11 June 2018

Effective governance of Crown entities requires board members to have a good understanding of the legislative environment in which they must operate. This includes the legislation that establishes their entity, the Crown Entities Act 2004 and other legislation that applies generally to Crown entities.

Entity-specific legislation

Most Crown entities are established by a specific Act or under wider empowering legislation, for instance:

  • the Environmental Protection Authority Act 2011; or
  • the Commerce Act 1986, providing for the establishment of the Commerce Commission.

The governance manual should provide information on the key elements of the entity's establishing legislation, and make clear the relationship between that and other general legislation that applies to the entity.

Crown Entities Act 2004

The Crown Entities Act 2004 (CE Act) provides a consistent framework for the establishment, governance and operation of Crown entities. It clarifies the accountability relationships between entities, their board members, responsible Ministers and the House of Representatives.  Governance manuals need to give all board members a broad understanding of the Act as it applies to their role on behalf of the entity.

Application of some of these provisions will vary according to whether it is a Crown agent, Autonomous Crown Entity (ACE), or Independent Crown Entity (ICE). Key examples of the distinctions are in the table below.

An entity's governance manual needs to describe how the main provisions of the CE Act apply to it: it does not need to refer to all three categories of entity.

Key distinctions between categories of entity

All references are to the CE Act

Crown Agents  (CA)

Autonomous Crown Entities (ACE)

Independent Crown Entities (ICE)

Government policy directions

Must give effect to government policy when directed by the responsible Minister (s. 103)

Must have regard to government policy when directed by a responsible Minister (s. 104)

Are generally independent of government policy (s. 105), unless specifically provided by an Act.

Directions to support a whole of government approach

Must comply with a whole of government direction from the Minister of State Services and the Minister of Finance (s. 107)

Must comply with a whole of government direction from the Minister of State Services and the Minister of Finance (s. 107)

Must comply with a whole of government direction from the Minister of State Services and the Minister of Finance (s. 107)

Appointment of board members

Appointed in most cases by the responsible Minister (s. 28)

Appointed in most cases by the responsible Minister (s. 28)

Appointed by the Governor-General on the recommendation of the responsible Minister (s. 28)

Term of board members

Hold office for 3 years or less (s. 32)

Hold office for 3 years or less (s. 32)

Hold office for 5 years or less (s. 32)

Removal of board members

May be removed by the responsible Minister at his or her discretion (s. 36); unless an elected member (s. 38)

May be removed by the responsible Minister for any reason that in the Minister's opinion justifies the removal (s 37); ); unless an elected member (s 38)

May be removed by the Governor-General for just cause, on the advice of the responsible Minister given after consultation with the Attorney-General (s39)


Determined by the responsible Minister in accordance with the
Cabinet Fees Framework (s. 47)

In most cases determined by the responsible Minister in accordance with the Cabinet Fees Framework (s. 47)

Determined by the Remuneration Authority in accordance with the Remuneration Authority Act 1977 (s. 47)

Re-categorisation of an entity

May be re-categorised as an ACE or ICE by Order in Council

May be re-categorised as an ICE by order in Council but not as a CA

May not be re-categorised by Order in Council. Would require legislative change.

This table expresses the general state of affairs under the Act; variations may be provided for expressly in a particular entity's Act. There are some differences for different types of boards, such as District Health Boards where the majority of board members are elected rather than appointed.

Other key provisions of the CE Act are discussed in other chapters of this guidance. These include: members' individual and collective duties, the role of responsible Ministers and monitors, accountability relationships, strategic planning and Statements of Intent, reporting requirements, delegation of power and functions, declaring and managing interests, employment of entity chief executives and staff.

State Sector Act 1988

Under the State Sector Act, the State Services Commissioner's mandate applies to Crown entities in a number of ways, including to:

  • review the State sector system in order to advise on possible improvements to agency, sector and system-wide performance;
  • review governance and structures across all areas of government in order to advise on:
    • the allocation and transfer of functions and powers;
    • the cohesive delivery of services;
    • the establishment, amalgamation and disestablishment of agencies;
  • promote leadership capability in departments and other agencies;
  • promote strategies and practices concerning government workforce capacity and capability. The Commissioner may draft government workforce policy for the purpose of fostering a consistent, efficient and effective approach to such matters across the State sector. The Minister of State Services may approve a policy as a Government Workforce Policy Statement (GWPS) that may apply to any or all Crown agents and ACEs. Crown agents must give effect, and ACEs have regard, to a GWPS;
  • promote transparent accountability in the State services;
  • promote and reinforce standards of integrity and conduct in the State services; and
  • set minimum standards of integrity and conduct. The State Services Commissioner has issued a code of conduct that applies to the staff of Crown entities. (Also, see chapter on Crown entities as employers.)

Public Finance Act 1989

The CE Act specifies most of the provisions relating to a Crown entity's financial powers, accountability and reporting obligations.

However, the following sections of the Public Finance Act apply to Crown entities:

  • s. 19, s. 26Z, s. 29A provide for the Secretary of the Treasury to request information necessary to prepare government statements and reporting;
  • s. 35 sets out the responsibilities of departmental chief executives for financial management of non-departmental matters. These responsibilities include reporting on non-departmental appropriations administered by the department (including those used by Crown entities) and advising the appropriation Minister on the efficiency and effectiveness of expenditure under these appropriations. These departmental chief executive responsibilities are distinct from Crown entities' financial management and reporting responsibilities;
  • Subpart 1 of Part 5 (which is cross-referenced in s 150A of the CE Act) provides information on:
    • the first annual report of a newly established entity (s. 45I);
    • the final annual report for a disestablished entity (s. 45J);
    • the final annual report for an entity that ceases to be subject to the annual report requirement (s. 45K);
  • s. 49 provides that the Crown is not liable to contribute towards payments of debts and liabilities of Crown entities;
  • s. 74 provides that money that has remained unclaimed in an entity's account for six years shall be paid to the Treasury;
  • s. 80A allows for the Minister of Finance to issue instructions, and Crown entities are required to comply with those instructions. The instructions must be consistent with generally accepted accounting principles; and
  • s.81 provides for the Governor-General to make regulations for a variety of purposes.

Other legislation with general application

A considerable body of legislation applies to all Crown entities as employers, in respect of matters such as holiday entitlements, employment relations, and health and safety. Employment matters are generally handled by chief executives rather than board members but, in ensuring compliance with them, the chief executive invariably acts under delegation from the board.

The Official Information Act 1982 applies to Crown entities. Board minutes are among the documents that can be requested under this legislation. The general expectation, as expressed by the Chief Ombudsman for instance, is for official information to be released (either pro-actively or in response to a request), unless there are clear grounds to withhold it under the Act.

For further guidance on the Official Information Act, see: www.ombudsman.parliament.nz/resources-and-publications/guides/.

The principles contained in the Privacy Act 1993 include:

  • how an organisation collects and stores personal information and what procedures are required to protect the security of that information;
  • how long an organisation can keep personal information; and
  • what personal information can be used for, and when it can be disclosed.

For further guidance, see: www.privacy.org.nz/how-to-comply-with-the-privacy-act/.

The Protected Disclosures Act 2000 (as amended in 2009) provides for the reporting of wrong-doing in workplaces (sometimes called 'whistle-blowing') to an appropriate authority, such as an Ombudsman. All Crown entities must have a protected disclosures policy. Under this Act, current or former employees of an entity, contractors and board members can make a disclosure that will be 'protected' if the information they are disclosing is about serious wrongdoing in or by the organisation, and they reasonably believe that the information is true or likely to be true.

For further guidance, see: www.ombudsman.parliament.nz/.

Governance manual content: Relevant legislation

At a minimum, a good governance manual should cover:

  • the relevant entity-specific legislation, the Crown Entities Act and the relationship between them as it applies to the particular category of Crown entity; and
  • all other legislation that has general application to boards and entities.