Trading with a WA Government Trading Enterprise? Factor in new approvals and processes

If you are a Government Trading Enterprise (GTE), a subsidiary of a GTE, or a party that contracts with GTEs in Western Australia, you will need to be aware of how recent reforms to GTEs will affect your business. Significant transactions with lower dollar values which involve "policy sensitivities or have material public policy implications" will now require approval by the relevant Minister and Treasurer, and GTEs have new rules for properly signing documents.

The 2017 Langoulant Special Inquiry found that because each GTE operates under separate establishing Acts, governance requirements varied between GTEs. The Government Trading Enterprises Act 2023 (WA) and Regulations standardise governance requirements for many GTEs.

Which GTEs are affected by the reforms?

The GTE Act covers 12 "Tranche 1 GTEs" and their subsidiaries, and it is contemplated that further GTEs will be transitioned under the new framework in the future, including already identified "Tranche 2 GTEs" which include Forest Products Commission, Gold Corporation, Insurance Commission of Western Australia and Western Australian Treasury Corporation.

While the GTE Act affects Tranche 1 GTEs from 1 July 2023, actions undertaken by a GTE before 1 July 2023 will have continuing effect. The Tranche 1 GTEs are:

• Electricity Networks Corporation (Western Power)
• Electricity Generation and Retail Corporation (Synergy)
• Regional Power Corporation (Horizon Power)
• Water Corporation
• Bunbury Water Corporation (Aqwest)
• Busselton Water Corporation
• Western Australian Land Authority (DevelopmentWA)
• Fremantle Port Authority
• Kimberley Ports Authority
• Mid-West Ports Authority
• Pilbara Ports Authority
• Southern Ports Authority

Significant Transactions, Significant Initiatives and Disposal of Significant Assets

Most notably, the GTE Act introduces the concepts of "significant transactions", "significant initiatives" and "disposal of significant assets" which are outlined in detail below.

A broader consideration of significant "social, economic, technological or industrial" impacts or a "significant impact of another prescribed type" of transactions or initiatives (which are not yet prescribed in the GTE Regulations) will now require the GTE to inform the relevant Minister and Treasurer if contemplating disposal of a significant asset and before undertaking, and during the further development of, a significant transaction or a significant initiative, even if the monetary value of the project is less than the prescribed threshold for significant transactions.

Potentially adding to transaction timelines, GTEs must also obtain the approval of the relevant Portfolio Minister, who in turn is required to obtain approval from the Treasurer, before entering into a significant transaction or disposing of the significant asset. This approval is not at this stage required for significant initiatives.

However, for significant transactions only, the Portfolio Minister for the GTE, and with the approval of the Treasurer, may declare that a specified transaction or class of transaction is not a significant transaction, subject to any conditions.

Significant transactions

A significant transaction is one:

• worth the lesser of 5% of the written down value of the consolidated fixed assets and investments of the GTE, as appearing in its last audited accounts, or $25 million; or
• is likely to have a significant social, economic, technological or industrial impact or a significant impact of another (to be) prescribed type.

The definition of "transaction" includes "the set of all the contracts and arrangements which are entered into for the purpose of achieving a particular outcome or are incidental or ancillary to that purpose" which suggests that GTEs and other counterparties will need to look at the broader transactional context – not solely the value of their individual transaction.

Significant initiatives

A significant initiative is an action that is likely to be of significant public interest or under the to be prescribed criteria, is likely to have a significant social, economic, technological or industrial impact or a significant impact of another prescribed type.

Disposal of significant assets

A GTE and all of its subsidiaries, or the group of which the GTE is a part, must not cease to have at least 75% of the beneficial interest in a significant asset unless there is a disposal order in effect under the GTE Act. The disposal order is to be published in the WA Gazette and subject to a disallowance resolution. A significant asset is an asset where the total value of the asset exceeds the greater of:

• 5% of the written down value of consolidated fixed assets and investments of the GTE; or
• $100 million.

Assumptions people dealing with GTEs can make

Counterparties dealing with GTEs are entitled to make certain assumptions in section 154 of the GTE Act when transacting with GTEs, unless the counterparty has actual knowledge that the assumption is incorrect or where the counterparty ought to know that the assumption is incorrect, due to the counterparty's connection with the GTE. These assumptions include that:

• the GTE is at all relevant times complying with the GTE Act and its Establishing Act, and
• a person who is held out by a GTE to carry a specific title (for example, a director) has been properly appointed and has authority to perform the functions customarily performed by that role; and
• a document purported to be signed or executed under common seal by a GTE in accordance with the GTE Act is taken to be duly executed, unless the contrary is shown.

It's important to note that these provisions differ from the assumptions that a person dealing with a company is entitled to make under section 128 of the Corporations Act. One effect of this is that both GTEs and counterparties should, before entering into a contract, verify that the GTE will in fact be signing the document in accordance with the requirements in the GTE Act. This will include confirming that each person who will be signing the document on behalf of the GTE has been properly appointed and has all necessary authority to sign.

Director's Duties

The duties of GTE directors and CEOs remain largely unchanged, except for the addition of the duty to perform functions in good faith and for a proper purpose and for some GTEs, the duty not to provide false or misleading information to a relevant official. The duties have been consolidated in Part 5 of the GTE Act. However, directors both of GTEs and of parties engaging with them should be across these reforms to ensure that their own governance and accountability frameworks are consistent and up to date with the reforms.

New rules for GTEs at a glance