Business Law Reform Bill

Part 1 of the Business Law Reform Bill deals with the Companies Act with regard to reporting changes. I would like to commend the Commerce Committee, because overall, although the Business Law Reform Bill is meant to make just technical changes and to streamline various legislation, it was interesting to see the select committee go through Part 1 with a fine-tooth comb and come up with further substantial amendments to the provisions to make sure that shareholders cannot give up their right automatically to receive financial statements, even though publicly available in electronic form, but should receive notice for receiving further financial reports or concise limited versions of reports.

So throughout this bill, and also through other legislation, the Commerce Committee, under the leadership of Katherine Rich, has taken great care to ensure that the changes—even though on the surface of it they are technical—are drafted properly. Half of the provisions were amended by the committee, thus making them much more concise, so I am slightly surprised to see Supplementary Order Paper 72 in the name of the Minister being introduced to this Committee, particularly in respect of Part 3, which deals with financial reporting standards. We will take up this procedural issue, because I am dismayed to see quite a large Supplementary Order Paper that proposes changes to the latter part of the bill after the select committee had gone through the bill and made a very good effort to clarify it. We will come back to that.

Part 1 also deals with the qualification of directors, whereby people who are convicted of certain offences in other countries will be barred from taking up a directorship in New Zealand. National supports that provision in terms of increasing globalisation, whereby companies and directors operate within international environments. It is important that our legislation catches up with these global business operations, so the provision is important in updating that..

National is supporting Part 1, because now that companies in particular can put their financial statements on websites, they can save in their printing and mailing-out costs of large sets of annual reports. Of course, one can also see the benefit to shareholders, because many of them probably receive the annual report and just file it away, without too much reference to it. So we believe that simplifying that procedure is a step in the right direction. One can see that the National Party does support sensible legislation, subject to it being brought in front of the House properly and going through the due process of select committee scrutiny. On the face of it the changes are welcome, although some of the drafting has been subject to heavy changes to make sure that when the legislation is being implemented no room is left for misunderstanding and confusion.

At this stage I register our appreciation for the support the officials gave us on this technical bill. At times debate on technical terms can be quite challenging, but the officials supported the select committee well, and we do welcome this very small step by the Government to streamline companies’ reporting procedures.

As I rise to take part in the debate on Part 1 of the Business Law Reform Bill, I think it is worthwhile to go over a bit of the history of the bill. This bill was presented by the Minister Lianne Dalziel as a non-controversial bill. I recall her first reading speech as being very much along the lines of: “This is a technical bill, there is nothing to see here, move along quickly, these are all technical changes.”

But the Commerce Committee learnt, after it received some of the early submissions, that the reality was quite different. Submitter after submitter was really very concerned about what was in the bill before the select committee made amendments. The likes of the captive insurers industry said that if the bill went through in its present form, that industry would be wiped out in New Zealand. General Electric turned up and said that if the committee made some of the proposed changes relating to insurance, it would have to rebrand its entire company in New Zealand. One of the credit union representatives turned up and said that it appreciated what the Minister was trying to do but that the bill still did not give the clarity the unions needed to have in order to know they could work together. Then one of the banks turned up and said—

The CHAIRPERSON (Ann Hartley): The member needs to come to Part 1.

KATHERINE RICH:—it worked in 100 different countries and that New Zealand was the only one that required it to hire three people for 10 days, at a cost of well over $100,000, just to report here in New Zealand.

So we see that the changes—which have been quite major changes—made as a result of work done by the select committee have tidied up this part and made sure that it is at least in a state whereby the Committee can have a decent look at it.

I too thank the officials for giving us good advice and for walking us through the changes we needed to make. Some of the changes are common-sense ones. In 1993 not many firms used electronic means to publish their annual reports. Most firms, as many members will know, put together glossy documents at huge expense. Unfortunately, many of those documents were not read by some shareholders, but it is an important process that needs to be carried out in order to allow transparency and the free flow of information so that shareholders can be in a position to judge their investment and remain informed.

Of course, with the progress of modern technology it is quite important that we change some of our laws, so as to be able to deal with the use of electronic data. I think this is a good change to make, because it allows many of our companies to start to distribute electronic information, which is a lot less expensive for a company than the producing of annual reports. Companies still have to go through the reporting process, obviously, but they do not have to go through the expense of printing and producing glossy documents. Documents can be sent out to shareholders in a much easier manner; it is certainly easier, a lot of the time, to get things on one’s computer than it is to receive things through the mail.

So that is basically what Part 1 of the bill aims to do, and it is something that National is very supportive of. It is important to look at ways of streamlining processes for businesses in order to reduce costs. Unlike the Minister, we do not pay lip service to reducing red tape and costs. We are more than happy to support changes such as this that make it easier for businesses to transfer and distribute information and to do so in a way that is not too expensive.

It is important that nobody can opt out of receiving this information. I know we get annoyed sometimes with the amount of material coming to our in-boxes, but when it comes to information relating to a commercial firm—a firm we might have shares in—it is important that that information is transferred freely. We need to make sure that the information reaches shareholders so that they can make their minds up—hopefully, if they read it—and determine whether their investment is a good one. It is important to make sure that shareholders read the information. One can distribute all the information one likes, but that does not necessarily mean that shareholders will read it. Companies still need to go through the process to ensure that the information is distributed.

The question was put that the amendments set out on Supplementary Order Paper 72 in the name of the Hon Lianne Dalziel to Part 1 be agreed to.

Amendments agreed to.

Part 1 as amended agreed to.

Part 2 agreed to.

Part 3 Financial Reporting Act 1993