Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard   

Previous Fragment    Next Fragment
Tuesday, 1 February 1994
Page: 62

Mr LAVARCH (Attorney-General) (8.37 p.m.) —I start by thanking all honourable members who have contributed to this debate and by responding to my good friend the honourable member for Mitchell (Mr Cadman), as he spoke last. Perhaps of all the speakers he was probably the most critical of the government in this area. As the honourable member will well recall from his service on the House of Representatives Standing Committee on Legal and Constitutional Affairs and the work we did over a fair period in the area of corporate practice, the overwhelming theme of the evidence which came through to that inquiry—and which I think is fundamentally true—was that the major failure of Australian corporate regulation in the late 1980s was not a general failure of the substantive law but rather a failure to adequately enforce that law and to have in place a system capable of enforcing it.

  The honourable member for Mitchell seemed to be attributing this to the mates syndrome and the government having had its hands tied and not responding, and he started reeling off a few state governments. I assure the honourable member that this was not confined to one side of politics. Coming from the state of Queensland, I rather recall some shoddy practices occurring with the National Party government of that state. As for high profile business people and so-called mates, one rather high profile business person who seemed to be associated with rather high levels of the Liberal Party—he even might have been the president of the Liberal Party—is also, like Mr Burke, facing charges before the Australian courts at this time. I will go no further with the matter, except to make the obvious point that we should not really be throwing too many stones in this sort of debate about some of the practices of the late 1980s.

  As for dragging the chain and not coming to grips with the necessary corporate reform, which was again argued by the honourable member for Mitchell, the truth of the matter is that during the last term of the parliament the former Attorney-General, the honourable member for Holt (Mr Duffy), achieved the single most important reform to corporate regulation and corporate law in this country that we will ever see: the creation of the national scheme and the Australian Securities Commission. It replaced the cooperative scheme, which over the years came into increasing disrepute, between the states with a clear line of ministerial authority in the enforcement and responsibility of corporations law in this country. Various state corporate affairs commissions and the old NCSC were replaced by one single regulator, decently resourced and empowered to enforce the law.

  Whatever we do in the process of simplification during this term of parliament will be very much icing on the cake—the substantial reform cake which was achieved during the term of the last parliament under the leadership of the former Attorney-General. Nothing we do in this term will come anywhere near the overwhelming significance of those particular reforms.

  Most contributions of other honourable members were extremely thoughtful, and I think they deserve a response. The contribution of the honourable member for Tangney (Mr Williams) was in two parts: firstly, he spoke in the broad about the corporate reform processes and the measures in this bill; and, secondly, he raised a few specific concerns. He said that this bill was welcomed only as an improvement from what it replaced in terms of enhanced disclosure and that it was not generally received by the business community or industry as a welcome reform.

  That has not been my experience. The vast bulk of the reforms in this bill are welcomed. I certainly cannot say that about the extensions of the rights of companies to indemnify directors or company officeholders. The reforms are warmly welcomed by the business community. In terms of enhanced disclosure, I think there is a broad recognition that, while business dislikes anything which it may see as putting an additional cost on the operation of business, it is necessary to have the right balance between an informed market, adequate investor protection and the rights of business to be able to operate in a competitive environment which recognises costs. It has been my experience, through very extensive consultations done in relation to this bill, that the reforms are fairly warmly regarded. Obviously, nothing is ever regarded well universally. I think the reforms contained in this bill are fairly well regarded.

  Secondly, the shadow Attorney-General asked, `Why are you doing this at this stage? You have announced a simplification program. You should be waiting for that process to go through. Every time you change the law you create a certain amount of uncertainty, which is terribly undesirable. The only time you should be moving away from the simplification program is if something is urgently required as an area of reform'. Again, one has to see this in context. This is a series of reforms to the substantive law following on from the adoption of a national scheme. It is in the same light as reforms to the insider trading provisions, reforms to the prospectus provisions and the important reforms to loans to directors and company officers.

  In that light, it is another leg in that series of substantive law reform and it has been argued for a long time that it is extremely important. The honourable member for Fisher (Mr Slipper) in his speech, unlike his shadow Attorney-General, did not criticise the government for doing it; he criticised the government for dragging the chain and for not having done this some time before. Those opposite cannot have it both ways. In my opinion, this is extremely worthwhile and important reform.

  On the question of whether it is urgent reform and, hence, should not be done independently of the simplification process, I think urgency is very much in the eye of the beholder. I imagine the business community would believe that the extension of the right to indemnify company directors is very worthwhile and urgent reform and would be very upset if that were to wait until the simplification process was completed. From that perspective, I believe they would think the indemnification rules are very urgent but they may think that the enhanced disclosure provisions are not that urgent. The investing community of Australia may have a different view. They may think the indemnification rules are not quite so urgent but that the enhanced disclosure provisions are very urgent. I think the question as to what one considers urgent very much depends on where one sits in this equation of the balance between investor protection and the proper regime for business.

  I agree with the shadow Attorney-General on his general point. That is the approach that we are attempting to take in terms of the simplification program, but the program should be allowed to run its course. We should not be having large scale policy debates independently of the simplification program, unless they are genuinely considered very desirable or quite urgent. It is a fact of life that a series of reforms to the Corporations Law is necessary, in my view, which will need to be proceeded with separately from the simplification program. I think collective investments are probably in that particular category. It is an area of the Australian economy in which we have had a number of difficulties in the past. We have had a major review of the area. The report from the CASAC and the Law Reform Commission is now available for public comment. After we receive those comments we will proceed this year in line with our considered approach.

  The simplification process is an extremely big task. The honourable member for Curtin (Mr Rocher) chided me for saying that it was going to be a long-term project and, therefore, that I was not being too enthusiastic or keen enough, but that is a fact of life. It is an extremely complicated and major piece of legislation. It will be a long-term project, particularly if we are going to be genuine about the consultative processes which I have set out that we wish to follow.

Mr Rocher —Give us a timetable.

Mr LAVARCH —I will get to that and explain it to the honourable member. It will mean that, throughout the life of this parliament, a product will be produced in terms of the simplification program. A program of the sections of the act to be undertaken was released at the end of last year for public comment by the task force involved in the project. I will make sure that a copy is sent to the honourable member for Curtin so that he can acquaint himself with its provisions and comment on whether he thinks it is the right way to go about it. It is out there at the moment so that we can get learned dissertations from people, such as the honourable member for Curtin, on these subjects. But it will take time; hence, we will need to proceed with other reforms as well.

  The shadow Attorney-General then made more specific points. He thought that there was a general perception that the fundraising reforms that the government had proceeded with were haphazard. I will accept to an extent that there have been a number of reforms to prospectus provisions and that they have not all been incorporated in a single package with bells and bows on it. The new prospectus provisions are relatively new. They created a little controversy at the time but they have now been generally welcomed. We do have a major report—the Lonergan subcommittee of CASAC—on prospectus reforms and some of those reforms are contained in this bill. Again, with the range of work that needs to be done in this area, it is not always possible to devote all the resources that we would like in order to get these things done in one bite. Sometimes they have to be done in smaller pieces. To some extent I think that has been the case in changes to prospectus provisions.

  The shadow Attorney-General then made fair comment in terms of the ASCOT system; that is, the admissibility into court of information contained on the database of the ASC. I think he put the case well. The point is that any evidence which is led in court on the basis of the provisions in this bill is the starting point of a submission to rebut. It is possible to lead evidence to overcome the prima facie nature of evidence which has previously been led. I think the honourable member argued that it would not be possible to bring forward a witness to rebut what was contained in an annual report or a chairman's statement. That is not my understanding of how it would work.

  The honourable member made the comment that there seemed to be different tests applying to disclosure requirements for listed companies based on the listing rules of the Stock Exchange and the regime which needs to be set up for non-listed entities. A couple of points need to be made about that. It is important that this legislation cover non-listed entities. We are interested in making sure that all entities which are raising funds from the public are generally covered by a disclosure regime, often, in the case of non-listed companies, through the prospectus provisions and, to a more limited extent, through the reforms contained in this bill. But that applies also to listed entities. There needs to be confidence on the part of the investing public. In many cases, when they are deciding where to put their money, they do not draw the distinction between whether a company is listed on the Stock Exchange or not.

  Investors need to know that timely and accurate information which they, as investors, need is available to them when they are making an informed judgment. I think the tests are fairly similar for the two. Given that we need to have a statutory scheme for non-listed entities, the information is not exactly in the same terms as the listing rules but it is very similar.

  I am grateful to the honourable member for Barton (Mr Punch) for his contribution. He outlined both the basic rationale of the bill and its major provisions. It is very important to see this in the context of the reforms necessary in response to the excesses of the 1980s. I am very grateful to the honourable member for McMillan (Mr Cunningham) for his strong support for the measures contained in this bill and for his comprehensive coverage of the issues.

  The honourable member for O'Connor (Mr Tuckey) made an interesting contribution. He did not really talk much about the bill but instead spoke a bit about small business. I point out to him that a new corporate structure for small business is the top priority in the program of the simplification task force. I ask him to look at the proposal which was contained in the government discussion paper released last year relating to how we can breathe life into the area of Corporations Law. I think it is very important that we get an appropriate small business corporate structure in place. It is important for our economy and that is why it has been given a high priority by the task force proceeding with the simplification process.

  The honourable member for O'Connor went on to argue the case for a one-stop shop. He said that the tax office might be an appropriate place for people to lodge both their annual returns for Corporations Law purposes, together with their tax form. This is not an area for which I have ministerial responsibility. It is an interesting idea. I think there are probably some practical difficulties in actually making that work but maybe they could be looked at.

  The honourable member for Bendigo (Mr Reid) spoke about corporate crime—white collar crime. He was particularly concerned about an article in the Australian Financial Review which stated that a lot of white collar crime is not reported. I have not seen that particular article. The provisions of this bill are important in two ways. They aim to make sure that material information is made available. To that extent hopefully they will do something to break down the veils of secrecy which exist. The provisions are also predicated on memorandums of understanding being entered into between the ASC and the Australian Stock Exchange so that there is a good flow of information and cooperation between the two bodies. That point is not directly in response to the honourable member's comments on the bill; nonetheless the memorandums will play their part in making sure that we have a climate where people know what is going on. That is important in terms of combating serious fraud which is often involved in white collar crime.

  The honourable member for Curtin, whose remarks I have addressed slightly, asked about simplification. I can advise the honourable member that the task force actually undertaking the simplification project has now been in place for some months. Membership of the consultative group has now been finalised. I have not announced it yet. I experienced some delay in actually getting a chairperson for the group. We asked a number of people who were willing to put in the time and who also had the standing in the community which I thought was important for the job. That delayed the finalisation of that group for a little time. I am happy that we now have a very good chairperson of the group and I will shortly be making an announcement with due fanfare. Honourable members can be assured that that process is well under way. The program which the group proposes to tackle has been released and it is open for public comment.

  All in all, I appreciate the support which honourable members from both the government and opposition have given to this legislation. I think it is good legislation and worthy of the support of the House.

  Question resolved in the affirmative.

  Bill read a second time.