Crown Entities Act 2004: Section 107 directions to support a whole of government approach

A direction to support a whole of government approach under section 107 of the Crown Entities Act 2004 can be used where the government has decided on a multi-agency approach for some activity, and there are benefits from applying this to some or all Crown entities. The intent is that such directions can be more readily used to achieve better results and improve State sector performance. 

Section 107, Crown Entities Act 2004 | New Zealand Legislation

Introduction 

This guidance provides information on issuing and giving effect to a direction under section 107 of the Crown Entities Act 2004 (the Act). The guidance is reflective of Cabinet’s expectations on what the process for setting such a direction should include, as outlined in the original Cabinet Office Circular (CO (13) 4 which is now superseded by this guidance). Minor clarifications have been made through this guidance to be clear that statutory decision making of Ministers (e.g. to issue a section 107 direction) should only be endorsed by Cabinet, rather than approved (see steps 2 and 4 in section 1 of the Guidance).

More information about referring a matter to Cabinet or a Cabinet committee when a Minister is acting under statutory authority can be found in the Cabinet manual (at 4.25 and 5.34-5.38).  

A collective approach to managing section 107 directions is necessary because:  

• the responsibilities of multiple Ministers are likely to be affected;  

• the government needs to manage the number and range of directions that restrict decision making in arm’s length agencies; and  

• the House of Representatives is able to disapply a direction. 

A summary of the process for issuing a direction is outlined in section 1. Additional information on giving effect to a direction is outlined in section 2.

Under section 107 of the Crown Entities Act 2004, the Minister for the Public Service and the Minister of Finance can jointly direct Crown entities to support a whole of government approach by complying with specified requirements for any of the following purposes: 

• to improve (directly or indirectly) public services;  

• to secure economies or efficiencies;  

• to develop expertise and capability;  

• to ensure business continuity;  

• to manage risks to the government's financial position.

While the matters below are not specified in the Act, it is suggested that a section 107 direction:  

• reflects a broad interest that is wider than the interests of any individual Crown entity;  

• generates benefits from a common approach that may not be achieved through individual decision making; and  

• relates to matters that are relevant to the selected Crown entities and be clear about the obligations it imposes.  

Under sections 107(2) and 107(2A) [1], a direction can be given to one or more specified “groups”, “categories” or “types” of entity for example, to:  

• a group including at least three entities, where the entities in the group have in common at least one significant characteristic that relates to the direction (e.g. relating to the Crown entities’ asset holdings or presence in a region); or  

• all statutory entities, or all Crown agents, or all autonomous Crown entities, or all independent Crown entities; or  

• all Crown entity companies; or  

• all companies listed in Schedule 4A [2] of the Public Finance Act 1989, where a direction is given for the purpose of improving public services or to develop expertise and capability; or  

• all school boards of trustees; or  

• a combination of these categories or types or all of them.  

Except for Crown Research Institutes, Crown entities subject to a section 107 direction must give effect to a section 107 direction as soon as it comes into force. The Crown Research Institutes Act 1992 [3] specifies that Crown Research Institutes are only required to have regard to a section 107 direction. 

A section 107 direction cannot be given to:  

• only one or two entities; or  

• tertiary education institutions; or  

• Crown entity subsidiaries as a category (although, a parent entity must ensure that its subsidiaries comply with a direction given to the parent, to the extent that it relates to the subsidiary (section 97)) [4]; or  
• State Owned Enterprises, organisations listed in Schedule 4 of the Public Finance Act 1989, or publicly listed companies listed in Schedule 5 of the Public Finance Act 1989.  

A direction cannot relate to statutorily independent functions or change how these functions are carried out, or require action in respect of a particular person or persons (section 113) [5]. A direction also cannot interfere with decisions on particular cases or quasi-judicial decision-making, or affect rights of review or appeal to a court in an entity’s Act.  

These limits mean that while a section 107 direction is available in the right circumstances, Ministers should also consider whether the proposed objectives are better achieved in another way, such as through:  

• legislation, e.g. because the proposed new obligations should be subject to select committee scrutiny and proceeding through all the stages of the House;  

• letters conveying Ministerial expectations to be addressed in Statements of Intent;  

• direction by a Responsible Minister, where permitted;  

• requirements agreed by Cabinet and set out in a Cabinet Office Circular;  
• minimum standards of integrity and conduct in a code (or codes) of conduct; or  
• regulations or instructions under Part 4 of the Act (section 173(1)(l)) [6], the Public Finance Act 1989 [7], or other legislation.

[1]Section 107, Crown Entities Act 2004

[2] Schedule 4A, Public Finance Act 1989: Non-listed companies in which Crown is majority or sole shareholder

[3] Section 7, Crown Research Institutes Act 1992

[4] Section 97, Crown Entities Act 2004

[5] Section 113, Crown Entities Act 2004

[6] Section 173, Crown Entities Act 2004

[7] Public Finance Act 1989