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Wednesday, 29 April 1987
Page: 2012

Senator HILL(5.31) —It was last April that I moved that certain matters be referred to the Standing Committee on Constitutional and Legal Affairs, namely, that it consider the role of Parliament in relation to the Ministerial Council for the Companies and Securities Commission and the National Companies and Securities Commission, and also the role of Parliament in relation to the operation and effectiveness of companies and securities legislation. As a principal instigator of the project, it appeared to me that for too long senators from all sides of the chamber had voiced frustration and irritation at the inherent inadequacies of what we refer to as the co-operative companies scheme. It seemed that it was time for the Senate once again to look at the question whether there was not a better alternative. That, of course, is in the historical context of the Senate taking the lead in that area of the law over many years. We need to reflect only on the enormously valuable work previously done by the Select Committee on Securities and Exchange, which was chaired by our friend and former colleague Peter Rae. The frustrations of the current scheme are well known, and I shall refer to them briefly. Firstly, under the scheme there is no proper parliamentary accountability. The Federal Parliament is unable to meet its constitutional responsibilities for Bills that are introduced into the Parliament, and particularly into this chamber. In practical terms, there is no power either to instigate legislation or to amend legislation. In no other area has the Senate had to demean itself by rubber stamping into law something that is, in effect, determined by a committee-in this instance, that being the Ministerial Council.

The second area of frustration and concern is that, under the scheme, there is a lack of proper ministerial responsibility. Ministers in this place have been able to excuse themselves from responsibility on the correct assertion that it is not their responsibility but the responsibility of the Ministerial Council, which consists of a Minister of this Parliament plus Ministers from each of the States. Therefore, with no one Minister responsible for a Bill, it follows that the whole process of ministerial responsibility cannot be met.

Thirdly, we have witnessed continued examples of poor drafting, sloppy drafting and, in some cases, even meaningless provisions. That could certainly be corrected had the Senate the power to amend, but with the inability of the Senate to do so, that has resulted in an obviously intolerable situation.

Fourthly, there is a problem with the exposure draft procedure, which has been developed to compensate for the lack of power to amend. In effect, it has meant that committees have considered the recommendations made by business and community groups, accepted some of them and rejected others without reasons being given; and all behind closed doors. That clearly and obviously is a second best option to a Parliament-or in this case, the Senate-debating amendments in open forum and giving an opportunity for the public to see why particular courses of action are adopted.

Fifthly, the Senate will be aware of the administrative inadequacies of the scheme, especially through the starving of funds to the NCSC. Again, no one body is responsible for the administering mechanism. Sixthly, constant criticism has been put before the Committee of different practices in the application of the law because the States' corporate affairs commissions adopt different practices. Examples were put before the Committee of unnecessary duplication and general frustration for the business, legal and accounting communities that must work under that legislative regime.

Frustrations have been voiced not only in the Senate, but by the business community as a whole. The Senate will be aware of continuing criticisms by academics, and even by some State governments in recent times, that have recognised the shortcomings of the existing system. It was, therefore, time for a review, and I believe that the report is a milestone in the development of corporate law reform in this country. Its importance lies in the fact that a committee of the Senate, representing both sides of Australian politics, considered all the evidence and unanimously concluded that it is time for a national corporate law.

As the Senate is well aware, the process of reform in Australia is more often one of evolution, and that is what has gradually occurred. We know that the history of company law originated in British law. We then had separate company law in each of our States, which obviously led to inconsistencies. More often than not, businesses began to be run on a national basis. Therefore, there was a need for uniform companies law in the States, and efforts were made to develop a uniform scheme. That was an improvement, but it still had shortcomings. From there, through the tortuous process of the previous committee to which I referred, we eventually reached a co-operative scheme. The process of evolution continued, and we have now arrived at the current position.

First, we have the shortcomings that I mentioned and, secondly, a growing awareness not only of the national nature of business-and the single market-place was continually referred to us-the complexity of business, the greater profit lines and the ever increasing numbers of advisers, so prevalent in nationally-based businesses, but also, as was stressed to us, an awareness that there was a growing international nature to Australian business, with a need for Australian corporate law to adapt and respond to that and be reformed efficiently and, when necessary, rapidly. Therefore, there is a changing nature to the business environment in which the law must operate.

Thirdly, and most significantly, we have found as the years have gone by that principal legal advisers have become much more confident that the Commonwealth has the constitutional power to cover the field. The Committee was assisted by the most valuable report of Sir Maurice Byers to that effect. So it seems to the Committee that the co-operative scheme has now outlived its usefulness, and it is time to help the evolutionary process by the Commonwealth taking the next logical step, and that is a Commonwealth scheme.

I am pleased that in the 24 hours since the report has been tabled it has been positively received by the business community. I hope now to see a recognition by the States that the recommendations of the report are in the best interests of the nation as a whole. Obviously, I would like to see a move to the Commonwealth with the support of the States. There may well be a role for the States in administration, perhaps as agents of the Commonwealth. In other words, I am sure that an arrangement with the States, with goodwill on both sides, can be negotiated. This report will not end the process of reform in this area. As in other areas reform will continue. In passing I mention that worthwhile suggestions were put to the Committee that could be considered in another context-moves to plain English drafting and perhaps dividing the NCSC into its various functions.

In conclusion, I thank my colleagues for their co-operation during the hearings. I thank those who made submissions and appeared before the Committee. I particularly thank the Secretary of the Committee and its staff for their excellent work in assisting the Committee. I commend the report to the Senate.