Companies and Limited Partnerships Amendment Bill

These amendments to the Limited Partnerships Act are being made so that those misusing New Zealand companies cannot avoid the new regime by registering limited partnerships instead. So Part 2 of the Companies and Limited Partnerships Amendment Bill, if we put it really simply, is to avoid an unintended consequence by tightening up one area of the legislation that dishonest or mischievous directors might pursue by structuring their companies in order to do the kinds of ill practices that we are trying to stamp out here, the kinds of things that we discussed earlier: taking debt dishonestly, behaving fraudulently, and behaving not in the best interests of the company they are representing. So if those same people who wanted to practise those things look for a different structure to misuse New Zealand companies, they are not going to find it in the amended Limited Partnerships Act, or at least we hope, as the bill is drafted and has been carefully considered, that that will be case.

In this part of the bill we have also got reference to the Financial Markets Authority, which was established in 2011, I think—if memory serves me right—and that has authority for oversight. It has got a responsibility here for overseeing the behaviour in the sector. In clause 46 in Part 2 we have the requirements for a limited partnership. They are all laid out and stipulated. The law is changed so that the nature of those people who can take up that particular nature of organisation is quite clear, as is what behaviour might be deemed acceptable and unacceptable.

The better alignment of these bits of law is, of course, a no-brainer in a sense. I mean, who would oppose it? And that is why it is really good to be able to support this legislation. It is taking sensible steps forward and, as others before us have asked, we must wonder why these changes have taken so long. Those who do commit a serious breach of their duties to act in good faith will face consequences, and that will not be significantly different under this part of the bill. I would invite the Minister of Commerce, if he is willing, to speak about any changes that there might be between the Companies Act and the Limited Partnerships Act in terms of the kinds of penalties that will apply, but my reading of it is that the penalties apply under the two structures in the same way. Minister, I am looking to you for a nod of affirmation or perhaps I will—I cannot see any response from the Minister there, but perhaps he will get back to us on that in due course. It would be interesting to know whether there were any differences because what we try to do, as I said at the outset, is ensure that the law is aligned across the different structures to avoid those unintended consequences. So I would invite the Minister’s considered view on that. Certainly, I cannot find how it would be applied differently.

These new powers will give, ultimately, a power to investigate and deal with non-compliance. That is what we are asking for; that is what we have got. That will help to build that reputation New Zealand has for transparency and for being a good place to do business where people can deal fairly, and we know we need that. We know that currently the environment is lagging. For example, we heard today from Mr Brownlee in the select committee that there had been 11,000 new small businesses formed since the Canterbury earthquakes. That is higher than usual turnover. That would tend to suggest that small business is not doing well in that area. Businesses are starting and folding in Christchurch. That tends to suggest that all is not well, and we know that over the past 4 years more small businesses in New Zealand have been destroyed than created. The number of small businesses being created has dropped substantially and the number of small businesses that are not surviving has risen.

So the environment is not healthy for small business. I am sure members in this Chamber who engage with small business, as I do in my spokesperson roles for the Labour Party, will have spoken to people who are struggling to get by. Often small-business owners in retail are earning less than the people whom they are employing. That is a situation brought about by an economic environment where the rewards of any recovery are not shared fairly across the population. Everybody wants to know that there is a fair environment, one in which anyone who puts their shoulder to the wheel and is willing to work hard and abide by the rules can hope to prosper. [Bell rung] So this sets up—Mr Chair?

The CHAIRPERSON (Eric Roy): Are you seeking another call?

Yes, Mr Chair. So this piece of legislation sets up the rules in such a way—sorry, Mr Chair, I was in the moment. This legislation sets up a fair system, a system where people can imagine that they can start a business, where they can prosper, where they can get ahead, where they can make the most for their family and for those around them, where they might hope to one day own a home. We know that, of course, homeownership is, unfortunately, at its lowest rate in 50 years in New Zealand, and this is something that the Government has not addressed.

Labour has a plan to build 100,000 new homes across New Zealand in order to work with New Zealanders to reach that aspiration. Of course we will do that in partnership with industry, but having that dream is part of owning a business. It is part of hoping for a fair business environment and hoping that you can get ahead to own that home, to have a family that has the things that you would wish them to have as they grow up: a good education, a good health-care system, and to be able to live in a country where there is high trust not just in business but across the society, and, of course, work. And we know many employers feel that part of what they are doing is providing a social service, actually. I talk to employers every week who acknowledge that a great part of what they do in their workplace is supporting their employees. Actually, a lot of small-business employers are very well minded about this and believe that part of their civic duty is to create a structure where they can support and encourage and grow people who might one day own their own business, or who might work somewhere else but who for the meantime are in their employ.

So I congratulate the Government on finally getting the bill to this stage. I hope that it moves quickly from here because it is a piece of legislation that is worth getting into law. It makes sure that those white-collar criminals are brought to justice and that the rules for doing that are transparent. We applaud that on this side of the Chamber. We wish that some other white-collar criminals who are known closer to this place were brought to justice more promptly too. We do not always get what we want, but this is a good step in the right direction. Thank you.

I will speak to Part 2 of the Companies and Limited Partnerships Amendment Bill, which talks to amendments to the Limited Partnerships Act. Can I just begin where my colleague Dr David Clark finished, and that is that we do support this piece of legislation and we do agree with the party on the other side on making sure there are good business conditions for New Zealand firms and that those firms want some certainty. That certainty comes about from many things. It comes from the reputation that companies have. One of those factors is obviously the laws governing companies and limited partnerships here in New Zealand.

We have seen of late some concern about the reputation of some of our companies, and about some people who have come to our shores to make use of our good name and to take advantage of our laws to ply their illegal trade under the guise of a New Zealand company. This bill, in Part 2, goes quite a long way in the specifics to combat some of the issues that have come about. Part 2 gives the Registrar of Companies the ability to remove a limited partnership company from the register if, in certain circumstances, the registrar believes that there are grounds that the company is not carrying out business and there is no proper reason for it to continue to trade.

I guess that is pretty precisely what I was talking to at the beginning of my contribution, in terms of those people who come to New Zealand to ply their trade under the flag of a New Zealand business but have no proper reason to do that, and who are engaging in what we would call either scurrilous or illegal behaviour. So that is a good power that this bill has added to the registrar to make sure that that reputation and certainty is there for New Zealand firms. There are also grounds for the registrar to remove a limited partnership—[Interruption] I raise a point of order, Mr Chairperson. We have already had one instance of some barracking from across the Chamber—

The CHAIRPERSON (Eric Roy): Order! You cannot refer to a previous point of order. I have already cautioned a member on your side to be terse. Please raise the point of order, or I will dismiss it.

I cannot really concentrate on my speech, with the level of barracking across the Chamber.

The CHAIRPERSON (Eric Roy): Let us just have a bit more decorum all round. There is a degree of agreement on the bill and there is no need for this interchange.

That is right. It is a relatively good day here in the Chamber. The bill also gives the ability for the registrar to respond to requests to confirm information under its enhanced investigatory powers. There are two good instances of where the Registrar of Companies has been given more power to, I guess, increase the reputation of New Zealand legislation around our companies to protect their reputation.

I would like to refer specifically to clause 58 of the bill, which inserts sections 103A to 103G in the Limited Partnerships Act. New section 103A talks about people who are prohibited from managing limited partnerships, and subsection (2)(b) refers to a person who has been convicted of an offence under any of sections 377 to 380 of the Companies Act or a crime involving dishonesty as defined in section 2(1) of the Crimes Act. Maybe someone in Parliament with a legal background might be able to help me because I am not sure whether that is quite specific as to what Mr Banks was found guilty of in terms of his case, which sees him no longer in this House. That certainly was a dishonest act, because he declared a couple of donations as anonymous when he knew what their source was.

My colleague Clare Curran made a very good point in the first part of this debate as to why it has taken so long for the changes in Part 1 and Part 2 to find their way to the Committee stage, when this piece of legislation, I believe, was introduced to the House some 2 and a bit years ago. She made, I think, a very strong point, that the party across the Chamber is very vocal and very quick to pass legislation when it claims it is getting tough on what you would call street-level crime, but when it comes to crime of the white-collar nature, it seems to drag its heels to the extreme. I think that is certainly the case here.

This piece of legislation was, I think, first mooted by the Hon Simon Power, and then introduced in the new term of this Government, but we are finding ourselves, on 18 June, at only its Committee stage. If someone can remind me when the Commerce Committee reported this bill back to the House—I think it would have been some time ago. So maybe the Minister in the chair, the Minister of Commerce, could answer that question as to the Government’s attitude and its lack of urgency on this kind of criminal behaviour, which again goes to the reputation of doing business here in New Zealand, but it seems that when it wants to beat its chest around law and order on street-level crime, even when it is not really effective, it will move that through this House with great haste.

Maybe the Minister in the chair, the Minister of Commerce, could answer that question. He has made contributions in the Committee stage that were quite useful, so maybe on that specific point Minister Foss might be able to point us in the right direction as to the different attitudes that this Government has to street-level crime and to white-collar crime.

We will be supporting Part 2, as we did Part 1, because it does go some way to increasing the protection around the reputation of New Zealand businesses, specifically to be more specific about who can and who cannot ply trade or manage limited partnerships. Part 2 does give the Registrar of Companies much more power to monitor those. Again I make the point I made when we debated Part 1. We need to make sure that the registrar has the resources to do that because this Government, along with the likes of the Commerce Commission, has talked about giving the registrar new powers but has not necessarily given him the ability or the backing to make sure he can effectively express those new powers. Certainly that has been the case in other pieces of legislation.

So just to finish off, we would ask the Minister in the chair to talk to the specific question as to why this Government has a different attitude to street-level crime and to white-collar crime. I do not really rate our chances of getting an answer.

In speaking to Part 2 of the Companies and Limited Partnerships Amendment Bill I would just like to, I guess, remind the Committee of the actual history of this bill. It is pretty important to keep that in the public’s mind. There were two Cabinet papers, as I understand it, that came before Cabinet in 2011, which was actually 3 years ago. The issue that was being considered was whether or not there was a case for criminalising directors’ statutory duties. That arose within the Ministry of Economic Development and it was part of, I think, a 2010 securities law review discussion paper. The history of this legislation goes back to 2010 and then it came to Cabinet in 2011. It ended up taking 18 months to get through the select committee process, and its second reading was a year ago, in 2013. I think nobody can dispute the history of this piece of legislation, and again it would be quite good if the Minister of Commerce could get up and say why he thinks it took so long.

I also want to remind everybody as to what one of the major issues was that really sparked, I guess, the impetus around this issue. This was in New Zealand in 2012—actually, on 27 June. It is nearly 2 years ago, minus 9 days, that New Zealand got removed from something called the white list, which is a European Union list that provides guidance for EU banks and financial institutions about countries with EU-equivalent money-laundering and anti - terrorist-financing laws. It has a white list of the countries that are basically the preferred countries—the countries that are transparent, that have got good laws in place, and that actually do the right thing around financing standards in terms of dealing to anti - money-laundering and counter-terrorism.

We got removed from that list in 2012. New Zealanders listening out there tonight, that happened in 2012. That is 2 years ago. This Government claims it is the Government for business and transparency and all that sort of thing. New Zealand got removed from that white list 2 years ago. We were basically being told we had to undertake additional measures to ensure that customers, including companies, from New Zealand are who they say they are. That essentially means that we have to be able to reassure people that businesses and business transactions that are happening in this country are actually transparent, and that we are doing everything we can to ensure that dodgy behaviour is not happening and that people are not getting away with that. Well, you would think that this Government, which claims it is the Government for business, would have thought that this was a priority. Why was it not a priority? We have been removed from a list—

💬 Hon Simon Bridges: You’ve already given this speech.

Minister Bridges, how about getting up, taking a call, and telling us what your views are on this. Why has it taken 2 years for a piece of legislation that was already before a select committee—why was it not a priority? Why was it not a priority? What is the answer?

💬 Hon Simon Bridges: This was your first speech.

Yes, but what is actually the answer? Why was it not a priority?

💬 Hon Simon Bridges: A busy Government.

“A busy Government.” is the answer. It was a busy Government. So what was the Government actually busy with? What about our international reputation? What about our reputation and getting back on to that white list? Why is that not a priority?

💬 Hon Simon Bridges: Oh, you want me to take a call?

Yes, it would be great if he takes a call because we might actually get an answer. [Bell rung] Mr Chair.

The CHAIRPERSON (Eric Roy): Clare Curran.

Thank you, Mr Chair—a very good decision. We got dumped from that list and that was around growing publicity of New Zealand - registered companies being linked to crime overseas. There was a report by the Organized Crime and Corruption Reporting Project. There was a company called Tormex Systems Ltd, a New Zealand - registered company that allegedly laundered US$680 million through a Latvian bank account. That was just one of many examples of entities that exploited New Zealand’s simple company registration regime. There were plenty of other examples. I know that the select committee considered many of those examples and took that issue really seriously. We were actually doing our job in this Parliament, thinking “Right, we’ve got to sort this. We’ve been removed from this white list. We’ve actually got to get the issue sorted.”, yet it was 2 years down the track before the legislation came back to the House, and it still has not been passed. It still has not gone through the House.

What has happened to our reputation? Well, members have all got their heads down over there on the other side of the Chamber, so, clearly, they actually did not think that that was that important. There were obviously other more politically expedient pieces of legislation they could put through the House that would impact on people who were actually more vulnerable, and for some reason those members just decided to take their time.

The select committee actually did quite a lot of work on this, and we recommended—and this goes to Part 2, around the requirement for directors to live in New Zealand. This is actually quite a good part of this legislation. There was a lot of work done on this. We recommended that the requirements for an agent living in New Zealand be omitted: “Better balance could be achieved by requiring a company to have a director who lives in New Zealand, or who lives in and is a director of a company in a country with which New Zealand has reciprocal arrangements for the enforcement of low-level criminal fines.” This was pretty important. We strengthened the legislation before the select committee on this.

We put a higher test into the legislation. I am just going to read out what it says in the commentary because it is quite important: “The purpose of requiring a director who lives in New Zealand is to ensure that there is an identifiable individual with a substantive connection with the company who can be questioned about the activities of the company, and who can in certain circumstances be held to account.” That is so important. It cannot be just an address. It cannot be just a shop or a door behind which there is no actual person. We heard submissions on this issue. We knew that it was really important to actually ensure through legislation that there could be actual people.

💬 Hon Simon Bridges: Now Phil Goff is counting the numbers.

This is the committee working together.

The big problem, Mr Bridges, is that we have not actually got to the point of passing the legislation. It is important that the people of New Zealand know tonight that that Government over there is actually not that concerned about white-collar criminals. This Government drags its heels on putting this sort of legislation through. It does not consider it urgent. It does not consider it that important. This legislation has obviously been put down the pecking order because that is such a busy Government doing other things that are actually going to impact on ordinary, struggling New Zealanders, who are just trying to keep their heads above water and pay their bills every week. Instead, we are letting the white-collar criminals in this country off the hook.

This piece of legislation does need to get passed. It needs to get passed soon. We have got to address these issues. Thank you very much to the officials for the work that was done by them in the select committee. The work done generally by the select committee around this is important. I have no idea why this bill, as with so many bills that seem to come before the House on these sorts of issues, is taking so long to actually get through the House. I would really like to hear the Minister get up and tell us why that is. Why is it that his legislation seems to get put down at the bottom of the list—at the bottom of the list?

💬 Hon Phil Goff: Because he’s a junior Minister.

Is it because he is a junior Minister? What is it? Is it that the Minister sitting there, Simon Bridges, seems to have a louder voice and, therefore, his stuff gets put up—

I move, That the question be now put.

The question was put that the amendments set out on Supplementary Order Paper 465 in the name of the Hon Craig Foss to Part 2 be agreed to.

Amendments agreed to.

Part 2 as amended agreed to.

Schedule 1 agreed to.

Schedule 2

The question was put that the amendments set out on Supplementary Order Paper 465 in the name of the Hon Craig Foss to schedule 2 be agreed to.

Amendments agreed to.

Schedule 2 as amended agreed to.

New schedule 2A

The question was put that the amendment set out on Supplementary Order Paper 465 in the name of the Hon Craig Foss to insert new schedule 2A be agreed to.

New schedule 2A agreed to.

New schedule 2B

The question was put that the amendment set out on Supplementary Order Paper 465 in the name of the Hon Craig Foss to insert new schedule 2B be agreed to.

New schedule 2B agreed to.

Schedule 3 agreed to.

Clauses 1 and 2