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Monday, 14 October 1985
Page: 1165

Senator HILL(5.25) —The Companies Amendment Bill 1985 and the Companies (Fees) Amendment Bill 1985 are supported by the Opposition. They have the effect of reducing the administrative burden on those in business and it is somewhat rare that we have legislation come before this chamber which has this effect. It is, therefore, not surprising that we support it. There are some matters though that we would in different circumstances seek to amend. I am not sure whether that is still the case, as the Opposition has just been presented with certain amendments by the Government which have gone through the Ministerial Council for Companies and Securities and which I have not yet had time to examine properly. However, certainly subject to those amendments doing what we would otherwise seek, we have a couple of amendments which in normal circumstances we would have sought to introduce.

It is very difficult with legislation of this type. It is therefore an opportune time for me to express again my concern as to this method of legislating by Ministerial Council rather than by the Parliament. It is true that the procedure provides for parliamentary rubber stamping but that is exactly what it is-no more and no less-simply a rubber stamping because of the fact that there is no effective way for the Parliament to amend the legislation that comes before it. Passing a Bill, as you would know, Mr Deputy President, by this method by the Federal Parliament has the effect that it becomes law of the Commonwealth and law in each of the States. A Bill cannot come to the Federal Parliament until it has been approved by the Ministerial Council. Presumably an amendment, if accepted by the Chair, therefore defeats the whole Bill. Nobody quite knows the effect of the Senate seeking to amend that which has been agreed by the Ministerial Council. What this really amounts to is that this Parliament and the representatives of this Parliament have been prepared by this system of legislation to abdicate their responsibility to the Executive. I never cease to be amazed that such a procedure could have been adopted by the Parliament some years ago.

On the brighter side, one advantage of this unique method of legislating is that it has forced the bureaucracy into a process of comprehensive consultancy. We certainly do not condemn that. The opportunity for greater public input in the legislative process is something that we on this side of the chamber certainly applaud. Public input has meant that the principal of the two Bills is in a very different form from that which was first put out for public scrutiny. The proposed amendments, these Bills, were released for public comment in January of this year. They dealt with, first, the question of limited liability for the holders of units in unit trusts, and secondly, the introduction of a new shorter form of annual return. The Ministerial Council is not proceeding with the first, which it decided was better dealt with by administrative means rather than through legislation-that is, by the National Companies and Securities Commission requiring a prospectus to include a prominent statement as to whether the trust deed limits the liability of a unit holder. The theory is that investors can make up their own minds.

I must say in passing, however, that the whole maze of unit trusts certainly requires a much more detailed consideration than that which this Parliament has given it in the past. I will expand upon that in a few moments. The need for that consideration, one could argue, has come about or at least has been made more prominent by a number of recent unfortunate examples in the unit trust area. The Companies Amendment Bill deals with the second of the matters that were covered in the first exposure draft and the reduction of the regulatory burden on the business community by means of simpler forms of annual returns. As I said in opening, that is supported. Even that part of the original exposure draft has, however, been modified by the public exposure procedure. The Bills which are now before the chamber involve the introduction of a new form of annual return partially prepared by the corporate affairs commissioners and using, where the States have such equipment, automatic data processing equipment. Such annual returns are to include certain key financial data which are set out in the Bill. A matter which was included in the original exposure draft and which is not now covered was the intention to relieve exempt proprietary companies that do not have their accounts audited of the obligation to lodge a copy of accounts and other documents with their annual return. That is no longer there. It was also apparent from the original exposure draft that the time limits for the lodging of returns were to be reduced. After consideration of submissions which were forwarded that provision also has now been deleted.

I have mentioned that there are two specific matters which have caused us some little concern and on which, under normal circumstances, we would have wished to introduce amendments for consideration. They were raised by the Law Institute of Victoria. But for the amendments that have just been given to me by the Government I would have asked for some explanation as to why they were not covered in the original Bills. I suspect, as I said, that they may now be covered by the Government's own amendments. The first is that under proposed new section 275A(1) the Commission may call for accounts, arguably, even from an exempt proprietary company with an auditor. That seems inconsistent with what the Minister for Community Services (Senator Grimes) said in his second reading speech. Also it seems illogical to change the exposure drafts so that brief details do not have to be included in an annual return; yet under proposed new section 275A(1) a full set of accounts may be required. The Law Institute of Victoria felt that there may be some inconsistency in that respect and it appears to us also to be the case. As I said, I have to study the amendments that have only just been presented to me. I must say that it is a pretty unsatisfactory way of doing business, but the matter I have raised may be covered in the amendments.

The second matter which we would have wanted to raise by way of amendment concerns the details regarding a change of director which are included in an annual return and which are provided by the Bill to have the same effect as if there they were included in a separate return of directors. That is common sense and is to be applauded. Yet section 68A(3)(b) of the principal Act has not been amended, which means that the provision that is contained in the annual return cannot be relied upon. That is a matter of some detail and could, in a normal situation, be easily remedied by an amendment. Unless the Government has included it in the amendments put before us today, there is nothing we can do about it. I regard that as a matter of regret. I repeat that the Government cannot even introduce an amendment unless the amendment has first gone through the Ministerial Council. Therefore, matters such as that cannot be dealt with in this unique type of law making and I regard that as totally unsatisfactory.

It is of concern to me, and I think to many on my side, that so little interest is now taken in the Parliament in this field. That may be related to the fact that when the Parliament no longer has a responsibility in an area it is more likely to lose interest. I do not think that that is a good thing. Certainly, it is arguable in this time of rapid change in the corporate area that there is a particular need for parliamentary involvement. It is arguable whether, in the regulatory framework within which business must operate, the rules of fair play are keeping pace in a time of rapid change. It is arguable whether investor protection to which much corporate legislation is directed is now adequate or relevant. It was interesting for me to hear Mr Bosch, the new Chairman of the NCSC, speaking at the recent Australian Legal Convention in Melbourne. He has obviously recognised very quickly the deficiencies created by the pace of change. On that subject he said:

The whole pattern of investment is in flux.

As might be expected this has gone hand in hand with a surge of entrepreneurial energy and innovation. For instance, in December 1980 the first cash management trust was introduced. By June 1983, there were 16 of them with a total of $2.28 billion in investor funds. There are now in Australia 18 managers of unlisted property trusts, 10 managers of equity trusts, 8 managers of mortgaged trusts, 14 managers of cash management trusts and 8 life offices offering insurance investment bonds. In addition, a number of other investment products have been developed including timeshare schemes, franchise schemes, agriculture and rural investment schemes, film investment schemes and retirement villages.

To someone who only a few years ago practised a lot in this field, that paragraph in itself is evidence of the massive change that has taken place. The Chairman reflected, I believe accurately, that the Australian regulatory framework has failed to keep pace with this organisational change. With this great increase in financial products on offer has come a new world of investment dealers. On that subject Mr Bosch said:

The operation of the primary factors has given rise to a great many financial products, cash management trusts, insurance bonds, more sophisticated futures contracts, variations of traded options and the re-introduction of short selling come to mind.

To handle them and to help the traditional products compete an increasing number of advisers and dealers have entered the financial field using an array of titles including investment advisers, investment consultants, investment planners, securities dealers, investment specialists and many others.

Senator Haines —How long do they stay in business?

Senator HILL —Some stay in business for a very short period; some stay in business for longer. That changing need for investor protection, which I think should be evident from the circumstances which I have just related, should be a real concern for this Parliament. How we meet that challenge as to the pace of change in these areas is a critical question of attitude. Mr Bosch put his solution when, in concluding his paper, he said in part:

Many of our laws and regulations are already showing signs of being inadequate, irrelevant or unenforceable and changes we can see coming will certainly make the position worse. Substantial change in the pattern of regulation is therefore inevitable. The best we can do is to make it less complex and difficult by moving away from reliance on legislation towards a greater use of rules and policy statements.

I disagree with that. For all the weaknesses in matters of certainty of law and all the extra work it might require for a parliament and all the extra work that might be involved in interpretation, I strongly believe that certainty under the law is better than any system that is replaced by bureaucratic discretion, rules and policy statements. Mr Bosch's concluding comments might simply reflect the fact that he was speaking to an American presentation given by Professor Loss, but certainly in this complex field where there is need for change I do not want to see this country going down the American path. I think that is the wrong way to go.

In concluding, I say again that we support the Bills because this is an example of deregulation which is for the benefit of the whole industry. It reduces the burden for business in a sensible way, and that is to be applauded. I do not support deregulation that will be replaced by a greater bureaucratic discretion. I regret the disinterest that is being shown by the Parliament in this matter. If one goes past Mr Jacobi in the House of Representatives, and Senator Peter Rae who will be speaking in this debate and who has taken a major role in this subject matter for many years, it will be seen that very few people take an interest in this matter. To that extent we are not meeting our responsibility to the Australian people. We should look for a mechanism in which the Parliament might again become more active in this area and meet the responsibility which the people of Australia are entitled to expect of it.