Mr JOHN BROWN(9.23) — We are now dealing with clause 565, dividends payable from profits only. This clause causes the Opposition some worry. In fact, the Opposition included this clause in our second reading amendment. The clause now only provides that no dividends shall be payable to the shareholder of any company except out of profits. Whilst the clause gives an inclusive definition of dividends it does not give any definition of profit. Sub-clause (2) assumes that the concept of profit is clearly defined and understood for this sub-clause makes it an offence for a director or executive officer of a company wilfully to pay dividends out of what he knows is not profits. For that reason alone a definition of profits is totally desirable. In the view of the Opposition, more importantly, in failing to define profits the Bill leaves the way open for a liberal interpretation of the concept and for the strictures of this clause to be avoided.

In the exposure draft of the Companies Bill clause 376 defined profits, for the purpose of payment of dividends, as being the sum of:

(a) The aggregate of its revenue profits so far as not previously applied (whether by distribution, capitalisation or otherwise); and

(b) The amount, if any, by which the aggregate of its realised capital profits so far as not so previously applied exceeds the aggregate of revenue losses and realised capital losses so far as not previously written off.

The proposed clause contained further strictures relating to the inclusion of capital profits in the profits against which dividends could be debited. There was some criticism of these provisions from an accounting point of view. Probably some of the criticisms were justified. However, it is a great pity that the Government got cold feet in this area.

Mr Jacobi —They watered it down.

Mr JOHN BROWN —That is why they got cold feet, because they used cold water to water it down. What was a most important step towards reform has been abandoned and the interpretation of the concept of profit left entirely to the directors of the company. While we may share some of the views of the Minister that not all directors are thieves, cheats or brigands, I think the Minister would also agree that there are quite a number of directors, in and out of gaol, who perhaps would not qualify for that description. The Opposition is quite concerned that the definition of profits is almost left to the value judgment of a director. The Opposition regrets that instead of persisting with a worthwhile reform and endeavouring to get it right the Government has succumbed to unreasonable pressure from accountants and other lobbyists and that good reform in the exposure draft, like a lot of other good reforms, has disappeared from the Companies Bill. We regret that that is what has happened. This is another one of the many amendments which we think need to be made to the Companies Bill to make it the Bill that we all want, given the fact that it is a co-operative scheme rather than a uniform scheme. Even with that fact in mind if this amendment were cleared up perhaps there might be more protection.