Ms JULIE BISHOP (9:52 AM) —I rise to speak on the report on the Corporate Law Economic Reform Program Bill 1998 tabled in this House yesterday by the Deputy Chairman of the Joint Committee on Corporations and Securities, the member for Maribyrnong. The Treasurer, the Hon. Peter Costello, established the Corporate Law Economic Reform Program in March 1997 specifically aimed at creating an environment in which businesses can create wealth and create jobs for all Australians and ensuring an efficient, responsible and flexible corporate environment.

In April 1998 the Treasurer released the draft Corporate Law Economic Reform Program Bill for public comment. The bill is in four parts, dealing with reforms to directors' duties and corporate governance, fundraising, takeovers and accounting standards. This bill is a significant step in the government's reform agenda to modernise the legal structures and the regulatory framework under which Australian businesses operate. The legislation is not designed to relax necessary regulation but seeks to simplify it. The bill has undergone an extensive process of public consultation and discussion. The committee's inquiry began in April 1998 following a request by the Treasurer. In general, there was strong support for both the consultation process and the general thrust of the bill. The process, for example, was described in one submission as a `model of best practice consultation in policy development'.

Of the many issues considered by the committee, I will refer to just a few. One area of concern was the extension of the compulsory acquisition provision to allow a 90 per cent majority shareholder to compulsorily acquire the remaining shares at any time. Several individual shareholders and the Australian Shareholders Association opposed this change on the basis that it would allow their shares to be acquired from them against their will and without sufficient regard to general considerations of fairness. The committee had regard to their views, but the committee also considered the effects of the small minority shareholdings on the efficiency of Australian businesses and on the interests of all of the shareholders of the companies involved and concluded that this extension of the compulsory acquisition provisions is justified and that it is generally fair to minority shareholders. The committee did recommend some minor amendments aimed at protecting the interests of those minority shareholders.

A matter of significance which arose during the inquiry concerned the effects of capital gains tax on shareholders whose shares are acquired during compulsory acquisition or who receive a scrip-for-scrip takeover offer. One witness noted that not only will shares be taken from minority shareholders in compulsory acquisition but also the tax liability would also arise under the capital gains tax provisions. There were concerns that self-funded retirees would be particularly affected because their capital base would be diminished and subject to capital gains tax during a compulsory acquisition or a scrip-for-scrip takeover offer. The committee took this into account and concluded that the capital gains tax implications of accepting a takeover offer in these circumstances would deter many investors from accepting an offer and this of course would frustrate the economic objectives of the reforms contained in the bill.

The committee recommended that, irrespective of progress on other much needed capital gains tax reform, rollover relief from capital gains tax be provided where shares are compulsorily acquired and when a takeover offer for a publicly listed company is accepted on a scrip-for-scrip basis. An amending tax bill should be introduced urgently to accompany debate on the legislation to give effect to this recommendation. Failing this, the legislation ought be amended so that a potential unwanted capital gains tax liability provides an absolute defence against compulsory acquisition.

Another major issue was in relation to the Takeovers Panel. During the inquiry the committee conducted a video conference with Mr Peter Lee from the United Kingdom Takeovers Panel. This proved to be a very valuable exercise for the committee as the Takeovers Panel has successfully operated in the United Kingdom for over 30 years. It was apparent to the committee that for the Australian panel to be fully effective it must enjoy the support of the whole business community. The hearing also focused the committee's attention on the importance of ensuring that the best possible people available are appointed to the Australian panel with appropriate remuneration. The committee concluded that the bill will establish an effective Takeovers Panel.

It should be noted that there was general support of all committee members for the report and there were no dissenting reports, although there were supplementary reports on particular aspects lodged by several members. I take this opportunity on behalf of the chairman of the committee, Senator Chapman, to thank the other members of the committee and to thank the committee secretary, Frank Nugent, and his staff for their invaluable contribution to the inquiry. We recognise the contribution made by the individuals and organisations making submissions to the committee or appearing during the public hearings and responding to requests by the committee for further information. The committee has recommended that, subject to the specific recommendations mentioned in its report, the bill be passed in its current form.

Debate (on motion by Mr Swan) adjourned.