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Wednesday, 13 May 1981
Page: 2316

Mr JOHN BROWN(4.45) —Clause 5 specifically refers to the interpretation of the Companies Bill. I wish to speak generally about interpretations and specifically about one of those interpretations. In a Bill where complexity and detail have already passed well beyond any desirable limit, it should be recorded that there are at least six confusingly similar but technically distinct modes of referring to the corporate entities to which the Bill is in various ways applicable. The terms used are as follows: Company, body corporate, corporation, foreign company, recognised company and recognised foreign company. In addition, in certain parts of the Bill reference is made to companies which are intended versions of all of those six foregoing terms. It appears to me that the Government's much vaunted uniformity has done nothing to simplify companies legislation which is what it has allegedly intended to do.

Turning to one specific interpretation contained in the Bill, that is, the interpretation of an exempt proprietary company, I wish to make a few observations. We of the Opposition believe that exempt proprietary companies and the privileges associated with them should be abolished. My reason for saying that is that there is at present an elaborately defined category called 'exempt proprietary company'. Some of the peculiarities which these companies are allowed to use in the performance of their duties are, firstly, that they need not appoint an auditor, and secondly, that they need not file a copy of their accounts along with their annual returns so long as they either operate as an unlimited company or have the accounts audited. The underlying policy seems to be that companies which are genuinely private, being not directly or indirectly owned or controlled by a public company, should have to appoint an auditor, file accounts or risk unlimited liability but should not be afflicted with more than one of these alternatives. We think that this is muddled thinking. Why should a limited private company, which has gone to the trouble and expense to have an audit, be allowed to keep its accounts in secret to the detriment of creditors and credit rating agencies which perhaps could make good use of those accounts if they were listed? Conversely, why should unaudited accounts which may be inadequate and misleading be the ones which have to be made public?

In England since 1967 and in other countries a simple formula has applied. The price of limited liability is financial disclosure. We find that this is one of the paramount weaknesses of the Companies Bill as introduced in this chamber. Credit rating agencies have derived significant benefit and private companies have been better induced to look after their finances when they have to disclose their accounts. I note that the report of the United Kingdom's committee of inquiry into small firms, the Bolton Committee, moved exactly as I suggested to eliminate limited private companies. There may be a case for exempting small private companies from disclosing certain individual items. For example, their turnover might be non-disclosable in order to protect them from takeover. The general notion that such private companies should have financial privacy based perhaps on the idea that individual proprietors do not want their employees, or dare I say the tax man, let alone anyone else, to know how rich they are is outmoded and unjustified in a society where pay scales in virtually all salaried employment are easily ascertainable.

In the interests of simpler company law, better creditor protection and better financial control in small companies, the status of exempt proprietary companies should be abolished and all limited companies compelled to prepare and file audited reports. I leave it at that. I hope that our views are clearly known to the Minister for Business and Consumer Affairs (Mr Moore) in this regard. I think that my colleague the honourable member for Hawker (Mr Jacobi) may have some further pointed observations to make on the same clause.