Philip Ruddock (Berowra, Liberal Party) Share this | Link to this | Hansard source

I rise to speak to the Corporations Legislation Amendment (Deregulatory and Other Measures) Bill 2014. The government has introduced a package of reforms to the Corporations Law to reduce regulatory burden and improve productivity and competitiveness. What I really want to talk about is why this bill is part of an overall package and why it is of fundamental importance to the future of this nation.

I listened to some comments in another context by one of my colleagues, and I am very worried about the personal future of members of the opposition. I am very worried about whether or not they will be able to continue to play a role in public life in this country if they pursue in their personal affairs the arrangements they want this nation to pursue. They see it as being desirable that we should budget for consumption and spending where we do not have the income available. They want us to essentially go out to dinner every night and simply put the tab on our bank card or on our mortgage. If you conducted your personal affairs in the way in which they want the affairs of the nation to be run, you would not be able to survive. When I make this point about their personal affairs, let me just say I am reasonably satisfied that in their personal affairs they would try to ensure that they live within their means, but when it comes to the nation it is regrettable that we do not see the same approach being taken.

I speak to many people around my electorate and they do appreciate very much that the country has to live within its means. In looking at that issue, it is not just how much you spend that is relevant; it is how you go about the earning of your income that is equally important. They are concerned in their businesses about unnecessary costs which make them less competitive and make their businesses more difficult to sustain. I must say that, in my own electorate, people are gratified that we have been able to make some changes in relation to the carbon tax. They are glad that it has gone, because that has made their businesses more competitive. But, equally, the sorts of measures that are contained in this legislation are absolutely important to them, because they find that a lot of the reporting that they have to make builds costs into their businesses, and that makes it extraordinarily difficult for them to be able to effectively carry out those businesses.

In my 41 years in this House, I have never seen such a determined approach by a government to reduce the regulatory burden. What we have seen with the removal of regulations is the freeing up of businesses to be able to do what they do best. I commend the member for Kooyong, the parliamentary secretary, for the work that he is doing in this regard. He is committed to tackling the volume of regulation, which is already too high. It is essential that we do ensure that our businesses remain competitive. I would simply say that this is not a job that has been finished. In an earlier life I was the Attorney-General of Australia, and I was able to work with the states to put in place a single defamation code. The importance of that was that it stopped forum shopping around Australia. When it was put in place, it meant that the volume of litigation was significantly reduced. I am a lawyer. I do not mind litigation, but sometimes litigation can be very unnecessary and very unhelpful.

I was very much focused on personal property securities. We had something like 80 different pieces of legislation across all the states and territories of Australia that were different for personal property securities. You can think of them: bills of sale, hire purchase, maritime liens and floating charges. When you put the myriad different forms of personal property securities across all the states and territories it meant that businesses trading across state and territory boundaries would often have to get complex legal advice about floating charges that they might have over their stock. I can remember a firm that ran a hotel in Mount Gambier and a hotel in Geelong, and they had to get advice because the floating charge over their stock-in-trade was different under South Australian and Victorian law. We are, I might say, somewhat belatedly now—I do not think I have been the Attorney for seven years—seeing a single scheme of personal property security being implemented.

I would encourage the government to continue looking not only at its own regulatory burdens that it imposes upon people but also at the multiplicity of regulatory burdens that are as a result of our Federation. I do not think our Federation arrangements were intended to inhibit successful businesses operating in Australia or to reduce their economic competitiveness, but I suspect that a lot of the regulatory burden which is so often unnecessary imposes those costs. So I do commend the member for Kooyong for his hard work in addressing these issues.

I think this bill, which I will go to, deals with a number of issues that will help to improve our economic competitiveness. If we improve our economic competitiveness, businesses are more successful. Hopefully, they end up paying more taxes. That is helpful for the Commonwealth. It helps our budgetary position. It enables the government to more effectively live within its means. I think we ought to be talking about how governments can live within their means, and I think we need to be quite lateral in the way in which we do it. We need to look at our expenditures. I encourage members of the opposition to come forward. I listen all the time to hear from them as to ideas they have about the way in which we can structure our budget more constructively. I do listen. I don't hear it.

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

You don't hear very much.

Philip Ruddock (Berowra, Liberal Party) Share this | Link to this | Hansard source

No, I don't. I do listen. But it is also important that they support measures of this sort that will help boost our economic competitiveness. This bill is about reducing business compliance costs by something of the order of $14 million per year. It contains measures to improve the efficiency of those processes which companies have to meet. They will better balance the rights of shareholders to raise issues with the company and the costs of companies being required to call and hold general meetings. It will improve the remuneration reporting requirements. It will clarify the circumstances in which a financial year may be less than 12 months. It will exempt certain companies limited by guarantee from the need to appoint or retain an auditor. It will improve the operation of the Takeovers Panel. It will extend the Remuneration Tribunal's remuneration setting responsibility to include certain statutory bodies.

If I can go to some of those particular measures, there is the abolition of the 100-member rule. The government is removing the requirement for directors of a company to hold a general meeting on the request of 100 shareholders. It seeks to strike a better balance between the interests of minority shareholders and the shareholders as a whole, because all of these meetings involve costs which can be quite significant. In large corporations the 100-member rule allows groups holding less than what we can call one per cent of voting shares to force a company to incur significant costs in holding meetings. That has to be questioned. This particular issue is supported by both industry stakeholders, including the Institute of Company Directors, the Governance Institute of Australia and the Business Council of Australia, as well as shareholder groups such as the Australian Shareholders Association. The measure is expected to save businesses around $1.5 million per annum in compliance costs. Isn't that a desirable outcome?

In relation to remuneration reporting, the government is improving the disclosure of executive remuneration information in Australia by ensuring that it is provided in a form that is useful to shareholders and investors. The measure removes the requirement for unlisted disclosing entities to prepare a remuneration report. This measure is estimated to save unlisted entities from disclosing about $8.5 million in compliance costs. The remuneration report is simply not relevant to those agencies, but it is a regime that imposes very significant and unnecessary costs.

In issues relating to auditor-appointing requirements, the government is removing the nonsensical requirement for certain companies limited by guarantee, which are not required to undertake an audit, to appoint an auditor—that is, you are not required to audit, but you have to appoint an auditor. How ridiculous! Currently all public companies are required to appoint an auditor, even if they are not required to conduct a full audit of their financial reports. This unnecessary regulatory burden imposes $4 million of compliance costs on business. This change is expected to predominantly benefit companies that have a not-for-profit focus.

You can see, Mr Deputy Speaker, why this legislation is of fundamental importance in addressing issues that do go to the costs of running businesses in Australia. Inevitably, it will help in small measure to improve their international competitiveness. We ought not through our regulatory regimes impose costs on businesses in Australia that are quite unrelated to the costs others abroad may face, because that is essentially imposing upon them and their employees a penalty in terms of their competitiveness. This legislation is an important deregulatory package; it is part of a continuing process in which this government is involved. As I said, I commend the member for Kooyong, who has had the responsibility for progressing these issues, for his determination in identifying measures that can effectively reduce compliance costs and that will ensure a far more competitive environment without reducing proper responsibility. This measure deserves support, and I hope that the opposition will have some regard to my earlier observations about the importance of ensuring that we not only live within our means, but also put in place a more productive economy through the sorts of measures that are contained in this legislation.

Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Parliamentary Secretary for Foreign Affairs) Share this | Link to this | Hansard source

Labor supports this bill and I am pleased to offer my contribution in supporting this bill passing the parliament. I do wish to make some comments about the comments just made by the member for Berowra, though I am conscious of his points about reducing red tape, which I find somewhat ironic, given that earlier we had the member for Higgins introduce the report of the Economics Committee. It actually advocates increasing red tape for foreign investment in Australian property by imposing a proposed levy. I understand that the Economics Committee discussed a figure of between $500 and $1500; today we learnt that the committee is now proposing the higher end of the range, $1500. When we talk about reducing red tape it is easy for those opposite to adopt a holier-than-thou approach on these issues, but we need to be conscious that there was some hypocrisy in the comments of the member for Berowra. Nevertheless, Labor is pleased to support these reforms because they are sensible—they make a sensible addition and changes to our corporate landscape.

Labor has a proud record of improving corporate governance, transparency and accountability in decisions of government, particularly with respect to their obligations to shareholders, workers, customers and the general public. During the course of the last Labor government, a number of reforms were introduced that not only improved safety for workers and the public, ensured greater competition in a number of industries and Australia generally, but also provided reliable accounts and information, particularly on executive remuneration. Over a number of years we have seen outrage in the community not only by shareholders but the wider community about some of the ridiculous remuneration packages and bonuses that were paid to corporate leaders in this country and throughout the world. Through such measures, Labor introduced a corporate regime that is one of the most robust and responsible anywhere in the world. This bill meets those conditions and on that basis we are pleased to offer support.

Items 1 and 2 of schedule 1 of the bill amend the Corporations Act to better balance the rights of shareholders to raise issues with a company against the cost to companies of being required to call and hold general meetings. This relates to the so-called '100-member rule', which creates an obligation on a corporation to hold a general meeting if requested to by 100 or more shareholders. That requirement will be removed by this bill. The requirement that a general meeting be held if requested by five per cent or more of shareholders will remain.

Importantly, the proposed amendment does not affect the right of 100 shareholders to put up a resolution to be considered at a general meeting or to distribute a shareholder statement with the notice convening that meeting. So the changes do not affect the ability of 100 or more shareholders to engage in activism. That is very important and that is the way it should be, because shareholder activism is an important component of corporate governance. What these amendments do is ensure that the operation of this provision does not burden companies with the cost of having to hold extraordinary general meetings where this is unreasonable. There have been examples in the past. Woolworths was required to call an extraordinary general meeting on the issue of $1 limits on poker machines—and the cost of convening that meeting was close to half a million dollars. Over many years the NRMA had to call a series of extraordinary general meetings. It is estimated that the cost of those meetings was in the millions of dollars. The proposed amendment is a sensible reform, one that ensures that an appropriate balance remains between the right of shareholders to put resolutions at general meetings and the need to ensure that, in doing so, the costs imposed on the companies involved are not unreasonable.

The second element of these reforms is improving remuneration reporting. Years ago in Australia, shareholders became increasingly concerned, even outraged, at the size of executive remuneration packages—pay, bonuses, shares and share options. These were being paid even where executives were, by any reasonable measure, failing in their duties, as reflected in the performance of their companies. We saw situations where executives presided over falls in the share price and/or falls in the profitability of their companies yet still commanded outrageous remuneration. This created angst within the community, particularly amongst shareholders. Many saw the outcomes as being unfair and unreasonable.

Labor acted on those concerns. It responded by implementing a fairer system that put shareholders, particularly institutional and mum-and-dad shareholders, first. The current shadow Treasurer, then the Assistant Treasurer, introduced reforms in July 2011. They became known as the 'two-strikes rule', which holds directors accountable to shareholders for executive salaries and bonuses. These reforms have led to a much more responsible and reasonable approach to executive remuneration being taken in this country. I think it is fair to say that the system has worked.

The way the system works is that companies have two opportunities, from the perspective of accountability to shareholders, to get their executive remuneration right. If a company's remuneration report receives a shareholder no vote of 25 per cent or more at an annual general meeting, that is the first strike. If there is another strike in the second year—if the company's subsequent remuneration report again receives a no vote of 25 per cent or more—there can be a vote to spill the board. In other words, there can be a vote on whether or not all directors need to stand for re-election. That subsequent vote to require a re-election of the board needs a majority of 50 per cent plus one to pass. If it does receive that majority, the election for directors has to be held within 90 days. As I said, this is a model which has worked. It has seen companies take a much more reasonable approach to executive remuneration. The stories of outrageous executive salaries and packages have dissipated—and that is a positive thing. Labor is very proud of its record of improving remuneration reporting and dealing with executive remuneration. Concerns were raised by shareholders and users of remuneration reports and we dealt with them.

Labor also supports removing the unnecessary requirement for unlisted disclosing entities that are companies to prepare a remuneration report. Unlike listed entities, they are not required to have their remuneration report adopted by shareholders through a non-binding resolution and they are not subject to the two-strikes test. In this respect, the reform in this bill is supported.

This bill also makes changes so that listed disclosing entities that are companies must disclose the number of options that lapse during the financial year, as well as the financial year in which those options were granted, for each member of the key management personnel. There will, under the changes introduced by this bill, be no obligation to disclose the value of options that lapse or the percentage value of remuneration that consists of options for each member of the key management personnel. Again this is a sensible reform that has Labor's support.

The bill makes an number of amendments that will improve the value of the information in remuneration reports. This goes to item 6 of schedule 1 of the bill, which clarifies the circumstances in which a financial year may be less than 12 months. There is confusion about conditions under which directors may determine that a financial year is shorter than 12 months, and these reforms clarify that.

Finally, in respect of the appointment of auditors, items 7 to 9 of schedule 1 of the bill amend the Corporations Act to exempt certain companies limited by guarantee from the need to appoint or retain an auditor. Currently all public companies, including companies limited by guarantee, are required to appoint and retain an auditor. This bill amends this so that small companies limited by guarantee, and those companies limited by guarantee that have their financial reports reviewed, are not required to appoint or retain an auditor. This means that companies that are not required to undertake an audit no longer have to retain an auditor. Again, this is a sensible reform that Labor is pleased to support.

The bill also amends the ASIC Act in respect of the operation of the Takeovers Panel. Labor sees this as an improvement and is happy to support it.

On the whole, these are sensible amendments to Australia's corporate landscape. They build on Labor's achievements in government of making our corporate legislation more representative of the interests and aspirations of shareholders, of workers, of customers, of clients and of the Australian public. We believe that these sensible reforms and the Labor reforms that were put in under the previous government should make Australia a more attractive place to invest. On that basis I am happy to commend the bill to the House.

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

I am pleased to rise and speak on the Corporations Legislation Amendment (Deregulation and Other Measures) Bill 2014. This bill forms part of our government's commitment to repeal counterproductive, unnecessary and redundant legislation and regulations. I would like to start by giving an example from my electorate of Hughes of some of those burdensome regulations that tie the hands of small business. This example in the retail sector shows the absurdity of this regulation, the stupidity of it, and the big task that we have of working through and repealing this red tape to free the hands of entrepreneurs in this nation.

There is a shopping centre in my electorate called the Homemakers Centre, at Warwick Farm. It is on the Hume Highway and has six lanes of road on either side. Opposite is Warwick Farm racecourse. In the front of the shopping centre there are two large takeaway outlets. There is a very large car park. There are a lot of shops in there. Next door is the Masterton Homes display village, and on the other side of this is a small motel. It is an ideal location for a shopping centre.

A few regulations were put on that centre at a few retailers. I would like to compare the regulations in my electorate to the regulations in Afghanistan under the Taliban's control. I will quote from a 2001 article by Amy Waldman published inTheNew York Times. It is a story from Herat in Afghanistan. It says:

Hefozullah, a seller of cooking oil, was arrested at the marketplace for keeping his shop open during Friday prayers. He was sent to jail for four days and became No. 3,183 in a registry of arrests at the Ministry for the Promotion of Virtue and Prevention of Vice.

The article goes on and talks about 'the penal code promulgated by the Taliban's leader, Mullah Muhammad Omar', which sets out in copious detail what retailers in Herat—in Taliban controlled Afghanistan—can and cannot sell. I will quote directly from the article. It says:

Those who fly pigeons—a favorite Afghan pastime—will be imprisoned until ''their pigeons disappear from their home.''

Then it goes on and lists all the things that are banned from sale from retail shops. It says:

A kite seller will be imprisoned for three days.

It lists other things that are banned:

… cinematography, any equipment that produces the joy of music, pool tables, chess, masks, alcohol, tapes, computer, VCR's, televisions … wine, … nail polish, firecrackers, statues, sewing catalogs, pictures, Christmas cards.

It goes on:

Nothing was left to chance or the imagination under the Taliban. Merchants importing products like shampoo would find that Taliban customs officials had gouged out the eyes of the female models on the boxes. The merchants were then required to display the products with black tape over female faces, or be subject to a beating or jailing.

The journalist goes on:

It is no wonder that residents here react as if waking from a grotesque dream.

Compare that list of things that were banned under the Taliban from being sold with the recent court decision of the New South Wales Supreme Court. Here, where the Taliban had a Ministry for the Promotion of Virtue and Prevention of Vice enforcing those red-tape regulations, we have similar regulations, but they are being enforced by the Land and Environment Court and the New South Wales Court of Appeal.

The case was the Warehouse Group (Australia)—they were the appellant—versus those champions of free market competition Woolworths Limited. This was a case where three senior judges were involved in the Court of Appeal with Queen's Counsel—a platoon of legal experts—working out what a retail shop in my electorate could and could not sell. There were many days of court hearings and a rather lengthy decision.

I will read through some of the list of things that were banned, not in Taliban controlled Afghanistan but in the electorate of Hughes, which I represent. There is a list here of over 40—it is in roman numerals. It goes to over 50 separate items. I would like to go through a few of them. Item (i): floor coverings were banned from sale. Small plastic containers were banned from sale. Garbage bins were banned. Paint was banned, as were paint accessories—it goes on—dust masks and paint scrapers. Dangerous items that need government control such as kitchen implements, mashers, vegetable peelers, kitchen hand food storage containers, curtains and accessories were also banned. Curtain tassels were banned—we must have laws in this country to control the sale of dangerous curtain tassels! Item (xxx) on the list of banned items is baby goods. Baby bibs were banned from sale, along with baby strollers, baby prams and baby car seats, and item (xxxv) on the banned list is child's potties. In this country we have such red tape and such regulation that we are required to have in the New South Wales Supreme Court Court of Appeal three distinguished and learned judges and a platoon of lawyers making a decision that a retail shop in my electorate should be banned from selling child's potties.

The list goes on. Other things banned included dog toys—we cannot have anyone selling dog toys! And there are bird cages. While the Taliban would ban the sale of pigeons or anything related, we just ban the sale of bird cages. Toys are banned. Item (xlvii) is sheets. Again, while the Taliban Ministry for the Promotion of Virtue and Prevention of Vice would simply ban any equipment that reproduces the joy of music, at least our court of appeal detailed those things that reproduce the joy of music that are banned. Prerecorded videos were banned, prerecorded CDs, prerecorded audiotapes, blank videos, blank CDs and, item (lix), blank audio tapes. They were all banned from sale. On the Taliban list of banned items it was simply Christmas cards, but of course our New South Wales Supreme Court was able to do better than that—they set out the things that were banned from being sold in a retail shop in my electorate: Christmas goods, Christmas trees, Christmas decorations and, just like the Taliban, Christmas cards. We simply cannot have shops in Australia being unauthorised sellers of Christmas cards. How would we get on without this red tape? At least in Taliban-controlled Afghanistan retail shops could sell bottles of shampoo as long as they gouged the eyes out of the women on the boxes or put black tape over them. In my electorate, thanks to the decisions and the red tape and regulation we have, we simply banned it altogether.

This is just an example of the regulation and red tape that we have. Other parts of my electorate fare even worse. It is not a matter of just having a list of things that they are not allowed to sell—dangerous goods such as potties and Christmas cards and things that reproduce the joys of music. We had in my electorate what was known as the Orange Grove shopping centre. On one side of Orange Grove Road we had a big Officeworks and on the other side a big Harvey Norman complex. Do we know what happened to Orange Grove shopping centre? They did not have a list of goods they were banned from selling—they were simply banned from operating. The red tape and regulation by the then New South Wales Labor-controlled state government simply banned them from operating and selling anything. That was done when former senator Bob Carr was New South Wales Premier—better known now as the senator who complained about not having silk pyjamas on an international flight; he complained about how unfair it was that he had to travel business class and about the quality of food and the types of music he could listen to. The very same Senator Carr was the one who banned a complete retail shopping centre from selling any of those goods. Silk pyjamas were banned, food was banned and of course the sale of any musical item was banned—the very things that Senator Carr complained about when he was forced to put up with the hardship of travelling in business class. These are just some examples of the red tape we have in this country.

This bill is estimated to reduce business compliance costs by around $14 million. The measures in the bill provide a better balance between the rights of shareholders to raise issues with a company and the costs to companies required to hold a general meeting. The bill will improve and reduce remuneration reporting requirements, clarify the circumstances in which a financial year may be less than 12 months, exempt certain companies limited by guarantee from the need to appoint or retain an auditor, improve the operation of the Takeovers Panel and extend the Remuneration Tribunal's remuneration setting responsibility to include certain statutory bodies.

There is some urgency in this action we are taking because we have some serious difficulties in this country. We face the problem of an ageing population. Commodity prices for our largest exports of coal and iron ore that were quite high under the previous government's term are coming back. Perhaps the biggest problem we have to deal with is servicing the interest on Labor's debt. For the past six years the previous Labor government simply—and this is the best way to explain it—ran this country at a loss. In each of those six years they spent more money than they raised.

Chris Bowen (McMahon, Australian Labor Party, Shadow Treasurer) Share this | Link to this | Hansard source

How are you going?

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

I note the shadow Treasurer at the table, and I am sure he is familiar with the figures that the government of Australia now has to finance because of the interest bill on their debt. It is $13½ billion a year. To put that in context, that is $570 for every man, woman and child in this country—and that is just for the interest bill that has to be paid. For every family of four the annual interest bill that we must now pay is $2,280.

We can break it down over periods of time. Every month it is $1.125 billion. That is $1,125 million that flow out the door. That is the obligation that we have in interest just in one month. In a week it is $260 million. In a day, today, it is $37 million. On this day, this government will need to find $37 million just to pay the interest. In the next hour it is $1.5 million. That is the obligation that this nation has—to pay interest on a debt that this previous Labor government left.

Why is there some urgency about this? The money that is borrowed to pay for the six years of losses during the Labor government is done through the sale of government bonds. Whether through good luck or good management, we are currently in a period where global interest rates are at record lows. We have been able to borrow most of that money at around 3.5 per cent. The problem is that, even though we have that interest obligation, if we do not only address the interest but pay that debt down, who knows where interest rates will be in 10 years time, when a lot of these government bonds fall due and we have to refinance them. It may not be 3.35 per cent. We know that it could be double. And therefore, rather than having that $500 cost for every man, woman and child, it could be double. That is the urgency; that is the problem. That is why we must repeal red tape and free the hands of our entrepreneurs. I commend this bill to the House.

Mark Dreyfus (Isaacs, Australian Labor Party, Shadow Attorney General) Share this | Link to this | Hansard source

The Corporations Legislation Amendment (Deregulatory and Other Measures) Bill 2014 amends the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001. Items 1, 2 and 10 of the schedule to this bill amend the Corporations Act 2001, and their intent is to better balance the rights of shareholders to raise issues with a company and the costs of companies that have been required to call and hold a general meeting. It would repeal the so-called 100 member rule which creates an obligation on a corporation to hold a general meeting at the request of 100 or more shareholders.

These meetings are often called for protest purposes and almost always, particularly in the case of larger corporations, create a very significant cost to business. For example, Woolworths was compelled to call an extraordinary general meeting in relation to $1 limits on poker machines. Whatever one's views about the worth or otherwise of imposing a $1 limit on poker machines, it can be seen that this was very much a political action using corporate rules. What it did was to impose on Woolworths, as a very direct cost, about $500,000, which was the cost of notifying its shareholders for that extraordinary general meeting. The resolution when put to the extraordinary general meeting, despite the political action behind it, received just 2.5 per cent support of those attending the meeting.

No-one objects to the fact that people might have different views. No-one objects in any way to the expression of those views. Indeed, shareholders should be able to legitimately raise concerns about the affairs of companies in which they hold shares, through a number of mechanisms, but they should not be permitted to do it at a significant cost to other shareholders. It is not appropriate that a very small number of shareholders be able to impose costs at that level simply for the purpose of making a political point. You could cite as another example that in the two years from late 1999 to late 2001 the NRMA in New South Wales was forced to call 12 extraordinary general meetings to consider resolutions removing directors, each of which incurred several million dollars in costs, and in no case were any of the relevant regulations that were the supposed purpose of those extraordinary general meeting passed by the members of the NRMA.

The proposed changes do not remove the ability of 100 or more shareholders to add items to scheduled annual general meetings and to instigate debate as an agenda item at these meetings. This retains the right for 100 or more members to raise issues of concern, without the often significant cost to shareholders of scheduling extraordinary meetings under the current acts. Shareholder activism is a component of corporate governance. Shareholders should be able to put issues on the AGM agenda and should be able to instigate debate at the meeting. The right is of particular importance to retail shareholders, who have limited opportunities to meet with the company prior to the AGM. These rights will not change with this proposed legislation.

Australia is currently alone in providing for a shareholder test that applies regardless of how much capital the requisitionists hold. It is more common to require that requisitionists must hold at least five to 10 per cent of the shares before they can call a general meeting. Again, no-one disputes the fact that shareholders have a right to question directors and decisions made by a company, but it should not be at a cost to other shareholders. Labor supports this change.

Items 3 to 5 and 10 of schedule 1 to this bill amend the Corporations Act 2001 to improve and streamline remuneration reporting requirements. Currently, disclosing entities that are companies must disclose the value of options that lapse during a financial year for each member of the key management personnel. Disclosing entities that are companies must also disclose the percentage value of remuneration that consists of options for each member of the key management personnel. This bill makes changes so that listed disclosing entities that are companies must disclose the number of options that lapse during a financial year and the financial year in which those options were granted for each member of the key management personnel. There will be no obligation to disclose the value of options that lapse. Under this bill there is no obligation to disclose the percentage value of remuneration that consists of options for each member of the key management personnel.

Also currently, all disclosing entities that are companies are required to prepare a remuneration report, regardless of whether they are listed or unlisted. This bill changes that so unlisted disclosing entities that are companies are no longer required to prepare a remuneration report. Listed disclosing entities continue to be required to prepare a remuneration report.

Labor supports improving the disclosure of executive remuneration information in Australia. There have been concerns raised by shareholders and users of remuneration reports that currently the reports contain some information that was of limited benefit or can be found at other places in the annual report. Labor also supports removing the unnecessary requirement for unlisted disclosing entities that are companies to prepare a remuneration report. Unlike listed entities, they are not required to have their remuneration report adopted by shareholders through a non-binding resolution and are not subject to the two-strikes test.

Item 6 of schedule 1 to this bill amends the Corporations Act 2001 to clarify the circumstances under which a financial year may be less than 12 months. There is confusion about the conditions under which directors may determine that a financial year is shorter than 12 months. Currently, section 323D sets out how companies, registered schemes and disclosing entities may determine the length of their financial year. While an entity's financial year is expected to be approximately 12 months long, entities can determine otherwise in cases where an entity needs to modify its financial year by up to seven days to accommodate week based internal reporting frameworks or an entity needs to synchronise its financial year in order to prepare consolidated financial reports.

However, subsection 323D(2A) allows entities to determine that their financial year is less than 12 months if none of their previous five financial years have been less than 12 months, the shorter financial year commences at the end of the previous financial year and the decision is in the best interests of the entity. Stakeholders have raised concerns about the interaction between this provision and the operation of subsection 323D(2), which requires that a financial year is 12 months long, unless determined by the directors to be a period that is longer or shorter than 12 months by up to seven days.

There is confusion surrounding whether taking advantage of the flexibility in section 323D(2) would trigger the five-year period in which an entity is precluded from accessing the benefits offered by section 323D(2A). Similarly, subsection 323D(3) requires an entity to synchronise its financial year end with that of its parent entity when it becomes a controlled entity. Again, stakeholders have raised concerns that this provision may trigger the five-year period in which an entity is precluded from accessing the benefits offered by section 323D(2A).

The bill seeks to clarify that directors may determine that a financial year is shorter than 12 months by more than seven days irrespective of whether during an entity's previous five financial years the directors have determined that the financial year is shorter than 12 months by up to seven days or determined to synchronise the financial year to prepare consolidated financial statements. Labor supports the amendments in this bill that clarify the circumstances and conditions under which directors can determine the financial year is shorter than 12 months by more than seven days. This removes the unintended confusion arising from changes made in 2010 intended to make it easier for directors to alter financial year end dates.

Items 7 to 9 of schedule 1 to this bill amend the Corporations Act to exempt certain companies limited by guarantee from the need to appoint or retain an auditor. Currently, all public companies, including companies limited by guarantee, are required to appoint and retain an auditor. This bill changes this so that small companies limited by guarantee and those companies limited by guarantee that have their financial reports reviewed are not required to appoint or retain an auditor. This means that companies that are not required to undertake an audit are no longer required to appoint and retain an auditor. All other public companies are required to appoint and retain an auditor, as is current practice. Labor supports these changes that remove unnecessary costs on business by removing the requirement for companies to appoint and retain an auditor, even if they are not required to conduct an audit. The change is expected to provide the greatest benefit to not-for-profit community organisations, allowing them to better service the community.

Part 1, items 1 and 2 of schedule 2 to this bill amend the Australian Securities and Investments Commission Act 2001 to improve the operation of the Takeovers Panel by allowing takeover matters to be dealt with more efficiently. Currently, the president and members of the Takeovers Panel may only participate in proceedings if they are within Australia. These changes mean the President of the Takeovers Panel may give a direction in respect of members who are to constitute the panel whether or not the president is in Australia. Further, members of the Takeovers Panel may participate in proceedings whether or not the members are in Australia. As technology improves and the world becomes ever more connected, it is sensible to alter legislation to reflect that change. This bill will allow members of the Takeovers Panel to participate in proceedings if they are physically located outside of Australia at the time. Labor supports this sensible change to allow the more efficient resolution of disputes.

Part 1, items 3 to 8, and part 2, item 9 of schedule 2 to this bill amend the ASIC Act to extend the Remuneration Tribunal's remuneration setting responsibility to include certain Corporations Act bodies. Currently, the ASIC Act provides that the responsible Treasury portfolio minister determines the terms and conditions—including remuneration—of the chairs and members of the Financial Reporting Council, the FRC; the Chair of the Australian Accounting Standards Board, the AASB; and the Chair of the Auditing and Assurance Standards Board, the AUASB. The ASIC Act also provides that the FRC is responsible for determining the terms and conditions, including remuneration, of the offices held by the members of the AASB and the AUASB.

This bill brings responsibility for determining the remuneration and full-time member recreation leave entitlements of the chair and member positions of the FRC, the AASB and the AUASB within the Remuneration Tribunal's jurisdiction. The Remuneration Tribunal has specialist skills in reviewing and determining remuneration and is therefore better placed to determine the remuneration of these offices. Moreover, it will ensure consistency in the remuneration setting arrangements between the three bodies and other statutory office holders.

Currently, the responsible Treasury portfolio minister determines the terms and conditions—including remuneration—of the chairs and members of the Financial Reporting Council, the chair of the Australian Accounting Standards Board and the chair of the Auditing and Assurance Standards Board. The ASIC Act also provides that the FRC is responsible for determining the terms and conditions held by the members of the AASB and the AUASB.

Labor supports the provisions in this bill that brings responsibility for determining the remuneration and full-time-member recreation leave entitlements of the chair and members within the Remuneration Tribunal's jurisdiction. There is no question that that is the best place for them and where they ought to be. The changes that are contained in this bill are supported by Labor. They were changes that Labor was progressing through in government and matters that had been worked on with bipartisan support across both sides of this chamber, and within the industry and the sector itself. It is good, sensible policy. I offer Labor's support for these measures and commend the bill to the House.

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Corporations Legislation Amendment (Deregulatory and Other Measures) Bill 2014and indicate that the Labor Party and I will be supporting this government legislation that amends the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001. With the Minister for Small Business and the shadow Treasurer in the chamber we would be quick to acknowledge the important role that corporations play in Australian society, in the protection of the individual and the mustering together of an appropriate response to the risk that comes with business. In fact, much of the development of modern Australia can be traced back to corporations, with people pooling their money and not having an individual risk.

Corporations have evolved over time. Not everything that applies to a corporation is covered in the corporations legislation. Modern corporations are aware of their social licence. It is not something that is written in any particular section of the corporations legislation, but they must have a strong connection with their community and earn the right to carry out things that they do, whether it be the tasks they do, the products they make or sell or the role they play in the community.

Items 1, 2 and 10 of schedule 1 to this bill amend the Corporations Act to better balance the rights of shareholders to raise issues with the company and the cost to companies of being required to call and hold a general meeting. I focus particularly on this because of the point I made earlier about social licence. Obviously, shareholders of the company have the ability to give input at an annual general meeting of a corporation, and say, 'This is what we are concerned about.' But it costs money to set up an annual general meeting and to notify all the shareholders. Even in these days of electronic communications it still costs money to hold such meetings. This amendment to the Corporations Act repeals the so-called 100-member rule, which created an obligation on a corporation to hold a general meeting at the request of 100 or more shareholders. These meetings are often called for protest purposes. I am not saying that those purposes are not legitimate, but there can be significant costs that have to be met by every shareholder in the corporation, and such meetings do create a significant cost to business. These proposed changes do not remove the ability of 100 shareholders to add items to the regular, scheduled annual general meeting. Obviously, shareholders always have the right to instigate debate as an agenda item at any of these meetings. They still have a chance to have their concerns heard as an item at the annual general meeting, whether their concerns are about the financial governance of the organisation or some of the social licence matters. This legislation retains the right of 100 or more members to raise issues of concern, but without the often significant costs to shareholders of scheduling these extraordinary meetings, as exists under the current act.

The 100-member rule is not linked to having five per cent or 10 per cent of the value of a corporation, which is what happens in several countries. For example, for a significant company like Woolworths, only 100 shareholders would be required to compel the company to call an extraordinary general meeting. That is actually what happened with Woolworths when it came to debating $1 limits on its poker machines. The cost to Woolworths of notifying its shareholders of the meeting was $500,000. When it hosted the meeting the motion received only 2.5 per cent support. Perhaps it might be said that if the motion to put a $1 limit on poker machines had received 10 per cent or 50 per cent support it might have been worthwhile. Irrespective of the merits of the reason for the shareholders calling the meeting in the Woolworths example, Labor has seen that we need to be more sensible about this and not have unnecessary costs attached to corporations. The other example mentioned by the shadow minister, Bernie Ripoll was the example of the NRMA—

Mr Bowen interjecting—

Sorry, the shadow assistant—

Chris Bowen (McMahon, Australian Labor Party, Shadow Treasurer) Share this | Link to this | Hansard source

He's the shadow minister for financial services.

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

The shadow minister for financial services—thank you, shadow Treasurer—and member for Oxley. He is my next door neighbour and a great guy. He gave the example of the NRMA, which in two years was forced to call 12 extraordinary general meetings to consider motions about removing directors. The meetings cost several million dollars and resulted in none of the directors being removed from the NRMA board. It is hard to justify such behaviour.

Items 3 to 5 and 10 of schedule 1 of this bill amend the Corporations Act to improve and streamline remuneration reporting requirements. Currently disclosing entities that are companies must disclose the value of options that lapsed during a financial year for each member of the key management personnel. So disclosing entities that are companies must also disclose the percentage value of remuneration that consists of options for each member of the key management personnel.

Item 6 of schedule 1 of this bill amends the Corporations Act 2001 to clarify the circumstances in which a financial year may be less than 12 months. This sounds like something out of Yes Minister, but it is actually good business practice every now and then to change the year. There is confusion about the conditions under which directors may determine that a financial year be shorter that 12 months. Currently section 323D sets out how companies, registered schemes and disclosing entities may determine the length of their financial year. While an entity's financial year is expected to be approximately 12 months long, entities can determine otherwise in cases where an entity needs to modify its financial year by up to seven days to accommodate week based internal reporting frameworks or an entity needs to synchronise its financial year in order to prepare consolidated financial reports.

Items 7 to 9 of schedule 1 of this bill amend the legislation to exempt certain companies limited by guarantee from the need to appoint or retain an auditor. Obviously there are significant costs associated with auditors. They perform an important role. Normally when companies get into trouble you find that the auditor has not been doing an appropriate job. Currently all public companies, including companies limited by guarantee, are required to appoint and retain an auditor. This bill amends this so that the small companies limited by guarantee and those companies limited by guarantee that have their financial reports reviewed are not required to appoint or retain an auditor. This means that companies that are not required to undertake an audit are no longer required to appoint and retain an auditor. All other public companies, however, are required to appoint and retain an auditor. So the public has that security, knowing that auditors will be looking through the books of those companies.

Part 1, items 1 and 2, of schedule 2 of this bill amend the Australian Securities and Investments Commission Act to improve the operation of the Takeovers Panel by allowing takeover matters to be dealt with more efficiently. Currently the president and members of the Takeovers Panel may only participate in proceedings if they are within Australia. This bill makes amendments so that the president of the Takeovers Panel may give a direction in respect of members who are to constitute the panel whether or not the president is in Australia. Further, members of the Takeovers Panel may participate in proceedings whether or not they are in Australia.

Part 1, items 3 to 8, and part 2, item 9, of schedule 2 of this bill amend the Australian Securities and Investments Commission Act 2001 to extend the Remuneration Tribunal's remuneration setting responsibility to include certain Corporations Act bodies. The ASIC Act currently provides that the responsible Treasury portfolio minister determines the terms and conditions, including the remuneration of the chairs and members of the Financial Reporting Council, the chair of the Australian Accounting Standards Board and the chair of the Auditing and Assurance Standards Board. The ASIC Act also provides that the FRC is responsible for determining the terms and conditions, including remuneration, of the offices held by the members of the AASB and the AUASB.

This bill brings responsibility for determining the remuneration and full-time member recreation leave entitlements of the chair and member positions of the FRC, the AASB and the AUASB within the Remuneration Tribunal's direction. The Remuneration Tribunal has specialist skills in reviewing and determining remuneration. It looks after members of parliament's remuneration as well, and it does a good job. It is therefore better placed to determine the remuneration of these officers. Moreover, it will ensure consistency in the remuneration setting arrangements between the three bodies and other statutory office holders.

One of the controversial items in this legislation which has bipartisan support will be the one about 100 members. I revisit that item because so many campaigns are organised when a corporation is perhaps doing something that people are not happy with. We have seen it with union campaigns in the past where perhaps inappropriate workplace practices are taking place. We have seen it when corporations are selling something, farming, mining or doing something that members of the community are not happy with. The 100 shareholders practice has often been used in the past in these cases. I want to stress again that, when compared with other common law jurisdictions that utilise corporations or even civil countries that use corporations and all the benefits that come with corporations, Australia has been a bit stand-alone in letting 100 shareholders, as I said, irrespective of the value of the shares held by those 100 shareholders, take control and basically impose a cost on other shareholders.

That would be the more controversial point, but the other aspects, such as improving remuneration reporting, clarifying the financial year, streamlining the auditor appointments, improving the efficiency of takeover panels and improving the government remuneration process, are not particularly controversial. This is normal, run-of-the-mill government business. I am happy to support this legislation before the chamber.

Steven Ciobo (Moncrieff, Liberal Party, Parliamentary Secretary to the Minister for Foreign Affairs) Share this | Link to this | Hansard source

I thank those members who have contributed to this debate. This bill makes a number of amendments designed to reduce the regulatory burden on businesses operating in Australia. Schedule 1 of this bill amends the Corporations Act 2001 to reduce the cost to businesses operating in Australia by removing the ability for 100 members of a company to request a general meeting. While this change ensures company resources are no longer spent on meetings requested by only a very small minority of shareholders, we have also made sure important shareholder rights are retained. This change will not impact on the right of a member or members with at least five per cent of the voting shares to request a general meeting. Nor will it impact on the right of 100 members of a company to place items on the agenda of a general meeting.

This bill simplifies remuneration disclosures in Australia. Unlisted disclosing entities will no longer be required to prepare a remuneration report. This bill clarifies when entities can change their financial year end dates. Stakeholders have been calling for this clarity since an amendment to permit companies greater flexibility to change their financial year end date was inserted into the Corporations Act in 2010. Entities will finally be able to access this flexibility with confidence.

Finally, schedule 1 of the bill removes the requirement for companies limited by guarantee, that are not required to undertake an audit, to appoint an auditor. This primarily benefits smaller companies limited by guarantee who feel the burden of the existing requirement most acutely.

Scheduled 2 of this bill amends the Australian Securities and Investments Commission Act 2001 to improve the efficiency of government processes, reflecting the government's commitment to identifying cost savings and efficiencies within its own processes. Schedule 2 also improves the efficiency of the operation of the Takeovers Panel. It further extends the remuneration-setting responsibility of the Remuneration Tribunal to the Financial Reporting Council, the Australian Accounting Standards Board and the Auditing and Assurance Standards Board.

In summary, the amendments made by this bill will reduce the costs borne by Australian businesses because of government regulation. It will permit business to focus on what it is they should be doing—running their business. I commend the bill to the House.

Question agreed to.

Bill read a second time.