Deborah O'Neill (Robertson, Australian Labor Party) Share this | Link to this | Hansard source

As we drew towards the adjournment debate last night, I was speaking about this legislation, the Corporations Amendment (Phoenixing and Other Measures) Bill 2012, and how it makes modern sense of the previous regulations requiring companies that had become failed companies to advise people, the public, through the usual broadsheet method of getting that advice into a regular publication. However, the world has moved on somewhat since broadsheets were the only way of communicating about businesses that had become insolvent and the reality is that Australians use the internet to find very important information that impacts on their lives. That is one of the key things that this bill will bring into being: the opportunity for ordinary Australian citizens who have been impacted by a failed business to be able, in a free and easily accessible way, to go to a website and find out about the company that they might have a particular interest in. This is very important for the sorts of people that we are seeking to represent here, ordinary working families who, through no fault of their own, have found themselves with an unscrupulous sort of employer who has sought to use their labour and not pay for that labour. So this is a very significant modernisation dimension that is embedded in the bill.

Obviously, one of the things that we hope this bill will achieve is to make sure that power is given to the Australian Securities and Investments Commission to ensure that people have the security that they need in this situation where companies fail. Our concern, as a Labor Party putting forward this piece of legislation, is particularly as to the employees of such companies as those that become failed companies. We understand that when a company fails employees can miss out on some or all of their entitlements: unpaid wages and other accrued benefits. The General Employee Entitlements and Redundancy Scheme, GEERS, will certainly protect those workers' entitlements in these situations and make sure that the workers can actually recoup as much as possible of their entitlements as quickly as possible.

The reality is that some companies will fail. At that time when they fail, if it is a genuine failure and not one that has been orchestrated, the reality is that they might not have quite the agency to go through the proper processes to wind up their own company. This bill will give ASIC the power that it needs to place a company into liquidation and to deregister a company where the company itself has failed to take that action. So, in essence, this bill, which I commend to the House, is one that will certainly benefit the business sector and employees. It paves the way for a much more streamlined and cost-effective process involving the publication of insolvency notices via a single, publicly available website and it gives the benefit to creditors of companies in external administration by absolutely reducing the costs of complying with their regulatory obligations. So for those particular reasons and many other good elements that are embedded in the bill I commend it to the House.

Steven Ciobo (Moncrieff, Liberal Party) Share this | Link to this | Hansard source

I am certainly pleased to rise to speak on the Corporations Amendment (Phoenixing and Other Measures) Bill 2012. As the Deputy Chair of the Standing Committee on Economics, I note the committee was a tipping point in terms of the discussion and debate surrounding whether or not the coalition would support this particular piece of legislation and whether or not we would support the initiative that the government has taken.

Let us start with the areas that we have in common. The reality is that the coalition, like the government, is concerned about phoenixing activity. There can be no doubt that directors participating in knowingly setting up companies whereby they transfer assets from indebted company A to unindebted company B—with the full intent, by doing so, of avoiding their obligations and indebtedness from company A—is among the worst types of activities that companies can participate in. The consequences of phoenixing activity are significant. Unfortunately, we see it all too often on the Australian economic landscape. There are estimations that the economic cost to the Australian economy of phoenixing activity is around $2½ billion a year. As well, there is a very real human cost associated with phoenixing activity. There are those who are left without access to entitlements and there are creditors who are left without access to cash flow, which of course has a cascading effect across corporate Australia. In particular, those who are generally most affected are tradies.

Phoenixing activity is something that does require action. But this is not a new thing. It is not that we have become aware of phoenixing only in the last 12 months. Indeed, there have been a suite of inquiries, of consultations and of previous pieces of legislation that have gone toward addressing phoenixing activity. Unfortunately, though, because this bill was not put to the House of Representatives Standing Committee on Economics—or, rather, was put to it but was then discharged by the Labor members of the committee—we were not able to investigate in any way whether these increases in ASIC's powers to notionally address the issue of phoenixing activity are actually the right medicine for the problem. We were not able to take into account the concerns of, for example, the Australian Institute of Company Directors, among others. We were not able to take into account feedback from the small business sector. We were not able to take into account feedback from across the corporate community about whether the big increase in ASIC's powers that would be provided for under this legislation is in fact what is required to address phoenixing activity. We know that there are already at ASIC's disposal a raft of corporate powers to deal with the phoenixing activity. We know that ASIC has the ability to, for example, ban company directors for up to five years—or longer, with a court order—if that is what they seek to do, and they can do that with phoenixing activity.

Why has that not proven to be effective? We do not know. We have not been given the opportunity to know, because this bill was discharged from the economics committee. That is the reason the coalition has adopted what I think is a good approach to this piece of legislation—that is, that the government is required to live up to a certain burden of proof to demonstrate why ASIC's powers should be expanded and why this will be effective at addressing phoenixing activity. In the absence of robust arguments put forward by the Labor Party about why this is a requirement and why it will be effective this time—as opposed to previous occasions when it was, apparently, shown to be ineffective—the coalition cannot stand by and enable ASIC's powers to be significantly increased. That would have a consequent impact across the Australia community—in particular on small businesses, due to the raft of additional compliance burdens and concerns when dealing with ASIC.

In many respects it is that difference in approach that underscores the difference in philosophy between the Labor Party and the coalition. We stand ready and willing to help to address the issue of phoenixing activity, but we need to hear solid arguments. We need to hear robust proposals about why certain initiatives that are being looked at with a view to being undertaken will prove to be effective. I know that many in the corporate sector take the view that the principal problem here is not so much the powers available to ASIC or that there is not scope already available under the Corporations Act, for example, to deal with phoenixing activity but, rather, an inability for ASIC to appropriately tackle the issue of phoenixing because perhaps they are not appropriately resourced. The government wants to avoid scrutiny on this. The government does not want to 'let the sun shine in', which I believe were the words the Prime Minister used. It seems unfortunate that that would be the approach adopted by the Labor Party—an 'our way or the highway' attitude towards this bill. The fact is that there could easily be a bipartisan approach to this issue. There could easily be the coalition and the Labor Party working together.

It is not good enough for the Labor Party to say, 'It's our way or the highway'. It is not good enough for the Labor Party to say, 'We're going to introduce this raft of new powers for ASIC and you should get on board.' The fact is that powers exist already. The regulator has at its disposal a number of initiatives that can be undertaken. Company directors can be prosecuted for phoenixing activity. If phoenixing activity is rampant, why is it not working? Why is ASIC not already using the powers at its disposal? We have not heard those arguments being put forward by the Labor Party. Instead, we are just told: 'This suite of new powers should be delivered up to ASIC and if the consequences are that it's a massive additional piece of compliance for the small business sector across Australia, tough luck.' We disagree. We will always stand on the side of small business. We will always stand on the side of those who take the view that there are and should be, appropriately, curbs on the power of government and on its regulators because they need to demonstrate why additional powers are required. It is a basic approach that we apply to policing, so why should it not be a basic approach that we apply to company policing?

The bill before the House today gives ASIC significant new discretionary powers—I emphasise 'discretionary powers'—to place a company into liquidation, and these powers can be used in a range of circumstances: where a company is six months late responding to a compliance notice and has not lodged other Corporations Act documents in the preceding 18 months; where ASIC has no reason to believe a company is carrying on a business and no objection to liquidation is received from directors; where a company's review fee has not been paid within 12 months; and where a company has been reregistered in the preceding six months and ASIC has reason to believe it is in the public interest to place the company into liquidation. Those are broad powers, especially the last one. Many would say, 'Look, don't be concerned. ASIC's never going to do the wrong thing. We just need to trust the regulator to always make the correct decision.' I think a higher level of responsibility is owed. I believe that regulators are accountable, back to this chamber. It is my belief that companies have a responsibility to comply with the law. Where you have rogue companies that are not complying and where you have company directors who are participating in phoenixing activity, of course everyone on the coalition side and I suspect on the Labor Party side would take the view that those company directors should be disqualified. But that is not a good enough justification to give a broadbrush power to ASIC because ASIC takes a view that it is in the public interest that there should be an ability to liquidate a company. We think it is important that the regulator understands that we are willing to work with it, if resourcing is the issue; but we need to know what the problem is. The laws exist now. Why are they not effective? Do not simply hand down, like Moses on the mountain, a new template that says, 'These are the new laws and they shall be obeyed.' Rather, the obligation is upon the Labor Party to demonstrate why these new laws are necessary.

Incidentally, Senator Nick Sherry, a previous Assistant Treasurer with the Labor Party—one of the five or six that Labor has had in the past four years—outlined, I believe, 11 recommendations to deal with phoenixing activity. None of them, not a single one, is incorporated in this bill. This was a Labor Assistant Treasurer—perhaps that is why they have gone through five or six in the past four years—who put forward recommendations on how to deal with phoenixing activity, and those recommendations are absent from this bill. If that does not underscore what a completely ad hoc approach the Labor Party has taken to this issue then I do not know a more compelling argument than that. The fact is that there is scope to take a much more logistically appropriate and strategic approach to phoenixing activity.

I am also concerned about comments that were made, for example, by the chairman of the law committee for the Australian Institute of Company Directors. Professor Bob Baxt, who is a distinguished competition law expert. He made some comments to a previous inquiry that the House of Representatives Standing Committee on Economics undertook at the end of last year—when I was not the deputy chair—which was dealing with the issue of phoenixing activity. He said:

There is too much legislation introduced on the basis of, 'It's a good idea; let's do something and we will see where it takes us.' … For the phoenix company and the phoenix director, there are processes in place which suggest that the regulator has the power to deal with them. Why should all of us be subject to those rather burdensome laws just because there are one or two who may have escaped the safety net?

That illustrates the difference in the philosophical approach between the Labor Party and the coalition. When we say we are trying to get the monkey off the back of small business, when we say we are trying to nurture an entrepreneurial spirit within the Australian community and when we say we understand the trials and tribulations of being a small business person, we mean it. That is the reason we take positions on, for example, this bill. We have not heard the threshold being met by the Labor Party in its justification for why these additional powers are warranted. The Labor Party is devoid of any motivation, it seems, to outline the case. That is why we say: put this legislation now to a Senate inquiry, given that it was discharged from the House of Representatives Standing Committee on Economics. Let us put it to a Senate inquiry and let us get the evidence out there. Let us understand why this suite of new powers is a requirement.

Perhaps the reason the Labor Party just does not get small business is that there is no small business man or woman among them. There may have been one or two who have walked into a small business. I am sure the member for Kingsford-Smith, who is at the table, has walked into a couple of small businesses in his time. In fact, he is actually probably the closest thing they have got to a small businessman on that side of the chamber—although it was a little bit more than a small business, wasn't it? There is no doubt that those opposite just do not understand the mind of a small business man or woman. They do not understand that compliance is a big issue. Small business people do not have people working away in offices in tall towers making sure that they can tick all the boxes and dot all the i's and cross all the t's when it comes to compliance; rather, the compliance burden is something that is met by the small business principal themselves. More often than not it is a husband and wife team and more often than not there is only one employee in the business, and that is the owner. These are the people who face the consequences of big increases in ASIC powers and big increases in compliance. For this reason, we say there is a burden of proof that must be met by the Labor Party if they want to increase those powers.

Let us put this legislation through the Senate inquiry process. I say to the government: it is time to stop running away from scrutiny; it is time to actually justify why additional powers are required, if, indeed, they are required; and it is time to show why existing laws are falling short, if, indeed, they are falling short. On each of these basic tests, I believe any reasonable Australian would understand that these are not high thresholds to meet. They are basic questions that should be answered. If they were answered by the government then I have no doubt that we would actually have a bipartisan position on the legislation. Until such time as the government answers those questions and until such time as the government meets that burden of proof, we will stand opposed to additional compliance. We will stand opposed to broadbrush increases in powers for ASIC, until the government has demonstrated why they are necessary and how they will work.

Sharon Grierson (Newcastle, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in support of the Corporations Amendment (Phoenixing and Other Measures) Bill 2012. I particularly commend the Parliamentary Secretary to the Treasurer for his efforts in developing this legislation, as it is another significant step in our proud Labor tradition of standing up for and protecting the rights of Australian workers. As its namesake, the bird from Greek mythology suggests, the practice of 'phoenixing' in business refers to collapsed and abandoned companies with outstanding debts to creditors and employees, and then these companies later 'rise from the ashes', usually disguised, thinly, under a new trading name.

I have heard many of the opposition speakers oppose this bill. They say that there is no need for this new legislation. That is not true. ASIC was under-resourced under the Howard government. I think it worked out of a broom cupboard—and I say that from my experience on the Public Accounts and Audit Committee. It was starved of resources. What did we see as a result of that? We saw a global financial crisis that unfortunately saw bad practice. We saw many people lose their livelihoods, their savings, their superannuation entitlements and their holiday entitlements. We saw contractors who were never paid. We saw bad business.

I heard the member the Moncrieff say that his party will always stand up for small business. Well, we will always stand up for good business. Good business is what we need in this country—good entrepreneurs. So many times through the GFC we saw good businesses disclose their problems to their workers, their employees and their suppliers and contractors, and work hand in hand to make things work. There is a spirit of goodwill out there in the workplace with business. There are good representative groups and bodies that, when consulted, can offer good advice. We saw many examples of good business making supreme efforts so that workers would not lose everything. We also saw workers give up hours and go to part time to get through those times.

We are talking today about phoenixing companies. Apparently it is not a big problem—there is no evidence. Well, I quote from the Age of 3 January:

According to the Australian Taxation Office, there are about 6000 phoenix companies in Australia …

If that is correct, that is far too many. The practice costs our economy billions of dollars a year, and I believe it must be dealt with firmly. In 2010, our Labor government made the election commitment to provide the Australian Securities and Investments Commission, ASIC, with additional administrative powers to wind up companies that have been abandoned with workers and creditors left high and dry.

This bill is a key element of our government's Protecting Workers' Entitlements 2010 election commitment, and we honour that in this legislation. This legislation is a critical step in assisting the remuneration of employees for work that they have carried out in instances where a company has failed in its duty to make payments. Employees in affected companies have in many cases unfairly lost pay they are entitled to and benefits such as their accrued long service leave, holiday pay and superannuation due to cowboy practices and the abandonment of companies.

The federal government's GEERS is currently only able to assist employees in accessing their entitlements once an abandoned company has been formally placed into liquidation. It is a loophole that has existed for far too long. As the law stands, ASIC is required to undertake lengthy court procedures and incur associated legal costs in order to wind up a company and place it into liquidation. Only then may employees access GEERS.

Through the phoenixing and other measures bill, corporate watchdog ASIC will be given the authority to directly place an abandoned company into liquidation where it is believed that the company has ceased operation or where a company has deregistered but not formally liquidated. Currently, if an abandoned company has deregistered with ASIC, employees seeking their entitlements, or ASIC itself, must first apply through the courts to officially reinstate the company so that then, and only then, can it be placed into liquidation. This is unnecessary and complicated red tape that does little to help the immediate needs of unpaid employees or contractors who simply want what they are entitled to—a fair go and fair payment.

To address this frustrating and costly complication, the legislation will provide ASIC with the additional power to place a company into liquidation in cases where ASIC is currently only able to deregister a company. Not only will it give ASIC the power to reinstate deregistered companies, immediately place them into liquidation and thereby render employees eligible for GEERS; the legislation allows ASIC to place a company into liquidation without the need to provide notice where there is reasonable objective evidence that the company is no longer carrying on business as usual. Such evidence may, for example, be failure to pay a review fee. It is an important step that we amend the Corporations Act. Workers and contractors, but particularly employees, should expect to receive what they are entitled to without a second thought.

Another key aspect of the phoenixing and other measures bill sets down regulations regarding the publication of notices relating to the events before, during and after a company's administration. Currently, throughout the course of administration, there are a range of notices that are required to be published in either print media or the ASICGazette. In complying with these requirements, this publication obligation means substantial costs to external administrators, which is then of course passed on to already out-of-pocket creditors. In addition to this, the creditors also incur the cost associated with monitoring media activity, searching numerous newspapers for notices that may be relevant. Of course, they are often just national newspapers; regional newspapers are often overlooked. There is no set day of the week that those notices would appear. It is a confusing system.

This legislation aims to amend that, with the establishment of one central and publicly available website by ASIC. Being the direct point of publication for notices relating to corporate insolvency, the website will be accessible, searchable and ever-present, removing the need for hard-copy publication. The legislation establishes a coherent and affordable means by which to inform creditors, in a prescribed manner, through the publication of those notices online. This legislation is about ensuring information is easily and readily accessible, particularly for employees. This is a modern and necessary reform of the way in which we protect the entitlements of working people. The website will be established through ASIC by 1 July 2012. This legislation is another measure in harmonising Australia's insolvency industry. Over the coming four years, approximately 53,000 newspaper advertisements will be placed with the website, cutting the red tape, cutting costs for external administrators and reducing the burden on already affected creditors. Over this period, the use of the website will save around $15 million in print media advertising fees. I know the print media may not be pleased about that, but certainly we need to make those savings. This is a positive step our government is taking towards reducing the costs associated with compliance and regulation obligations.

There have been some serious cases locally, in and around my electorate of Newcastle, involving phoenixing activity. In 2006 I raised in the parliamentary committee process the Chinese-backed development and construction company Hightrade with ASIC. At that time, under the Howard government, ASIC had, as I said, very little powers to pursue such companies. The Newcastle Herald's Joanne McCarthy and the CFMEU's Andrew Ferguson went after the elusive Hightrade throughout that time, and I commend them for what was a sustained and consistent effort on their part towards making the company accountable to its creditors and employees through their public campaign. Contractors and suppliers, investors and workers all lost out. At the time, the ATO brought a case against Hightrade before the Federal Court—another very costly exercise. The behaviour of phoenix companies, such as Hightrade and other development and construction companies, has in the past demonstrated a failure to meet superannuation obligations as well. The Joint Committee of Public Accounts and Audit has consistently pursued the behaviour of such companies with the Commissioner of Taxation, something I am very proud of. At the time that the Herald were pursuing these matters, I stated in the Herald that the commissioner had agreed with me that 10 prosecutions of company executives for phoenix-type behaviour since 2000 was not satisfactory, and that this area of corporate behaviour was deserving of further attention from the ATO as well as ASIC.

I am pleased that legislative reform to combat phoenix companies has been considered and that in this parliament we are now seeing practical measures brought forward in legislation to combat phoenix companies and mitigate the negative effect they have on our community. Bad corporate behaviour can never be justified for any reason. I draw attention to the case of the roof contractor and former Australian Wallaby, Michael Martin, who lost hundreds of thousands of dollars when Hightrade company Reica Constructions avoided their tax and creditor debts and was wound up in 2006 during the construction of the Hunter Valley Resort at Pokolbin. As Joanne McCarthy reported in the Herald on 3 November 2009, 'The Tax Office was left the biggest creditor, owed $36 million'. That is us—every taxpayer being taken down by a bad company. There have been far too few powers for authorities to act in a timely and cost-effective manner to benefit those who have lost out due to corporate mischief. I am pleased that this legislation is working towards a better system.

As stated, the Corporations Amendment (Phoenixing and Other Measures) Bill 2012 is a key component of the government's Protecting Workers' Entitlements Package, announced at the last election. Other elements at the core of the government's package are the Fair Entitlements Guarantee, Securing Super, and Strengthening Corporate and Taxation Law, under which this and other legislation fall. Through no fault of their own, workers are losing their entitlements when companies are abandoned or where business behaves badly. Why should workers—people we know—have to worry about being paid an honest salary for an honest day's work? We will continue to pursue these sorts of reforms.

The Fair Entitlements Guarantee, which is currently undergoing a rigorous consultation process with stakeholders before being introduced as legislation, will alter the existing GEERS program so that employee entitlements cannot be abolished or amended easily by employers. In supporting these commitments, changes have already been made to the GEERS scheme prior to the guarantee being enshrined in legislation. Our government has removed the previous 16-week cap on redundancy pay and 'excluded employees', such as company directors, are no longer able to access assistance under GEERS. If an employee is owed money, they should be paid in full—not just 16 weeks and be left out of pocket. This is about fairness and some certainty. It is about cutting the red tape and ensuring quick and easy access to entitlements.

The second core element of the Protecting Workers' Entitlements Package is securing superannuation. Our government is strengthening compliance measures and ensuring that employees receive what they are entitled to. The Australian Taxation Office and the Fair Work Ombudsman have been given greater enforcement powers, ensuring that businesses pay their employees' superannuation guarantee. We also introduced legislation this morning to make it compulsory for employers to show on a payslip the anticipated date that an employee's superannuation contribution will be paid. Previously, it was only required that the amount be known. There have been too many cases of people who, when a company goes into liquidation and closes down, find their superannuation payments have not been made.

Thirdly, we are strengthening corporate and taxation law, giving ASIC more muscle by increasing the penalties against companies that wrong their employees and wrong their creditors. The Corporations Amendment (Phoenixing and Other Measures) Bill is a component of this. Again, in addition to this bill, the Corporations Amendment (Similar Names) Bill will be brought before the House in the near future. Currently out for consultation, the similar names bill will aim to further crack down on practices whereby company directors establish a phoenix company using a similar name to the initial failed company. The bill will fairly and justly impose personal liability upon those directors for the creditor debts of the failed company.

Certainly, under that similar names bill and those penalties for directors, there is nothing wrong with establishing a new business after a business has failed. We understand that. It is fine to have a second chance, as long as creditors and employees have been treated fairly, debts have been dealt with and directors have acted in a responsible fashion. Outlaw directors should be held liable for their exploitative behaviour. Unfortunately, in some cases, there does seem to be very deliberate actions with no intent to ever pay the workers or the creditors.

The suite of bills and action that this government is taking will ensure that directors cannot continue to sink deeper and deeper into debt through phoenixing practice and shirk their obligations. I thank again the Parliamentary Secretary to the Treasurer, the Treasurer and the Assistant Treasurer for their work on this bill and know it will be of immense benefit to working people in my electorate and those small creditors often existing week-by-week around the country. It is legislation that only a Labor government would deliver. Sadly, it was not in place during the GFC when we saw so much burden placed on people, when they chose those sorts of options to get out of debt—options that saw people suffer—rather than take responsible action. It is legislation that is very much needed and, unfortunately, we have had to deliver and we will deliver. It is ultimately about a fair go for working Australians. I commend this bill to the House.

Steve Irons (Swan, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Corporations Amendment (Phoenixing and Other Measures) Bill 2012. I have heard the contribution of the member for Newcastle during which she said this legislation would deal with bad company directors. The problem with the legislation, which goes to the nub of it, is that there is no direct definition of 'phoenixing'. This is the argument that the coalition makes.

I say at the outset that I have a background in small business and own a small business that I started in Perth in 1988. The member for Wentworth is present in the chamber, but my business is in no way relevant to the size of his business and his background in business. I was fortunate enough to be mentored and advised in business by Rob Dunn. One of the many lessons I learnt was fiscal discipline, along with 'don't be afraid to build up assets in the company', which is the company's strength, particularly when dealing with banks and creditors. This bill also goes to the nub of dealing with assets of companies.

There are not that many people in this parliament who have business experience, which is disappointing. I know that there are members on this side of the House who have run their own business, like the member for Fadden, who will speak on this bill later on. We have heard from the member for Moncrieff who put the coalition's position so well and spoke of our attitude towards phoenixing and how that should be dealt with in the legislation. If we look across to the Labor benches we see that there are very few who have the experience of running a business. Certainly, being a lawyer for a union does not qualify you to say that you have run a business. Unfortunately, unless you have walked the walk you are sadly behind the eight ball about how business works and how insolvencies in business come about. It shows in the quality of the bill that we are debating today. Before I turn to the bill, I want to speak on this government's record on small business. Before the 2007 election, the Labor Party made a commitment, a promise to the Australian people that there would be a 'one in, one out' approach to regulating business in order to cut red tape. Since Labor was elected it has introduced 16,173 new regulations and only repealed 79, clearly breaking its 'one in, one out' promise to cut red tape. That is 204 new or amended regulations for every one repealed. This is a spectacular broken promise by this government, to go with the carbon tax and the private health insurance broken promises, and it is one that is being felt by many thousands of businesses around Australia and in my electorate of Swan.

In the area of compliance, there is a clear difference between the coalition's approach and the Labor Party's approach to small business. The coalition has a deregulation task force and is committed to reducing red tape to encourage employment in this sector during a tough time. The Labor Party, as I said, have introduced over 16,000 regulations in just four years. They just do not understand business, its difficulties and its importance to the economy during difficult trading conditions. I heard the member for Robertson saying that their side of the House do get business and that they value that small businesses are the major employers of people in Australia. Well, I ask the member and all members on the other side of the House to come into this place and explain to small business why you keep punishing them with new regulations and taxes.

As an example of more punishment to small business, I quote from an article in the Australian, about the sudden decision to wind up the $320 million solar hot-water program, which:

… left the industry reeling and sparked warnings that up to 7200 jobs were in jeopardy.

The Parliamentary Secretary for Climate Change, Mark Dreyfus, angered the solar hot-water industry by giving five minutes' notice on Tuesday night that no more applications for solar hot-water rebates would be accepted under the Renewable Energy Bonus Scheme.

The report went on to say:

The latest solar row follows turmoil in the insulation industry after the pink batts scheme was scrapped in the wake of poor installations, training and accountability, and the blowout in the Green Loans scheme, where the assessors were swamped with demand.

The government was also forced to act to end a glut in renewable energy certificates sparked by generous subsidies for rooftop solar panels. The glut forced down the price of renewable energy certificates and sparked an investment strike in big clean energy projects.

Clean Energy Council acting chief executive Kane Thornton said the "unexpected" winding up of the solar hot-water program would immediately hit sales and "put more than 1200 manufacturing jobs and 6000 installation jobs at risk … Cutting this program without warning in the middle of a financial year is yet another example of stop-start policymaking that continues to plague the entire clean energy sector".

…   …   …

Rheem Australia government relations manager Gareth Jennings said his company, which makes the Solarhart range, was left holding millions of dollars in stock for which there may no longer be a market.

…   …   …

Solar hot-water system manufacturer Dux said it had been expecting the scheme to end on June 30 and many dealers and plumbers around Australia had expressed "disbelief" at the decision. "This was completely out of the blue," general manager Simon Terry said.

Unfortunately, the bill before the House today is yet another messy example of the government's lack of understanding, and it needs some serious work before it should be allowed through the House of Representatives. This bill attempts to tackle the practice of 'phoenixing' or 'phoenix activity', which, as the shadow minister has said, is typically associated with directors who transfer the assets of an indebted company into a new company of which they are also directors. The directors then place the initial company into administration or liquidation, with no assets to pay employee entitlements or to pay creditors such as contractors and the ATO. Meanwhile the same directors continue the business using the new company structure.

The coalition is strongly opposed to fraudulent phoenix activity as it undermines confidence in Australia's business community and damages its reputation. However, we are concerned that the government's approach to this important public policy matter is confused, ad hoc, piecemeal and not appropriately targeted. As such, we believe this bill needs redrafting and suggest that the government goes back to the drawing board. If the government is not prepared to do this, this current legislation we are discussing today needs at the very least a thorough examination by the Senate Economics Legislation Committee.

I note that shadow minister Cormann has suggested that this legislation is so poor that a wider inquiry should be undertaken by the Senate Economics References Committee to canvass all options of reforming the law surrounding phoenix activity and make recommendations to the parliament for comprehensive and coherent legislative change. Madam Deputy Speaker, I know it is a strong call to suggest that this legislation go back to the drawing board, that even amending it will not suffice, so let me take you through some of the reasons that have led the coalition to take this position.

There are at least seven problematic areas which need to be addressed, and I think at the outset it is worth reminding the House that this is not the first attempt by this government to get these laws right. Last year, the government introduced a series of different measures targeting some aspects of phoenix activity, in the Tax Laws Amendment (2011 Measures No. 8) Bill 2011 and the Pay As You Go Withholding Non-compliance Tax Bill 2011. After examining these bills, the House of Representatives Standing Committee on Economics made the unanimous and bipartisan recommendation that the government not proceed with those provisions, with the committee in particular noting the 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. As a result of this, the government withdrew the legislation, supposedly to take this on board. However, it would appear from this legislation before the House today that the government has not attempted or managed to solve this problem it set out to solve. In fact, it has yet to provide any indication as to how it will tighten the provisions to better target phoenix activity as recommended by the committee.

Government speakers such as the member for Wills, who is speaking next, need to explain why this issue has not been solved as per the unanimous decision of the Senate committee. The bill should not progress until this matter is addressed. This is the first problem with the legislation. Part of this problem might be the fact that there has been no attempt to define 'phoenix activities' in any of the bills the government has introduced dealing with this area. A proper definition is needed, not only to better target the legislation but to avoid costly legal disputes down the track and give confidence to the sector. We have seen the embarrassment caused to Australia by the legal disputes this government has landed us in. The Malaysian deal High Court fiasco, which the member for Griffith called a 'walk on the policy wild side' was reported around the world—in Asia and on the BBC—and cost our international reputation dearly. There is another storm brewing with the High Court case considering the tobacco plain packaging legislation, and it is difficult to have full confidence in the government's assertion that its legislation is constitutional and will not cost billions of dollars. To have no definition of 'phoenix' in the Corporations Amendment (Phoenixing and Other Measures) Bill 2012 is quite frankly unbelievable, and for this reason alone this bill should not proceed. At present the Australian Institute of Company Directors does not have confidence in this legislation because of this very point. If we refer back to the speech by the member for Parramatta yesterday, she said:

I will go back to some of the comments that the shadow Treasurer made. His comments were about phoenixing more generally. Of course this piece of legislation does not deal with the entire phoenixing behaviour. Of course this legislation does not involve all of the changes that need to be made in order to reduce phoenix activity and protect consumers and creditors from that activity. Of course there is other work to be done.

If the member for Parramatta is saying that, why are we even debating this bill? The member for Parramatta has admitted that this bill is not sufficient.

However, there are other reasons why this bill should not be passed through the House, and these should also be considered by members in the House today as they decide which way they will vote. One of them relates to schedule 1 of the bill, an amendment that allows ASIC to put a company into liquidation in a series of specific circumstances. These circumstances include where a company is at least six months late responding to a compliance notice issued by ASIC under section 348A, 'return of particulars', and has not lodged any other documents under the Corporations Act in the preceding 18 months; ASIC has no reason to believe the company is carrying on a business; and ASIC has reason to believe that it is in the public interest. They include where the company's review fee has not been paid in full within 12 months of the due date. They also include where a company has been reregistered under section 601AH(1) within the preceding six months, and ASIC has reason to believe that it is in the public interest. And they include where ASIC has no reason to believe that the company is carrying on a business, ASIC gives 20 days notice to the company and its directors of the liquidation and no objection is received from the directors or the company within the specified time limits. Before making such an order, ASIC must give notice on the ASIC database as well as publish its intention. ASIC cannot put a company into liquidation under this schedule if an application for the winding up of the company is before the courts.

The coalition is concerned about the significant increase in ASIC power represented by the bill and, in particular, the lack of provisions relating to the parliamentary scrutiny of these proposed powers. One of the major issues identified as contributing to the phoenix activity is that the regulators are not fully utilising the existing powers available to them. Other issues include a lack of prosecutions, under-resourced regulators, insufficient follow-up on complaints and inadequate penalties to act as a deterrent. ASIC is Australia's corporate regulator and has a very important role to play; however, the need for new and additional powers appears superfluous given that the regulators are not fully utilising their existing powers because of a lack of resources or otherwise. There certainly does not seem to be much clear thinking by the government in the way it is proposing to grant these powers over the course of many different pieces of federal legislation and in an uncoordinated manner.

As the shadow minister said, we strongly recommend that the government ceases this ad hoc and piecemeal approach, withdraws the current bill and instead engages in meaningful consultation with stakeholders to address their legitimate concerns and to determine a comprehensive and coordinated legislative approach to this important public policy matter.

There are a number of other, broader issues with this bill, in particular relating to the government's approach to phoenix activity, which have been raised by members speaking prior to me on this matter. These 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 phoenix activity. These unresolved issues also detract from the legislation and should be considered by members.

So where should the government go from here? It should withdraw this legislation and go back to the drawing board. If not, at the very least this government should refer the matter to the economics committee and in fact, given that through its ad hoc approach the government has clearly demonstrated that it has a poor understanding of this area of business, the Senate committee should be drafted in to help consider these issues in a full and holistic way.

For future legislation, the government might consider the proposals paper on combating phoenix activities released in November 2009 by Nick Sherry, who was then Assistant Treasurer. None of the 11 proposals in that paper are reflected in the new ASIC powers outlined in this legislation. It reminds me of the review conducted by the member for Oxley, the Ripoll review, which, sadly for that member, was almost completely ignored by the government. I note that the member for Oxley has also spoken on this bill.

As I and other members on this side of the House have said, this is a poor bill and we will not be supporting it.

Debate adjourned.