Smaller companies struggling with high compliance costs will lose out if the Australian Prudential Regulation Authority's (APRA) proposed governance standards get the green light, according to Australia’s peak body for governance professionals in Australia.

Chartered Secretaries Australia (CSA) says a prescriptive, “one-size-fits-all” approach fails to take account of the financial constraints of smaller entities and will not necessarily lead to better governance.

The draft standards require the majority of APRA-regulated entities to establish boards comprising of a majority of non-executive directors and to appoint an independent non-executive as chairman.

CSA CEO Tim Sheehy says while his association strongly supports the role of independent directors, the requirement “will add enormous, and in our view unnecessary, compliance costs for smaller entities”.

He says APRA’s requirement that regulated entities have a dedicated internal audit function will see small companies’ payroll commitments soar.

“While an internal auditor has an important role in a company’s risk management process, this must be tempered by practical considerations,” Mr Sheehy said. “In reality, many small companies simply do not have the workflow or resources to justify appointing a dedicated internal auditor.”

And the CSA thinks APRA’s January deadline for implementing the new governance standards is unreasonable. “The tight timeframe… would leave some companies with as little as six months to comply with a raft of very extensive changes.”