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Thursday, 30 June 1994
Page: 2398


Senator GIBSON —On behalf of the Joint Statutory Committee on Corporations and Securities, I present a report entitled Report on the annual reports of the Australian Securities Commission, the Companies and Securities Advisory Committee, the Companies Auditors and Liquidators Disciplinary Board and the Australian Accounting Standards Board 1992-93, together with transcripts of evidence.

  Ordered that the report be printed.


Senator GIBSON —I move:

  That the Senate take note of the report.

I seek leave to incorporate a tabling statement in Hansard.

  Leave granted.

  The statement read as follows

PARLIAMENTARY COMMITTEE ON CORPORATIONS AND SECURITIES

CHAIRMAN'S TABLING STATEMENT

  I present a report pursuant to section 243 of the Australian Securities Commission Act 1989 by the Parliamentary Joint Committee on Corporations and Securities on the annual reports of the Australian Securities Commission and other bodies for 1992-93.

  The Committee has examined the annual reports for the year 1992-93 for each of the bodies established by the Australian Securities Commission Act. The Committee also held a public hearing with the ASC on 20 April 1994 at which the Committee sought further information on some of the matters mentioned in the ASC's Annual Report.

  Mr Speaker, I table a copy of the Hansard of that public hearing.

  There are several important matters arising from the ASC Annual Report and the public hearing which I will draw to the House's attention.

Abuse of the Corporate Form

  The Committee has received representations regarding abuse of the corporate form in the textile industry to the effect that businesses have been structured so that the employees of the business have been employed by a company with limited assets while assets of the business are held by a separate company. If these businesses cease the company employing group employees have no assets with which to pay accumulated holiday pay, long service leave or redundancy payments and are placed in liquidation. Principals of the business retain control of its assets in a separate company where they are not accessible to employees or creditors.

  Representations have been made to the Committee that a NSW group of companies, the Gazal group, had structured its businesses in this way and that companies in the Gazal group have failed to pay holiday, long service leave and redundancy payments to employees.

  As well, according to press reports, the Textile, Clothing and Footwear Union has initiated legal action against the directors of a Victorian company, Jeanswear Australia, which went into liquidation a week before Christmas 1993 with staff being told there was no money available for holiday pay, long-service leave and other entitlements.

  The Committee is extremely concerned that the corporate form, while continuing to provide a simple and effective business vehicle can be deliberately abused so as to avoid obligations to employees and creditors. The Committee will actively pursue the issue of abuse of the corporate form.

The `Big 16' Investigations

  During its public hearing with the ASC the Committee reviewed progress on major 1980's corporate collapse matters, which came to be known as the `Big 16'. As well, the Committee heard in camera evidence from the ASC, which it does not intend to publish, on the progress of these investigations. The Committee appreciates these are extremely complex matters which predate the establishment of the ASC in 1991 but it has been concerned about public perception that progress on these matters has been far too slow.

  The ASC provided the Committee with information about the progress of these matters and outlined that in thirteen of the sixteen cases charges had now been laid and that further progress in these cases is dependent on the court process. One other matter has been concluded, the ASC having determined that there were no grounds for criminal or civil action. Of the remaining two matters, one is the subject of civil action and a report to the Minister and, in respect of the other, the ASC has concluded its investigations, although consideration of the matter has not been finalised.

  The Committee is satisfied with the evidence it has received from the ASC in respect of the progress on these major investigations. The Committee supports the view of the ASC Chairman that the ASC should not in future report on these matters as a specific group.

Relations Between the ASC and the DPP

  The new arrangements put in place as a result of the dispute between the ASC and the DPP in 1992 have been working well and that there have been no disputes requiring formal resolution by the National Steering Committee on Corporate Wrongdoing.

  Similar assurances have been given directly to the Committee by both the Chairman of the ASC and the Director of Public Prosecutions.

  Although there have been some media reports of friction between the two organisations the Committee is satisfied that the relationship between the two organisations is basically sound and that both organisations are aware of the need to ensure that good relations are maintained.

Limitation on Commencement of Actions by the ASC

  The ASC Chairman commented earlier this year that Section 1316 of the Corporations Law may impede the prosecution of corporate crime, particularly in some complex investigation cases. While this matter was not mentioned in the ASC Annual Report, the Committee raised it with the ASC Chairman during its public hearing in April.

  The Committee views this as an important issue for enforcement of the Corporations Law. There already exists a perception in the minds of many Australians that the law is incapable of dealing effectively with prominent corporate criminals, that complex matters take too long to be investigated and come to trial and that the cost of investigating and pursuing these cases is excessive.

  That perception is not lessened by having major cases delayed by seemingly interminable reviews of the decision to prosecute.

  The Committee has not conducted any fuller inquiry into this matter to date. Such an inquiry may bring to light evidence that Section 1316 does serve a useful purpose.

  However, on the basis of the discussions the Committee has held on this matter with the Chairman of the ASC, it considers that the Attorney-General should give early consideration to the possible effect of Section 1316 and its role. The Committee would welcome a reference on this matter if such an inquiry would assist the Parliament in forming a clearer understanding of the application of this section of the Corporations Law.

The Committee formally recommends that the Attorney-General review Section 1316 of the Corporations Law.

Future Reports

  The Committee considers that the ASC Annual Report should be a vehicle not simply for recording statistics and major events, it should also serve as a vehicle for analysing and interpreting long term developments affecting the ASC and the administration and enforcement of the Corporations Law.

  Whilst the Committee is concerned that the ASC Annual Report provides a limited analysis of its role and activities, it is satisfied that information not covered in the annual report on which the Committee sought advice from the ASC was readily and fully provided by the ASC to the Committee during the April hearing.

Conclusion

  The Committee is satisfied with the overall presentation of the ASC Annual Report. However, it would like future reports to contain more information particularly:

analysis and interpretation of long term developments affecting the ASC and the administration and enforcement of the Corporations Law;

matters which have affected the ASC's effectiveness or have hindered the ASC in pursuing its goals and objectives.

  Mr Speaker, the Committee will continue to carefully scrutinise the activities, role and functions of the ASC and other bodies set up to ensure Australian corporations and securities laws are effective and up-to-date, and that reports under the ASC Act are informative and of maximum benefit to the Parliament and the community.

  Question resolved in the affirmative.