Companies Amendment Bill (No 4), Limited Partnerships Amendment Bill (No 2)

I move, That the Companies Amendment Bill (No 4) and the Limited Partnerships Amendment Bill (No 2) be now read a third time. It gives me great satisfaction to support this legislation at the third reading. This legislation will protect New Zealand’s international reputation as a trusted place to do business. This is an important part of the Government’s Business Growth Agenda to improve regulation and lift confidence in New Zealand’s capital markets.

I would once again like to thank the Commerce Committee and the submitters for their work on, and contribution to, this legislation. I would also like to express my appreciation for the broad cross-party support received in the House for this legislation. I would also like to thank the sector for its ongoing contribution and its continued engagement in the development of this legislation, particularly in including the refinement over the past few months for directors’ duties offences.

The Companies Amendment Bill (No 4) will strengthen the rules applying to the registration, governance, and reconstruction of companies. The Limited Partnerships Amendment Bill (No 2) mirrors the registration changes so that they apply to limited partnerships. I would also like to quickly outline some of the key initiatives.

Firstly, the legislation will ensure the integrity of New Zealand’s companies and limited partnerships registration regimes. It will require companies to have a director who either lives in New Zealand or lives in and is a director in a prescribed enforcement country. It strengthens the ability of the registrar to obtain information about who truly owns and controls New Zealand companies and limited partnerships. These changes address the misuse of shell companies registered in New Zealand, but do not impede the ease of doing business for the vast majority of New Zealand companies.

The introduction of further offences for directors who cause serious loss to a company or to creditors will encourage directors to focus on their key duties and will deter undesirable behaviour. This strengthens the reputation of New Zealand companies for good governance and supports investor confidence. These offences were redrafted in light of submissions to the Commerce Committee. I am confident that we have landed in the right place and that the offences are set appropriately. I have seen recent commentary to support this.

Aligning the processes for company amalgamations and schemes of arrangements with the Takeovers Act will ensure that all shareholders of widely held companies can participate in amalgamations and other arrangements in an informed way. This Government is committed to ensuring that our legislative framework promotes investor confidence, a key driver of long-term sustainable economic growth. The Companies Amendment Bill (No 4) and the Limited Partnerships Amendment Bill (No 2) are key reforms that will strengthen New Zealand’s international reputation as both an easy and trustworthy place to do business. I commend this legislation to the House.

Labour joins with the Minister of Commerce in supporting the passage of these pieces of legislation, the Companies Amendment Bill (No 4) and the Limited Partnerships Amendment Bill (No 2). Like the Minister has said, we are also a party that is for industry support, openness, transparency, and accountability in respect of our business arrangements in New Zealand and internationally so as to preserve, as I think the Minister alluded to, the credibility and integrity of our commercial entities in this country.

New Zealand does have an international reputation, a trusted reputation, for doing business. The World Bank and the International Finance Corporation have ranked New Zealand out of 183 countries as the easiest in which to start a business. To be fair, much of that work started under the previous Government and has been carried on in a number of respects by this Government. We are trusted in terms of our commerce. We are generally perceived to be clean and open and accountable, apart from the odd blip. Without diverting to the negative in this moment of détente between the parties, Judith Collins, I do not think, in her recent activities overseas has contributed in any way, shape, or form to that trusted, incredible relationship that we have in our business arrangements.

However, moving back to the legislation, I would say in passing—and it has become slightly habitual with this Minister—that legislation sits around for a long time. This is an important piece of legislation. This Government has been aware of this legislation, yet it has languished for a long, long time. It was introduced, of course, by Simon Power, and has languished on the Order Paper off and on, as I say, for quite a period. It is noteworthy that our reputation has suffered to some extent because the Government has chosen to give this such a low priority. In 2012 we know that New Zealand, along with Russia, was struck off the prestigious European Union banking and corporate white list over this country’s weak money-laundering and terrorism financing controls. I was Associate Minister of Justice in the last Government when we passed, as per our international obligations, anti-terrorism, anti - money-laundering legislation. This was part of that package in a different portfolio. Being struck off that white list means that banks and institutions in the EU “will not be entitled any more to make simplified research for banks and financial institutions registered in New Zealand”. It also means that European institutions can no longer “accept and acknowledge” customer identification and analysis performed in New Zealand.

That would not have happened if this Minister, bluntly, was on top of his portfolio. I know he is well-intentioned, but having this legislation languish and bobble about on the Order Paper and stagger its way through the legislative process has been to the detriment of New Zealand’s reputation. We have had incidents, for instance, that include a New Zealand - registered company that was used to run a US$25 million Ponzi scheme by its American chief executive owner, who is now facing up to 15½ years in a United States jail after pleading guilty. These may be, to some, relatively insignificant examples of where our system has lost its way, but each one of them, especially being expunged or struck off that white list in EU terms, sends a signal to overseas investors and overseas jurisdictions to put a question mark on New Zealand’s international commercial reputation.

Generally, these bills—and they are in this case—are bipartisan bills. We all accept and we all support the intent. But what I would say to that Minister, Mr Foss, is that this legislation and its passage required a heck of a lot more urgency and a heck of a lot more priority than was given by him. He is the Minister of Commerce. He is the person who is in charge, effectively, of ensuring the credibility and integrity of our commercial and business arrangements. This sat around to the point where we got pinged by the EU. I know, and former diplomat Mr Hayes will know, that embassies and foreign agencies look at issues like this and they make their own interpretations and they make their own judgments. Mr Hayes, of course, spent much of his career protecting, enhancing, and promoting New Zealand’s international reputation in an attempt to progress our commerce internationally. He will know that when things like the EU white list occur, capitals, others, and agencies make judgments, and reputations suffer and they take a heck of a long time to repair. It has become a bit of a habit that Mr Foss’ legislation tends to come out with a hiss and a roar, and then it simply is put on the back-burner. Maybe it is not considered a priority by Cabinet. Maybe his influence within Cabinet is waning—who knows? Maybe the Government just feels that there are more important things to do. In Government that is always an excuse. There is always something more important to do. But this is integral to the arrangements and the credibility and integrity of our businesses in New Zealand.

The Companies Amendment Bill (No 4), of course, gives the Registrar of Companies powers to investigate and deal with non-compliance with the Companies Act 1993. This includes the power to flag companies on the register that are under investigation. It allows the removal of companies from the register if they provide inaccurate information or persistently fail to comply with the Act. The registrar will also be able to ban directors of such companies from taking part in the management of any company for up to 5 years. The Limited Partnerships Amendment Bill (No 2) makes similar changes in respect of the Limited Partnerships Act 2008, so that those misusing New Zealand companies cannot avoid the new regime by registering limited partnerships instead. There is better alignment with the Companies Act and the Takeovers Code to ensure that shareholders understand the effect that changes on company control will have on the value of their shares.

We know that shareholders now are increasingly becoming better educated and briefed on the nature of the companies they invest in. That is partially born out, I think, of many shareholders being burnt by the difficulties that occurred with finance companies some years ago. Our communities and investors are becoming more financially literate. They expect to have far clearer information. They expect to have a greater understanding. There was a time when shareholders—and I talk not about institutions, but small mum and dad shareholders, if you will—would pick an investment, but would not get particularly involved or particularly briefed, apart from the annual and quarterly reports, in scrutinising the activities of directors and the company as a whole. We know there is greater scrutiny now of director and chief executive officer remuneration. Powers are limited in that respect with shareholders, but shareholders are increasingly becoming more active through shareholders’ associations and other entities in scrutinising the activities of companies.

The Labour Party supports this legislation. We agree it is necessary. We would have facilitated the passage of it if the Government had determined that it wanted to put some horsepower behind it and get it through in a faster fashion. There has been no explanation from the Government. I see the Commerce Committee chair, Mr Young, who did an excellent job in terms of putting this through. In fact, I suspect that maybe he should be the Minister of Commerce, because he can expedite legislation faster than his boss through the select committee process. But we have had no explanation as to why this languished, why New Zealand’s reputation suffered through the removal from the EU white list—why that occurred in 2012. Could that have been avoided if the Minister had got his act together, got his officials sorted, and got this legislation through? In the end, it becomes a matter of priorities. I am sure business people will welcome the passage of this legislation because their reputation, in terms of international trading and exporting, is dependent on a sound, accountable, transparent environment both in New Zealand and overseas to support their activities and arrangements. I do hope this is the second-to-last piece of legislation in the commerce portfolio where we will be forced to make comments about the lack of speed and haste. The Minister has not managed this process well, and I hope he will learn from this and become slightly more efficient in his job.

Just in reply to some of those comments from Clayton Cosgrove, I want to highlight the number of pieces of legislation that went through the Commerce Committee that touch on commerce and consumer affairs. I think that members of the Commerce Committee—of which the previous speaker, Clayton Cosgrove, is the deputy chair—would say that we are a very hard-working committee. In fact, we would claim to be the hardest-working committee in this Parliament, where we measure legislation not by pages but by kilograms. [Interruption] I can see that they are sparking up. A little bit of praise and approval—is it not amazing how much the Opposition members all smile? It is a pity they are not getting it out there in the electorate.

We targeted loan sharks and provided more protection for vulnerable families. We updated consumer law to give more protections to individuals, reflecting the increasing number of online purchases. We improved financial reporting requirements so that 90 percent of New Zealand businesses no longer need to produce full financial accounts. We strengthened capital markets and created more opportunities through crowdfunding, which I think is going to be very enabling for the start-up sector, in particular. We tightened the regime for those providing financial advice. We introduced standardised reporting for KiwiSaver funds, allowing more informed comparisons. We lowered fees for KiwiSaver default members. This is what this Government has done.

We strengthened our reputation as a good place to do business. The previous speaker spoke of what the World Bank was saying about New Zealand—the easiest place in the world to start a business and the third-easiest in the world to do business. So our reputation does stand internationally. We progressed our commitments toward a single economic market with Australia. We strengthened the ability of our trans-Tasman regulatory agencies to work together. We have improved intellectual property settings, which allows for innovative local companies to grow and to protect the product they develop.

We reduced the costs of businesses, as far more reporting can be done online. We have allocated the New Zealand business number to 500,000 companies, allowing business and the Government to communicate more effectively. What a great Government we are. I have to say that we worked under a very excellent Minister of Commerce, the Hon Craig Foss.

The debate that took place on the original bill, the Companies and Limited Partnerships Amendment Bill, was one, I think, that the Commerce Committee probably enjoyed quite considerably. How to protect creditors and consumers but how to not put all the straps on directors so that they are totally bound up by compliance was an issue that we found quite challenging to find the balance on, but I believe that we did. The legislation addresses the misuse of New Zealand’s registration scheme by overseas entities as well. It tightens the criteria for company registration and is part of the Government’s Business Growth Agenda to improve regulation and to lift confidence in New Zealand’s capital markets.

One of the underlying themes of our Government is that we have worked very, very hard to boost growth and allow jobs to be created in our economy. Only a strong economy can provide financial security for families, real opportunities for young people, safer communities, and the high-quality education and health services that all New Zealanders need. These pieces of legislation—the Companies Amendment Bill (No 4) and the Limited Partnerships Amendment Bill (No 2), which derive from the Companies and Limited Partnerships Amendment Bill—are important to achieve that. They shore up and strengthen our regulatory environment, especially around the area of commerce, financial markets, investment, etc.

One of the things that we found through the financial company collapses is that New Zealanders all over this country—particularly the elderly who had retired—had lost confidence. They had so much of their savings burnt up that this Government took it upon itself as a priority to move through that whole sector and to tidy up, clean up, and tighten up, where needed, the different regulations and legislation that would enable investors in our country to invest with confidence again in the innovation, the bright ideas, and the hard-working companies of New Zealanders.

I would just like to say thank you very much to my fellow select committee members for the hard work they have done. Thank you to Craig Foss, who does a great job as the Minister of Commerce. I am happy to commend these bills to the House.

Before I get into the substance of these bills, the Companies Amendment Bill (No 4) and the Limited Partnerships Amendment Bill (No 2), in their third readings, I would just like to make a comment about what the previous speaker, Jonathan Young, just said around the underlying themes of this Government. My colleague Clayton Cosgrove touched on this in his speech before mine, but I would just like to say that one of those themes—we have discussed this quite a bit during the Committee stage, particularly—is how instead of boosting jobs and business activity, one of the things that this Government will have as its legacy is how it has dragged its heels on making dodgy businesses, otherwise known as white-collar crime, accountable. I do want to make that point. I have got other points to make, but I want to reinforce that point because it is an important point. I do have some concerns about this. Labour is clearly supporting these bills because it is really important that we do and that we get them passed into law.

As for the lack of accountability for the dodgy business practices, it has taken 6 years to get to this point, and this is not the only piece of legislation that this Minister of Commerce has dragged his heels on around these practices. I think it is important that the public knows that and asks some questions about why that is.

I want to go back to talking about the original legislation as it was reported back from the Commerce Committee to the House in the second reading. The select committee made these comments around the criminalisation of serious breaches of certain directors’ duties and how we acknowledged, as a committee—and it was a hard-working committee; there is no doubt about that—that we had some dilemmas. The dilemma was around how to create that balance for criminalising genuine dodgy behaviour and not criminalising legitimate business risk-taking behaviour.

We said that we had sought an appropriate balance between encouraging positive entrepreneurial behaviour and imposing clear and effective sanctions on behaviour that crossed a criminal threshold. We said we recommended no changes other than minor drafting amendments to the relevant provisions, but said we would support further consideration of the drafting of these new offences to ensure that those provisions were expressed in a way that provided clear guidance to directors and did not have a chilling effect on legitimate business risk-taking. However, when we got to the Committee stage, we had a Supplementary Order Paper that did a bit more than that.

I want to return to the comments that my colleague David Parker made during the Committee stage when he expressed some real concerns around a possible loophole that this legislation might create. I will just reiterate the importance of why we have got this legislation, which is having limitations on companies, limiting the liability of investors and the amount that they invest, and the importance of having measures in place to ensure accountability when people put their money at risk.

But what we have done, I fear—and I think my colleague David Parker also feared—is that we may have created some loopholes that might result in us returning back it to this House. I just want to put this on the record, because I wonder whether what we have ended up with may have been a softening. I also want to note that we did not and, of course, could not return to a select committee process for comment around this. I know that the Minister countered that in his responses, but it may have been a softening of the legislation that was returned back to this House. If we have any members across that side of the House who would care to comment on this, or who have the capacity to comment on this, and reassure the House on this tonight, it would be useful, because I do not know what it was that actually brought that Supplementary Order Paper 403 to the House.

I am just going to quickly go through what it does. It removes—and this is what we are voting on tonight, and I think everyone should be really clear about that—the so-called reckless trading offence that was in the Companies and Limited Partnerships Amendment Bill that came back to the House, and it replaces it with a new provision that is based on elements of the duty in section 135 of the Companies Act, which means that there are accountabilities. The accountabilities are that the criminal provisions apply if the director agrees to or causes or allows the business of the company to be carried on in a manner that causes serious loss to one or more of the company’s creditors, where the director knows that a serious loss will be suffered by one or more of those company’s creditors, etc., and where one or more of those creditors that suffered the serious loss did not give their prior consent to the carrying on of the business in that manner.

That sounds good. All of that sounds good. All of those provisions sound good, but there are exceptions, and it is the exceptions that worry me. The exceptions are where I fear we have created a loophole and where there has been a softening of this legislation, which may require a return to this House at some point. Those exceptions are where the Supplementary Order Paper proposes that directors will not be liable in the following situations. The first is where they believe on reasonable grounds that all the creditors that will suffer the serious loss have been identified and whether they also believe that those creditors have consented to the business being carried on in that manner. The second is where the new offence will not be triggered by the carrying on of the business of the company in accordance with a compromise under Part 14 of the Act, a court-ordered arrangement, amalgamation, or compromise under Part 15; an administration under Part 15A; or a deed of company arrangement made under Part 15A. That all sounds very complicated. The problem I have is that we, as members of the Commerce Committee, were not given the opportunity to test these changes. We were not given the opportunity to test words such as “the director—believes on reasonable grounds that all the creditors that will suffer serious loss ... have been identified; and believes that all those creditors have consented to the business being carried on in that manner.”

That goes to intent, and I think that criminal provisions where directors are liable have to be really clear under the law. It is my concern—and I think it is also my colleague David Parker’s concern—that there have been some changes brought back to the House that were unable to be tested. They were unable to be tested not only by the members of the select committee but also by any other submitters that might have had a contrary view or a view that would challenge them. We were also unable to challenge the officials who had provided the wording to us.

In this sort of legislation, where it goes to white-collar crime and where there is the ability for directors who have been implicated in these sorts of dodgy schemes to be really challenged in court, we have got problems in our country where they have loopholes to be able to go through. We talk about reputation. Reputation is really important, but it relies on really good, well-founded, well-tested legislation. I have got some concerns about what we have ended up with tonight, I have got real concerns about how long it is has taken, and I have got real concerns about that Government’s commitment to really addressing white-collar crime.

I rise to speak to the bills divided from the Companies and Limited Partnerships Amendment Bill. The Green Party is definitely going to support this legislation. It was the Green Party that raised these issues a long time ago, when we realised that there was so much rorting going on. In fact, it was back in September 2011 when we realised that on 28 July 2010 Cabinet, under Simon Power, decided that it should do something about some of these rorts and some of this money-laundering and the using of New Zealand as a tax loophole, effectively. We had through parliamentary questions found that a number of New Zealand - registered companies were being used to commit money-laundering, tax evasion, and fraud overseas, but were coming here. It was through that that there were something like 1,800 companies deregistered fairly quickly, because they had effectively one address and were doing no business, but were just sitting there. There were still, at some time after, a few to be taken off. It was good to see that there was some movement.

But it was that long ago that there was a decision that something should happen and that it was acknowledged. The Minister of Commerce announced in September 2010 the intention to introduce a law in 2011 to tighten up the requirements around company registration, and we waited, and we waited, and we waited. That was in the last Parliament, and here we are in the next Parliament—it is fading out, and its time is nearly up—and we have to ask where National has been in sorting the rorts. National has clearly been absent.

Later in 2011 we were offering the Government help and asking whether we could help it get legislation through to sort these rorts out. We asked it whether we could sort that out. We asked whether we could have just one resident director—and clearly that has been a move made in this legislation—and ensure that directors document their identity better. One bit that seems to have been missed is to obtain an IRD number. Why would they not have an IRD number? Why should it not be included?

Then, just last year, in November—and maybe this was what helped get it moving again—New Zealand was recognised as a tax haven by the Tax Justice Network for the first time ever. The Tax Justice Network produced a most comprehensive report of tax havens, and, as I say, last November it ranked us on its financial secrecy index. That was really, really unfortunate, because that is a place where countries of real disrepute in terms of tax havens and tax rorts are included. We had a below-average rating and we needed to change that.

Out of that, in fact, Russel Norman, who had been promoting the fact that we should have these changes right back in 2011, as I say, came up with his own bill, and it is in the members’ ballot as we speak. That bill was to help deal with this situation. So it is really good that we have some movement now, but we do not think it went far enough. As a result of some of the goings-on back in 2010 and 2011 and, clearly, previous to that, New Zealand was struck off the European Union’s white list in 2012, and that added extra costs to New Zealand exporters doing business in Europe. As I say, we have offered to support this legislation and we will support it. This legislation will strengthen the company registration process. Dr Norman’s bill is the Income Tax (Foreign Trust Registration Disclosure) Amendment Bill. That bill will still be worthy on a number of points over and above what we are passing through the House tonight.

Our comment is: where has National been? Why has it taken so long, when it was clear that our reputation was being impugned internationally and there were extra costs on businesses, and yet it has taken from at least 2010, through the time of this National Government, and through to where we are now, June 2014, to have something actually happening? So we will be pleased to support the legislation for the positive parts of it. We are disappointed with the bits that are not being covered, and not requiring registered companies to obtain Inland Revenue Department numbers is part of that, as is not addressing some of the problems with nominee directors and not clarifying the confusion relating to beneficial ownership. It is very unfortunate that these things are still lapsing in terms of this legislation, and we look forward to their being covered under the next Government. Thank you.

In addition to the kind birthday wishes I received on 19 June, last week, from friends, family, and colleagues across the House, I received a couple of wonderful bits of news through the media. The first was—and it might be a bit sad to be pleased about this on one’s birthday, but, anyway, they were a couple of great bits of news—that gross domestic product for the first quarter of this year had risen by 1 percent, and New Zealand had moved close to having nearly 4 percent GDP growth for the year.

💬 Hon Member: Excellent.

That is an excellent result for this economy and for New Zealand. The second of three bits of news that came through on 19 June was that we had had a $1.4 billion quarterly surplus for our current account. I must say that that really—

💬 Hon Nathan Guy: Put the icing on the cake.

—put the icing on the cake in terms of the birthday treats that were being rolled out. And I saw the anguish across the other side of the House, particularly of the Hon David Parker in his contribution to the debate around the current account and how terrible it was. All of a sudden, well, it actually was not that bad—

The ASSISTANT SPEAKER (Lindsay Tisch): Order!

—and it was probably one of the better current accounts for some time. But the third bit of good news was the immigration statistics that came through, which were the best in 20 years—

The ASSISTANT SPEAKER (Lindsay Tisch): Order! It is not part of this legislation.

Yes, I know, Mr Assistant Speaker, that you want me to get to the point, but there is a very good point in this, which is that all this good news has been the result of much hard work on this side of the House. It has not been due to any one particular silver bullet that we have delivered as the governing party; it has been the result of the hundreds of small steps that we have taken in order to get our economy growing, being more productive, and being a better place to do business.

Today we pass the third readings in this House of the Companies Amendment Bill (No 4) and the Limited Partnerships Amendment Bill (No 2). Once again, this is legislation that improves the business environment for New Zealand and helps Kiwi businesses and those who are investing in New Zealand to have more productive business relationships in this country. It helps us to grow our economy, helps to build jobs in this country, and helps to lift wages, and that is a superb opportunity.

I think—in the few comments that I would just like to make—that New Zealand has an international reputation as one of the best and most trusted places in the world to do business. That is a reputation we have built over many years through many different Governments, but today we take another step. I welcome the support across the House from Labour, and I see that even the Greens are supporting this particular legislation, because, once again, it takes a positive step in terms of building our international reputation as being one of the most trusted and best places to do business. That is fantastic for our economy, it is great for jobs, and it is great for wage growth. Thank you.

I take a call on behalf of New Zealand First on the Companies Amendment Bill (No 4) and the Limited Partnerships Amendment Bill (No 2). At times one would wonder whether the Hon Chris Tremain is actually in the same House, because having listened to that previous address and his glowing account of what the Government has done in relation to this legislation, one really does wonder whether he has followed it through. The fact is that the Government should be hanging its head in shame in regard to this legislation.

💬 John Hayes: Oh, what nonsense.

It is not that it is not good legislation, Mr Hayes from the Wairarapa, but the fact is that it has taken so long to get here. The first reading of this legislation was on 24 July 2012. The second reading of this legislation was in July 2013. That was some 2 years after it had been to Cabinet and had been brought to the attention of Cabinet. That was 2 years ago, after all parties in this House had already agreed that this legislation needed to be passed. So every Government MP should be hanging their head in shame. Why has this legislation taken at least 4 years to get to its third reading in order to put in place sensible protections in terms of our commerce in New Zealand on the international stage?

As a result of the inept incompetence of this Government in this area, we were dropped from the white list of the European Union. I used to work as a trade commissioner for the Government of Flanders in Belgium. I spent 10 years going to and from Brussels and understanding the requirements that the European Union laid down, and it absolutely appals me as a previous representative in this country of Belgium—of Brussels, the capital of the European Union—that this Government can be so inept and so slow at passing some legislation that basically is here to assist New Zealand commerce, to ensure that corrupt practices do not take place in this country. As a result of that, we were dropped off the white list of the European Union and were taken off what was regarded as a country operating with good corporate governance oversight.

💬 John Hayes: Have you been drinking again?

Mr Hayes, you have been in trade for many years. If you feel, Mr Hayes, that you have acted responsibly as a Government in allowing this legislation to take this long to come through this House—leaving this country exposed in the way that it has been—then I am sorry but it is no wonder this Government is consigning you to greener pastures. Quite frankly, you should have known better. You should have known better, Mr Hayes. Mr Hayes should have been one of the champions to ensure that this legislation got through this House much sooner than it did.

💬 John Hayes: Can we have the chairs on the Titanic now?

Now that I have got your attention again, this legislation does close a lot of loopholes and avenues for operators who have flouted the law, such as requiring that a director be resident in New Zealand, which goes some way. There have been activities of window companies and shell companies operating here in New Zealand. Certainly, as a result of this legislation, some of those discrepancies and anomalies will be closed down. The legislation also gives the ability to the public to be warned about suspect entities by way of a note in the companies register. The public can be warned about anything that is perhaps of concern, and a red flag can be raised in terms of some of the activities of an entity that may be operating here in this country in that regard.

The legislation also increases the fines. It brings in imprisonment for a term not exceeding 5 years and a fine not exceeding $200,000. Again, this sends a strong message internationally that New Zealand will not condone practices of those sorts in this country. The legislation basically tidies up a lot of administrative errors in terms of some of the commerce matters under the Limited Partnerships Act and other similar Acts to do with commerce and commercial acts. It is a positive move. New Zealand First has always said that we will support good policy that tightens up laws that support New Zealand companies—and, in particular, our international trading sector—to be competitive on the world stage.

New Zealand has a good reputation in terms of corruption. In fact, in recent years the surveys have shown that we have been consistently No. 2 after Finland, although after the Oravida saga this year, one wonders what the ranking will be in the coming year—

💬 Hon Judith Collins: We’re actually No. 1 for the last 8 years, you wally.

—once the international people do an evaluation of what the Oravida saga has drawn out in this country—

💬 Hon Judith Collins: No. 1 in the last 8 years.

—and Minister Judith Collins’ involvement in that. So it will be very interesting to see, when our ranking perhaps drops from No. 2 to perhaps No. 6 or No. 7, whether maybe that Minister, the Hon Judith Collins, who is sitting there on the other side, barking away at the moment, will take responsibility for our loss of integrity.

💬 Hon Judith Collins: No. 1 in the last 8 years, you fool.

Mr Assistant Speaker, are you going to intervene in that? I thought that incessant interjection was not condoned in this House.

Anyway, moving on, New Zealand First is pleased to see that this legislation is going through its third readings, we are pleased to see that this will be passed into legislation this evening, and we are pleased that finally this piece of legislation will be on the books for New Zealand. But, for ever and a day, this National Government should look seriously at itself and ask why it has taken the best part of 5 or 6 years to ensure that New Zealand commerce is protected to a greater degree in this respect.

The Companies Amendment Bill (No 4) and the Limited Partnerships Amendment Bill (No 2) address the misuse of New Zealand’s registration scheme by overseas entities and tighten the criteria for company registration. New Zealand has the best environment for doing business. We enjoy a stable democracy, we have a culture that assigns a high value to fairness, we value transparency and clear accountability, and we also have a very sound legal system, so we are a very open economy. This legislation will increase our transparency with minimum compliance costs for companies. Only a very small proportion of the companies registered in New Zealand will need to adjust their circumstances accordingly. This legislation will certainly improve regulation and lift confidence in New Zealand’s capital market. I commend the bills to the House. Thanks.

I take a call in the third readings of what began life as the Companies and Limited Partnerships Amendment Bill. I think it is pretty fair to say that these bills have broad support across the House, but they do not go through these third readings without some sense of criticism from this side of the House. That has been well traversed by a number of speakers who have come before me.

New Zealand does have a very good reputation in terms of being able to come here and do business. I think our reputation in business is probably equalled by our environmental reputation. People look at New Zealand and think that it is a pretty fair place and easy place to carry out work, but that reputation has come about because of the very stringent attention of this House around corporate governance. I think it was the Minister of Justice who said that it was for 8 years that we have held the first—

💬 Hon Judith Collins: 8 years.

—8 years for the first—

💬 Hon Judith Collins: In a row—8 years in a row.

Eight in a row? Thank you very much for confirming that. So, well before the term of this Government, New Zealand was seen as the best place to do business. But there has been some concern recently about that potentially slipping back, with stories around money-laundering, as we have heard before, starting to creep into media nationally and internationally. I think that as people have seen New Zealand as a good place to do business, that is when the crooks come in and try to use our good reputation to start up a business and to use it for purposes that we would prefer they did not. So there has been some concern for some time, and it is good that this legislation is going to be passed on 24 June.

But probably one of the more interesting parts of the legislation is the last page, where it gives us the dates as to when this legislation was introduced and when it had its first reading. I think someone else may have pointed out that this legislation was introduced to the House on 13 October 2011 and got its first reading on 24 July 2012. I think, as Andrew Williams pointed out earlier on in his speech, that before this legislation was introduced to the House, it would have gone through Cabinet probably some 4 years ago, and we have only got to the stage now—on 24 June, just months away from the next general election—that this Government has seen it as a priority to progress this piece of legislation. It was just last week that we went through the Committee stage of this debate, and the select committee, the very hard-working Commerce Committee, which I sit on, had reported this legislation back to the House some time ago. This legislation has languished on the Order Paper for some time.

You have to ask the question about the ability of this Government to walk the walk when it comes to talking tough on cracking down on white-collar crime, because it has been big on talking, making sure that we can strengthen regulation around business, and making sure we can cut red tape around business. But this legislation, as I say, was introduced, I think from my recollection, before the last general election, and has only been forwarded, progressed, in this House just before we break for the next general election. So you do have to ask the question about how seriously this Government has taken this legislation. As I say, it is a good piece of legislation, but why has it taken 3 years for it to get here? The Government would have been forming the legislation well before that, for a couple of years, so it may have been this Government’s intention to pass this legislation at the beginning of its first term in late 2008, but some 5½ years later we are only now really seeing it come to fruition.

It is legislation that is much needed, again, around that international reputation that we have here in New Zealand. I understand that the World Bank and the International Finance Corporation rate New Zealand as the easiest place out of 183 countries in which to start a business, so we do have a reputation to protect. But there have been incidents recently, and I have got one here in front of me, as an instance of people coming from overseas and using New Zealand businesses as shell companies to basically run frauds. There was a New Zealand - registered company that was used to run a Ponzi scheme, which is the flavour of the moment, to the tune of US$25 million by an American chief executive and an owner, who are now facing up to 15½ years’ jail in the United States after they pleaded guilty to that. This is a very real issue. There are people looking at New Zealand, seeing that it is a good place to do business, and using the protection of that reputation to commit crimes. That was quite a large one—one of US$25 million. So, as I say, there has been plenty of local and international media attention.

We do need to make sure that we are right on top of this and are not leaving any wriggle room for those crooks out there to take advantage of the good name that New Zealand has. Again, that takes me back to the point as to why this Minister of Commerce has taken so long to progress this legislation. If this legislation had been passed in maybe the Government’s first term, when it was thinking about this under Minister Simon Power, then we might not have had the instance that I have just talked about where that Ponzi scheme was able to be run out of a New Zealand company. Also, as other speakers have said, since this Government has come into power and has had this idea and this legislation on the cards—but, again, it has languished—in 2012, New Zealand, along with Russia, I should add, was struck off the European Union’s banking white list because of the country’s weak money-laundering and terrorism finance and controls. That is obviously not a good look for us. We want to make sure that that reputation is upheld, but it is not a good look for New Zealand to be in the company of Russia in being struck off that very prestigious EU list.

Can I just talk directly to the legislation, because it is legislation that will take action that this side of the House is going to support. Certainly on this side of the House one of the things that we are happy with is that this legislation will give new powers to the Registrar of Companies to investigate and deal with companies that do not comply with the Companies Act. I think one of the good things around that is that this includes the power to flag companies on the register that are under investigation. That is something that has not existed. We do think that is a good idea because it will put those on red watch, to make sure that if we do have suspicions about people using New Zealand companies as shell companies to undertake illegal activity, those companies will be flagged. It will also allow the registrar to remove companies from the register if they do not provide accurate information or they persistently fail to comply with the Act. My understanding, through the select committee process, is that that was one of the flags that the registrar identified as a trademark of people who potentially could use those companies as a shell company to get ill-gotten gains.

I realise that I have got just a little bit of time left, but I just did want to stress the point about the amount of time that this has taken to progress. Again, to go back to the last page of the legislation, this legislation was introduced on 13 October 2011, some time ago, and got its first reading and referral to the very hard-working Commerce Committee on 24 July 2012. It is nearly 2 years ago that this was referred to the select committee. I question the Government’s rhetoric around making haste to protect our reputation when this Government has taken so long to progress this legislation. It is legislation that is needed and that has got broad support around this House, but we obviously do take umbrage at what the Government is trumpeting—that it is getting tough on white-collar crime and making sure that directors of companies act in a way that we would all expect they should act. But this legislation has languished for 2 years in this House before it has got anywhere close to being passed. It is no secret that this Government can pass pieces of legislation pretty fast to crack down on other forms of crime, but when it comes to white-collar crime, it is taking its time.

I will take a short call so that we can progress the Companies Amendment Bill (No 4) and the Limited Partnerships Amendment Bill (No 2) quickly. I want to acknowledge Mr Faafoi’s contribution. It is great that he recognises the quality of this legislation. I do not know what to say about Mr Williams’ contribution, talking about his time as a sausage salesman in Brussels. I do not know what relevance it really has to the legislation.

This is very good legislation. It seeks to strengthen the rules applying to the governance and registration of companies and limited partnerships, and the reorganisation of companies. The measures in this legislation are linked to other work aimed at deterring money-laundering and making it easier for New Zealand law enforcement agencies to find out the ultimate owners and controllers of companies. This is very good legislation, and I am very happy to commend it to the House. Thank you.

I rise to take a call to support the Companies Amendment Bill (No 4) and the Limited Partnerships Amendment Bill (No 2). This is very important legislation. It is urgent legislation and should be passed with a great sense of urgency.

The report prepared for the Minister of Commerce, who is responsible for this legislation, in August 2012 said that New Zealand shell companies allowed money-laundering totalling $1.5 billion a year. The report warned that New Zealand was becoming a domicile of choice for those seeking to engage in illegal activities. Again in 2012 New Zealand was struck off the prestigious European Union banking and corporate white list over this country’s weak money-laundering and terrorism financing controls. Being struck off the white list will put New Zealand banks and corporates in an awkward situation and it will have a negative impact on New Zealand banking and institutions.

What is worth reiterating is that this legislation’s genesis came from revelations in early 2010 that a New Zealand - registered company had leased a plane loaded with 35 tonnes of guns and explosives. It was later intercepted in Bangkok, trying to smuggle arms from North Korea to Iran. The Government has been aware of those issues for some time, and this legislation is part of the measures addressing those problems.

It is disappointing that this legislation has received almost no attention since its introduction and has languished at the bottom of the Order Paper. How on earth could such legislation, which protects New Zealand’s international reputation and prevents this country from being abused and exploited by those terrorists, have received such low priority from this National-ACT Government? Labour, however, has taken a positive and constructive approach, and we support this legislation.

This legislation will give new powers to the Registrar of Companies to investigate and deal with non-compliance with the Companies Act. This legislation will allow the removal of companies from the register if they provide inaccurate information or persistently fail to comply with the Act. The registrar will also be able to ban directors of such companies from taking part in the management of any company for up to 5 years. The legislation will make similar changes to the Limited Partnerships Act, so that those misusing New Zealand companies cannot avoid the new regime by registering limited partnerships instead. This legislation will better align the Companies Act with the Takeovers Code to ensure that shareholders understand the effect that the changes in company control will have on the value of their shares.

And, finally, this legislation introduces criminal offences for directors who commit serious breaches of their duties to act in good faith and in the best interests of the company and to not carry on business in such a way that risks serious loss to the company’s creditors. To conclude, this legislation enhances the registrar’s investigative and deregistration powers. It will help protect New Zealand’s international reputation and prevent this country from being exploited and abused by those terrorists. Thank you.

Bills read a third time.