Business Law Reform Bill

I move, That the Business Law Reform Bill be now read a first time. It is my intention to move at the appropriate point that this bill be referred to the Commerce Committee. It is important to make sure that legislation aids business activity, and, to ensure that it does so, it must remain up to date and relevant. Business law should hinder neither the ability of business to function nor the effective and efficient operation of the markets in which those businesses operate. Given the amount and the complexity of legislation that affect businesses, it is inevitable that amendments will be needed from time to time in order to meet the same. As the business environment changes, legislation must be updated accordingly.

This is the second omnibus Business Law Reform Bill. It represents the commitment of this Parliament to the incremental improvement of existing business law to keep in step with the changing needs and requirements of the market. The bill contains various amendments to a number of business law statutes that, in their own right, would not justify a single piece of legislation.

It is at this point that I wish to acknowledge all parties in the House, with the exception of New Zealand First, which have agreed that this bill should proceed. I believe that New Zealand First has done irreparable damage to its reputation with the business community, assuming, of course, that it had a reputation to damage. I can inform this House that many representatives of the legal fraternity and the wider business community have expressed considerable dissatisfaction that one party could stand in the way of legislation that is designed to assist the business community in a number of significant ways.

In particular, the bill will remove unnecessary compliance costs associated with some administrative processes. It will clarify various statutory provisions, achieve consistency between different legislative requirements, and update various statutory provisions. Although the changes effected through the bill are individually small, and therefore would not justify their own statute, in totality they will have a significant and positive impact on the body of law under which businesses must operate. For example, in the field of compliance costs, one of the key aims of the bill is to reduce compliance costs associated with administrative procedures. An example of that is sections 52E and 52F of the Securities Act, relating to employer-based superannuation schemes. All such schemes must prepare both prospectuses and investment statements, except for “small-employer superannuation schemes” that existed before 1 September 1983 and have assets of less than $5 million.

A number of industry participants expressed their concern at the unnecessary compliance cost associated with having to register a prospectus for employer-sponsored superannuation schemes under the Act. Indeed, one organisation claimed that complying with that provision costs up to $100,000 annually. Industry participants commented that they seldom, or never, have inquiries for the prospectus. In the light of the expense of preparing and publishing a prospectus, they consider that the costs outweigh the benefits. The bill contains a clause exempting all employer-based superannuation schemes from the prospectus requirements in the Act, which will greatly reduce compliance costs for the operators of such schemes.

Another example is section 97A of the Building Societies Act, and section 210 of the Companies Act 1993, where certain financial documents must be sent to all members of building societies or shareholders of companies. Consultation has revealed that in many cases the members or shareholders are not interested, and, indeed, may not wish to receive all the financial disclosure documents. In that case, the cost of printing and posting such documents to them is an unnecessary compliance cost. The bill contains a clause allowing members and shareholders to opt out of receiving certain information.

One further example is sections 10 and 12 of the Financial Reporting Act, which sets out the disclosure requirements for reporting entities and exempt companies. Exempt companies are those with, among other requirements, assets of less than $450,000 and a turnover of less than $1 million. Exempt companies have lesser disclosure requirements than reporting entities. Consultation has revealed that in some instances exempt companies will have prepared fuller disclosure for other reasons, yet must also prepare the additional lesser disclosure documents under the exempt company regime. The bill contains a clause allowing exempt companies to opt into fuller disclosure. This will provide exempt companies with the flexibility to make compliance cost savings.

The second heading is “clarification”. Another key aim of the bill is to improve the clarity of our existing commercial law statutes. Where a statute is unclear, businesses and regulators have to waste time and money on either getting legal advice or taking a case to the courts to interpret the statute. One example of that is section 196(1)(a) of the Companies Act 1993, which provides that at each annual general meeting a company must appoint an auditor to hold office until the end of the next annual general meeting. It is not clear in the statute whether an auditor may resign before then. The bill contains a clause clarifying that of course an auditor can resign between annual general meetings.

Regarding consistency, the bill also aims to remove anomalies in the law that have emerged over time. For example, section 53E of the Securities Act provides that issuers of equity securities, debt securities, life insurance policies, unit trusts, and superannuation schemes must have their financial statements audited annually by a qualified auditor. In the case of participatory securities, annual audits are carried out only if the statutory supervisor so requires. The bill contains a clause requiring that all arrangements or schemes to which participatory securities relate should be audited annually to remove that inconsistency.

Finally, the bill is about updating the law. This process is particularly important, as, among other things, it allows business to take full advantage of the new information technology environment. For example, section 15(2) of the Commerce Act prescribes that meetings of the Commerce Commission should be held at such times and places as the commission determines. That does not provide the commission with sufficient flexibility to convene meetings using, for example, videoconferencing tools. The bill contains a clause that will allow the commission to take advantage of technology to convene meetings.

In aggregate, the changes included in this, the second omnibus Business Law Reform Bill, will achieve the key public policy objective of ensuring that the law affecting the operation of business is clear, efficient, and effective. The bill will reduce the cumulative costs of complying with legislation and the cost of reconciling different legislative requirements to promote both the efficient use of economic resources and enterprise and innovation in the economy.

I again thank members of the Progressive Coalition, United Future, the Greens, the National Party, and the ACT party for facilitating the introduction of this bill and reference to the select committee. On behalf of the business community representatives whom I have met, I say shame on New Zealand First for playing politics with a demonstrably non-political bill. Several months have been lost by that about-face, given that the bill was actually agreed for introduction before last year’s election. I thank the Leader of the House for finding a way round the obstructive behaviour of a party that has lost any credibility it ever had over this matter. I commend the bill to the House.

It was most interesting to be in the House during the last few minutes of the Minister’s speech to hear how she operates to encourage cross-party support for any future bills she might bring to the House, and I will comment on the involvement of New Zealand First later on in my contribution to this bill.

I would like to draw the House’s attention to the regulatory impact and compliance cost statement attached to this bill. The innovation of such statements was, apparently, to quantify to New Zealand business and to consumers the costs that would come from implementing such policies and also the benefits that would flow to users, as well. I must say that it is clear from reading the compliance cost statements in this bill that the Government defines the benefits very thinly. Some examples, but not many, are given that would justify some action that this Minister said was all about removing “unnecessary compliance costs”.

I remind the House that this bill does not address any of the business community’s key concerns with regard to the regulatory cost introduced by this Labour Government. In general, I remind members that Business New Zealand has estimated that the increased costs imposed by recent and prospective Government policy changes add about $44,000 a year to the annual cost of a company employing just 20 staff. This House needs to know that this minority Labour Government has made over 15 increases to taxes, levies, excises, and fees since 1999 on the basis of its pledge that there would be only one increase in taxes. That was the pledge that only 5 percent of New Zealanders would pay additional income tax. We know that is a hollow pledge, because 15 percent of our population earn over that threshold and this Government is doing nothing to remedy that situation. As I said, this bill does nothing about the 15 increases in taxes, fees, and levies that this Government, which promised there would be only one new tax, has delivered to New Zealanders. In fact, in this Parliament we are looking at an additional tax on electricity consumers. This bill does nothing about that. We are also looking at an additional tax on the burps—a polite way of describing it—of farm animals, which is another tax that this Government said it would not be bringing to Parliament, but it is.

The House will want to know that the National Bank’s small business monitor survey shows that regulation, the cost of compliance, is the biggest problem facing small business in New Zealand today. Small businesses say that, together with compliance costs and regulation, the Resource Management Act is one of the big compliance stumbling blocks in the economy. What in the bill does anything about what worries small businesses in New Zealand? Not a jot! Nothing in this bill will make much of a difference to small businesses in New Zealand, and nothing in it will address the community’s concerns about the Resource Management Act. Similarly, I have to advise the House that nothing in this bill addresses the significant problems businesses are facing from the Employment Relations Act, the Human Rights Act, the Health and Safety in Employment Act, and the Hazardous Substances and New Organisms Act. These are the issues that small businesses in this country want addressed. If we are to have a Minister of Commerce come into this House and pony up a bill that she said “removes unnecessary compliances costs”, then I would have thought that the compliance cost statement in that bill would clearly enunciate those changes.

What is there in this bill that the Government says will make a saving? Well, there are few things in it for big business, and some things for the insurance industry.

💬 Dail Jones: Which it may not want!

Yes, which it may not want. There are some things in it for the big businesses that issue prospectus documents. There is some stuff in here for the big businesses that are suffering some concerns with the Financial Reporting Act.

However, it is very interesting what is included in the bill. This Government, which said that people who earn over $60,000 a year are wealthy and that they can afford to pay extra taxes, has changes its mind. This Government has introduced legislation that actually defines what a wealthy person is. This Government has decided what a wealthy person is. It says that a wealthy person has assets in excess of $2 million and an annual income in excess of $200,000. So why is this Government hitting middle-income earners with higher personal tax rates? If people are wealthy and earn over $200,000 a year, why then are middle-income people suffering the added consequence of higher personal taxes under this Labour Government? The biggest compliance cost for working New Zealanders today is their income tax. We know that the high rate of inflation that this Government has tolerated in the last few years is pushing more and more New Zealanders up into the higher tax bracket. Nothing in this bill does anything about it. When this Government came to office, it said that only 5 percent of New Zealanders would pay higher tax. What we know is that 15 percent of New Zealanders are paying higher tax.

What would the House have expected to be in the Business Law Reform Bill? I would have thought we would be doing something about the burden that the Occupational Safety and Health Service is putting on small businesses. I would have thought we would have something about the difficulties that a rigid labour market and the Employment Relations Act make for businesses that want to open on statutory holidays. I would have thought we would be doing something about that. I would have thought we would be making some changes to the Human Rights Act, to the Health and Safety in Employment Act, and to the Hazardous Substances and New Organisms Act—the things that businesses say should be acted on as priority. Where are the changes to the Local Government Act to remove the burden on small businesses that are trying to get ahead?

Where are the changes to the Resource Management Act, the biggest stumbling block to investment in this country? Where are the changes that are putting Lockwood’s investment in the Rotorua district at risk—changes that should be made to the Resource Management Act to prevent silly and ridiculous objections under the Resource Management Act that have stopped Lockwood from making its investment there? Where are the changes that will make that? I will tell members where the changes are. They are in the National Party’s 16-point plan for changes to the Resource Management Act. We promoted those in the House, and members opposite have opposed them. They should look at our 16-point plan to fix the Resource Management Act. That is the sort of thing that would have encouraged Lockwood to make its investment in the Mamaku in Rotorua. If that investment does not go ahead, then the people of Rotorua have no one else to blame but the Labour Government, because it voted against the changes to the Resource Management Act that would have ensured that investment would have gone ahead. The Government is responsible if there are problems with that investment. We should see more in a Business Law Reform Bill than has been promoted in this one.

I listened with some interest to the speech made by the Hon Tony Ryall. Let me put my cards on the table at the beginning and say that United Future will be voting for this bill. I think the principle that I would respond to Tony Ryall with is that we cannot let the perfect become the enemy of the good. Also, I would like to say that many of us New Zealanders were very, very disappointed indeed that the more extreme provisions of the Resource Management Act were not dealt with during the term of the National-led Government. I think that many people have spoken through the ballot box on that issue. I would certainly hope that the Government might take notice of that and that we can indeed give the people of New Zealand some relief from that legislation, which, in some ways, I think has been very poorly thought through.

However, I come back to this bill. The amendments appear to be largely technical and uncontroversial in nature. They are intended to clarify and update various statutory provisions to give effect to the intended purpose of the provisions, remove unnecessary compliance costs, and remove conflicts within and between different pieces of legislation. Most of the amendments stem from suggestions from business law practitioners, enforcement agencies, and the business community.

Given that the bill is running well behind schedule and that the business community is eager for the proposed reforms to be implemented, we have pleasure in supporting this bill.

This bill is an exciting piece of legislation if one is a lawyer or an accountant, or if one goes to the Regulations Review Committee meetings on Wednesday mornings at 8.30.

💬 Darren Hughes: I bet the member is always late.

No, the member is usually on time for that committee.

As a lawyer, believe it or not, one can go through the 13 pieces of legislation that are being amended by this bill, and one could show some interest in all of them. Of course, the most disappointing feature of this legislation is that it has been held up since 2001 by this Labour minority Government. This bill was sought after, and requested by, all the commercial sectors in 2001. Somehow or other, in 2003 New Zealand First gets the blame. Well, that is a long, long bow.

The National Party says that it has a 16-point plan to sort out compliance cost requirements. New Zealand First has a one-point plan. It is very simple: vote New Zealand First. Can we fix it? Yes, we can! It is just a one-point plan for us. We are not a very subtle bunch. One point is enough for us; one vote is enough for us. [Interruption] If we have a good idea, we stick with it. That is right.

I have looked through this legislation and read it clause by clause. Of course, we have had the speech from the Minister, and I thought: “Oh well, let’s see what it says.” I ask members to look at this wonderful piece of drafting that we have in clause 13. I looked and looked at it, and I hope that perhaps the next Government speaker will explain it to me. Clause 13, “Interpretation”, states: “Section 2(3)(b) of the principal Act is amended by omitting the word ‘capital’, and substituting the word ‘capital,’ “. Shall I say that again? Clause 13, “Interpretation”, states: “Section 2(3)(b) of the principal Act is amended by omitting the word ‘capital’, and substituting the word ‘capital,’ “. Well, what does that mean?

💬 Pansy Wong: Is it now a little “c”?

No, they both have a small “c”. This is a wonderful piece of legislation, which has been heralded by the Minister of Commerce.

💬 Hon Tony Ryall: Das Kapital!

Oh, Das Kapital—with a “k”. It should have been with a “k”, not with a “c”. All I can say is that that is the first amendment that will be made to this piece of legislation. Somehow or other the Government has messed it up already.

I must express my appreciation at the very beginning for the tremendous support given to me by the New Zealand Law Society in investigating this bill and what must have been its predecessor. I have about 26 pages of information here from the New Zealand Law Society and its representative at Kensington Swan, for which I am very grateful. Each of these pages has about four to six suggestions for this legislation. I would say that at the very least three-quarters of them support the legislation, and New Zealand First will be supporting this bill, because in principle we do support it. There is no doubt about that, but obviously we could not support clause 13, which will remove the word “capital” and substitute it with the word “capital”. There is obviously something wrong there.

As I flicked through the bill and looked at various things—and this is for the record as much as anything else, or for anyone looking at it later—I note that clause 23 seems to be an amendment that was not in the original suggestions made. Clause 29 is headed: “Penalties that may be imposed on directors in cases of failure by board or company to comply with Act”. That clause seems to be relatively new, judging by the information handed out to people. Clauses 34 and 35 seem to come within the same category, as well. Clause 37 deals with the Distress and Replevin Act of 1908. As I have mentioned on a previous occasion, the Law Commission in its 1995 report on the Property Law Act said that this Act should be repealed. Does anybody in the Chamber know what the Distress and Replevin Act of 1908 is all about, based as it on the—

💬 Hon Maurice Williamson: What does “Replevin” mean?

Exactly! What does it mean? Here we are voting for something that even the member for Pakuranga does not know the meaning of. No, no one knows. [Interruption] Mr Worth and myself may have dealt with the Distress and Replevin Act—and perhaps Mr Franks, but I am not sure whether he knows. But that does not stop us from passing legislation and moving legislation on, and I am sure that the select committee will take a great interest in it. But the essential fact is that the Distress and Replevin Act should be repealed. That was the submission of the Law Society and the Law Commission—in 1995 as I recall. Why has the Government not repealed the Distress and Replevin Act and put in the new Property Law Act in place of the 1952 legislation?

The Government says it is trying to do something to assist the business community. In fact, the House is just patching up a dreadful old piece of legislation that talks about levying distress, or, in other words, seizing goods, usually by a landlord or a judgment creditor, and recovering them. I think that the word “replevin” would be an old Norman-French word that goes back to 1066 and probably means “recover”. Am I right? [Interruption] No, I am not. I have forgotten what “replevin” means, and I do not want to know what “replevin” means, to be perfectly frank. All I can say is that in practice the Act is a very dangerous piece of legislation. I have come across its being implemented by real estate agents, who really would have got into all sorts of problems if anyone had ever criticised what they were doing.

As I look at Part 6, “Financial Reporting Act 1993”, and at the definition of “turnover”, I feel sure that people will have a closer look at that. I look at clause 42, “Meaning of group financial statements”, and in particular at section 9(1)(e), and I know that people will be having a closer look at that, too.

I am skipping through the bill. There are 13 parts, with 13 Acts of Parliament being amended, so I have to move along fairly quickly. I refer now to clause 46, which deals with the removal of disputes processes. Now, I would have thought that in this day and age we like to see dispute settlement taking place away from lawyers. Clause 46 removes dispute resolution processes and I wonder whether the select committee will have another think about that.

While I am speaking about the select committee I point out that this bill, I am told, is to be referred to the Commerce Committee. We have a Justice and Electoral Committee, which has five lawyers on it. Why do we not send the bill to the Justice and Electoral Committee, which in past years would have considered legislation of this kind? Why send it instead to the Commerce Committee, which, I think, has two lawyers on it—or only one? I mean no disrespect to Mr Parker, but I would have thought that a bill of this kind, with 13 technical pieces of legislation, ought to be going to a select committee with at least five lawyers on it. But, no, no. Why send the bill to a select committee that might actually know something about the bill and might be able to interpret it and understand it? So the Government is sending the bill to a select committee that has only one lawyer. The bill will then be, really, in the hands of the officials as to what ultimately goes into the legislation.

I move on. The bill also deals with the Life Insurance Act, the Personal Properties Securities Act, and such like. Clause 59 may be of interest to lawyers, as may be clause 65. I notice that clause 68 inserts new section 75A, which is in addition to the information given to me by the New Zealand Law Society, and I would suggest that any lawyer looking into this bill later on would have a close look at that clause. The suggestion of the New Zealand Law Society regarding clause 72 about the satisfaction of judgment debts—making sure that the collateral goes towards the satisfaction of an obligation rather than what was originally in full satisfaction—has been taken into account by the Government.

The main thing really that I want to look at in the short time that is left to me is the compliance cost matter, which I hope Mr Franks might take up in greater detail. [Interruption] I am talking about compliance costs, with regard to sections 5(2E) and 5(2F) of the Securities Act, which is referred to in Part 10 of the bill. As I read that provision—and the Law Society submission about the provision goes for over one and a half pages—to me there is some great doubt about whether the proposal in the bill for the Securities Act, with regard to section 5(2E), I think it was, relating to compliance cost requirements, is satisfactory. I just mention it in passing so that at a later date someone can perhaps have a closer look at it and see whether he or she is satisfied with the bill as introduced by the Government.

I look at new section 36A inserted by clause 92, which is additional legislation that is included, and there are many other various notes that, I respectfully suggest, the Commerce Committee will have considerable interest in. I would hope there might be parties in this House that will ensure there may be a substitution on the Commerce Committee to help it with the legislation. New Zealand First always wants to ensure that commercial legislation, or any legislation, works satisfactorily.

The claim made by the Minister that this bill will reduce compliance costs, and suchlike, is a load of rubbish. In many respects, this legislation requires additional things to be done. It is all a matter of interpretation. The main point is that this bill has been waiting to come into the House since 2001. I would have preferred to see its parts come in individually, because my concern is that if one part holds up this legislation, then it will hold up 13. We must make sure that if there is one part holding it up we can take it out of this bill, and proceed with the other 12.

After wonderful oratory like that, which is incisive and visionary in its nature, I believe it is amazing that this House got by in the 20 years after Mr Jones decided to leave Parliament and was not a member of this Chamber. I am not quite sure how we managed to frame legislation without Mr Jones’ presence during these last 2 decades.

I am not sure, either, whether the reason he is opposing this bill is that the residents’ committee of his local retirement village where he makes his home decided that he should come to Parliament and oppose this bill. I can understand why Mr Jones is opposing the repeal of the Distress and Replevin Act of 1908. It was his first private member’s bill back in 1908, when he first came to this Chamber, so I can understand why he has a huge commitment to it.

I support this bill because it does clarify some compliance costs. I think it is very good Government legislation.

I think the Labour Party should apologise to the public. The honourable member Mr Dail Jones demonstrated that he has actually gone through this Business Law Reform Bill, chapter and verse. We have just listened to Darren Hughes, who totally convinced everybody out there that he had not even bothered to flick through this bill. He just wasted 3 minutes of parliamentary time on talking about nothing. The Minister, the Hon Lianne Dalziel, shows a total lack of enthusiasm. I wish the Government would give the portfolio back to the Hon Paul Swain. At least every time he stood to introduce some business law legislation, he showed some enthusiasm and understanding.

The Labour Party is actually apologising for this bill. When I read the regulatory impact and compliance cost statement in the explanatory note it was very clear to me that the Minister was making an apology, because it states: “The Business Law Reform Bill is an omnibus bill that contains minor changes to a number of business law statutes”. All I can say to the Minister is to stop apologising and bring some major changes that will enable the business community to go ahead and expand their business.

I also want to challenge the very uncharitable Minister of Commerce, who accused New Zealand First of single-handedly delaying this bill for 2 years. I do not understand; all I know is that United Future members, obviously intimidated by the Minister’s stand, immediately got up and said that they did not understand why they should support it, but that they had better do so, because they do not want United Future to be named as the party that may even show some attempt to stand up to Labour and get it to do some real work. My challenge is to United Future members to take another call and explain to the public why the bill makes only minor changes. Why can it not bring along some major changes that allow the business community to go forward?

I want to come back to this bill and challenge the Ministry of Economic Development, which is headed by the Hon Lianne Dalziel. When I was on the Commerce Committee the ministry always complained that it had developed this compliance cost statement, and said that each piece of legislation that comes before the Parliament has to have a detailed statement on how it reduces compliance costs, and justifies the benefit of it. We are always encouraging and ask how the Commerce Committee can be helpful in giving some power to help the Ministry of Economic Development demand that various Government departments produce substantial justification for bringing legislation before this Parliament.

When I look through this Business Law Reform Bill, all the Ministry of Economic Development can say, under the regulatory impact and compliance cost statement, is that the bill will “remove unnecessary compliance costs associated with some legislation”. For a ministry that is supposed to show a leading, fine example—[Interruption]

The ASSISTANT SPEAKER (H V Ross Robertson): There is too much unnecessary conversation going on.

Thank you, Mr Assistant Speaker. I think the members should devote some time to reading through the compliance cost statement. Darren Hughes found time to point a finger at other members of Parliament. I wish he had found time to read through the bill, and in his 3-minute speech make a better job of talking about it.

The Ministry of Economic Development is charged with the important task of demonstrating how a compliance cost statement should be made. But all it can say is that one of the key aims of the bill is to reduce compliance costs, and then gives three examples. When the Ministry of Economic Development can only produce a weak, general statement of compliance cost justification, how can it go ahead and complain that the various Government departments never take seriously the producing of these compliance cost statements?

My colleague the Hon Tony Ryall is absolutely right: this bill does not do much about reducing compliance costs. Let me give one example. They are saying that this bill is trying to be helpful, it is trying to say that some entities no longer have to provide full financial statements, so some shareholders can write in and say: “Well, the shareholder doesn’t want to get the full set of financial statements.” But guess what the requirement is? Apart from producing the full set of financial statements, the entity has to produce some simplified financial statements. One can argue that that has increased compliance costs, because the entity has to produce a full set of financial statements, anyway. If it has mailed them to the shareholders, there is the cost of printing. There is a compliance cost. Introducing an alternative, simplified financial statement actually requires an additional step. I presume the entity has to send out those forms, for the shareholders to select whether they want to receive the full financial statements or the simplified statements. So one can argue whether it does reduce the compliance cost requirement.

The honourable member Dail Jones raised a good point when he mentioned clause 13 in Part 3 and said that it sounds strange that this clause omits the word “capital”, and substitutes the word “capital,”. I think that was a very good question, and Labour members should take a call. I read through the legislation and, interestingly, the first word “capital” is within inverted commas, and the second word “capital,” has a comma within the inverted commas. I tell Dail Jones that that might mean something different.

The only point of difference I have with Mr Dail Jones is that I am in favour of the bill going to the Commerce Committee, because it does not have as many lawyers. From my previous experience when one sends a bill to a select committee that is full of lawyers, they spend large amounts of time debating technically where the commas and the full stops are. My honourable colleague Richard Worth is showing some distress. I have high respect for lawyers, except they seem to spend large amounts of time commenting on whether a comma or a full stop will lead to a lot of differences. Of course, after they have this lengthy debate, and when things do not work out and the case is put before the court, then we find that another set of lawyers will come up with an entirely different interpretation.

But I think Labour members should take another call and show the public that they have, indeed, read this bill, make some substantial contributions, learn from Mr Dail Jones, and not accuse New Zealand First of not supporting this legislation. We got it from the horse’s mouth—that New Zealand First does support the legislation. Labour members should stop blaming other parties for their slackness in bringing this bill to the Parliament.

After that fascinating and eloquent discourse, all I can say is that this bill does contain various amendments to a number of business laws. The amendments seek to reduce costs for business. That has to be a good thing and that is why I support the bill.

Mr Speaker—

💬 Pansy Wong: Did you read the bill?

I have read enough of the bill, and if Pansy Wong listens carefully she will hear what I have to say about it. The Green Party believes this is a good bill, and we look forward to its speedy passage. I am sure there will be wording that the various members of the Commerce Committee will seek to tidy up, especially if there is a good body of lawyers on the select committee, because after all this bill is largely commercial in nature. But it is more than just a technical bill. There are some very, very significant improvements to legislation in this bill. That is why we were bitterly disappointed that New Zealand First held up the introduction of this bill by requiring this House to have a notice of motion so that the bill could come before us, especially as the bill was agreed to by the Business Committee on, I think, 21 May 2002. So why New Zealand First changed its mind, I really do not know.

The most important changes in this bill, and the ones that I am sure listeners are desperate to come into effect, are the changes in Part 10, in particular. Part 10 contains changes to the Securities Act, and will restore some sense of balance and perspective, and, if one likes, adopt a logical approach to employer-subsidised superannuation schemes. We have had the ridiculous situation for the last 2 or 3 years that very tiny employer superannuation schemes have had to jump some pretty high hurdles in order to comply with the Act. I am particularly talking about the need to produce a prospectus, when in most cases the members of the scheme do not want to see a prospectus. They are quite happy to put aside a little bit of their salary and for their bosses to supplement that, and they look forward to a nest egg when they retire. But that nest egg has been disappearing because of the compliance costs that successive Governments have imposed on employer-subsidised superannuation schemes.

One can see the consequences of that when one looks at the figures the Government Actuary produces each year. It is horrifying to note that over the last 12 years the number of employer-subsidised schemes has dropped from 2,242 in 1990 down to only 560 in 2002. Of course, it would have been 559 if the Green Party had not had the good sense to set up the Green Futures Superannuation Fund. But it is not just the reduction in the number of schemes that has caused us major concern; it is also the reduction in the number of working New Zealanders who are receiving the benefits of employer-subsidised superannuation. That number has dropped from 310,741 in 1990 down to only 245,003 in 2002. In other words, there are 65,000 fewer New Zealand workers who are saving for their retirement through an employer-subsidised scheme, and whose employer is being a good citizen by subsidising that scheme. Anything that we can do to reverse that trend and to encourage employers to support their staff in saving for their own retirement has to be a good thing.

That is why we particularly support the changes in Part 10 of this bill, and also the changes in Part 12, which will lead to another significant reduction in compliance costs for employers. They will not have to send a full set of annual accounts for those superannuation schemes out to all their staff. That means not only that the people in existing schemes will face reduced administration costs, and therefore more money in their savings account—their superannuation fund—but that there will, hopefully, be two significant or important steps towards more businesses offering their employees subsidised superannuation. Of course, the trifecta will come through when the new taxation bill comes in this Thursday and the Government takes its first tentative step towards getting rid of the taxation disincentive that is currently imposed on employers, who at the moment have to pay at 33 percent for their specified superannuation contribution withholding tax. That is fine if one’s marginal tax rate is 39 percent, but if one’s marginal tax rate is 21 percent or 15 percent that means employers are being penalised and, therefore, that those low-income employees are also being penalised. We will say more on that on Thursday, when that bill comes in. But together those three things should make an important difference.

This bill contains a number of other important amendments. Often they have been at the suggestion of the respective industries. For example, the amendments in Part 1 relating to building societies were proposed by the Financial Services Federation, a very important organisation that represents New Zealand - owned and operated mutual funds—the backbone of the community financial sector, in the opinion of the Green Party. Many of us will be aware of the role that local building societies play, not only in helping people to achieve their homeownership aspirations and helping businesses to achieve their small business dreams, but also in supporting local community projects. It was a pleasure to meet with the chief executive of the Southland Building Society last week, and to hear that it has just achieved a record year. Its members’ equity is up by 14.7 percent, its total assets have grown by 18 percent to $1.34 billion, and, what is more, its pre-tax operating surplus has increased by 60 percent to a record $16.2 million. I think the members of that society would be the envy of a lot of people who have put their money in managed funds that have gambled it on the overseas sharemarket, and who have seen their money disappear. Clearly the tried and proven building societies are a much better place in which to make an investment than that.

So too, of course, are the credit unions, which are covered in Part 7. Again, the changes in the bill were proposed by the Association of Credit Unions, and it is good to see that this Parliament is prepared to help credit unions to continue to play their important role. There is another piece of legislation before the House that will help them and the buildings societies: the Reserve Bank bill. That bill will allow them to continue to use the words “bank”, “banking”, and “banker”, so that they can promote their services to the community in competition with the big foreign-owned banks that are sending the profits from our deposits off shore. It is far better that we support New Zealand cooperatives and New Zealand mutuals, because the profits stay in our community.

Speaking of New Zealand – based companies, I point out that Part 4 is another important part of the bill. It has to do with the Co-operative Companies Act. I hope that the Co-operatives Association will make a submission on the bill. I presume it supports the changes that are in this bill, because, again, those changes will help to reduce compliance costs. It is vital that we support the cooperative sector, because cooperatives are indeed the backbone of the whole economy. They are often under-rated and under-appreciated, but when we think about it, we realise our largest business in this country, Fonterra, is a cooperative, and I think our second or third largest—when the three companies in the group are added together—is a retail cooperative, the Foodstuffs group. There are a lot of cooperatives now operating in the primary sector. Ravensdown Fertiliser Cooperative is another example of a cooperative, and there are others in the retail sector. They have a very important role to play, and it is good to see that this Government is responding to the wishes of those organisations through the introduction of this bill.

I want to say one last word to Tony Ryall, whom I heard speaking when I came into the Chamber. I think he was being rather disingenuous in suggesting that the bill should contain a whole lot of other amendments, when he fully understands it is not possible to bring them in under the appropriate Standing Order that this bill has been introduced under.

This bill is business friendly. It reduces unnecessary compliance costs and other impediments to business. It is important that the ongoing improvement of business law continues in this country. We have received many comments in response to and in support of this bill from many, many people—from the Institute of Directors and the New Zealand business society, Business New Zealand, and from Westpac, the Financial Services Federation, and many more. This bill is good for business, and I commend it to the House.

I raise a point of order, Mr Speaker. We have been privileged to hear a witty and fascinating speech, albeit of short duration. I seek the indulgence of the House that the speaker be permitted to continue.

The ASSISTANT SPEAKER (H V Ross Robertson): The member cannot seek leave on behalf of anybody else, and that is not a matter for a point of order.

The ACT party welcomes the long-awaited arrival of this bill in the House, and we look forward to it being a pattern for reasonably conservative and careful updating of the law from time to time. But I urge the Commerce Committee, which is the select committee to which the bill will be going, to be very careful that this bill is a measure that has conservative, non-contentious, and well-drafted provisions, because a quick trot through it reveals some worrying aspects.

The first of those is simply the ambition of the drafters. I notice that the statement of the net benefits of the proposal in the regulatory impact and cost compliance statement, which is in the explanatory note of the bill, contains rather incautious terms. If there is one thing that should mark out a bill of this kind, it is that the statement of its purposes and intentions should be a very sober, careful, and unchallengeably accurate statement. Yet I see a sentence that states: “This incremental improvement will also ensure that the body of business law has the following characteristics:”—I just pause for a minute to say that to “ensure” anything is very bold, indeed—”clear statutory provisions, where money is not spent on legal fees to establish their meaning, and businesses and regulators can proceed with certainty;”. I think that is a noble objective. It is a wonderful statement of aspiration, but I would never ever have claimed that something could ensure that. The drafters of this bill, who felt able to claim that they were ensuring clear statutory provisions, where money is not spent on legal fees to establish their meaning, and businesses and regulators can proceed with certainty, are in heaven.

That sparked in me an eager attempt to look at some of the things that I have known for many years were needless irritations and pointless causes of constant recourse to the lawyers. The first of those that I will look at is the new exemptions in the Securities Act. We were directed to look at those exemptions by Rod Donald, who spoke recently. The Green Party now feels that it has pretty much got on top of the investment and capitalism business. It feels it has mastered it: one just invests in a rising market where one’s colleagues are opening the floodgates to immigration, and one can feel like a Midas, too. By doing that one can find that investment is easy, and that all the bunnies who invested off shore just did not know how to do it. One just has to be like the Greens and buy property. That is very interesting.

I can see that shortly someone in the Green Party will point to the exemption for the wealthy and claim that they no longer need prospectuses or offer documents, because they come within that category of the wealthy. Wealthy people will now be able to avoid the compliance costs of the Securities Act—although I see that exemption is only for individuals with a net worth of $2 million and an income of $200,000 a year. No, the Greens, I think, possibly still have a little way to go towards meeting those criteria, although their superannuation scheme, if property keeps on going up in the way that it is at present, might get each one of them into that blessed category.

To be serious, though, there are problematic aspects to this bill and I do want the Commerce Committee to look at them very closely. For example, it seems to have been assumed by the Minister who introduced the bill that nobody could possibly object to the change to section 61 of the Securities Act, which prohibits indemnities or insurance for the directors, officers, employees, and auditors of issuers. It states that issuers must not indemnify or directly or indirectly effect insurance for directors, officers, employees, and auditors of issuers that covers liability for any negligence or default in their capacity as directors, employees, or auditors. If we now think of the inventiveness of the courts in going back and applying their hindsight judgment to business, we can realise that that could be pretty significant. That prohibition could mean that a normal directors’ and officers’ liability policy for a member of a public issuer is something that must be funded out of his or her own fees.

Then we look at the proposed new anti-avoidance clause, new section 61C, which states: “effect insurance includes pay, whether directly or indirectly, the costs of the insurance”. Does this Government still believe in Father Christmas? Does this Government believe that the directors of companies would not expect their fees to pay indirectly the costs of any necessary insurance? How do we deal with this issue, and what is the net effect of saying that a company may not effect ordinary, prudent insurance for its directors?

Let us think, for example, of the directors of the various investment funds that inadvertently failed to comply with New Zealand’s securities law in filing all the copies of accounts, etc. that they were required to file recently with the Registrar of Companies. It is said that one group of trusts alone—BT Financial Group, which is now a Westpac subsidiary—is liable to pay $200 million to New Zealanders. Not unnaturally, those people are desperately lobbying the Government to be relieved of that liability. Not unnaturally, the Government, which is in a far from cosy relationship with the Australians, is coming under pressure to try to accede to that lobbying and to relieve those Australian companies of the obligation to pay New Zealanders $200 million that they would not have been able to get if it had not been for that default.

I look at that provision that states that a company, or an issuer in New Zealand, cannot indemnify directly, nor indirectly effect insurance, for a director. I ask myself whether we are about to see the directors of Westpac in Australia suddenly struck with illegality, because that company has been issuing in New Zealand. If we are, we should think very carefully about that. For companies to be precluded from ordinary, prudent insurance simply means that the regime in this country will come under constant pressure, of the kind that is now coming, to exempt the Australians from something that New Zealanders are being afflicted with.

I also want to look very quickly—and I urge the committee to look—at the new exemptions from the prospectus offering requirements. I have already mentioned the exemption for “persons who are wealthy and experienced in investing money” in clause 89(2). That term is further defined in new section 3(9), inserted by clause 89, as people with the experience to be “able to assess—(a) the merits of the offer; and (b) the value of the securities; and (c) the risks involved in accepting the offer; and (d) that person’s own information needs;”.

Why are those exemptions so confined? Why is a Labour Government so anxious to protect people who can well afford to lose money from the consequences of their own folly or imprudence? Why is the Government to impose that securities regime across a whole lot of people who individually have far less than $2 million in net assets, and who have an annual gross income of far less than $200,000, but who ought to be allowed to participate in the kinds of offers that are made outside the Securities Act regime? Why has that threshold been chosen, when for this Government if one earns over $60,000 a year one is wealthy enough to have one’s tax whacked up to 39 percent, and one is wealthy enough to be in the top 5 percent of the population? Does this Government say that the top 5 percent of the earning adults in this country are so stupid that they cannot be trusted to make their own investment decisions and cannot be trusted to opt out of the securities regime, and that the only ones who can do so are those who earn $200,000? That must be such a tiny proportion of the population that I ask what the point of the exemption is.

I was tremendously excited when I picked up this legislation. In fact, I was virtually beside myself when I read that this bill was coming before the House. I rushed back from a number of functions that had been on around Wellington this evening, to participate in this debate.

Frankly, I was amazed by the Minister’s speech. She was so modest in her claims about the bill, that I said to myself I should take a moment longer to review the legislation. Her claims were not the kinds of claims I expected to see in the bill. I read the provisions cutting the corporate tax rate, slashing it to 15 percent. So we were there with Hong Kong. I feverishly worked my way through the bill, desperately looking for the clause that stated the company tax rate would be 15 percent. I forgave the Minister for that. I said that the Minister gave a modest speech. She left that off the agenda, because Dr Cullen is difficult to negotiate with, so I moved on. I said not to worry about that.

💬 Hon Lianne Dalziel: Don’t be like Tony Ryall. Be your own man. You can do it.

I am my own man. I said to move on to employment legislation. Let us look for the provisions covering the Employment Relations Act. Did I find any amendments to that Act? I was grossly disappointed. Then I looked for the business friendly legislation that would put Air New Zealand in the hands of Singapore Airlines as a partner. I looked for the legislation that would say that Toll Holdings would play a significant role in New Zealand’s rail network. All those things were missing. I then said to myself that I had been conned.

This is not the Business Law Reform Bill the Minister had promised to me over a quiet candlelight dinner in Bellamy’s. This is not the legislation that I had hoped and dreamt for. This is not the legislation for which I came to this Parliament, from my seat in Helensville, promising the business community that I would champion through. This is omnibus legislation that is fairly non-controversial. So for the rest of my time this evening I will focus on what this bill really does talk about, not on the wonderful things I was looking for, such as the Utopia that would have served to the business community the very heights of business law reform that they look for.

However, before I move on to the parts of the bill, I implore the Minister to go back to her office to look at what is coming out of the business community, to look through that bevy of information across her desk, and to make those reforms so that business in New Zealand can go forth.

Part 10 looks at the Securities Act. In particular, it looks to change the provisions as they relate to a prospectus—that is, a prospectus can be admitted. I simply flag for the select committee—and I understand the legislation will go before the Commerce Committee—

💬 Dail Jones: A bevy of lawyers.

The bevy of lawyers on the Commerce Committee should be careful when looking at that provision. I say that simply because Rod Donald made a very good point in his presentation, that the number of employer superannuation schemes has fallen from 2,242 to 560. There may be only 560, but the prospectus is a road map. Just as it serves as a road map for the current negotiations happening in Palestine and Israel, the prospectus is a road map for peace with investors in a superannuation scheme. If that prospectus is not delivered, because of the need to cut costs and because of the need for efficiency, but if a manager was to go about activities that were not the intention of those investing in the scheme, that could lead to disaster. I would hate to see any member who is an investor in one of those 560 employer superannuation schemes—and hopefully there will be more—get into any danger at all.

One of the provisions of the bill is that it changes the definition of a wealthy person. Mr Stephen Franks touched on that when he gave his submission to the House a few moments ago. It talks about a wealthy person having net assets of $2 million and an income of at least $200,000. That is wealthy, when one looks at New Zealand’s household income research and sees that 53 percent of all New Zealand household incomes are under $40,000. That is probably an accurate reflection of wealthy.

But I also want to reflect on the words of Dr Michael Cullen, the Minister of Finance in the Labour Government, who said that the increase in the top personal tax rate from 33 cents to 39 cents was a “wealth tax”. Those persons were earning $39,000, 20 percent of the annual income of a wealthy person as registered here. I hope that Dr Cullen will see it within his heart to come to the House and make a personal statement or a ministerial statement and confess that he was indeed wrong—

💬 Dail Jones: Again.

—that he was wrong again, that a wealthy person is not someone who earns above $60,000, but someone who earns above $200,000, and that he will change the top personal tax rate to reflect that.

The legislation includes a number of other important parts, and I touch now on the provisions dealing with the Superannuation Schemes Act, which include the ability to send abridged accounts to investors in the scheme, instead of the annual report. In some respects, it is an important amendment that could play an important role, in the sense that so many of us, as investors, receive information that is really wasteful. There are better ways of transmitting that information. We could transmit it by a set of abridged accounts, with a full set of accounts available on the website. That could be a far more effective and efficient way of investors being able to get that information.

I also touch on the provisions dealing with the Unit Trusts Act, which see the maximum penalty for offering or issuing unit trusts contrary to the Act increased from $1,000 to $1 million. That has to be one of the most substantial increases that has come before this House. For dishonesty, the penalty has gone from $200 to $200,000. Those are significant increases and I am sure the Commerce Committee will look at them and apply them to see whether they befit the legislation.

I also touch on the provisions dealing with the Commerce Act, which allow the Commerce Commission to use video technology. As someone who has spent a considerable period of time in the business community and managing a business of a global nature, I certainly understand videoconferencing and the benefits of that, and I would argue very strongly that the Commerce Commission should have that tool available to it. It is one of the reasons that National supports this legislation.

National is happy to put forward and promote any legislation that comes before the House that is business friendly. We are supporting this legislation. We will support it to the select committee, but we urge the Minister to go back to her office tonight, because it is never to late to put out a Supplementary Order Paper that might put a smile on the dial of the business community in New Zealand and make it even more productive, so that we might go forward as a richer and wealthier nation.

Bill read a first time, and referred to the Commerce Committee.