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Tuesday, 7 February 2017
Page: 111


Mr HUSIC (Chifley) (19:18): I am grateful for the opportunity to follow on from the shadow Assistant Treasurer in relation to the Treasury Laws Amendment (2016 Measures No. 1) Bill 2016. As indicated, the opposition is not opposed per se to those provisions of the bill that relate to changes that will be made to the employee share scheme and some things that the government has flagged in the second reading speech.

I note that the second reading speech makes reference to the fact that it is giving life to a commitment made in the National Innovation and Science Agenda that was released in December 2015. That commitment said it would look at whether or not disclosure documents used as part of the employee share scheme regime, documents that are used by early-stage innovators and start-ups, be made public. The government had said back in December 2015 it would look at it.

A second reading speech was made on 1 December last year, almost a year after the government made that commitment. What was interesting is that the Treasury consultation around this bill closed on 7 December. We had a second reading speech and legislation introduced on 1 December, saying that it had consulted with the start-up community on this, but then the consultations actually closed a week after this.

As the member for Fenner, the shadow Assistant Treasurer, indicated, there has been very little released as to what happened in those consultations and how that was managed and, importantly, how it was translated into this bill in terms of what we are discussing. The second reading speech makes reference to the fact that this could be a problem and says that it wants to avoid it.

The second reading speech indicates that it is a reflection of a commitment granted in the National Innovation and Science Agenda, but it does not actually highlight (1) what the problem is (2) if it has been validated within the sector and (3) what measures, as raised by the sector, by start-ups, have been picked up by the government and reflected in this bill. I will be interested to hear from the minister at the table how that has been managed, because there are some concerns. Again, I would ask the government to respond to these concerns.

It is usually the case that a start-up will hold a percentage of equity that is going to be divided amongst all employees so that individual shares may fluctuate between a team. The share registry, when it is put into the disclosure document and made public, will be quite transparent about the way the shares have been divided. What the government is saying is that some of the assumptions about the business and some sensitive business information will not be made public through the share registry. We totally understand that, because it may be the case for some early-stage innovators and start-ups, particularly at their point of development, that they do not want to reveal that information publicly. But bear in mind that when a disclosure document has been made public, employees will want the transparency of that to be made available. They will also want to know that any changes to the share arrangements will be updated in the disclosure document. How will those updated changes or supplementary documents be made available, as is provided for under the legislation—the Corporations Act 2001?

And what I will be interested to hear from the minister is: how will employees know (1) how any changes in the share arrangements will be reflected in the document and (2) that they will have access to them?

The other thing is: there will be employees in start-ups not necessarily covered off by the particular share arrangements of one start-up. Those employees will want to know how share arrangements are made in other start-ups. They will use them as a way of being able to negotiate for their share arrangements in other instances.

My other concern is that employees of start-ups may have their bargaining power limited by virtue of the fact that there is a lot less information made public. Again, on the face of it, you would think that what is being proposed is straightforward, and I certainly appreciate that. You do not want to necessarily provide a lot of business information in the public domain for some of those early-stage companies. But it is a problem (1) if it has an impact on employees' shares and the way that they are treated and updated and those changes are reflected, and (2) if it inhibits, by virtue of the fact that this information is no longer available to employees of start-ups, their negotiating power.

The other thing that I want to raise with the minister while we are here is this. You have got this set of changes that are being put forward now to the parliament in relation to employee share schemes and whether or not disclosure documents will be made public via the share registry anymore. So you will have disclosure documents that spell out what the business is, what it predicts future business or industry conditions will be, and how that will impact on earnings. What is being proposed here is that that type of detail no longer be made public. That is what is being proposed in this case.

But we are also debating an arrangement, elsewhere, in other legislation, that will make this quite evident, and that is in equity crowdfunding legislation where disclosure documents will have to be made public. There may be a case where some firms who have an ESS available to their employees may choose to raise capital through an equity crowdfunding campaign, but their document there will have to be made public. So what we are interested to find out from the government—and I hope that this can be addressed, Minister, in the summing up in response to the bill—is: how will the operation of these changes work in tandem with a situation where a firm that has got an ESS in place has then decided to seek an equity crowdfunding campaign to raise funds, but will also provide a disclosure document where there may be variations to those disclosure documents. I would be very interested to see how that will operate—that you will have one disclosure document that is not made public but another disclosure document that will need to be made public through the process of equity crowdfunding. I think these are serious issues that should be responded to. Again, I say to the minister: I am very interested to hear again where they intend to make public the type of feedback that is being provided by the start-up sector to the legislation that was proposed, bearing in mind that you tabled this legislation one week before you closed the consultation process off on 7 December—

Ms O'Dwyer interjecting

Mr HUSIC: Absolutely. And if there is confusion to this, I am certainly happy to stand corrected. But I am interested to know: what has been raised, and how the bill reflects what has been raised, in the consultation; and, importantly, how—quite separate to this—there might be situations where there is a conflict between one disclosure document regime being made private and another disclosure document regime, in terms of equity crowdfunding, being made public, and what happens in those circumstances. Again, we do not seek to oppose the bill on this basis, but I do think it is important that some of these matters be addressed and attended to, because I think it will give a lot more certainty in the broader public space, particularly for start-ups, about what might happen to them. I will just contain my remarks to that.