CORPORATIONS LEGISLATION AMENDMENT BILL 2002Cognate bills:CORPORATIONS (FEES) AMENDMENT BILL 2002CORPORATIONS (REVIEW FEES) BILL 2002: Second Reading
Mr CADMAN (Mitchell) (10.33 a.m.) —By its title—Corporations Legislation Amendment Bill 2002—this bill is one that you would think that only accountants and corporate lawyers would be interested in.
However, it has a great deal of practical implications for businesses of all types, particularly small businesses. I want to outline for the House some of the forward thinking that this government has brought to the changes and amendments to corporate practice so that small businesses and large businesses alike can be more efficient, not be imposed upon to such a great degree as they have been by government in the past, and be given an opportunity to get on with their real reasons for existence—that is, to produce goods, process goods, provide services, make profits, reinvest and employ people.
When the government first circulated a discussion paper on changes that needed to be made to corporate practice—I think it was in December 2000—I do not think anybody considered it would take this long for some of these changes to come about. They appear to be simple, but when one examines the processes that were required—changes to law, changes to processes of registration, notification of changes of company structures and directors, and all that sort of thing—it becomes quite a complicated process. The government was aiming to simplify the process by cutting out steps but it was also looking at the prospect of using electronic lodgment and changes. It is now possible to register a company electronically, to lodge returns electronically, and to carry out all the requirements of the pay-as-you-go tax system and the goods and services tax electronically.
When it comes to the structure of a company, that is a legal entity and, if you are going to muck around changing directors, structures or names of companies, there are very important legal processes. Ultimately you must have an entity which has sound legal status, and if anything goes wrong you must be able to nail the wrongdoers. To do all of that electronically requires a process where there are checks and balances to ensure that the identity of people making changes can be ascertained and to ensure that the directors of any company are real people—not individuals manufactured to delude or mislead the public. This has been some time in coming through, and I am delighted to see it.
There are a number of measures that I would like to run through. There are a number of statutory requirements of corporate law to notify registration or changes in structure of a company. They are: the Australian Securities and Investments Commission must be notified of the company name; the address of the registered office; the address of the principal place of business; information about the directors and company secretaries, shares issued, options granted, unused shares, company members and solvency; the ultimate holding company and the Australian Company Number. All of those things have been standard practice for a long time and everybody—even in the smallest businesses in Australia—is aware of the requirement to notify who you are, what you are doing, who else is involved with you, and where you can be contacted.
It seems like simple stuff, and these changes continue that practice but do not require the yearly notification of all of these factors which have, with most companies, continued over many years and will continue for many years. It has been a drain on small and medium businesses in particular to constantly fill in—or have a tax agent do it for them—year in and year out, forms that require information that is exactly the same as the year before. Probably the only variation would be whether or not the company is solvent. The purpose of the annual return used to be to inform creditors about the financial affairs of the company. It appears, I think, that the annual return is to provide the public with some reassurance that the company is still operational and still solvent. I believe that that is a reasonable process. The bill deals with the issues I have described and it requires that a company, once registered, need only take the form and say, `This form is accurate and there are no changes needed to it.'
A couple of other things are significant. One is that the ACN, or the Australian company number, is being replaced by the ABN, the Australian business number, which is comprehensive and pervades everything. I trust that we will eventually get rid of the Australian company number concept completely. As I understand it, from what the legislation says, this almost does that but not completely, because it seems that ACNs are still used in the registration process. I trust that the whole thing will change so that the Australian business number, which was a requirement of the goods and services tax, is the sole identifier and will hold sway right across all transactions and all businesses.
The basis of the changes is that there is no longer a requirement to lodge annual returns. There are a number of other factors in this legislation. CLERP 7 requires that there will not be any further requirement to lodge a notification, or do an annual return. It is said that the winners from simplification are both business and government. There is a provision to lock in at $200, until 2004, fees for small business. That seems fairly straightforward. There have, however, been a number of concerns raised. I want to deal with some of those concerns with a response that I have been given to some of these queries by the Parliamentary Secretary to the Treasurer, Senator the Hon. Ian Campbell. He indicated that:
... rather than introducing a raft of new forms, CLERP 7 changes would see the introduction of a single multipurpose form. The proposed multipurpose form would replace various forms that companies must use to notify ASIC of ongoing changes. For example, changes in registered office and principal places of business, changes in particulars of office holders and details of an issue of shares. The multipurpose form will make it simpler for companies to meet their obligations under the act, to notify ASIC of changes in company details. Companies will be able to use one form to notify ASIC of common types of changes at the one time instead of using various forms.
He gave the following examples:
If a small company operating from home moves its address, it currently has to lodge a number of changes of address forms under the Corporations Act. Under the CLERP 7 bills, the company will only need to lodge one form to make all the relevant notifications. Another example is where a company alters its share structure. Again, the company will only need to lodge one form.
So that is the purpose, as I indicated at the beginning of my speech. Companies will no longer be required to lodge an annual return. An extract of particulars will come to them from ASIC and they will just have to give it a tick if they agree with it. It will be sent to the company by ASIC, either lodged with a registered agent or through an electronic mailbox—ASIC's online EDGE system—together with an invoice for the annual review fee. The company is not required to respond to the extract of particulars unless something is incorrect. Unless they need to change something, the company does not even have to acknowledge the fact that they have received it. No forms will need to be completed and no lodgments will take place. All they will need to do is pay the review fee.
There are some new requirements for proprietary companies relating to the notification of ongoing changes of membership of structures and ultimate holding companies. That is perfectly reasonable. Too many instances have come to my attention of companies changing their structure or phoenix companies dying and ripping people off and then coming out of the embers again in a slightly different shape and it being impossible to trace who the directors or the operatives are of the company. This legislation seeks to continue the protection that has been there, and I commend the government for it.
There has been criticism of the start-up date of 1 July. I understand why some firms feel that they might not be ready, but I also agree with Senator Ian Campbell that we need to make a start and get moving soon. If there are some problems or delays because of the early commencement of this legislation, then some exercise of leniency should be allowed, but I imagine that only a small number of companies will be required to lodge their returns within the month of July.
I want to turn now to corporate matters in general and comment about corporate governance, some of the issues that relate to this legislation and the concerns the public has with matters broadly described as the `HIH affair', although this applies broadly to many companies and not just HIH. It is time that we really started to anticipate the report of the royal commission and to think about what changes to corporate governance will be needed in Australia. No doubt, as my colleagues would be well aware, there could well be criminal charges placed against some of the operatives in the HIH affair. But it is not just that alone that is of concern; it is the carefree, laissez-faire attitude that can be found in some large corporations. The tax office and ASIC target the little guys, but I think an even more onerous responsibility should be placed on directors and CEOs of large corporations. Governance where there is much responsibility and large funds involved must be stringent but not cumbersome.
As we look forward to the results of that royal commission, the practices of some of our corporate leaders need to come under the microscope. I have a list of examples of the golden handshake syndrome that gives the wrong message about corporate responsibility and being fair dinkum in providing an employment base, a profit base and an investment base for large companies. The payouts of Chris Cuffe of Colonial First State at $32.8 million and Brian Gilbertson of BHP Billiton at $30 million, in particular, were huge amounts of money and absolutely unacceptable. The ones that irk me the most were the payouts made to directors of AMP who shot the company down the drain and then left with a golden handshake. Those were not an appropriate acknowledgement of success. I would have thought that huge rewards would be there for those who gained great success: huge rewards for huge success—more employment and more profit for investors and for the mums and dads from a gifted CEO's activities. But we have reversed the process: the worse the result, the more the payout! That is grabbing as much as you can from a sinking ship and baling out before it actually sinks beneath the waves. That is greed and absolutely inappropriate. I am private enterprise through and through, as the honourable member for Melbourne Ports opposite may realise, but to see somebody abuse something that you value is—like people abusing this parliament—an absolute anathema.
The comments of the Prime Minister and the Treasurer in regard to these matters were very significant. They said that these guys needed to really watch what they were doing or the government would stamp on them. There should be disclosure of the terms and conditions of any payout available to all shareholders immediately these guys are signed-up, so that there are no bale-out provisions.
I really am impressed with the attitude Stan Wallis had when he was offered a retirement payout from AMP of $1.6 million. He refunded it. He said—and this is very interesting—something along the lines of, `I didn't do well. I don't deserve it. I haven't got a great result for the company. I don't deserve this money.' To me, that is an absolutely ethical and sustainable attitude, and I commend the man for it. But it does not really relate to previous payouts. People snatched the money and went.
Mr Slipper —He still got bagged out, though, didn't he?
Mr CADMAN —He still got bagged out but Wallis represents an ethical result and he did not get full credit for what he did—refusing to take the money. But I think that that is a fine example of what can and should be done. Graeme Samuel interestingly enough told the ABC in a report that I have:
It's more important to have prompt disclosure once the deal is done—
with the appointment of a CEO or director—
so the marketplace and investors know about these significant contractual arrangements.
The five senior executives who left AMP, by the way, took $12 million. I know people in retirement who are suffering. They have had to sell their homes and move to different places because a planned retirement is no longer there. They have suffered because their AMP shares are worth half of what they were previously. Yet these five senior directors bailed out with $12 million between them. Most of them probably reckon Stan Wallis is a dill for not taking his as well. I despise that attitude and I think that we need to really strongly condemn it.
Shareholders ought to be insisting upon information regarding remuneration. Katie Lahey of the Business Council of Australia said:
You really can't reward poor performances but companies are obliged to honour existing contracts, although some of these contracts perhaps have been poorly worded.
She refers to AMP's poor results and to the criticism of the Commonwealth Bank for its payout of Chris Cuffe and to other executives on the list, some of which I have read out.
All in all, I trust that as we come to consider the result of the inquiry into HIH we will see more corporate changes. These changes that we are dealing with today will benefit small business. They are in line with what the government has already promised and I know that the promises that have been already made about the role of the government in engendering good attitudes in corporate governance for large corporations will be followed through as well. I have great confidence that the commitments made have been kept here and I trust the commitments made in regard to large corporations will also be maintained.
Author: Alan Cadman MP
Source: House Hansard - 26th March 2003
Release Date: 1 Apr 2003