Shayne Neumann (Blair, Australian Labor Party) Share this | Link to this | Hansard source

I speak in support of the Corporations Amendment (No. 1) Bill 2008 [2009]. The bill proposes to amend the Corporations Act 2001 to provide a mechanism for recognising in Australia disqualifications from managing corporations that occur in prescribed foreign jurisdictions. This is a particularly important piece of legislation to close a regulatory gap and prevent people from avoiding disqualification simply by moving jurisdiction from an overseas country to Australia. It is anticipated that our trans-Tasman brethren in New Zealand will actually be the first cab off the rank.

Initially it is suggested that mutual recognition will apply to New Zealand only, but the bill provides the tool, or the mechanism, by which other jurisdictions can later be added. It really is all about ensuring our relationship with New Zealand and other countries in terms of the consistency of corporations law being achieved. Our relationship with New Zealand is a longstanding one, as everyone in this House knows. In fact, New Zealand is actually mentioned in our Constitution. It was anticipated that New Zealand might actually become a state of Australia, and some would say that might have been a good thing. They are our natural allies, and they are our natural adversaries on the sporting field. But in terms of migration, trade, defence ties and people-to-people links we are very close and there are many Australians who travel to New Zealand for business and for holidays and who have relationships and relatives over there.

As someone who was in business for a long time before being elected, in 2007, I had many business relationships with people in New Zealand. In fact, I was part of a group of lawyers and law firms called the Southern Cross Legal Alliance. We had relationships with New Zealand firms in Auckland and Christchurch, and I visited New Zealand on many occasions with court cases overseas. Our firm had cases in New Zealand, and it was quite common to deal with New Zealand law firms on corporations, family law, personal injuries and other areas of law.

New Zealand, a country of about 4.2 million people, is our natural friend. It is like a brother to us as a country. We have cooperated well in international relations for a long time. In fact, we have looked to standardise our relationships in terms of the statute of limitations provisions, legal procedures, partnership laws, family law, the service of legal proceedings, evidence law, the standards of products, legal obstacles to greater federal-state and New Zealand-Australia cooperation—we have identified all these areas where we can work harmoniously together. We are part of the Pacific region. At the Pacific Islands Forum, APEC and the ASEAN regional security forum, we have dealt with New Zealand as part of our defence arrangements for a long time. New Zealand has been part of ANZUS. We have cooperated with New Zealand in East Timor, Bougainville and the Solomon Islands. And it is just natural to cooperate with New Zealand in the area of corporations law.

About 62,000 Australians live in New Zealand, many of them for business reasons. At last count—I think it was 30 June last year—there were 521,000 New Zealanders living in Australia. That is more New Zealanders, more Kiwis, living here in Australia than there are people who reside on the Gold Coast, in south-east Queensland, one of the biggest cities in our country. That goes to show just how many New Zealanders come to Australia to live and how many Australians go to New Zealand to live.

Australia makes up about 20 per cent of New Zealand’s trade. In fact, when you consider all the trade that goes on between the countries, the area of law that we are currently standardising is very important. The total trade between the country of Australia and the country of New Zealand is $16½ billion. That is an enormous sum of money that we are trading in imports and exports between the countries. Corporations deal with this all the time. So we have people from New Zealand coming to Australia and working in companies over here, and we have Australians working in companies in New Zealand. It is a bit like travelling across the Tweed River from Queensland to New South Wales or travelling across the Murray River: it is just natural for us to have relations with New Zealand.

We find from time to time that people who have been disqualified in our jurisdiction want to go and practise as managers and as directors in New Zealand and vice versa. New Zealand in 2007 closed this loophole. It is important to understand what the current law is in this regard, particularly in relation to managers and directors. In relation to the circumstances under which someone could be disqualified from a position as a director, the current Corporations Law in Australia does not provide for automatic recognition under Australian law of disqualification from being a director in another country. Only in circumstances where there are serious crimes, where a person has been convicted of an indictable offence in relation to the management of a financial company, do you find that they are disqualified. That is one of the key features of the old law. In circumstances where people are involved in offences of dishonesty punishable by imprisonment of at least three months, you might be disqualified, but disqualification is only a rare occurrence. Where people are managing corporations, the current law does not actually provide a mechanism by which a court in Australia can recognise a disqualification of a person from managing corporations that occurred in a foreign jurisdiction. So there is a real gap in our law in this area.

We entered into an agreement with New Zealand that was important in business law. It was a memorandum of understanding on business law coordination. What we are doing here, as has been said on numerous occasions, is taking yet another step along the way to cooperation with New Zealand in what has been described by many people as our greatest aspiration—that is, a single trans-Tasman economic market based on a common regulatory framework. That has been the aspiration of governments of both persuasions for a long time.

The relevant minister, Senator Sherry, the Minister for Superannuation and Corporate Law, in his second reading speech on 3 February this year said:

… the bill establishes a framework by which individuals who are disqualified from managing companies in prescribed foreign countries can also be disqualified in Australia either automatically or by court order. As such, the bill will improve protection for investors and the integrity of Australia’s markets.

It is just natural that New Zealand is the first prescribed country. Under the law change that we are talking about there is a mandatory aspect and a discretionary aspect. For example, the first proposed provision will result in a person being automatically disqualified from managing a corporation in Australia if they are disqualified from being a director or being concerned in the management of a foreign company by a court in a prescribed country. In other words, a court over there has looked at all the facts and said, ‘Well, this person should not be involved as a director or a manager in this country.’ A court of law in New Zealand has examined the facts and the law as it applies to that particular circumstance in that particular case and has decided against the director or manager. So there is a mandatory aspect to it: we have the protection of the New Zealand courts—and that is quite common. We commonly recognise New Zealand decisions in areas such as child support and family law and in other areas, where their judgements are recognised in our courts and then enforced. It is a common thing that we do in Australia.

The second proposed provision extends the power of Australian courts to disqualify people from managing corporations, an application made by ASIC. That means that a person has been disqualified under the law of a prescribed foreign jurisdiction, but a court of law has not actually looked at the facts of the case, so they are just automatically disqualified. In those circumstances, our courts will have a discretion to consider the disqualification and make a decision accordingly as to whether they think it is justified in all the circumstances. So whether people are automatically disqualified as a result of a court of law in New Zealand deciding the matter and Australia just recognising it or whether they are automatically disqualified in New Zealand and then come to Australia, our courts will act as a protection in the circumstance, with a discretionary aspect to the law change. This is important.

So, whatever the circumstance, a court of law, presided over by a New Zealand judge or an Australian judge, will consider the issue. Of course, we expect in future our OECD partners to also be engaged in this sort of process. It is closing the gap so that someone who is disqualified in New Zealand does not come over here and start practising as a manager or as a director. We simply do not want people who have been judged by our peers in New Zealand as not being capable or worthy of serving in those corporate capacities doing their job here in Australia. We do not want that to happen. We want our companies to be managed well, we want directors to fulfil their duties under the Corporations Law. We do not want directors and managers in those circumstances simply jumping ship, crossing the Tasman, and doing here in Australia what they have done in New Zealand and what the courts and the law of New Zealand have found they have done.

As I said, this amending legislation fulfils a requirement that the Australian and New Zealand governments have undertaken as part of the memorandum of understanding on business law coordination. In 2007 New Zealand did what we are doing here today. It is an important law change. It is important because we want integrity in our corporate law, in our managers. At this particular time we want as much honesty and probity amongst our corporate managers and directors as possible.

This amending legislation of course has the support of the Australian Institute of Company Directors, who have supported the law change. They supported the automatic disqualification initiative and they look forward to the further development of the law in this area. The legislation has also been through the process which is commonly known as MINCO—that is the Ministerial Council for Corporations. That body has been consulted and, in the circumstances, this particularly worthy legislative reform deserves the support of both chambers of this parliament, as does so much other legislation. As someone who has practised as a lawyer and who has dealt with cases in Australia and New Zealand, I am very pleased to support this bill.

Stuart Robert (Fadden, Liberal Party) Share this | Link to this | Hansard source

I rise to support the Corporations Amendment (No. 1) Bill 2008 [2009]. I thank the member for Blair for his detailed and erudite contribution on the law and how it pertains to the issue. This bill prevents persons who are disqualified as company directors in New Zealand from becoming directors in Australia. It addresses the perceived loophole in the existing law whereby people ostensibly just crossed the Tasman to avoid disqualification.

The objectives of this bill are certainly in line with the principles of the MOU on business law harmonisation between our two countries. The benefits of mutually recognising director disqualifications were raised by the member for Higgins and the coalition government in 2006. Hence the coalition supports the move. By way of background, the MOU was first signed in 1988 and allowed for harmonisation of business law. It was reviewed every five years, the last review being in 2006. New Zealand closed this regulatory gap by amending their Companies Act 1993 in 2006. The Australian bill is modelled on the New Zealand bill.

As we debate this bill in the parliament, it is interesting to note that, according to ASIC’s 2007-08 annual report, 280 litigations were finalised in Australia. ASIC jailed 23 people, 40 were banned under section 206B(1) and 66 officers were banned or disqualified as a result of ASIC action. Eighty illegal investment schemes were wound up. ASIC received 11,436 complaints. If you look back at the 2006-07 financial report of ASIC you will see that 21 criminals were jailed, compared to 17 in the previous year. There were 256 civil orders against people or companies, 105 illegal schemes shut down and 110 people removed from directing companies. Statistics from various years have shown an increase in the number of directors banned, schemes shut down and funds frozen.

I can only assume that the figures in New Zealand are exactly the same; therefore, it is a lay-down misere. The last thing we want in this country is someone from another country—and in this particular instance we are talking about New Zealand, although the way the bill is structured will allow other countries to be added—for example a director who has been banned because of criminal or commercial malpractice, financial services advisers who have been banned because of misconduct, auditors or liquidators disciplined for misconduct or people with civil orders against them, coming across the Tasman with impunity and bringing their own professional negligence and incompetence into this country. I commend ASIC for the work it is doing in keeping on top of those who would flagrantly disregard our laws, and indeed our people, for their own self-aggrandisement.

Bernie Ripoll (Oxley, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in support of the Corporations Amendment (No. 1) Bill 2008 [2009]. This bill is simple but quite important. It acknowledges the need to recognise in Australia the disqualifications and penalties placed on certain people in other jurisdictions and allows those penalties to be carried through under Australian law. The bill proposes to amend the Corporations Act 2001 to provide for the recognition in Australia of the disqualification of people in other countries. These are people who have been disqualified from managing corporations or the like. We will be closing a loophole, a gap, in our own regulatory system which can be taken advantage of by people who are disqualified from managing a corporation in another jurisdiction. For example, a person might be disqualified by the courts in New Zealand, for either criminal activity or malpractice in New Zealand, but then they might decide to come to Australia and take up practice doing what they did in New Zealand. I think it is fair to say that, if asked whether this is a just and fair thing, an ordinary person would answer no. If a person is disqualified from managing a corporation in New Zealand and is found guilty of whatever offence they have been charged with then that person should not be able to simply get around the law by transferring to Australia.

Australia and New Zealand share a special relationship. It is a long relationship and we are very good friends across the Tasman. We share a lot of common aims and goals and we share parts of our cultures. There are certainly plenty of Kiwis here in Australia, and I think we understand each other very well. That extends beyond our close ties, our shared language and our historical perspectives and relationships to the way we manage our legal and regulatory frameworks. The closing of the regulatory gap in our legislation, through this bill, follows on from a policy goal to progressively bring New Zealand and Australia closer together in this area—and there is a government memorandum of understanding on business law coordination.

It follows on from our view that there needs to be uniformity and consistency across all jurisdictions, including state and federal jurisdictions. We need to close the loopholes. Among the simplest examples to put on the record are driver’s licences and speeding fines. If you cop a speeding fine or lose points for bad driving behaviour in, for example, Queensland, why should you be able to get away with it in New South Wales? In the end, it is the same country, one jurisdiction, and there should be some uniformity across the different states of Australia. This is being done across a whole range of licensing, regulation and other bits of legislation in this country.

I have been talking about the close ties and the close relationship between Australia and New Zealand. We are two almost borderless nations with a free flow of capital, ideas, employment and labour. The more you remove the barriers—so that people can work in the different jurisdictions and so that you can move capital, labour and business interests between them—the more you have to have uniform regulatory arrangements in the two jurisdictions. So it makes perfect sense for this parliament to amend the Corporations Act to close some of those regulatory gaps. I commend the Minister for Superannuation and Corporate Law, Senator the Hon. Nick Sherry, for bringing this legislation forward.

It was initially envisaged that this mutual recognition would go beyond New Zealand. With what is in this bill the only other prescribed jurisdiction will be New Zealand. But, as time progresses and we negotiate with our other good friends in other jurisdictions across the globe, we will be moving our regulatory regimes into line across other jurisdictions. It makes perfect sense when you look at the regulatory environments in countries where people can easily and almost seamlessly move capital, labour and business across borders. The regulatory rules that apply across those borders are very similar, if not the same. I am sure people can think of a dozen, if not more, examples of where this could be applied in other areas. It could apply in medicine or in the practise of law itself. Earlier today we talked about bringing into line some of the regulations for tax agents. Again, it is about uniformity and consistency across jurisdictions. This is a logical progressive step in that direction.

This bill does two main things. It makes it possible for an Australian court to automatically disqualify from managing a corporation in Australia a person who is disqualified from being a director or from being concerned in the management of a foreign company by a court in a prescribed country. To put that in layman’s terms, under this bill a person who has been disqualified by a court in another country—at this stage, it is only New Zealand—will be automatically disqualified in Australia.

The bill goes further, to provide an extension of the powers of the Australian courts to disqualify people from the same provisions as I have just described—from managing corporations—if that is done on application by ASIC, the Australian Securities and Investments Commission. So the courts will be given the power here in Australia to disqualify a person proscribed in another jurisdiction from being a director or taking part in the management of a company, provided that our courts consider—and I think this is important—that that disqualification in another jurisdiction actually was appropriate and justified. It is probably a caveat worth noting that, while there is an automatic disqualification—so people have been disqualified in another jurisdiction, the court has already made that decision, and it is then automatic here in Australia—the bill also extends the power of the Australian courts and the Australian Securities and Investments Commission to deem, if they bring it to a court, whether that disqualification here in Australia is actually appropriate. I would hazard a guess that there will not be too many of these because, if you are disqualified in another jurisdiction, I would think that you are pretty well gone, but there may be some extenuating circumstance where a person could apply and actually make the case that the disqualification was not appropriate and did not need to be justified here in Australia.

This will ensure that all disqualifications—people being disqualified from managing companies and being company directors—are effective under Australian law and, very importantly, have been made the subject of deliberation by a court. Whether that court is an Australian court or a foreign court is not so much the issue, and that is why in this bill we have recognised both. If there is to be, as in this particular case, trans-Tasman agreements on this then there must be the ability, obviously, for that country not only to recognise our court but for us to recognise their courts and vice versa.

I think this is a really positive step forward. This is going to send a very strong message to the corporate world that simply trying to skirt around disqualifications by moving jurisdictions—and one of the simplest, of course, would be from Australia to New Zealand—is no longer acceptable; you are just not going to get away with it. Maybe that will make a few white-collar criminals have a bit of a think about their actions. If not, it is just going to mean that they cannot practise any longer. Either way, I think that is a good thing. I certainly know and understand that this is obviously something that has been a matter of discussion between our two nations—that of New Zealand and Australia—and something that is supported by both.

I eagerly await the time when, at some point in the not-too-distant future, we quickly begin to add other jurisdictions—that we start moving through the jurisdictions perhaps primarily in our own neighbourhood, such as in the Pacific rim and the South Pacific, and that we look to our trading partners and those other countries that we have trade relationships with. I think that would be an appropriate way forward for us to deal with these. We could start looking at those that we do the most trade with—the ones where we have the strongest and longest-standing relationships—and we can sit down and negotiate on the same basis: that nobody in any jurisdiction wants to allow crooks to get away with the crime. If somebody is disqualified in a foreign jurisdiction then I can see no reason why they should not be disqualified globally, if that principle applies. In the end that is what this is about. This is really a global application and recognition of a person’s crime and their disqualification.

I have no hesitation at all in relation to what this provides for and what it will mean. As with many things in this type of area, it is about a couple of basic principles, one being the integrity of our systems—and I mentioned the integrity of our legal system in a previous speech, albeit in a slightly different area. In Australia I think we are all very great believers in the rule of law and in the importance of abiding by the law, and all those who want to exercise the advantages of our great country should also abide by the same principles that we apply to ourselves—those belonging to the rule of law—and that that should apply to other jurisdictions as well. So I think this is a really positive and good step forward. While it is only at this stage an agreement which initially just prescribes New Zealand, I can see a day in the not-too-distant future where we grow that list. I commend this bill to the House.

Robert Oakeshott (Lyne, Independent) Share this | Link to this | Hansard source

I will be brief, but I offer my support for the Corporations Amendment (No. 1) Bill 2008 [2009]. The bill amends the Corporations Act to disqualify a person from managing corporations if disqualified by a court of a foreign jurisdiction from managing a foreign corporation. It does only apply to New Zealand at present, and it certainly is, I would assume, a test of the waters with regard to whether this is to be expanded. We hear much in this place about the frustrations between various state agencies and the Commonwealth. It is, I think, a recognition of the global corporate market that we live in that we are now starting to see more and more legislation that raises some of the challenges with regard to the sovereign nation of Australia and other jurisdictions around the world. The reality is that we live in a global environment—in particular, a global business environment—so to establish some nets to catch those that are moving comfortably between those international jurisdictions, to work against all the various jurisdictions that they are doing business in, is, I would hope, a principle that most, if not all, in this chamber would certainly welcome.

I welcome the basic fundamentals on the surface of this bill, and I also acknowledge, as with the previous legislation with regard to the trade practices changes, that this has deep bipartisan roots in its genesis. I think it should be acknowledged that both sides of this House, regardless of politics, are supportive of the general direction, and that is to be welcomed. I do note, however, the previous speaker’s comments on the possibility for exemptions. It is important that those exemptions exist. It is in proposed section 206EAA with regard to this not being too prescriptive, but there are still discretionary powers from Australian courts to acknowledge differences between different company laws, and then potentially different breaches that may happen in different jurisdictions.

I did want to raise, as a point of interest, differences in the directors duties in Australia, in New Zealand and in various jurisdictions around the world. I think it is in section 112 of the New Zealand Companies Act. Whilst in Australia the focus for directors duties is very much on protecting the best interests of the company, it is a different law in New Zealand, in that it is protecting not only the best interests of the company but also other stakeholders—however those other stakeholders might be defined by New Zealand law at the time. It is very similar in the UK, where the focus is on not only protecting the interests of the company but also the interests of the employees of that company. For those who have got an interest in that, I think it is section 309 of the UK company law. So there are differences, and the point is that there are differences in the detail when it comes down to what we would consider the givens of things such as directors duties. That is why I think the exemptions that are held within this amendment bill are so important and really are, for me, the deal maker or the deal breaker in supporting this legislation.

I hope that everyone in this chamber does support the fundamental principle of rule of law in Australia. If you do believe in that, you do need to believe in the integrity of the rule of law. This is, I hope, a step forward in what is now a global business environment in recognising breaches that can occur across nations and therefore across jurisdictions. I welcome the bill and I hope it works.

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

in reply—I would like to thank honourable members who contributed to the debate on the Corporations Amendment (No. 1) Bill 2008 [2009]. In summary, the bill will establish a framework in the Corporations Act 2001 by which individuals who are disqualified from managing companies in prescribed foreign countries can also be disqualified in Australia either automatically or by court order. New Zealand is the first prescribed country that these provisions will operate in relation to. The framework has been designed to allow other countries to be added at a later date.

This bill fulfils the requirement under the Australian and New Zealand governments’ Memorandum of Understanding on Business Law Coordination. It moves us a step closer to achieving the policy goal of establishing a single trans-Tasman economic market based on common regulatory frameworks. Under the provisions of the bill, a person will be automatically disqualified from managing corporations in Australia where they have been disqualified by a court in a prescribed foreign country. In addition, an Australian court will have the power to disqualify a person from managing corporations on application by the Australian Securities and Investments Commission on the ground that the person has been disqualified by the operation of law or by the regulator in a prescribed foreign country. This will ensure that all people disqualified in Australia on the basis that they have been disqualified in a prescribed foreign country have had their disqualification scrutinised by a court.

New Zealand’s complementary provisions became operative in 2007 and in the interest of cross-border consistency these amendments have been modelled on those of New Zealand. The bill will enhance the protection of investors and the integrity of Australia’s markets. It does this by ensuring that people who are disqualified from managing corporations in New Zealand cannot avoid disqualification simply by crossing the Tasman. I commend the bill to the House.

Question agreed to.

Bill read a second time.