Stuart Robert (Fadden, Liberal Party, Shadow Minister for Defence Science, Technology and Personnel) Share this | Hansard source

The committee made a unanimous and bipartisan recommendation that the government not proceed with those provisions that detailed phoenixing, which have led to the substantive aspects of this bill. The committee specifically commented as follows:

… the committee notes concerns from the business community and its representatives that the bills potentially apply to the broad range of directors whether engaged in phoenix activity or not. The committee recommends that the government should investigate whether it is possible to tighten the provisions of the bills to better target phoenix activity.

The government subsequently withdrew the provisions from the bill and has to provide any indication as to how it will actually tighten the provisions to better target phoenix activity as recommended by the committee. The latest provisions in the current bill remain problematic. The Australian Institute of Company Directors has expressed concern about the general thrust of the changes. It is critical of the fact that no attempt has been made to define phoenix activity in any of the bills the government is introducing to deal with the issue. Whilst it is not opposed to all aspects of the bill, the institute does feel that additional powers should be better targeted on those specific activities the government is seeking to eliminate.

The coalition remains concerned that the government, while attempting to regulate and target phoenix activity, has still not made any meaningful attempt to craft a definition of what constitutes that type of phoenix activity. It is fundamental to ensure that any fraudulent activity being targeted is clearly defined so that everyone knows exactly what the lay of the land is. A clear definition would protect legitimate companies and ensure they are not inadvertently caught in what could be perceived as some quite significant measures, with ASIC being able to unilaterally move to liquidate the company. You would think that giving such powers to ASIC would require a clear and precise definition of what those activities would be that could lead to a company being wound up. We note there are significant increases in ASIC's powers represented by the bill. As Australia's corporate regulator, ASIC has a rightful role to play in properly overseeing and enforcing existing legislation. Such rules and regulations need to be properly scrutinised by the parliament to ensure they are being applied in accordance with the original intent of the legislation. We remain concerned that the bill does not allow for appropriate parliamentary scrutiny of these new powers.

One of the major issues identified as contributing to the extent of phoenix activity is that regulators are apparently not fully utilising the existing powers available to them. Other issues that have been cited include a lack of prosecution, underresourced regulators, insufficient follow-up on complaints, and inadequate penalties provided to act as a deterrent. In this context, giving additional new powers to ASIC would appear to be putting the cart before the horse, if ASIC is not currently using its existing powers.

We also remain concerned that the government seems to be taking a further ad hoc approach to the targeting of fraudulent phoenix activity by introducing many pieces of related legislation in an uncoordinated manner, such as the current bill and the previous bills that were so heavily criticised by the House of Representatives Standing Committee on Economics. Those criticisms were unanimous and bipartisan. We strongly recommend the government cease the ad hoc and piecemeal approach, withdraw the current bill and instead engage in some meaningful consultation with stakeholders to address their legitimate concerns and to determine a comprehensive and coordinated legislative approach to this important public policy matter.

As a starting point, the government should consider the proposals paper on combating phoenix activity released in November 2009 by Nick Sherry, who was then the Assistant Treasurer—one of five Assistant Treasurers in the short history of this Labor government. Of the 11 proposals for combating phoenix activity in that proposals paper, none are reflected in this new ASIC power. Did you just decide, Parliamentary Secretary, that you would ignore Nick Sherry? Did you decide that, as an Assistant Treasurer, he was not worth listening to? But then again there have been five Assistant Treasurers, so I guess the point is axiomatic. But these 11 proposals may in fact be a good place to start, since it was your Assistant Treasurer who put them together, I assume with the backing of Finance and Treasury.

The coalition has a number of other concerns about the government's approach to phoenix activity, which include how effective previous regulatory efforts have been in combating this practice; the appropriateness of available penalties; and the lack of recognition by the government of the role and capacity of liquidators in tackling this type of activity.

Failing the government seeing sense and going back to the drawing board, the bill needs a thorough examination in the Senate Economics Legislation Committee. The coalition would also like to see an Economics References Committee inquiry to look beyond the government's piecemeal legislative effort. That inquiry should canvass all options for reforming the law surrounding phoenix activity and make recommendations to the parliament for a comprehensive and coherent legislative change.

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