirements for proper governance of the entity as per the University’s policy on Governance of University Entities;

4. the importance and appropriateness of the incorporation or organisation to the mission of the University;

5. whether incorporation of the entity will be of benefit to further development, commercial application, or mutual arrangements between the University and industry;

6. whether incorporation of the entity will attract support for further research and/or provide royalty income (to the University, the Division or to staff members);

7. risk management of commercial activities including an assessment of the insurance requirement of the entity, it’s directors and officers, and its employees (it should not be assumed that the University’s insurance cover will extend to the entity);

8. any need to protect the University's or the entity’s intellectual property or other interests, where there is a possibility of others incorporating an entity that may diminish work completed or underway within the University.

9. the need for the entity to be properly managed with assigned responsibility and accountability for key functions including operational and financial management.

14. Any proposal to incorporate a University entity shall be submitted in writing to the Vice Chancellor through the Deputy Vice Chancellor by the Divisional Head. Prior to a Divisional Head submitting such a proposal, he or she shall consult the Head(s) of any School(s) affected and the Divisional Board. The application shall:

1. follow the requirements for registration under the relevant Act;

2. include a business plan;

3. demonstrate that all legal, financial and other necessary due diligence has been performed;

4. include the names of people proposed for appointment as office bearers or directors (bearing in mind the requirements of s. 19(c) below);

5. disclose any potential conflict of interest of the proposer or the proposed office bearers or directors;

6. include the name of person proposed for appointment as the Entity Manager who shall be responsible and accountable for the operational management and financial management of the entity (refer appendix B also);

7. detail measures taken and processes put in place for the control of risk and limitation of the liability of the University; and

8. be accompanied by a completed ‘Checklist for the Establishment of Incorporated Entities’ – refer appendix A.

15. Unless approved otherwise by the Vice Chancellor, all costs associated with the incorporation or organisation of an entity rest with the Division or Office establishing the entity.

16. Unless approved otherwise by the Vice Chancellor, all costs associated with the ongoing management, administration and financial management of that entity, including all accounting, taxation and company secretarial services provided by the University shall be the responsibility of the entity.

17. The Division or Office establishing the entity shall consult with the Director of Finance and the University Company Secretary to ensure the necessary processes are in place to facilitate the effective administration and financial management of the entity in accordance with University requirements and policies, the requirements of the members of the entity, and other applicable legal or statutory requirements.

18. Any negotiations between the Division or Office seeking to incorporate a University entity and the University must be conducted between the Division Head (or their nominee) and the Vice Chancellor (or their nominee). Written records shall be kept of all such negotiations.

19. Prior to recommending the incorporation to the Senate, the Vice Chancellor shall:

1. satisfy her or himself that it is in the University's best interest to proceed with the incorporation;

2. satisfy her or himself that the laws, Statutes, policy and procedures relating to the establishment of incorporated entities or associations have been complied with; and

3. appoint office bearers and/or directors of the incorporated entity or association. These appointments shall:

1. have the skills, knowledge and experience necessary to provide proper stewardship and control of the entity;

2. include one member designated as the Vice Chancellor’s representative, who shall be responsible for keeping the Vice Chancellor fully informed of the entity’s activities and of any potential risk to the University from those activities;

3. include the Chief Financial Officer (or nominee) of the University;

4. include at least one member who is a University appointee but who is not a staff member of the University;

5. include University appointees at least equal to the ratio of University to non-University equity in the incorporated entity;

6. include a Company Secretary provided by the University Secretariat;

7. be preceded by obtaining from the proposed appointees a declaration of any direct or indirect pecuniary interest in or conflict with the anticipated activities of the incorporated entity; and

8. specify any terms and conditions upon which approval would be given.

4. satisfy her or himself that there are limitations in the charter of the University entity against borrowing or guaranteeing indebtedness without shareholder approval, in any University entity that is controlled directly or indirectly by the University.

5. satisfy her or himself that a suitable person has been nominated as the Entity Manager who shall be responsible and accountable for the operational and financial management of the entity (refer appendix B also).

20. The Vice Chancellor shall ensure that office bearers or directors are familiar with the responsibilities of office bearers or directors under the relevant legislation.

21. At the first meeting, the board (or equivalent) shall adopt a written statement of its governance principles (in accordance with the policy on Governance of University Entities). This shall be evaluated on a regular basis but not less than every two years.

22. The board (or equivalent) shall document a clear corporate and business strategy that reports and updates annually the entity’s long-term objectives and includes an annual business plan containing achievable and measurable performance targets and milestones.

23. After first recovering all costs incurred by incorporation, the University shall deal with income from the incorporated entity with regard to the contribution made by the University Division, School or Office. Although that distribution shall be a matter for negotiation in each case, the University acknowledges that the starting point for negotiation shall be:

1. 15% royalty will be apportioned to the University;

2. recoupment by the University of accounting, taxation, financial management, secretarial, legal and other administrative services provided;

3. ongoing costs of the incorporated entity will rest with the incorporated entity;

4. profit will be apportioned pro rata on the basis of initial equity.

The Vice Chancellor shall approve the distribution.

24. The following activities of a University entity shall require approval of the members before the entity commits to such activities:

1. the incurring of any debt;

2. the provision of any guarantee;

3. the incurring of any contingent liability.

Approval shall only be given after careful consideration of a business case (in writing) including a risk assessment of the proposed activity.

25. A University entity shall prepare an annual financial report as at 31 December each year. The financial report shall consist of the financial statements, the notes to the financial statements and the directors' declaration about the statements and notes. The financial statements shall include a statement of financial position (balance sheet), a statement of financial performance (profit and loss statement) and a statement of cash flows, and shall be prepared in accordance with generally accepted accounting principles, Australian Accounting Standards and Urgent Issues Group Consensus Views such that they present a true and fair view. The financial report shall be prepared and finalised no later than one calendar month after the financial year-end of the entity.

26. Where the financial statements of the University entity are required to be consolidated with those of the University, they shall be audited by a registered company audit or appointed by the directors. This audit shall take place within two calendar months of the financial year-end of the entity.

27. The audited financial statements of the incorporated entity shall be presented to its board of directors (or equivalent) for consideration and approval within two months of the financial year-end of the entity.

28. A University entity shall keep accounting records that correctly record and explain the financial transactions and financial position of the entity, and that enable:

1. financial statements to be prepared such that they can be conveniently and properly audited as may be required;

2. any taxation requirements to be met;

3. any other legislative requirements to be met;

4. the preparation of any other reports as required by the members.

29. The Office of Financial Services of the University shall be responsible for keeping the accounting records of the entity and preparing the financial statements and associated note disclosures. The entity will be charged a fee for this service unless approved otherwise by the Vice Chancellor.

30. The Office of Financial Services of the University shall be responsible for preparing the necessary taxation returns for the entity. The entity will be charged a fee for this service unless approved otherwise by the Vice Chancellor.

31. The University Company Secretary shall be responsible for providing the corporate secretarial services for the entity. The entity will be charged a fee for this service unless approved otherwise by the Vice Chancellor.

32. A University entity shall prepare an annual business plan, shall operate on approved budgets, and shall report to its shareholders on its activities at least every six months and in the case of more active entities, quarterly. Preparation of the business plan, budgets and reports on activities shall be the responsibility of the Entity Manager. This information shall be presented to the board of directors (or equivalent) for consideration and approval as appropriate (refer appendix B also).

33. Staff involved with University entities shall make themselves familiar with related policy documents and legislation, including:

-	The Universities revised policy on Consulting Activities (October 2002).
-	Murdoch University Statute No. 18, in particular, the sections on Intellectual Property and Copyright.
-	For University companies, the Corporations Law (Cth), in particular those provisions that refer to the requirement to keep proper records, insolvent trading and the responsibilities of Officers and Directors.
-	Murdoch University Code of Ethics (Senate resolution 91/96, 7 October 1996), in particular the sections on conflict of interest and on use of the University name.
-	Academic and General staff condition of appointment contracts.
-	Guidelines for the Establishment and Management of Centres within the University (Senate resolution 19/98, 22 June 1998).
-	Trade Practices Act (Cth), in particular those provisions of the Act that refer to the recovery of all direct and indirect costs associated with the entity.

34. Any vacancy among the University appointed directors of a University entity shall be nominated by the Vice Chancellor in accordance with the procedures set out in s.19(c).

35. Every three years, or at any other time as determined by the Vice Chancellor in his or her discretion to do so, the Senate shall review and evaluate the University’s continued involvement in the University entity. The Vice Chancellor, in consultation with the chair of the board or committee of management of the University entity, shall determine the criteria for the review. Such criteria shall include those listed at clauses 13, 14 and 19 of this policy.

36. The Vice Chancellor shall appoint a review committee, and approve criteria and terms of reference for the review.

37. The review committee shall advise the Vice Chancellor. The Vice Chancellor shall recommend to Senate that the incorporated entity continue without change, continue with recommended changes, cease trading or be wound up.

38. Where a University entity has been established jointly with other universities or an outside entity, and as part of that agreement has a review process, the University will not appoint its own review committee. However, the entity shall provide the Senate with a summary of the report of any such review, along with any comments of the committee of management of the entity. The Senate shall then determine whether the incorporated entity should continue without change; continue with recommended changes; cease trading or be wound up.

39. Members of staff acting contrary to this policy are liable to be dealt with in accordance with the University’s disciplinary procedures.