Related bodies corporate

The concept of “related bodies corporate” is often used in the Corporations Act for many of its purposes requiring linkage of corporations. It is also a concept referred to in the Australian financial services licence (AFSL) regime that is used to provide some flexibility in relation to the structuring of corporate groups for licensing purposes. Under section 50 of the Corporations Act 2001 (Cth) (Corporations Act), a “related body corporate” of a body corporate includes:

  • A holding company of the body corporate or
  • A subsidiary of the body corporate or
  • A subsidiary of a holding company of the body corporate.

Some matters to be disregarded in assessing whether entities are related bodies corporate are outlined in section 48 of the Corporations Act. Importantly, under section 48(2), any shares held, or power exercisable by a body in a fiduciary capacity are disregarded (RBC Carveout).

Whether entities are related bodies corporate has some important licensing implications. Some examples are set out below:

  • An entity that carries on a financial services business is required to have an AFSL unless it falls under certain exceptions in section 911A of the Corporations Act. One of these exceptions is where an entity is only providing financial services to its related bodies corporate.
  • A person (provider) who provides financial services on behalf of another (principal) must satisfy one of the limbs in section 911B(1) of the Corporations Act. An employee within a corporate group is often able to satisfy section 911B(1)(a), enabling the employee to provide financial services on behalf of any principal in the group as an employee representative. This is because:
    • a corporate group will often have an employing entity within the group that is a related body corporate of each principal within that group, so that the employee will be an employee of the principal or a related body corporate of the principal; and
    • assuming the employee has no financial services role outside that corporate group, the employee will not be an employee or director or authorised representative of any other person who carries on a financial services business (or a related body corporate of such a person) who is not a related body corporate of the principal.

AFSL regime issues

This may create a problem for industry superannuation funds, where a trustee company will commonly hold shares in corporate group entities as assets of the fund (ie in a fiduciary capacity). The RBC Carveout means that, in such circumstances, any group entity (eg an investment manager) that provides financial services to the superannuation trustee company itself (and any other corporate group entities) will not be providing the services only to related bodies corporate. Therefore, the group entity cannot rely on the related bodies corporate AFSL exemption and will need to have an AFSL in place unless another exemption applies.

Similarly, if employees of a corporate group employing entity provide financial services on behalf of other entities within the corporate group (eg the superannuation trustee company itself or an investment manager) that are not related bodies corporate of the employing entity, those employees cannot rely on section 911B(1)(a) of the Corporations Act. This means that, despite not having any financial services role outside that corporate group, employees within that corporate group may be required to be appointed as authorised representatives of each principal on behalf of whom the employee provides financial services.


There are sound prudential reasons as to why the holding structure described above is prevalent in the industry superannuation fund sector, including that fund assets must only be used to financially benefit beneficiaries of the fund. Using fund assets to establish a company to provide services to the trustee and holding the shares of that company personally would mean the trustee is making an unauthorised profit and be contrary to a core message of “profit to members”.

In contrast, in the retail superannuation fund sector, service providers from within the corporate group are commonly held by other entities within that group (eg a parent company) in a corporate capacity (ie not in a fiduciary capacity) as they are not bound by the same limitations. Also, the service providers will often hold AFSLs for other reasons.

The implications of this are that the RBC Carveout may result in industry superannuation funds having to, potentially:

  • apply for and maintain multiple additional AFSLs, that may not otherwise be required, with associated cost and compliance complexities; and
  • appoint employees as authorised representatives of multiple AFSL holders within the corporate group, with additional obligations in relation to those employees who are authorised representatives.

Potential solution

One potential workaround for this issue is to seek relief from the Australian Securities & Investments Commission (ASIC) to extend, for certain AFSL purposes, the “related bodies corporate” concept to entities that would be “related bodies corporate” if section 48(2) of the Corporations Act did not apply.

It would be prudent for superannuation trustees to review their corporate structure and licensing arrangements to determine if the RBC Carveout causes any issues under the AFSL regime.