Companies (Clarification of Dividend Rules in Companies) Amendment Bill

I move, That the Companies (Clarification of Dividend Rules in Companies) Amendment Bill be now read a third time.

It is with some disappointment that I seem to be losing the gallery—[Interruption] But this was, as it has always been, a Parliament of diversity—

💬 Hon Gerry Brownlee: I raise a point of order, Mr Speaker. You have called it, but you’ve also got the duty of making sure that Parliament is attentive to its business; it’s clearly not at the moment. I wonder if we could take a moment to get a settled approach and—

💬 SPEAKER: I had tried to get that. I managed to get it on the floor, but I will remind people upstairs that Parliament has to get on with the rest of the work. So as well as the lobbies downstairs, could people continue their greetings of whatever nature outside rather than in here.

I was just reflecting on the diversity of the issues that come forward to this House through the members’ bills process—some, clearly, hugely wide reaching; others more narrow and technical, and I would be the first to admit that the bill that we are reading now for the third time this evening definitely falls into that third category. But despite it being such a narrow and technical bill, it is one of some import for our agricultural businesses that are often structured as companies but that wish to manage their constitution and their affairs in such a way that allows cooperative principles to be maintained.

Mr Speaker, this bill has a somewhat personal genesis for me—[Deputy Speaker coughs] Madam Speaker, sorry; I was unaware, caught up as I was in the emotion of this moment, that the Chair had changed. My deep apologies.

Years ago, I had the great privilege to work for Zespri International—

💬 Hon Member: For Fonterra.

No, Zespri International based in Tauranga. That business, when it was given flight initially by a National Government and, in terms of its formation in a corporate context by the then Labour Minister Jim Sutton, supported by the rural affairs Minister Damien O’Connor—as that company was being established, there was an expectation by the then Labour Government that it was established as a company but had the opportunity to be able to operate, should it wish, in following cooperative principles.

As a number of the Primary Production Committee would now be very aware, that was the genesis of my involvement with this particular technical change that we are seeking to hopefully conclude tonight, because when that company was established, it was established under the Companies Act 1993 but wanted to be able to treat its shareholders with the appropriate cooperative principle of wet shares being able to attract dividends. They are shares that had production that was backing them. The dry shares—those were shares that did not have kiwifruit production backing them—would not attract a dividend. This is the genesis of this bill.

Under the Companies Act, it is clear that you have two sections which are not in alignment over whether a company can so manage their affairs in that way. You have section 36, which allows a constitution to have that difference, and then you have section 53, particularly subsection (2), which a number of legal scholars have said negates that right. This small, technical amendment seeks to clear that up, that if you are a company that wishes to treat its shareholders in such a manner that dividends can be applied to shares which are backed with production, and dividends do not flow with shares that aren’t backed by production, there is no lack of clarity in the Companies Act legislation with respect to your ability to give effect to that wish. That is all this is.

I am very, very pleased to have been able to manage this process through, with the support of the Primary Production Committee. I acknowledge not only the chair, David Bennett, but the contributions from across the committee. There have been some very strong contributions from Kiri Allan that I want to acknowledge here tonight. You know, obviously we come from different perspectives politically, but she is from an area that has some connection with kiwifruit, and some companies, in particular, who have had to traverse this challenge previously, and she saw the issue that I was seeking to resolve through the technical challenge. I also want to acknowledge New Zealand First, who, after some consideration, also landed on the position that actually what was being done here was not something in the traditional, sort of, partisan approach that sometimes occurs in members’ bills but actually a simple, technical amendment to clarify that if a company wishes to set up their constitution in that manner, they can.

We had a small number of submitters. They were the co-operative society, we also had a submission from Zespri, and a particularly helpful one from then QC David Goddard, that assisted the committee in understanding the genesis of the Companies Act formation: why the original Companies Act was written as it was, the perceived intent around the ability for companies in their constitution to set up as they wish, and some of the legal challenge that has emerged over time with respect to section 53.

We have gone through a thorough process. We have debated it, obviously, here a number of times. We have also had a decent discussion at the committee of the whole House, where we again tested the premise and landed a view which appeared to have the whole House in support of these minor, technical changes.

You know, as I mentioned as I started, this is not a change that is likely to make the front page tomorrow relative to the previous bill, alas, but for those who are involved in agriculture, who wish to set up a company with the flexibilities of the Companies Act and to get some clarity around the tension between these two sections, this small bill provides that clarity and finally resolves an issue which has been a stone in the shoe for small agricultural companies that have wished to be structured with this degree of flexibility. I appreciate the support that this appears to have had, acknowledge the contributions of all throughout the select committee, and look forward to this bill proceeding tonight. Thank you.

Thank you, Madam Speaker. Whilst the gallery has all departed, and it is a little quieter in this House compared to about, you know, five or 10 minutes ago, I do want to acknowledge the member Todd Muller, from the Bay of Plenty—from one of the finest towns in all of this nation’s geography, Te Puna. He comes from the centre of the universe. I can’t help that. No, look—the member has worked extremely hard in terms of taking the Primary Production Committee with him to enable us to understand the tensions that existed in the Companies Act.

Now, when the Companies Act was introduced, there was a real intention by those drafters in this House, at that time, to ensure greater clarity and to enable, I guess, those that had to undertake commercial and corporate structuring responsibilities to ensure that they had the flexibility to determine the true nature of those entities.

One of the challenges, particularly in the agricultural sector—and the member just prior spoke to this exceptionally well, and has done throughout the course of this bill before us—was that when you had a person or a producer that was a productive producer, they were entitled to shares. Once they stopped producing, they still retained their shares in that company, but there was a tension as to whether or not the company could then delineate as to the benefits or rights attached to those shares.

It hasn’t been tested in the court. There’s very little academic research done. Actually, there was none that could be found and produced by the Ministry for Primary Industries, but we do know—the member and I, having had a long history with Zespri in particular—that there has been a real, tense challenge between those that determined that section 53, in particular, subsection (2), trumped the flexibility that was carried through through section 32 of the Companies Act. So section 32 permits a high level of flexibility in terms of the rights you can ascribe to various different shares. Section 53(2) says that “The board of the company must not authorise a dividend (a) in respect of some but not all the shares in a class; or (b) that is of a greater value per share in respect of some shares of a class than it is in respect of other shares of that class”, and then it goes through to, sort of, step through.

Now, I know that the member who introduced the bill, Todd Muller, was in a managerial position at Zespri at the time when they were trying to untangle the rights of wet and dry shareholders. That issue was really only resolved about two or so years ago by a vote of shareholders at an AGM, but the precursory work to get to that point had gone on for probably a good, I don’t know, five or so years. It had gone on for some time. It had cost the company and all of those shareholders, of course, which own that company—I’m not sure of the actual quantity of the sum, but in terms of time and energy to really seek a resolution, it was very frustrating. It went for too long and it cost far too much money. So from my perspective, and why, I guess, we on this side of the House chose to really engage in this process, we wanted to make sure that we weren’t opening up a Pandora’s box if we were to make ad hoc amendments to the Companies Act.

It is a fundamental piece of legislation that impacts thousands and thousands of people throughout our country, so we didn’t want to just hack away and, I guess, make amendments that could carry those unintended consequences. So, I guess, from this side of the House, a lot of our questions—actually, across the divide, we were really clear as a committee that we wanted to understand the impacts that this particular amendment would have on the overarching reading of these provisions if we were to enable this amendment to the Act.

On the balance of probabilities, and from the advice that we received, we felt comfortable on this side of the House to support these amendments as carried through in the member’s—it’s a relatively small bill but these are technical amendments that are made to ensure that there is real clarity. And I think it goes back to the intention of those drafters at the time. I’m not sure whether those drafters at that time intended there to be this potential conflict between section 36 and section 53(2).

I want to also acknowledge the contribution made by the Hon David Goddard QC. Look, we didn’t receive a ton of submissions on this relatively technical amendment, but the submissions that we did receive, and in particular from that particular honourable member, David Goddard QC—very, very helpful in terms of walking us through the—

💬 Dr Duncan Webb: Great judge.

Great judge—he is a great judge. He’s on sabbatical over in the States, I think, at the moment. He gave our committee the time to really ensure that we could understand the technical nuance of these provisions, and I think he was right. You know, he said, “Look, this doesn’t create huge ramifications across the board, but there are specific circumstances, in particular, where you establish yourself as a cooperative at the outset and then, of course, producers go on to have different arrangements and they may or may not continue in their roles as food producers, but they retain a particular class of shares.”

So I don’t think I intend to give a lengthy contribution on this particular amendment, but just to say that when it comes to things that really support our primary producers, our food producers, in particular—those that structure themselves in this way, and we mentioned Zespri as one type of company that does this; but for those companies and, in particular, those in food production that do structure themselves in this way—this is an important amendment. It’s something that I take pride in, on our side of the House at the very least, I guess, listening to those contributions of those food producers and working alongside them to ensure that they retain the mechanisms that our producers need—our food producers need—to remain as sustainable and viable entities but to ensure that they don’t need to waste resources, and particularly the example of Zespri, as I mentioned prior, I had to do over several, several years.

So without further ado from our side of the House, I’m pleased to commend this bill to this House.

Thank you, Madam Speaker. I’d just like to follow the two speakers on this bill so far and to reiterate the support for Todd Muller, who has brought this bill forward to the House. Todd Muller has done an excellent job in making sure that this bill has passed through the committee stage of the House and is now going to be into law at some point in the near future.

It is a small piece of legislation that does cover up an area of law in which there would be some dispute or some inaccuracy, with many not knowing the real context in which a decision is made by a company that wanted to do dividends in this manner. To clarify that is really important for our cooperative sector, and I think at this time it’s important to acknowledge the strong cooperatives we’ve got in New Zealand that are the backbone of New Zealand agriculture and that provide our farmers with the ability to compete on a world stage that they would not have if we didn’t have a cooperative base. Legislation like this, that assists those cooperatives in managing their finances and their shares and their approach, is vital to enabling them to be able to have the tools to actually compete and deliver for New Zealand farmers.

So this bill, although small in its scope, does have an important role in backing our farming sector and backing our cooperatives that are vital to the future of New Zealand going forward. So I’d like to thank all those involved on both sides of the House for the way that they conducted this through the committee. It was done in a very reasoned approach and we’ve got a good bill here that will deliver the outcome that’s been wanted. Thank you.

Thank you, Madam Speaker. I’m pleased to speak at the third reading of this bill, the Companies (Clarification of Dividend Rules in Companies) Amendment Bill in the name of Todd Muller. I want to acknowledge and congratulate the member for the Bay of Plenty for shepherding this bill through all the various stages in the House and, in particular, our discussions that we had at the Primary Production Committee on this bill.

I must say that when I first came across this bill, I thought, “What’s the point?”

💬 Hon Member: And then you read it.

I read it and I still was posing the same question, because, I guess—I practised corporate law quite a few years ago, but I know that the Companies Act provides a whole lot of flexibility in terms of corporate arrangements: how you structure a company, arrangements between shareholders, and also how key decisions are made. Sure, there are thresholds that exist within the provisions of the Companies Act, but the constitution of the company can create a whole multitude of creative scenarios in terms of coming to the right structure—the right model that fits the shareholders’ wishes and which fits their overall business objectives. So I honestly was questioning the actual purpose of this legislation.

To be honest, we didn’t really receive a lot of submissions from the many, many supposed agricultural companies out there that are really crying out for this piece of legislation, but there was indeed one particular company—that is, Zespri, our main kiwifruit exporter; a global company doing some amazing things around the world—who have a keen interest in the passing of this bill. And so with that, I tried to sort of look at the bill with a fresh set of eyes and look at the intent as to what we were actually doing.

Now, again, I think the officials from the Ministry of Business, Innovation and Employment, who advised us at the select committee, couldn’t really find any sort of mischief that it was really necessary that we had to pass this particular bill. They thought the legislation was fine as it is. I agreed with them. But, again, I guess the purpose of this bill, which is why we have come around to supporting it, is to provide absolute clarity that within a class of shares a company can create a dry share and a wet share. Again, it’s an extra specific piece of legislation, a piece of a provision that we’re putting in the Companies Act. So with that, I guess it does no harm, but I still sort of have to struggle: why should we be doing this in the first place?

However, be that as it may, I want to acknowledge Todd Muller. I want to acknowledge him for getting some world-class advice in terms of—we had QC-calibre advisers and legal brains who were telling us and convincing us that this is definitely necessary, this bill. And so the long and the short is we are supporting this provision.

On further questioning, though, I would have thought that a constitution of a company can be changed provided you have a special resolution. So, in any event, any company, provided they can get to that special resolution, can also create different classes of shares, could create an equivalent scenario that we’re trying to remedy with this bill. So there is still flexibility there within the Companies Act to do exactly what we’re doing.

Likewise, I guess, I was trying to play the devil’s advocate as we were examining this bill, and I was thinking of the rights of the shareholders within Zespri who were the pioneers of that company, the first generation growers of kiwifruit—I suppose they came together to form Zespri—who, obviously, have retired from the industry and no longer are involved in, I guess, growing fruit, but still hold shares in the company. And I was thinking, well, what about the rights of those particular shareholders? How are they being recognised in this bill? What this bill does is it basically says that the board can discriminate and can say, “Even though you all hold the same type of share, we’re going to pay dividends to the shareholders that supply us with fruit, and you shareholders that founded the company but no longer supply us with fruit, well, you’re going to get a different type of dividend.” And so that’s what we’ve been grappling with, in terms of the rights of shareholders vis-à-vis the company, the rights to dividends, and, also, I guess, the overarching business of Zespri, which is all about supplying fruit to a global marketing business, which is very successful.

So I was trying to look at it from that perspective and thinking: what about the rights of those shareholders? Unfortunately, we didn’t actually hear from any of them. There were no submitters at all on the bill representing this particular class of shareholders. I understand that there are actually quite a few of these types of legacy shareholders still within Zespri; we never actually heard from them. So perhaps they’re okay with getting paid a lower dividend or perhaps no dividend, despite, you know, having their sweat and toil over the years to build up the business to where it is today. So, again, I just want to return to the primary point, which is this bill makes it explicitly clear that a company, a board, can differentiate between shareholders within a particular class by categorising them. Say a company does adopt cooperative-type principles. It can create what are called dry shares and wet shares for those that supply and those that don’t or no longer—and so, again, it’s providing the board of companies like Zespri, who are multi, multi-million dollar businesses, absolute certainty for their board that they are able to treat their shareholders in that particular fashion. And so I guess that’s a good thing and it’s achieving what it’s intended to do.

I want to once again commend Mr Muller for shepherding this bill through all these various stages. I’m not going to take up any more time, but to say that I support this bill and I commend it to the House. Kia ora.

I intend to take a short call on the member’s bill this evening, but it is beholden upon me to stand here this evening in this House and acknowledge the sponsor member, Todd Muller, this evening; a fine gentleman, actually. Those are strong words in this House, but you cannot discard the contribution from the member, not only in this House but in the way he undertakes his business in his electorate and around the country on behalf of—

💬 Hon Iain Lees-Galloway: Leadership material.

Yeah, leadership material. And actually, Minister, that is actually what I wanted to say tonight. That is my contribution this evening, if the Speaker allows me to go down that path?

💬 DEPUTY SPEAKER: No, I won’t. I’d like you to talk to the bill.

Can I press and see if you push the buzzer on me?

💬 DEPUTY SPEAKER: I would like you to speak to the bill.

This member brought to the House a piece of legislation where—I would first start, perhaps, on the nature of those who would benefit from it: the companies who define themselves as cooperatives. And what I want to say this evening is that, actually, the cooperatives model, not only in New Zealand but around the world, has proven itself to be an incredibly powerful and empowering business model. I think New Zealand has seen that first-hand, and I won’t name names this evening because that’s unnecessary. Those members in the House can think of several large examples of cooperative business models operating quite successfully, not only on behalf of their membership but on behalf of “New Zealand Inc.”.

Let’s be clear about tonight’s debate: I’m standing up because, to be fair to the sponsor member, there is a small modicum of debate around the confusion. Mr Karatat—Mr Rino Karatat, oh Jesus, I’m sorry.

💬 DEPUTY SPEAKER: Tirikatene.

Mr Tirikatene outlined how the different shareholders—and we spoke earlier about the wet and dry shareholders—

💬 Hon Members: Come on, Fletcher.

Yeah, sorry guys—and that’s what we’re trying to define tonight, and that’s what the member has brought to the House. Actually, it was observed by the same member who submitted on the legislation—there was an absence of contribution from the sector, because, actually, some of the companies who originally thought they were caught up in this had decided, actually, we can figure out a way around it. But actually, New Zealand First stands up tonight and acknowledges the fact that there’s still some debate on that; there is still that question mark.

💬 Hon Member: No more question marks.

And why have that question mark when we don’t need to? When we’re dealing with, essentially, cooperatives who are the backbone of New Zealand business, and a great way for New Zealand beneficiaries to benefit from those endeavours. So the reality of it is we have a member who is—and this is non-political—a great leader in his community, who has shown those leadership qualities. Actually, that’s essentially why I am standing up tonight: to acknowledge that, to acknowledge the member and his efforts—not just in this bill but in all the work he does on behalf of his electorate—and to say that we can’t have that question mark sitting over those companies; they don’t need it, they don’t want it. And so, on behalf of New Zealand First, can I say we do support this legislation this evening. Thank you very much.

It’s a great pleasure to take a short call on this outstanding piece of legislation, introduced to the House by my colleague Mr Todd Muller from kiwifruit country. It’s also a great pleasure to follow Rino Tirikatene in what was an outstanding contribution to this bill. I’m also following the clear candidate for leadership of New Zealand First by the speech he just made; it could have meant anything to anyone.

But I do want to get back to the point. It is a piece of legislation that deals with some very small factors, and when Mr Muller first told me about this piece of legislation I was quite excited, because it seemed to me there might be an opportunity to rort a couple of my brothers by paying differential dividends, and I thought, well, that’s quite a good way. I see, unfortunately, the Primary Production Committee has tidied that bit of stuff up so you can’t do that, which is a little disappointing for me. But also, today, I had a group from Fielding, the Fielding Multicultural Group, in my office, and they were asking me about the legislation going through the House. Well, I clearly had no problem describing the previous piece of legislation to them. I certainly couldn’t describe this piece of legislation to them, I thought that would take far too long, but having listened to Rino Tirikatene I could’ve borrowed him to do it for me, because he did such a good job of it. I then got them on to the dog control bill, which is the next piece of legislation in the House; very simple and very sensible.

But this piece of legislation—it’s an interesting thing. When I was a young person, I really thought cooperatives were another form of socialism, but I’ve decided they probably aren’t. In fact, they probably serve quite a useful purpose. In fact, New Zealand agriculture was built on the back of cooperatives, and to some extent they’re all different and one or two of them will benefit from this piece of legislation. So before I put my foot any further in, I will sit down and commend this bill to the House.

I call Jan Luxton.

💬 Hon Member: Jo.

Thank you, Madam Speaker.

💬 DEPUTY SPEAKER: Jo Luxton. Sorry.

That’s all right. Thank you, Madam Speaker.

I’m pleased to rise in support of this piece of legislation, the Companies (Clarification of Dividend Rules in Companies) Amendment Bill. I think the title’s just about longer than the parts of this legislation. But I’d like to acknowledge and commend Todd Muller for bringing this piece of legislation to the House.

It came through the select committee after my time on the Primary Production Committee, so I wasn’t too familiar with it when it came through that select committee process. From what I understand of that process it was a little bit touch-and-go for the select committee. There were some issues around, I think, members from the Government side just wanting to know exactly what the purpose of this was, what it was going to achieve. Thankfully, that’s been worked through and the select committee has come to an agreement on this.

It’s actually really nice to speak in the House on pieces of legislation or bills where there is agreement across the House. It’s a nice way to spend the evening rather than in a combative-type situation.

To explain this, I guess, in easy layman’s terms, because it is quite a technical piece of legislation, I think the basics of it is that it provides clarity. There’s been some confusion potentially around companies’ abilities to—and the rules that come around the shares or the dividends that they can have within the company. We’ve heard about the wet shares and the dry shares, the wet shares being those that are for the people that provide the produce or whatever it might be, and then the dry shares are those who no longer continue to provide to the company.

This will enable clarity, which will be quite helpful. When I talked about wet shares being those that currently provide produce to the cooperative, thereby they can potentially receive a financial dividend, my understanding is that those that have dry shares potentially do not. But it does allow that ability for the company or the cooperative to be able to make that decision.

I think that this is a pretty good piece of legislation. I think anything that provides clarity, particularly in our rural producing sectors, our rural producing companies, is a good thing because we do know that our primary producing sector provides—I think I’ve written—around $46.4 billion in exports. And so we, on this side of the House, are more than happy to support any legislation that gives our primary producers clarity and enables them to do what they need to do to continue doing the wonderful work that they do in providing exports to the world and taking our exports out to the world. Because we know that we do provide the best primary food to the world, and that’s something that we can be proud of.

It is a good position for us tonight to be here to support this piece of legislation. So again I’d like to commend Todd Muller, who brought this piece of legislation to the House, and I’m more than happy to commend it to the House this evening. Thank you.

Kia ora, Madam Speaker. He mihi nui ki a koutou. Kia ora.

I rise in support of this legislation, the Companies (Clarification of Dividend Rules in Companies) Amendment Bill. I’d like to echo the sentiment of the House and acknowledge the member Todd Muller for getting this through. It is a significant achievement to get a member’s bill through Parliament, particularly from Opposition, so I acknowledge him.

Basically, this is trying to clarify a legal disagreement between section 36 and section 53, parts of the Companies Act. Look, I don’t think it’s in anyone’s interest to have companies spending their time and effort paying lawyers to try and get their heads around a legal—

💬 Dr Duncan Webb: Someone’s interest.

Some members might disagree with me, and some lawyers—I’m sure, most lawyers—might disagree with me. But I believe companies should get on with the business of their business, not paying lawyers to work out what could be seen as quite a legitimate inconsistency in legislation.

I’d like to thank the Primary Production Committee. There’s a small improvement in the legislation. I note some of the comments around the lack of engagement. I guess an optimistic interpretation is that people were relatively comfortable with the legislation, and sometimes silence is a show of support. So the Green Party supports the legislation, acknowledges the member, and congratulates him at this point in time.

💬 Willow-Jean Prime: Madam Speaker.

Tim van de Molen: Madam Speaker.

💬 DEPUTY SPEAKER: It’s Tim van de Molen.

💬 Willow-Jean Prime: Oh, yip.

Tim van de Molen: Thank you.

💬 Willow-Jean Prime: Sorry, a bit slow to get up.

💬 DEPUTY SPEAKER: It was whoever’s going to yield first. It’s a five-minute call.

I’m delighted to rise and take a call on this. I’d also like to start by commending Todd Muller on having a member’s bill drawn and reaching, now, the final stage in the House. That has taken some time to get to this point, and appreciate we’ve had a reasonably protracted debate on the previous piece of legislation that was before the House this evening. So we will see now a significant change in terms of the process happening on a typical members’ day. I think we’ll see a number of other great members’ bills put forward by National MPs progressing nicely through the House over the coming months as well.

But this particular bill is focusing quite simply on clarification in the Companies Act in relation to the dry-shares situation. We’ve heard already the relevance of that to Zespri’s situation and, potentially less so, to the Fonterra situation that had preceded that some years ago. But, really, looking to just amend section 53, making it clear that a company, if they outline it in their constitution, can make these changes.

Now, this is something that’s perhaps a bit unique to the agribusiness scene in New Zealand, where there are a lot of cooperatives that operate in that space. This just enables a bit more flexibility but also clarifies how it would work for other companies if they were choosing to look at a similar or potentially some variant on the share structure situation.

So, look, it’s relatively straightforward. It’s a great bill put forth by Todd Muller from a real-life situation that he has experienced and understands, and shows the depth and quality of MPs on this side of the House with their knowledge on a whole range of aspects, particularly in agribusiness in New Zealand.

So I look forward to seeing this pass presently in the House and commend it. Thank you.

Tēnā koe e Te Māngai o Te Whare. Thank you for the opportunity to take a short call tonight on the Companies (Clarification of Dividend Rules in Companies) Amendment Bill. Can I start by saying, when the member who sponsored this bill, Todd Muller, said that he doubted it would make the front page of the newspaper tomorrow—ye of little faith—Judith Collins, the honourable member, made a similar comment about derivatives and said that if it made it to the newspaper, one single article, she would bake for the Finance and Expenditure Committee, and guess what! It did, and we got her baking, so I wonder if I could put a similar challenge across the House to that member, that if it does in fact make the news tomorrow—and it won’t be the front page given earlier legislation this evening, but just putting that challenge out there. You don’t want to be upstaged by the Hon Judith Collins and her wonderful baking—Louise cake, it was. I do want to, in all seriousness, commend the member for his identification of an issue and using of the member’s bill process to be able to address an issue.

I want to say that this is my first call on the bill, although when I was reading through the Hansards of the earlier debates, I came across a quote in there by the member Kieran McAnulty. He said “It is with delight and some amount of surprise that I am standing here to speak on this bill.”, and the Deputy Speaker said “You certainly don’t look like Willow-Jean Prime.” So I believe I was probably down to speak on this bill in an earlier reading, would’ve been given leave, and Kieran filled in my spot at that time. But this is my first opportunity to speak on the bill. I am not a member of the Primary Production Committee, which this bill went to, so I want to commend that committee for giving some time to go through this process. Actually, when I read previous debates, the member Rino Tirikatene really did give it a thorough examination and play the devil’s advocate in terms of this and whether it was really necessary, whether there were some unintended consequences of what we did, whether there were other ways in which the issue could be addressed, but, ultimately, we have got support across the House for this piece that’s been put forward.

I wanted to reflect on the earlier contribution by Gareth Hughes, where he was sort of suggesting that it doesn’t do any harm, but as two former lawyers over here, we may not actually find favour with our colleagues in the legal profession, because when, in all seriousness, I heard the example given about Zespri, the amount of time, the number of years, that it took and, no doubt, the legal advice that they had to obtain as a company of their size and the importance of their structure, there would have been money that could have been a dividend actually spent on lawyers’ fees to try and clarify some ambiguity in the law.

I reflected on some previous debate notes, and it was pointed out by Gareth Hughes that figures in 2018 actually stated that the top 30 cooperatives in New Zealand had a revenue of $42 billion. So these are not small amounts of money that we are talking about.

It is substantial, and the potential for debate and disputes to arise within these organisations is very real when they are having to go to lawyers for advice, for clarity, and for interpretation around the law. Then, the contribution from Kiritapu Allan was that at the time this was probably not foreseen when the Companies Act was debated and there, potentially, were not Hansards to rely on. Did they intend for us to be able to have the difference between dry shares and wet shares or not?

So, in the absence of all of that and with the difficulty that we have had a real-life experience of, the suggested amendments—there being two main sections, section 36 and section 53—do help clarify the law. Yes, we’ll potentially reduce the workload of lawyers and the potential to charge there, but it gives certainty and clarity to the cooperatives in this country. I just do want to reflect that this has been a structure that we have used in New Zealand since 1871, so they are long-established corporate structures in our Companies Act—

💬 Dr Duncan Webb: Socialist structures.

—socialist structures, and Ian McKelvie would have got into a bit of trouble over on that side of the House for supporting such things—but our Companies Act should be there to support all of those types of arrangements. I commend this bill to the House.

It’s my pleasure to speak to the Companies (Clarification of Dividend Rules in Companies) Amendment Bill, and I do so in the knowledge that this is a member’s bill put up by Todd Muller, the member for Bay of Plenty. This really started his ascension to glory, because from that point until, in the end, he took on the climate change thing, he got us through, and it was an instrumental and a very successful across-Parliament agreement last week. He’s now our spokesperson for agriculture. You know, he is moving very rapidly up the ranks. So I am delighted to support this bill.

I am delighted to support this bill, because what Zespri—and this is really where it came from—is doing is that it is one of the most successful cooperatives in New Zealand. I want to remind members of this House that its business model really started from a whole lot of small growers getting together and forming a cooperative using market-led signals, having all control of the breeding rights, and then developing a highly successful international business. There are those shareholders at the beginning who took a lot of big risks and didn’t know quite what was going to happen and who may now have retired or may be out of the industry, but they are none the less shareholders, and there are those shareholders who are actively producing today and who are taking big risks and doing things and producing the fruit. All this bill does, really, is give some flexibility to cooperatives by making a change to the Companies Act, and I think we would do a disservice not to do this. Even though it sounds small and innocuous, it is significant to a small number of cooperatives in New Zealand.

Now, with what Zespri is doing and what it will continue to do, they do need to be nimble. They will need to manage capital structures—how they organise themselves—in perhaps different ways than they have in the past, and all this bill really does is allow the dividend flows to be managed to the maximum advantage to Zespri, its growers, and its shareholders.

As the spokesperson for horticulture, and having visited Zespri a number of times, I know the value of having a cooperative structure. There are other structures in New Zealand that are cooperatives in many other cases that have been highly successful—particularly in the primary production sector—and I think this is a great bill. From small beginnings, I’m pleased to see that it’s come with support from right across the House, and I commend it to the House.

Thank you, Madam Speaker. I wondered if I could trouble the House with a few thoughts on this excellent bill, which of course we support. It’s yet another bill with cross-party support. Only the other day, I was speaking on a bill in the final parts of its third reading and commending it to the House—the zero carbon bill—and here we are, again, joining hands across the House. What another happy occasion it is.

I must say, it was very heartening to hear Mr McKelvie just talk to us about cooperation—from each according to their ability to each according to their needs—and about how socialism runs deep through our society, right through the veins of Fonterra and Zespri and the like. It’s great to hear and it’s good to see that even at his advanced years, ideals are still there—are still there. Oh, thank you, Mr McKelvie.

But, look, this bill—I know some of my friends across both sides of the House have looked at it and thought that it’s not an interesting bill, but it actually is because it goes to the heart of company law. Company law, in the good old days, was nothing more than a contract between shareholders. The shareholders could come up with pretty much any deal they wanted, and it was in about the 1890s that some rules started forming around it to make sure that people weren’t caught out. One of those fundamental rules was fair treatment of shareholders—in particular, minority shareholders—but also there was the rule that emerged that whilst you could have different classes of shares with different voting rights and different dividend rights and so on and so forth within any particular class, you had to deal with those shareholders equally. So you couldn’t peel off a few of them who weren’t your mates and then look after your mates and issue a dividend, for example, to some but not to others of a class.

That rule has found its way right through to our current Companies Act, and that’s the one that’s caused some concern. But there’s another rule that goes the other way, which is that in a constitution, you can write pretty much whatever rules you like. There are some rules which are set in stone in terms of things like duties of directors, and you can’t contract out of those, but pretty much the rest of them—a whole lot of the other ones—you can. The dividends rule is one which is subject very much to the constitution. So, yeah, there’s a lack of clarity there. David Goddard QC, now Justice Goddard, thinks it might be unclear but he would fall on the side of “It’s pretty obvious we can do that.” So here we have a member’s bill which, for the benefit of those great cooperatives, we’re really there to clarify.

So, look, it’s really about making sure that shareholders aren’t caught unawares and, as Mr Hughes said, that companies aren’t spending unnecessary time and resources doing complicated workarounds. But at root, this is simply about fairness and equality across shareholders, clarity of company rights, and on that basis I’m very pleased, with both major parties of the House and others, to commend it to the House.

My short contribution to the Companies (Clarification of Dividend Rules in Companies) Amendment Bill: first of all, I’d like to kick it off by acknowledging the mighty Todd Muller, the MP for the Bay of Plenty, for his work around this bill. Now, the facts of the matter are that this is a member’s bill: he put it in the ballot, it hit the ballot 18 months ago, and as soon as it hit the ballot, it got drawn out. Some people go their whole career and don’t get a member’s bill drawn out, so that tells you the amount of sway, the amount of connections, that this man has—that he can get a ballot drawn out. So he’s destined for great things. Did I say he was a legend? Well, he is.

I can tell you this: I can see that the Government MPs are on the edge of their seats. Iain Lees-Galloway—I’ve never seen him so on the edge of his seat about this. This is why I came to Parliament. Not really—the last bill was. But anyway, this amends the Companies Act 1993 to provide legal certainty around dividend rules. It’s a simple bill, giving companies the rights to distribute profits according to their constitutions. Now, I won’t go into the details, because they’ve been well traversed by the previous speakers, but it’s rather like the farm debt mediation bill I spoke on yesterday: it just makes it easier for people to do business.

The passage of this bill will build on the work that the previous National Government did in the area, allowing businesses to grow and prosper. I know Zespri—they submitted and they welcomed the clarity that this bill brought to the challenges that they faced with their grower-owned organisation. I know that Craig Presland, CEO of Cooperative Business New Zealand, supported this bill, as did the agribusiness sector. I look forward to seeing many more bills brought to this House by our colleague and friend Todd Muller, MP for the Bay of Plenty. I know he will make a great Minister of Agriculture in the National Government next year. I commend this bill to the House.

Bill read a third time.