The Use and Benefits of Creating a Council-Owned Corporation in Queensland

Queensland local governments are under increasing pressure to deliver services efficiently, manage growth, and respond to community expectations while maintaining financial sustainability. One structural option available is the creation of a council-owned corporation. This model allows councils to separate commercial functions from core regulatory and community service roles, while retaining public ownership and oversight.

This article explores the benefits, risks, and practical considerations of establishing council-owned corporations.

1. What is a council-owned corporation?

A council-owned corporation is a legally distinct entity, usually a company under the Corporations Act 2001 (Cth), established and wholly owned by a Queensland local government. Councils may set up such corporations to:

• Deliver commercial services (e.g. utilities, waste management, property development, tourism assets).
• Manage significant infrastructure or development projects.
• Operate in a competitive market while preserving public ownership of assets.

Although corporatised, these entities remain accountable to their parent council through sole shareholding arrangements and reporting requirements.

2. Benefits of creating a council-owned corporation

Commercial efficiency

Operating under corporate governance frameworks allows entities to adopt private-sector practices in procurement, staffing, and financial management. This often results in greater flexibility, quicker decision-making, and improved operational efficiency when compared to the bureaucratic processes of local government. Corporatised entities can trial innovative solutions, adopt emerging technologies, and respond to market opportunities more quickly than traditional council structures.

Financial sustainability

Corporatised entities can generate new revenue streams, return dividends to the council, and reinvest profits into community services or infrastructure. They can also attract external financing and partnerships more readily than council departments.

Strategic asset management

Assets such as airports, ports, industrial estates, or renewable energy facilities can be better managed in a corporate structure that focuses on long-term sustainability, risk management, and market competitiveness.

Governance and accountability

A separate board of directors provides independent oversight and specialised professional expertise. Clear reporting lines to the council as sole shareholder, combined with statutory governance obligations, enhance accountability and transparency. This provides a clear separation between operational management and shareholder oversight, reducing potential conflicts of interest, and ensuring that the council-owned corporation remains aligned with community priorities while fulfilling its commercial objectives.

Community and regional benefits

By operating commercially, council-owned corporations can:

• Stimulate local economic development.
• Create jobs and training opportunities.
• Support regional industries and supply chains.
• Ensure critical services remain under public control rather than being privatised.

3. Risks and challenges

While attractive, the corporatisation model also requires careful consideration:

• Governance complexity: Councillors must distinguish between their role as policy-makers and as shareholders. This requires clear boundaries, structured reporting, and an understanding of both public-sector obligations and corporate governance principles to avoid conflicts of interest.
• Political sensitivities: Commercial decision-making may involve pricing, investment, or partnerships that can be controversial.
• Regulatory compliance: Corporations must comply with both local government legislation and the Corporations Act.
• Transparency: Balancing commercial confidentiality with public accountability can be challenging. For example, sensitive commercial information may need to be protected to safeguard competitive advantage, yet councils must also ensure that the public can access sufficient information to maintain trust and oversight.
• Financial risk: Like any business, council-owned corporations can face market fluctuations and investment risks. Poor financial management or unforeseen economic changes can impact both the corporation and, indirectly, the council’s budget.

4. Establishment process in Queensland

• Strategic assessment: Identify why a corporation is needed, what services or assets it will manage, and assess the alternatives.
• Business case: Prepare a comprehensive business case, including financial modelling, risk analysis, and community benefit assessment.
• Legal and governance design: Decide on company structure, shareholding arrangements, board composition, and reporting mechanisms.
• Regulatory compliance: Ensure compliance with the Local Government Act 2009 (Qld), Corporations Act 2001 (Cth), and any relevant guidelines from the Queensland Government or Local Government Association of Queensland (LGAQ).
• Implementation and transition: Transfer assets, establish staffing arrangements, and develop governance documents (constitution, service level and loan agreements, policies, etc).
• Ongoing oversight: Maintain regular reporting to council as shareholder, annual general meetings, and performance reviews.

5. Examples of application

In Queensland and other Australian jurisdictions, council-owned corporations are often used to manage:

• Utilities — water, waste and energy services.
• Infrastructure — airports, ports, and transport hubs.
• Property development — joint ventures or development corporations.
• Tourism and events — destination marketing organisations or venue management entities.

These corporations enable councils to remain agile and competitive in markets while securing public benefit.

Conclusion

Creating a council-owned corporation can deliver significant benefits to Queensland local governments: improved efficiency, stronger financial sustainability, better asset management, independent and specialised directors who bring professional expertise and enhanced community outcomes. However, the model requires a clear strategic purpose, robust governance, and careful management of risks. Councils that use corporatisation thoughtfully can unlock new opportunities to serve their communities while safeguarding public ownership and accountability.

The Muscat Tanzer team has assisted several local governments to establish council owned corporations and provides legal services to those corporations in the delivery of their projects and services. Drawing on our experience, we aim to guide councils through governance structures, helping them make informed decisions and maximise the potential of this model. If you need assistance with the establishment of a council owned corporation or in the delivery of a corporation’s project and services, please contact one of our team.