Christian Porter (Pearce, Liberal Party, Parliamentary Secretary to the Prime Minister) Share this | Hansard source

Before the House is the Corporations Legislation Amendment (Deregulatory and Other Measures) Bill 2014 and—as has been noted by several of my colleagues—this package of reforms to the corporations legislation is estimated to reduce business compliance costs by around $14 million per year, which over time adds up; over a full budget cycle that represents $56 million worth of savings.

Having been present from the commencement of this debate, and having listened to the member for Oxley, this bill certainly appears to have bipartisan support—about which we are, of course, pleased. But the member for Oxley's contribution mirrored, in large part, the response that has come from members opposite with respect to the overarching deregulatory agenda. That response has been, on each occasion, to support the bill for one of either of two reasons—one, a contention that the bill is unimportant; or secondly, where the bill is considered important, to support the bill on the basis that it would have been something that they, the Labor Party, were going to get around to in any event. The member for Oxley mirrored the second of those contentions. He noted bipartisan support for this bill and for all of its relevant provisions; he noted that these were the types of things that were being progressed—and that indeed these matters were being progressed—under the previous Labor government; and he, in effect—and I am paraphrasing—put the proposition that it was only a matter of time until they would have gotten around to it, in any event.

As has been noted by some of my colleagues, this does give rise to the question: if the members opposite had been as fulsome about their deregulatory agenda as they now claim to have been, why is there is so much left to do? Or indeed, why did the World Economic Forum, in the final year of the Labor government, note that we had slumped to 128th on the measure of burden of government regulation—nestled neatly in between Romania and Angola? But it is a proposition that Labor puts continually. Previously, the member for Isaacs has spoken on legislation under the deregulation agenda, saying: 'It is the same attitude that we had while we were in government.' Again, the member for Oxley had said previously: The Labor Party are prepared to support this '—this type of legislation—' not on the basis that it is great or d oes anything outstanding or changes the world but just because it is something we would do every day of the week anyway. ' The member for Blair has said: 'This was work that the Labor government, when we were in power, did without fuss and fanfare.'

I think it is worth testing this notion that these were the types of things that Labor was getting around to in due course, or that were imminent, or that Labor was progressing. With particular reference to this bill, and particular reference to the point that has focused the attention of most of the speakers, which is the 100-member rule, I must say that the member for Oxley's contention—that the removal of this rule has always had bipartisan support, and that it was something that they, Labor, were getting round to in their six years of government but just did not quite get to—is not, I fear, a particularly accurate reflection of the actual history of this matter, or of Labor's position on it. It is worth looking at it in some little detail.

From what I can gather, the modern history of the attempts to reform this provision go back to at least 2005—in fact, it was 2000. The coalition government tried to amend the policy by regulation in 2000, and those regulations were actually disallowed. Then there was another attempt, towards the end of the Howard government, to disallow by legislation—which did not see through the life of the parliament. So this quite stupid, 100-member rule had its first attempt at being reformed in 2000. I think a number of companies who have suffered at the hands of this quite ridiculous rule might ask why it has taken so long—14 years—for this to occur. When I put the contention that this is a really quite desperately stupid piece of regulation, that is absolutely borne out by the examples.

The example of the now notorious Woolworths matter has been mentioned. It is worth going into that in a little bit of detail, to establish the point of fact that this is a terrible piece of regulation which is now being removed. Anyone who cares to look at the Federal Court of Australia decision in Woolworths Limited v GetUp Limited [2012] FCA 726 will see exactly what happened and the history of the matter.

As has been noted, we consider that the removal of the 100-member rule will save some very considerable amount of money for corporations over the progressive out years of the budget. In the Woolworths example, under the 100-member rule, 210 shareholders, which was 0.05 per cent of the 417,000 shareholders of Woolworths, tried to force a meeting under the relevant provision, which was section 1322 of the Corporations Act. At least we can say that, fortunately, orders were eventually issued by the Federal Court under section 1322(4)(d) of the Corporations Act that allowed for an extension of time for Woolworths so that they could coordinate the requested meeting with their actual AGM.

In the matter there was some discussion of the cost that would have been incurred by Woolworths had they not been granted the extension and had the initial request been compelled upon them. They noted that the mere fact of having to mail out the notice to their membership and the construction of the meeting would have cost $550,000. They also noted that some or likely all of the 12 directors would have to attend the meeting; the directors of Woolworths were resident variously in the United Kingdom, the United States of America, New Zealand, Sydney and Melbourne; Woolworths would need to pay for flights and accommodation in respect of each director who attended the separate meeting; Woolworths accountants, solicitors and various key management personnel would need to attend; there would need to be additional time spent by key management personnel and other employees of Woolworths liaising with institutional and retail investors; the attendance of approximately 30 to 40 staff would have been required for the running of the extraordinary meeting; there would need to be attendance by a range of other people on behalf of Woolworths; and there would need to be the arranging of media facilities and conferences following the meeting and attendance by both Woolworths internal security staff and external security contractors. It was estimated that all of that would factor up to a cost of about $2 million for Woolworths if they had been compelled to see through that meeting. In the relevant Federal Court action, Woolworths used the existing provisions to argue that it was appropriate, given the great cost and inconvenience that would have been incurred by them, to have what would have in effect been a three-month delay and hold over the extraordinary general meeting to the time of the actual general meeting.

That proposition was opposed by GetUp. A reading of the case shows that GetUp in opposing the request for a three-month delay to save $2 million noted that, given what they were seeking to do—which was in effect to engender a political outcome with respect to those companies that Woolworths owns that operate poker machines—was not affected in any way by the potential for having the extraordinary meeting run parallel with and at the same time as the annual general meeting. They noted and conceded in the action that there was no prejudice to GetUp from Woolworths saving themselves and their shareholders $2 million and having the three-month delay. Nevertheless, GetUp argued that its original request should stand and that Woolworths should be put to that $2 million worth of expense. I think any rational person—it seems that all members opposite, at least today, are such people—would agree that that is a seriously ridiculous state of affairs.

The Woolworths case is not the only example that has emerged of the incredible waste that this really quite ordinary piece of regulation has caused. Another famous example, which was the subject of a Parliamentary Joint Committee on Corporations and Financial Services inquiry, was with respect to the NRMA. In that inquiry the NRMA outlined the impact that the incredibly disproportionate influence of this very silly rule was having on its business. The NRMA gave evidence to the committee that its:

… repeated experience over recent years—

this was in 2005—

has seen a situation where 0.005% of members are able to call a special meeting at the cost of approximately $4 million. This circumstance—

it noted to the committee—

has occurred 7 times in the past 3 years.

That was in the years leading up to 2005. That is incredible waste and an incredible expense that a terribly stupid piece of legislation was putting this company to. Shamefully, that was known to be the case in 2005. The parliamentary joint committee was considering an exposure draft of the Corporations Amendment Bill (No. 2) 2005, which, had it seen its way through the parliament—unfortunately, it did not—would have been the Howard government's solution to this problem.

There was an initial attempt to solve the problem in 2000. A subsequent process to solve the problem commenced in 2005. Nothing was done to solve this blindingly obvious and terribly wasteful problem over the six years under Labor. Here we are now with bipartisan support 14 years after the first attempt to save the money of companies that employ Australians and that represent mum and dad shareholders across Australia. Fourteen years after first identifying and attempting to solve this problem we are solving it. That delay, we are led to believe, is explicable over the past six years of Labor simply on the basis of what the member for Oxley said, which was to the effect that whilst there was agreement that this rule was, as I have asserted, a stupid rule, it was being progressed—that is, reform of the rule—and that it was on the cards or imminent but just had not actually happened yet. Again, I must say that, looking at the history in some little detail, that does not appear to represent the true position of members opposite. In 2005, when the Parliamentary Joint Committee on Corporations and Financial Services was considering the exposure draft of the Corporations Amendment Bill (No. 2) 2005, which bill was trying to fix this problem with respect to the 100-member rule, there was a majority report and there was a minority report.

Interestingly, the minority report, which is headed—would you believe?—'Labor members' minority report', deals precisely with the 100-person rule. If we have bipartisan support for the removal of the 100-person rule now, that is a very different position to the one that members opposite had in 2005 and, I presume, during the previous six years, because what the Labor members said in their minority report was this:

Notwithstanding this position—

and there they were referring to the great examples of waste that were put before this committee—

Labor members recognise the rights of small shareholders to access company governance processes. We also recognise that in companies with a large number of members, the threshold of 5% of voting rights necessary to call an EGM will preclude smaller shareholders from ever gaining the necessary numbers to call such a meeting. This would effectively close this avenue of shareholder participation for small shareholders acting together.

As a result, Labor members favour the inclusion of a cap to operate in conjunction with the 5% rule for the number of individual members required to call an EGM. The cap would come into effect when a threshold of 5% combined shareholding could not be reached by a significant number of small shareholders acting together. Labor proposes that this cap be 1,500 members.

So today we have bipartisan support for the removal of the 100-member rule and the reversion to the five per cent capital cap, which I might add is the system that exists throughout Europe, in the UK and in New Zealand. Indeed, at five per cent, we represent the lowest threshold of just about all of those jurisdictions.

But at the pivotal time in 2005 Labor did not favour the removal of the cap. They just wanted to ratchet the cap up. Fifteen hundred might sound more substantial than 100, but to look at how ridiculous that position of Labor's was in 2005 consider this: 210 shareholders of 417,000 in the Woolworths example represented 0.05 per cent of the shareholder base, which was able to cost the entire company about $2 million. If the Labor 2005 position where you have a cap at 1,500 were adopted, instead of only 0.05 per cent of members being able to force the waste of $2 million, 0.357 per cent of members would have been able to force the waste of $2 million. It was a seriously ridiculous position that was held by Labor in 2005. What position they held during the last six years is a mystery. We can assume it was the same as their 2005 position. But I would argue that the reason for their delay was, like with many of these things, that their heart just was not in it.

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