Business Law Reform Bill

CRAIG FOSS (National—Tukituki) Link to this

Bananas. That is what the previous speaker on this Business Law Reform Bill, Doug Woolerton, spent 10 minutes talking about last night. After his trip to Australia, he studied and consumed bananas in Australia. He was questioned—as a New Zealand First member, in relation to the confidence and supply part of the agreement with the Government—about whether New Zealand apples have got into Australia. Sadly the answer was no. After 2 years of rhetoric, good New Zealand apples from Hawke’s Bay are not into Australia yet.

The National Party supports the bill at the second reading. Previous speakers from our party have indicated that. There are 60-odd clauses in the bill. I guess it is one small step for New Zealand business, one tiny step for New Zealand businesses, but one giant leap for the Labour Party as it finally recognises some of the compliance anchors and barriers in front of business success. It is true that this bill will help small businesses, such as the Manukau company Rural Direct, whose achievements in recycling plastic to make products for the farming and packaging industries have resulted in it becoming a finalist in the recent 2006 Westpac Manukau Business Excellence Awards.

I give credit where credit is due. I think I actually sat in on the Commerce Committee a few times when submissions were being heard on this bill. The way the select committee has reported back in the commentary is very good. There are some very considered replies to some of the submissions, but I do note that that select committee also often struggled to make a quorum, and it was with the good faith and fair play of the National Party that it managed to keep its quorum together many times.

This is an omnibus bill and it was a shame that we did not have more clauses in it about business tax reforms rather than reviews and, of course, linking to personal tax reforms. There are two parts to the bill that I have a concern over. Clause 2—with all due respect to the Governor General—is the part that deals with the Royal assent. I am respectfully concerned about our Governor General’s time because, obviously, he will be checking signatures on the online petition asking for him not to give Royal assent to the retrospective pledge card legislation rushed through disgracefully last week.

I will speak to clause 34. There was a very good commentary and I appreciate the Minister’s speech around this particular point last night. This is the clause that gives exemption power to the Accounting Standards Review Board. I just have an awkward feeling about this part of the bill. I know the points are considered and there is about a page of commentary on the major two points. I was actually there the day that submission was heard and I cannot help but have a bad feeling about it because, basically, the Minister has decided that she knows best—or the officials have managed to convince her that they know best.

I will quickly read the qualifications of the members of the Accounting Standards Review Board, whose submission was rejected by the select committee. These are the people who recommended that the Accounting Standards Review Board did not have power to give any exemption whatsoever. They argued very forcefully and the commentary points that out. The chief executive officer of PricewaterhouseCoopers New Zealand asked that the Accounting Standards Board did not have this exemption. The chairman of Tanui Group Holdings and a director of a number of companies including Tower Corporation Holdings Ltd and National Institute of Water and Atmospheric Research Ltd asked that the Accounting Standards Board did not have this exemption. The New Zealand Treasury’s chief accounting adviser also pleaded that the board did not have this exemption. Just to reiterate, they are members of the board that this bill gives the power to exempt.

This board pleaded with the select committee not to be given that exemption. Board members also made representations to the Minister in charge of the bill and other Ministers in associated departments, and they cannot understand for the life of them why their combined expertise was massively outweighed by the union expertise, background, and history of the Minister. Another board member who pleaded that the board be not given the exemption has been a corporate and commercial law partner in Bell Gully since 1992, but the Minister knows better than him. Another board member is a partner with Beattie Rickman and works in business services in medium-sized businesses at the Institute of Chartered Accountants of New Zealand—again the Minister knows better than her. Finally, the Minister knows better than a person who is the chairman of the Financial Reporting Council, is a director of Wesfarmers, Telstra, and the Sustainable Investment Research Institute, is on the Victorian council of the Securities Institute of Australia and so on, has chaired a strategic review, and who, again, pleaded that the board be not given the exemption.

Regardless of the commentary in the start of the bill about this particular clause, I cannot, for the life of me, understand why their advice, their pleadings, their combined commercial nous was rejected by a Minister and I cannot quite recall last time she ventured into the real world of business. In fact, I have left one out: the project manager for the project for the conversion to International Financial Reporting Standards. This body also oversees that conversion and his advice was also rejected.

As Mr Finlayson, speaking on the previous bill, alluded to, the only logical explanation as to why the combined commercial nous of these various esteemed board directors—in fact, the board the Minister herself appoints—was rejected is, quite frankly, because this Government has lost touch. It believes in its own mirror, sadly. It believes it knows best; it believes it knows how to run business best. In fact, it has no idea and again I reiterate my objection to this particular part of the bill. Thank you, Mr Assistant Speaker.

Dr PITA SHARPLES (Co-Leader—Māori Party) Link to this

Kia ora. Tēnā koe, Mr Assistant Speaker. The Māori Party is pleased to take a call tonight on the Business Law Reform Bill. We support the intent of this bill to amend business law statutes so that the operation of business can be clear, efficient, and effective. Tangata whenua collectively owned assets and businesses produce $1.9 billion per year. While the revenue from taxes and exports will be significant, the key highlight for the Māori Party is the impact the success can have in uplifting the economic and social under-performance of tangata whenua if the accumulated wealth is for the collective whānau good.

The Māori Party is a business-friendly party that does, however, consider there is a need to strike a balance between maximising profits on the one hand and maintaining the integrity of our natural environment on the other. We believe economic gain must be achieved by balancing economic advancement with social progress, cultural uniqueness, and environmental enhancement. The way in which we do this is to provide the incentives for whānau, hapū, iwi, and other community-based groups to develop and implement collective business development strategies that increase economic participation and encourage local and regional self-reliance, including local and regional partnerships.

So how will the Business Law Reform Bill achieve these worthy goals? We believe that most of the changes in the bill are based on suggestions from business law practitioners, enforcement agencies, and the business community. The bill should improve existing business law by making small, high-priority changes to reduce some of the costs of complying with legislation, and that has to be a good thing.

The Māori Party comes to this bill absolutely inspired by the hard-working and devoted commitment of our people out there, doing the hard yards, making their businesses work, and, most of all, providing that tautoko—that support—that is so necessary to keep a good business afloat. We think about Te Awe Wellington Māori Business Network, the oldest Māori business network operating in Aotearoa—and that has been operating for only a decade. The network was set up to promote, assist, and encourage Māori in business through networking hui, where Māori business owners meet and share their business challenges and successes.

Then there is the Federation of Māori Authorities, New Zealand’s largest business network. The main focus of the federation is to support Māori across all the different levels, from whānau shareholders to land-related developments in the primary industries, to major, diversified enterprises. Or there is PoutamaMāori Business Trust, which earlier this year was the joint winner for 2006 in the Vero Excellence in Business Support Awards for the most significant contribution made by a not-for-profit organisation. Poutama has played a key role in developing Māori micro and small businesses over the past 18 years.

What I am absolutely excited about is the growth in rangatahi networks. My colleague Te Ururoa Flavell has talked about the rangatahi business hui sponsored by Lion Nathan and Te Arawa at Īhenga for secondary schools in the Rotorua region. Hone Harawira has talked about the rangatahi business competition run by Te RangaNgaku, the Māori management student network at Waikato Management School. As my mokopuna would say, it is mean Māori mean.

So this bill is about making things better for a whole lot of Māori, and what can be better than that? We are particularly pleased with the changes that have been made to the Financial Reporting Act 1993, including the removal of unnecessary or excessive preparation, audit, and filing requirements, the decision to increase the size threshold needed to be a “small company”, and the moves to standardise financial reporting with international standards for the ease of reading and understanding—that is, exemptions for international companies doing business in New Zealand. These developments will assist economic independence and will enhance financial efficiencies in the world of business, and we support that.

All these strategies seem to move towards easier, smoother, and lower-cost operations, demonstrating manaakitanga in each. We are also very supportive of the amendment to widen the qualifications for admission to membership of a credit union, thus covering employment by a group of employers as qualifying for a “common bond”. Friendly societies and credit unions grew out of the expression of local rangatiratanga, and it is only right that there is adequate accountability to members on kaitiakitanga. I make the point of applying our kaupapa, our tikanga, and our philosophies to Māori business, to small business—as, indeed, it applies to every business.

At the Hui Taumata last year, Professor Whatarangi Winiata anticipated a future in 2025 that was based on kaupapa. He shared a vision where Māori economic leaders will accept economic opportunities to be active contributors to the long-term survival of Māori through the expression of kaupapa Māori and the pursuit of tikanga Māori for genuine progress.

Perhaps the biggest point of difference over the 20 years is the theme that kaupapa and tikanga are the basis of Māori business. In the tikanga Māori model, the expression of the kaupapa is to be maximised, while ensuring that the financial constraint is met. The profit is thus a collective profit, with the objective being to grow the people, with an emphasis on mutual respect and harmonious relationships. Investment is prioritised as social, as human, and as cultural capital. So we look to the Business Law Reform Bill to see how well it can assist Aotearoa in meeting what others may call the triple bottom line.

Finally on this point, I will refer to an absolutely shocking release I read from KPMG just over a week ago. The latest 2006 KPMG fraud survey revealed that 53 percent of New Zealand organisations had experienced at least one fraud, with an average loss of $479,000.

MARYAN STREET (Labour) Link to this

It is good to speak to the second reading of the Business Law Reform Bill. This bill shows that the Labour-led Government is prepared to invest in the incremental improvement of the business legal environment. There are a number of small improvements in this bill. Taken together, these improvements represent an ongoing, progressive improvement of the business legal environment and, in so doing, ensure that legislation surrounding the operation of business is clear, efficient, and effective.

The bill contains a number of amendments that are intended to remove unnecessary compliance costs for businesses, and that point has been recognised by speakers opposite in previous speeches. The amendments are also intended to clarify commercial law statutes by removing conflicts within and between existing legislation. As Minister Dalziel noted in her speech yesterday, these amendments are based upon suggestions from the business sector—from business law practitioners, enforcement agencies, and the business community—and many of the suggestions came forward in submissions to the Commerce Committee. This process is a good demonstration of the ability of this Government to listen to, and to take heed of, concerns from the business sector. Those concerns have been incorporated into this bill as it now appears before the House.

In speaking to this bill, I will mention two particular items. The first is that members will notice, in the select committee report, the reference to the report from the Regulations Review Committee. I want to draw attention to that report, because it represents a very good part of the process of scrutiny that this House delivers for the safety of New Zealanders when preparing legislation. The Regulations Review Committee expressed some concern that powers in the bill that were being conferred to regulation might more appropriately be considered the domain of Parliament itself. That was a right and proper constitutional point to raise but, in fact, the regulation-making powers considered by the Regulations Review Committee and referred back to the Commerce Committee, as they appear at clause 28, which inserts new section 6A, and again at clause 31, which substitutes new sections 19 and 19A, will be made by Order in Council. Those powers, under new clause 6A(2), inserted by clause 28, will apply when “(a) amending the maximum amount of assets that applies under subsection (1)(a)(i):”, “(b) amending the maximum amount of turnover that applies under subsection (1)(a)(ii):” and “(c) amending the maximum number of full-time equivalent employees that applies under subsection (1)(a)(iii)”—that is, under the definitions of an “exempt company” in the preceding subclause.

The Regulations Review Committee brought this matter to the attention of the Commerce Committee and we considered it seriously, because having Parliament as the ultimate scrutineer of legislation is a fundamentally important aspect of our democratic processes. In this instance it was unanimously considered by the select committee, without demur from Opposition parties, that the risks attached to this particular regulation-making power were not sufficient to warrant an additional amendment to be made to the primary legislation itself. The process of scrutiny that has been undertaken is a good one. The Regulations Review Committee looks at legislation coming forward to see whether there are regulation-making powers that are inappropriate or that extend delegated regulatory authority beyond the scrutiny of this House. In this instance, the select committee decided that an amendment was not warranted.

The second point I want to make refers to the “Issues requiring further policy development”, in the Commerce Committee’s commentary on the bill. That section of the report said that submitters came before the select committee proposing changes that were “beyond the scope of this bill.” I refer particularly to a recommendation from the Takeovers Panel to amend the Companies Act by removing a possible loophole regarding the application of the Takeovers Code.

The Commerce Committee thought the Takeovers Panel had a legitimate point to make, but decided that further work was needed on that issue. The committee decided that it would be possible to bring forward some suggestions that might address the panel’s concerns, at least in part, but that further consultation and talking with the business community might be necessary. The Takeovers Panel proposed the amendment during the course of submissions, because it was taking the opportunity to raise that issue around the possible loophole in the application of the Takeovers Code and the panel saw an opportunity to advance the issue in the context of hearings on this bill. So the Commerce Committee decided to insert the following sentence in the commentary on the bill: “We would support additional measures being brought forward to address the Takeovers Panel’s concerns at least in part.” That is an important consideration, because there may well be things that we will be able to do, in short order, to address some of the concerns of the Takeovers Panel, particularly with regard to amalgamations, and where actions look like amalgamations rather than takeovers.

That point, I think, is not one that has been drawn out in the debate before. It is an important forward-looking point in the commentary that ought not to be overlooked by this House in the second reading. The bill remains unanimously supported in this House, and I look forward to its progress. Kia ora koutou.