Bernie Ripoll (Oxley, Australian Labor Party, Shadow Minister Assisting the Leader for Small Business) Share this | Link to this | Hansard source

The Corporations Legislation Amendment (Deregulatory and Other Measures) Bill 2014 amends the Corporations    Act 2001 and the Australian Securities and Investments Commission Act 2001. There are a number of measures, and I will speak to each of them separately.

I will start with the changes to items 1, 2 and 10 of schedule 1 to the bill, which amends the Corporations Act 2001. These changes are designed to better balance the    rights of shareholders to raise issues with a company with the cost to companies of being required to call and hold a general meeting. It repeals the so-called 100-member rule, which creates an obligation on a corporation to hold a general meeting at the request of 100 or more shareholders. These meetings are often called for protest purposes and create a significant cost to business. The proposed changes do not remove the ability of 100 or more shareholders to add items to scheduled annual general meetings and to instigate debate as an agenda item at these meetings. This retains the right for 100 or more members to raise issues of concern—as exists under the current act—without the often significant cost to shareholders of scheduling extraordinary meetings. This does not affect the right of 100 shareholders to put a resolution to be considered at a general meeting or to distribute a shareholder statement with the notice convening that meeting. The change does not affect the ability of 100 or more shareholders to engage in activism—and this is an important point to note. This is as it should be. Shareholder activism is a component of corporate governance. Shareholders should be able to put issues on the AGM agenda and to instigate a debate at the meeting. This right is of particular importance to retail shareholders, who have limited opportunities to meet with the company prior to the AGM. These rights will not change with the proposed legislation.

The 100-member rule can impose significant costs on business—for example, Woolworths was compelled to call an EGM in relation to $1 limits on poker machines. The cost of notifying its shareholders alone was $500,000. The hosting of the meeting meant that Woolworths incurred further costs. The resolution received just 2.5 per cent support. No-one objects to the fact that people might have different views. Shareholders should be able to legitimately raise concerns through a number of mechanisms but not at a significant cost to other shareholders. Similarly, in the two years from late 1999 to late 2001, NRMA was forced to call 12 EGMs to consider resolutions removing directors, each of which incurred several million dollars in costs and resulted in none of the relevant resolutions being passed.

Australia is currently alone in providing for a shareholder test that applies regardless of how much capital the requisitionists hold. It is more common that requisitionists must hold at least five to 10 per cent of the shares before they can call a general meeting. Again, no-one disputes the fact that shareholders have a right to question directors and decisions made by a company, but it should not be at a cost to other shareholders. Labor supports this change.

Items 3 to 5 and 10 of schedule 1 to this bill amend the Corporations Act to improve and streamline remuneration reporting requirements. Currently, disclosing entities that are companies must disclose, for each member of the key management personnel, the value of options that lapse during a financial year. Disclosing entities that are companies must also disclose, for each member of the key management personnel, the percentage value of the remuneration that consists of options. This bill makes changes so that listed disclosing entities that are companies must disclose, for each member of the key management personnel, only the number of options that lapse during a financial year and the financial year in which those options were granted. There will no longer be an obligation to disclose the value of options that lapse or the percentage value of remuneration that consists of options for each member of the key management personnel.

Currently, all disclosing entities that are companies are also required to prepare a remuneration report, regardless of whether they are listed or unlisted. This bill changes that so that unlisted disclosing entities that are companies are no longer required to prepare a remuneration report. Listed disclosing entities continue to be required to prepare a remuneration report. Labor has a proud record of reforming executive remuneration by introducing the two-strikes test that allows shareholders concerned with executive remuneration to vote to spill the board under certain circumstances.

Labor supports improving the disclosure of executive remuneration information in Australia. There have been concerns raised by shareholders and users of remuneration reports that currently the reports contained some information that was of limited benefit or can be found at other places in the annual report. Labor also supports removing the unnecessary requirement for unlisted disclosing entities that are companies to prepare a remuneration report. Unlike listed entities, they are not required to have their remuneration report adopted by shareholders through a non-binding resolution and are not subject to the two-strikes test.

Item 6 of schedule 1 to this bill amends the Corporations Act 2001 to clarify the circumstances in which a financial year may be less than 12 months. There is confusion about the conditions under which directors may determine that a financial year is shorter than 12 months. Currently, section 323D sets out how companies, registered schemes and disclosing entities may determine the length of their financial year. While an entity's financial year is expected to be approximately 12 months long, entities can determine otherwise in cases where: an entity needs to modify its financial year by up to seven days to accommodate week-based internal reporting frameworks or an entity needs to synchronise its financial year in order to prepare consolidated financial reports.

However, subsection 323D(2A) allows entities to determine that their financial year is less than 12 months if none of their previous five financial years have been less than 12 months, the shorter financial year commences at the end of the previous financial year and the decision is in the best interests of the entity. Stakeholders have raised concerns about the interaction between this provision and the operation of subsection 323D(2), which requires that a financial year is 12 months long, unless determined by the directors to be a period that is longer or shorter than 12 months by up to seven days.

There is confusion surrounding whether taking advantage of the flexibility in section 323D(2) would trigger the five-year period in which an entity is precluded from accessing the benefits offered by section 323D(2A). Similarly, subsection 323D(3) requires an entity to synchronise its financial year end with its parent entity when it becomes a controlled entity. Again, stakeholders have raised concerns that this provision may trigger the five-year period in which an entity is precluded from accessing the benefits offered by section 323D(2A).

The bill seeks to clarify that directors may determine that a financial year is shorter than 12 months by more than seven days irrespective of whether during an entity's previous five financial years the directors have determined that the financial year is shorter than 12 months by up to seven days or determined to synchronise the financial year to prepare consolidated financial statements. Labor supports the measures in this bill that clarify the circumstances and conditions under which directors can alter and determine the financial year is shorter than 12 months by more than 7 days. This removes the unintended confusion arising from changes in 2010 that were intended to make it easier for directors to alter financial-year end dates.

Items 7 to 9 of schedule 1 to this bill amends the Corporations Act 2001 to exempt certain companies limited by guarantee from the need to appoint or retain an auditor. Currently, all public companies, including companies limited by guarantee, are required to appoint and retain an auditor. This bill changes this so that small companies limited by guarantee and those companies limited by guarantee that have their financial reports reviewed are not required to appoint or retain an auditor. This means that companies that are not required to undertake an audit are no longer required to appoint and retain an auditor. All other public companies are required to appoint and retain an auditor, as is current practice. Labor supports these changes that remove unnecessary costs on business by supporting the requirement for companies to appoint and retain an auditor, even if they are not required to conduct an audit. This change is expected to provide the greatest benefit to not-for-profit community organisations, allowing them to better service the community.

Part 1, items 1 and 2 of schedule 2 to this bill amends the Australian Securities and Investments Commission Act 2001 to improve the operation of the takeovers panel by allowing takeover matters to be dealt with more efficiently. Currently, the president and members of the takeovers panel may only participate in proceedings if they are within Australia. These changes mean the president of the takeovers panel may give a direction in respect of members who are to constitute the panel whether or not the president is in Australia. Further, members of the takeovers panel may participate in proceedings whether or not the members are in Australia. As technology improves and the world becomes ever more connected, it is sensible to alter legislation to reflect that change. This bill will allow members of the takeovers panel to participate in proceedings if they are physically located outside of Australia at the time. Labor supports this sensible change to allow the more efficient resolution of disputes.

Part 1, items 3 to 8 and part 2, item 9 of schedule 2 to this bill amends the Australian Securities and Investments Commission Act 2001 to extend the remuneration tribunal's remuneration setting responsibility to include certain Corporations Act bodies. Currently, the ASIC Act provides that the responsible Treasury portfolio minister determines the terms and conditions—including remuneration—of the chairs and members of the Financial Reporting Council, the FRC; the chair of the Australian Accounting Standards Board, the AASB; and the chair of the Auditing and Assurance Standards Board, the AUASB. The ASIC Act also provides that the FRC is responsible for determining the terms and conditions, including remuneration, of the offices held by the members of the AASB and the AUASB.

This bill brings responsibility for determining the remuneration and full-time member recreation leave entitlements of the chair and member positions of the FRC, the AASB and the AUASB within the remuneration tribunal's jurisdiction. The remuneration tribunal has specialist skills in reviewing and determining remuneration and is therefore better placed to determine the remuneration of these offices. Moreover, it will ensure consistency in the remuneration setting arrangements between the three bodies and other statutory office holders.

Currently, the responsible Treasury portfolio minister determines the terms and conditions—including remuneration—of the chairs and members of the Financial Reporting Council, the chair of the Australian Accounting Standards Board and the chair of the Auditing and Assurance Standards Board. The ASIC Act also provides that the FRC is responsible for determining the terms and conditions and the offices held by the members of the AASB and the AUASB.

Labor supports the provisions in this bill that brings responsibility for determining the remuneration and full-time-member recreation leave entitlements of the chair and members within the Remuneration Tribunal's jurisdiction. There is no question that that is the best place for them and where they ought to be. The changes that are contained in this bill are supported by Labor. They were changes that Labor was progressing through and matters that had been worked on with bipartisan support across both sides of this chamber, and within the industry and the sector itself. It is good, sensible policy. I offer Labor's support for these measures.

Craig Laundy (Reid, Liberal Party) Share this | Link to this | Hansard source

I acknowledge the bipartisan nature of the member for Oxley's comments. On the night of 7 September last year, the Prime Minister famously said that Australia, once again, was open for business.

He has made no secret since that day that deregulating the nature of government is key. How did he do that? He appointed his Parliamentary Secretary, the honourable member for Kooyong, Josh Frydenberg, and put him in charge of driving this agenda. Not long after that, Josh made contact with me and asked me to give him a hand. I acknowledge today that I have this honour. I acknowledge the member for Bass and the member for Pearce who he did the same for. I had the honour of listening to stories from right around New South Wales, as I know the member for Bass did in Tasmania and the member for Pearce did in Western Australia. Josh picked different people in different states to be the front men, if you like, and to come back to him with all sorts of ways that we can drive this agenda.

Since that time, we are two omnibus repeal days down—$2.1 billion of red-tape in the first year, when the aim was $1 billion. I acknowledge the hard work and advocacy of my fellow members of parliament, and especially the member for Kooyong, for doing such a great job. I acknowledge the Prime Minister and the smarts of the PM to put this in his own portfolio, given that Josh's role crosses ministerial boundaries. It was a sensible thing to do and a logical place to put it. When your mantra is, rule 1, that we need to be open for business, it is the right way to do it.

Why do we need to be open for business? We need to be open for because, with MYEFO fast approaching and commodity prices and terms of trade at levels now far lower than they were on 7 September, there is no doubt that the engine room of this economy is the small and medium business sector—a sector which, sadly, has been lacking acknowledgement by government for a long time. I have had the honour of standing in this place many times but on few such occasions have I not advocating on their behalf. Why do I do that? I do that because I come from that sector. It employs 70 per cent of the people in this country.

In the last six years under a Labor government, in that small business sector alone we lost 519,000 employees. That is not good enough. We need to do better. The best way to do that is by understanding that government is a partner in business, not just a regulator. That has been the key to what the Prime Minister said that night and what the member for Kooyong has taken since that day and rolled forward into a number of pieces of legislation. Tonight, is quite clearly a continuation of that, and so I will speak about the Corporations Legislation Amendment (Deregulatory and Other Measures Bill 2014).

As a summary, the government has introduced a package of reforms to the corporations law that reduces the regulatory burden imposed on Australian businesses to improve their productivity and competitiveness. The reform package that we are talking about today saves compliance costs of around $14 million a year. The bill also contains measures to improve the efficiency of government processes, reflecting the government's commitments to seeking opportunities to improve efficiencies in all spheres.

The measures contained in this bill will, in no certain order, better balance the rights of shareholders to raise issues with a company and the costs to companies of being required to call and hold a general meetings; improve and reduce remuneration reporting requirements; clarify the circumstances in which a financial year may be less than 12 months; exempt certain companies limited by guarantee from the need to appoint or retain an auditor; and improve the operation of the Takeovers Panel.

Firstly, I will turn to the abolition of the 100-member rule. I acknowledge that the member for Oxley went into this in some detail. We are removing the requirement for directors of a company to hold a general meeting on the request of 100 shareholders—hence the name. This seeks to strike a better balance between the interests of minority shareholders and shareholders as a whole. In large corporations the 100-member rule allows groups holding less than one per cent of voting shares to force a company to incur the significant costs of holding a general meeting. There are significant historical examples of this. In 2012, the 100-member rule was used by GetUp! to force Woolworths into an annual general meeting which cost that company and ultimately shareholders $2 million. Ultimately it cost government their taxation revenue from what would have been an increased bottom line had this $2 million not been spent. It is a flow-on effect. That is why this is sensible policy.

Whilst saying this, small shareholders will continue to be able to have their voices heard, but in a way that does not impose an unreasonable cost on the company or other shareholders. One hundred shareholders will continue to be able to put a resolution on the agenda of a general meeting and circulate a statement to other shareholders.

In addition, shareholders with at least five per cent of the votes that may be cast at a general meeting will continue to be able to require that directors hold a general meeting. This measure is supported by industry stakeholders such as the Australian Institute of Company Directors, the Governance Institute of Australia and the Business Council of Australia as well as shareholder groups such as the Australian Shareholders Association. This measure alone is estimated to save business around $1.5 million a year in compliance costs.

Secondly, with regard to remuneration reporting, the government is improving the disclosure of executive remuneration information in Australia by ensuring that the information provided is useful for shareholders and investors. This measure removes the requirement for unlisted disclosing entities to prepare a remuneration report. This measure alone is estimated to save unlisted disclosing entities around $8.5 million in compliance costs. The remuneration report is simply not relevant for unlisted disclosing entities—for example, unlisted companies, unlisted debenture issuers such as Banksia, and unlisted managed investment schemes. Unlike listed entities, they are not required to have their remuneration report adopted by shareholders through a non-binding resolution and are not subject to the 'two-strikes' test. Australia's 'two strikes' rule allows shareholders to vote to 'spill' the board if the remuneration report receives a 'no' vote of 25 per cent or more, two years in a row. This measure also improves the usefulness of information on options granted to key management personnel. It has been informed by feedback from users of remuneration reports. Rather than reporting the value of lapsed options, this will be replaced with a requirement to disclose the number of lapsed options and the year in which the lapsed options were granted.

Thirdly, with regard to changing financial year end dates, the government is clarifying when entities—companies, registered schemes and disclosing entities—can change their year end dates. Put simply, this measure will put beyond doubt the conditions under which directors can determine that a financial year is to be shorter than 12 months by more than seven days. The bill clarifies but does not change the legal operation of the existing law.

Fourthly, with regard to auditor appointment requirements, this government is removing the nonsensical requirement for certain companies limited by guarantee that are not required to undertake an audit to appoint an auditor. Currently, all public companies are required to appoint an auditor even if they are not required to conduct a full audit of their financial reports. This unnecessary burden imposes a $4 million compliance cost on business per year. This change is expected to predominately benefit companies that have a not-for-profit focus—for example, sports and recreation related organisations, community service organisations, education-related institutions and religious organisations. It is a win, I am sure, for every member of parliament but definitely in Reid, where there is a prevalence of all those listed organisations. This measure will ensure that these organisations can focus on providing services for the community, rather than wasting money and time on needless red tape.

Fifthly, with regard to extending the remuneration tribunal jurisdiction, this measure gives the Remuneration Tribunal the authority to set the remuneration of the chair and members of the Financial Reporting Council, the Australian Accounting Standards Board and the Auditing and Assurance Standards Board. The Remuneration Tribunal is an independent body that has specialist skills in reviewing and determining remuneration. This measure will bring the setting of remuneration of those office holders into line with the remuneration setting of public offices more broadly and improve the efficiency of government processes.

Finally, with regard to improving the efficiency of the Takeovers Panel, this measure will allow Takeovers Panel members to perform functions while overseas. It seems like common sense, but that ability has not been provided before. This removes an outdated procedure and reflects the reality that the vast majority of panel members are engaged in employment separate to their Takeovers Panel commitments, which can include a significant amount of overseas travel. This will likely have a positive impact on business through the more efficient resolution of applications being considered by the Takeovers Panel.

I speak in support of this bill. I keep going back to the words mentioned on the night of 7 September by the Prime Minister in his first address after winning the election: 'Australia is open for business.' If you look at the $14 million that this bill saves, in reality a third to 49 per cent of that is ours, depending on the structure of the company involved. At a time when the revenue side of our budget is under extreme stress, through no fault of our own, through world trading situations, we need to do things like this and keep this agenda real and live, because the sooner we can get out of the expense side of the profit and loss statement of every business in this country, irrespective of size, the more that profit will flow to the bottom line, the bigger our share will be and the more that we as a government will able to reinvest in such vital services that our communities and our electorates need. I commend the bill to the House.

Andrew Nikolic (Bass, Liberal Party) Share this | Link to this | Hansard source

I am very pleased to make a contribution to the Corporations Legislation Amendment (Deregulatory and Other Measures) Bill 2014, which once again highlights this government's commitment to get rid of unnecessary legislation and regulation and, in so doing, increase Australia's productive capacity.

As Tasmania's representative on the coalition's deregulation committee, as the member for Reid mentioned, there is certainly a spring in my step every time I make my way to the member for Kooyong's s office to sit down with my colleagues—the member for Reid here, the member for Pearce, the member for Deakin, the member for Ryan and the member for Hindmarsh—and talk about real world issues. If there is one thing that has occupied the thinking of people in my community during my period as a full-time candidate for 2½ years, it is to try and take away the binding coils of regulation that impinge on their ability to run their businesses. So to now be in a position with my colleagues, having brought something to the table, to see it appear during a repeal day and then to be able to report to my community 'Here is something that we have done to make a meaningful difference in your business' is satisfying indeed.

There is a spring in my step when I go to the member for Kooyong's office not just because he is great company but because, as I said, we are seeing reward for effort. There is some degree of regulation that is no doubt both necessary and desirable in establishing efficient markets, but excessive red tape, as we saw during the six years of Labor and then the Labor-Greens governments, detracts from productivity and, ultimately, has a close correlation to lower living standards. So what we do here has a meaningful impact on people's lives. I know in my community and around the rest of the country, as I have gone to various places for committee meetings and so on, industries, peak bodies and stakeholders across the country have welcomed our deregulation efforts. What it demonstrates not just in this area of public policy but in so many other areas of public policy is that this government has the resolve to make the changes that have that meaningful impact on people's lives.

The member for Reid talked about our aspiration to achieve $1 billion in cuts every year when it comes to our deregulation efforts. Indeed, in our last repeal day in October, we removed nearly 1,000 pieces and more than 7,200 pages of legislation and regulation. That built on our last repeal day of last March, where the government removed more than 10,000 pieces and 50,000 pages of legislation and regulation—on that occasion cutting more than $700 million in compliance costs. The combined effects of our two repeal days in 2014 is a doubling of our commitment. As the member for Reid said, $2.1 billion cut in compliance costs—making that a meaningful difference in the lives of businesses around the country. That is 400 new measures to cut red tape across all agencies.

When it comes to red tape, the coalition government is getting on with doing what we said we would do. In the future that means the continued designation of two parliamentary sitting days each year as repeal days to continue this work. We are going to incrementally build on this until we have stripped away those binding coils of regulation and legislation. What the coalition's approach will do, if we truly believe in effects based policy making, will result in more efficient government and more productive business and not-for-profit sectors. That means higher competitiveness, support for new jobs and the lowering of household and business costs.

I listened very carefully to the member for Oxley and his very good remarks and his support for this bill. I only wish that that the member for Oxley in the 43rd Parliament had had more influence, because, in contrast to what we have achieved in just 14 months, in six years under Labor we saw the imposition of another 21,000 pieces of regulation. I used to be a senior public servant and formerly a senior Army officer, but I remember sitting there looking at cabinet submissions in early 2008 and I think the Rudd government got off on the right foot. What they were saying about the deregulatory impacts in cabinet submissions was absolutely right. Mr Rudd had a one-on, one-off promise. Indeed, as we wrote our cabinet submissions in the department, there were regulatory impact statements, but the problem was—like so many policy developments of the former government—there was a long distance between aspiration and delivery. That is why that undertaking never really saw its way through the next six years and that is why we ended up with 21,000 additional regulations. It was, to put it mildly, a forgettable period in our political history, because the government's solution was always more intervention—a little bit more Kevin would solve pretty much every problem!

That is where the layers of regulation we have today originate from. You might remember that old Sara Lee approach—the layer upon layer commercial. That is exactly what happened when it came to regulation—layer upon layer of regulation that hurt productivity, deterred investment and innovation and cost jobs. Those opposite may not believe me, but perhaps they should listen to the Productivity Commission, which has looked at this matter closely. They have estimated that regulation compliance costs could amount to as much as four per cent of Australia's GDP, unless we act to remove the unnecessary regulation that binds our multifactor productivity. So I congratulate the member for Kooyong and I congratulate those members of our deregulation committee, who are present here this evening, on the thoughtful and purposeful approach to real change when it comes to red tape. But I do not want to praise the member for Kooyong too much, because it is ultimately the portfolio ministers who have had to put their shoulders to the wheel to look within their departments and find the savings that underpin that $2.1 billion in deregulatory savings that we have found just in the last 14 months—minister after minister cutting six years of stifling red tape from their portfolios.

This bill we are considering this evening is no different, and I congratulate the Minister for Finance and Assistant Treasurer on this package of reforms to the corporations law that reduces the regulatory burden imposed on Australian business. This one package alone will save $14 million in compliance costs. That does not sound a lot, but a million here and a million there and pretty soon you are talking about serious money. And so $14 million being cut is impressive in this bill.

The bill also contains measures to improve the efficiency of government processes. As to the specific measures contained in the bill, they will achieve some important effects, and some of them have been touched on, but I would like to put some of the more prominent ones on the record. There are six things I would like to talk about: the achievement of a better balance between the rights of shareholders to raise issues with a company and the attendant costs to the company and other shareholders that is required to call and hold a general meeting; the bill improves and reduces remuneration reporting requirements; it clarifies the circumstances in which a financial year may be less than 12 months; it exempts certain companies that are limited by guarantee from the need to appoint or retain an auditor; it improves the operation of the Takeovers Panel; and it extends the Remuneration Tribunal's remuneration-setting responsibility to include certain statutory bodies I will deal with each of these measures in turn.

When it comes to the '100-member rule', the government is removing the requirement for directors of a company to hold a general meeting on the request of 100 shareholders—ergo, the name the '100-member rule'. We believe that that strikes a fairer and better balance between the interests of minority shareholders and the larger shareholder group. In large corporations, the 100-member rule allows groups holding less than what can be one per cent of voting shares to hold a company to ransom by forcing an expensive general meeting. What history tells us—and I am someone who has completed the company director's course—is that resolutions that are proposed by these very small activist groups of shareholders generally receive little support. My colleague, the member for Reid, talked about that infamous case study—the Woolworths case, where they spent nearly $2 million to hold a general meeting at the behest of just over 200 shareholders, or 0.05 per cent of the total shareholders of Woolworths, which has some 417,000 shareholders. When that general meeting was held, the actual resolution that was being proposed by this small activist group of GetUp sponsored shareholders, 97 per cent of the company did not support the resolution. That demonstrates clearly the linkage between the cost versus the benefit of a particular case being put in large companies. I am not for one moment saying that small shareholders should not have their voices heard—they should and will continue to have their voices heard—but in a way that does not impose an unreasonable cost on the company or other shareholders

One hundred shareholders will continue to be able to put a resolution on the agenda of a general meeting and circulate a statement to other shareholders. In addition, shareholders with at least five per cent of the votes that may be cast at a general meeting can still require that directors hold a general meeting. But it sets that bar high to ensure a more reasonable accommodation between the numbers of shareholders and the costs involved in a company in acceding to their demands.

This measure is supported by both industry stakeholders, such as the Australian Institute of Company Directors, the Governance Institute of Australia and the Business Council of Australia, as well as shareholder groups, such as the Australian Shareholders' Association. Again, a million here, a million there—this will save businesses around $1.5 million per annum in compliance costs.

The government is also improving the disclosure of executive remuneration information in Australia by ensuring that the information provided is useful for shareholders and investors. This measure removes the requirement for unlisted disclosing entities to prepare a remuneration report, which will save some $8.5 million in compliance costs. The remuneration report is simply not relevant for unlisted disclosing entities—and the member for Reid listed some of those before—because, unlike listed entities, they are not required to have their remuneration report adopted by shareholders through a non-binding resolution and are not subject to the 'two-strikes' test, which allows shareholders to vote to 'spill' the board if the remuneration report receives a 'no' vote of 25 per cent or more two years in a row.

In this bill, the government also clarifies when entities—companies, registered schemes and disclosing entities—can change their year-end dates. This measure puts beyond doubt the conditions under which directors can determine that a financial year is to be shorter than 12 months. The bill clarifies but does not change the legal operation of the existing law.

Notably, the bill also removes auditor appointment requirements for certain companies limited by guarantee that are not required by law to undertake an audit. It simply fails the common-sense test to impose an audit requirement on a company that is not, by law, required to undertake an audit. This imposes a $4 million compliance cost burden on business, which will be saved—and you can see these savings adding up as I talk through these provisions. It imposes that burden particularly on organisations like not not-for-profits. In my community of Northern Tasmania, for example, this includes sports clubs, community service organisations like my Lions club, education related institutions and religious organisations.

A further measure in the bill is to give the Remuneration Tribunal the authority to set the remuneration of the chair and members of the Financial Reporting Council, the Australian Accounting Standards Board, and the Auditing and Assurance Standards Board, bringing the setting of remuneration of those office holders into line with the remuneration-setting of public officers more broadly and improving the efficiency of government processes.

A further measure will improve the efficiency of the Takeovers Panel by allowing members to perform panel functions while overseas. This removes an outdated procedure and reflects the reality that the vast majority of panel members are engaged in employment separate to their Takeovers Panel commitments—which can include a significant amount of overseas travel.

In conclusion, this bill is yet more evidence of this government's resolve and purposeful implementation of our vital deregulation agenda. That there is so much red tape in our community that even well-meaning volunteers are dedicating too much of their precious time and effort to navigate their way through a maze of government rules shows us just how bad the situation has become. This bill is but one contribution to this government's bonfire of bureaucracy—but an important step nevertheless on the long road to sensible economic reform.

Jane Prentice (Ryan, Liberal Party) Share this | Link to this | Hansard source

The Abbott government is determined to continue their commitment to making the business of doing business easier and making the mechanics of governing more transparent. The changes proposed in the Corporations Legislation Amendment (Deregulatory and Other Measures) Bill 2014 Bill once again demonstrate the lack of care taken by the Labor-Greens alliance while they were in charge. The member for Oxley said on Radio 612 ABC that the former Rudd-Gillard-Rudd governments had repealed thousands of regulations while they were in office. So it is difficult to understand how the coalition government is still able to find so many amendments that will have such great impact and relief on the compliance load of business in this country. So what exactly did Labor manage to rectify?

The first amendment in this bill redresses the current imbalance that exists when just 100 shareholders without a minimum number of shares can force the board of directors of a major corporation with thousands of shareholders to pay for a general meeting, costing thousands of dollars, to vote on resolutions that historically garner very little support at these meetings. Ultimately, these types of special meetings only hurt all shareholders, as the expense of calling these meetings impacts on the bottom line and results in a smaller dividend. I understand that small shareholders in some corporations may have issues with the governance of the corporation, but there are yearly meetings where these issues can be addressed. And, if an issue is serious enough, this amendment still allows a general meeting to be called if just five per cent of shareholders call for it. So, in this instance, a disgruntled shareholder can contact other shareholders and garner support for a meeting but at a higher level. This would usually mean the support of just one institutional investor. One hundred shareholders are still able to put resolutions on the agenda of general meetings and circulate materials at the expense of the company. This bill does not seek to strip away the ability of small shareholders to have their concerns heard; it just ensures that it is done in a way that does not harm the corporation financially and inconvenience other shareholders.

One of the major points of interest to shareholders, business groups and indeed the wider community is the issue of remuneration for directors and executives. The Corporations Act seeks to make this as transparent as possible and that remuneration reporting provides all relevant details to shareholders. The key word in the next amendment is relevant. This amendment removes the necessity for listed entities to detail the value of lapsed share options offered as part of key management remuneration. Options which were taken up must still be reported, but if the option lapsed it has no financial impact on the remuneration of the individual involved. In fact, they may have been slightly worse off if they had paid for the option but failed to conclude the transaction.

I can already hear the objections of those opposite saying we are trying to hide corporate pay from scrutiny, but this is just not true. Options that have been taken up, resulting in a share purchase at an option price, need to be reported as income for the sake of a pay package. If the option has lapsed, it had no financial impact on remuneration. In effect, this is now making it clearer to shareholders which executives and management individuals took the options and ignores those who did not, a much easier system to read.

The third amendment streamlines the auditor appointment process for companies limited by guarantee. A company limited by guarantee is usually, but not always, a not-for-profit organisation that has taken the step from an incorporated body. While they will still need to have their financial reports reviewed, there will be no requirement for them to hire and retain an auditor. For such companies that have no operating capital beyond that which the guarantors have put up, this move makes common sense. The cost saving can and will be quite significant for companies that are in the business of helping others. All other companies will be required to appoint and retain an auditor as per the current law. Only a very select subset of guaranteed companies will be exempt.

While speaking of streamlining processes, this bill seeks to address an anomaly in the operation of the Takeovers Panel under the ASIC Act. While the members of the panel are appointed from the private sector and hold senior roles in banks, law firms and significant corporations, the application of the ASIC Act is limited to Australia. This can be interpreted to mean that members of the panel have to be physically present in the country in order to carry out their duties. This is plainly absurd. When you have senior members of large corporations it is expected that they travel on occasions to other countries, especially with the expanding markets the Abbott government is opening up through our pursuit of trade agreements in our region. There is no good reason that a panel member must be situated physically within Australia for them to do their job. Technology has certainly broken down many of the previous barriers to effective communication that existed 13 years ago when this provision was declared.

And again, in chapter 6 of this bill we return to the theme of efficiency. The ASIC Act currently gives the Treasurer responsibility for setting the terms and conditions, including remuneration, for the chairman and members of the Financial Reporting Council, or FRC, the chairman of the Australian Accounting Standards Board and the chairman of the Auditing and Assurance Standards Board, with the FRC having input into the terms and conditions of AASB and AUASB. Rather than this approach, the government feels it is much better if the already established remuneration commission takes over the role of establishing the terms, conditions and remuneration of these entities. This establishes a level of transparency not seen before and lays to rest any argument that these are 'jobs for the boys'. By keeping these decisions at arm's length there can be no claims of impropriety or favouritism. And the process is far more transparent than the previous arrangements. Decisions will be made available and not hidden behind the veil of cabinet confidentiality.

The last point I wish to speak on is the clarification of the financial year for corporations. This may seem a bit curious—as we all know, the financial year runs from 1 July to 30 June. However, this clarification allows corporations the flexibility to shorten or lengthen the financial year by seven days in order for the close of the financial year to fall in line with corporation computer runs. It can be very costly to run reports out of sequence for business. Staff need to be paid extra, computer programs need to be altered and the potential for errors is high. By clarifying that they are able to do this, the government is supporting business by saying: 'We can respond to your needs. You can continue as you are, and we can work around your operation in this instance'.

This bill is yet another example of the commitment the coalition government has to cleaning up the mess left by the Labor-Greens alliance. Yes, they left the budget in a shambles and locked future governments into reckless spending past their term. But that is just the tip of the iceberg when it comes to the reckless indifference they paid to actually governing. If they had spent as much time attempting to govern as they did on the machinations of who would be the next puppet Prime Minister, then we would not have to keep introducing amendment and repeal bills to the House

And, yes, there is more to come, because Australia needs an industrious government. Following the indolence of the Rudd and Gillard eras, we need to create stronger economic growth, which in turn means profitable businesses and in turn jobs for Australians.

I commend the bill to the House.

Matt Williams (Hindmarsh, Liberal Party) Share this | Link to this | Hansard source

I commend the member for Ryan on many of the points she made in her speech, including the pertinent fact that if Labor had done such a great job with reducing red tape then why have we spent a year going through so many different areas of operations of businesses and organisations to reduce red tape and get some real outcomes? The member for Pearce acknowledged that point as well.

On the subject of how that the coalition has approached this, right from the top down the Prime Minister has been extremely focused, from day one, on getting results in this area. He has the Parliamentary Secretary Josh Frydenberg, and a team of other members, including a number here in the House today. I see the fine member for Deakin. He has covered Victoria. So from a Victorian perspective if there are any types of industry associations or businesses that have had particular issues with red tape and compliance, he has been onto their case. In South Australia, I have talked with many groups, such as the South Australian Freight Council, the resources and energy council, Business SA, the Australian Industry Group and financial services. I have consulted with them, asked them what the challenges are, come back with suggestions, and provided input. We have gone out and tried to amend what we can. We heard the member for Bass earlier. I am sure he did the same thing in Tasmania. The member for Reid spoke earlier and covered New South Wales. It has been very much a team effort, a holistic approach, and I commend my colleagues on the good work they have done around Australia.

I note the member for Kingston is sitting in the House today, and I am sure if there was a matter that come up in her domain or area of interest she would say, 'Yes, can you help? We have had a go. We might not have got as far as we needed, but you are kicking some goals, coalition. You are getting rid of red tape—$2 billion—and maybe you can help on this occasion given that perhaps we did not go as far as we meant to. We made a start but the job is being finished in fine form.'

I know the South Australian Labor government has had a crack at this too, on many occasions. Just recently they got together with accounting firms including KPMG and a local bank, BankSA, and CEDA, and they all came out with a whole lot of points. To their credit, they identified reducing red tape and compliance as an area they must address better than they have in the past. Well done for jumping on the train—but you need to deliver. You cannot just talk about it; you have to get results. That is what we have done in many areas.

I want to make a few points about corporations legislation—these points have been addressed in great detail by my colleagues so I will not go into them in great detail, but I will run through some of the more important aspects of the bill. It is estimated that the reform package in this bill in particular will reduce business compliance costs by around $14 million per year. We are chipping away at so many different areas. Maybe it is not one big headline that might capture the attention of the news of the day, but it is important for the organisations and businesses out there. We are improving the efficiency of government processes. The first one I will talk about is the abolition of the 100-member rule. The government is removing the requirement for directors of a company to hold a general meeting at the request of 100 shareholders. We heard of examples where corporations have been required to spend millions of dollars holding annual general meetings at the behest of a small group of shareholders. We are not saying we should remove the ability of shareholders to propose resolutions or make their case, or have their voices heard. It is important to note that small shareholders will continue to be able to have their voices heard, but in a way that does not impose an unreasonable cost, an unreasonable burden, on the company and other shareholders. Importantly, this measure is supported by industry stakeholders, whether it be the AICD, the Governance Institute, the Business Council or, significantly, the Australian Shareholders' Association.

Another important element of the bill we are addressing is remuneration reporting. The government is improving the disclosure of executive remuneration information in Australia by ensuring that the information provided is useful for shareholders and investors. I want to touch on auditor appointment requirements because of their relevance to not-for-profits. We have to ensure that not-for-profits have as few regulations and compliance obligations as necessary, because they have limited resources. As we often hear, they run very effectively on the smell of an oily rag and they have the great objective of serving the community. This element will assist them by removing the compliance costs burden, to the tune of around $4 million, for certain companies limited by guarantee that are not required to undertake an audit to appoint or retain an auditor.

This bill is another example of us delivering on our commitment to reduce red tape, consulting with industry and getting results but knowing that there is still a job to be done. The government will continue to engage with the community and industry and reduce red tape to make their life easier. I commend the bill to the House.

Michael Sukkar (Deakin, Liberal Party) Share this | Link to this | Hansard source

I congratulate the member for Hindmarsh, who has done an outstanding job advocating for the interests of South Australia on our subcommittee which has been on the search for red tape reductions wherever we can find them. It is always important to put legislation into the broader context, and so I welcome the opportunity to speak on the Corporations Legislation Amendment (Deregulatory and Other Measures) Bill. Since forming government the coalition has placed a high priority on identifying and repealing the burdensome and redundant regulations that have built up over time. Many former governments are guilty of allowing that to happen, and none are more guilty than the Rudd-Gillard-Rudd governments of 2007 to 2013. I remind the Labor Party that former PM Rudd committed to a policy of one in, one out when it came to regulations. But these were just empty words. More than 21,000 new regulations were introduced during the Labor Party's six years in government. Businesses and individuals throughout the nation are bound up in red tape. In my own electorate of Deakin, the single biggest issue that small business owners speak to me about is the excruciating process of any interaction with government. That just got worse under the Labor Party. Our deregulatory agenda is changing this—slowly but methodically and surely. We are committed to helping lift up our nation by shedding the regulations that are holding us and our people back.

Assisting with this process, as foreshadowed by the member for Hindmarsh, was the coalition's deregulatory task force, very ably led by my friend the Parliamentary Secretary to the Prime Minister and member for Kooyong. I did have the privilege of serving on this task force, giving me a unique insight into the varied ways that regulation has been stifling innovation and curbing productivity in our country. My remit was to get out there and find every piece of red tape we could repeal that had a unique Victorian aspect to it. I did that with vigour.

This government recognises that while some degree of regulation is always necessary, bad regulation and too much regulation hurts productivity, deters innovation and investment and ultimately costs jobs. We have adopted a whole-of-government approach to cutting red tape. We did commit before the election to reducing red tape by $1 billion each year. A dedicated regulation unit tasked with identifying these savings was set up in each major federal department—backing up our words with actions. This year, for the first time in history, we held two repeal days dedicated to repealing thousands of pieces of redundant legislation—and weren't our two repeal days in 2014 an outstanding success.

So even before the Spring Repeal Day last month, the government had more than doubled our target and announced more than 400 measures with a net reduction of $2.1 billion in compliance costs. We have listened to the concerns of our nation, from small businesses to large corporations, from individuals to community groups, all to ensure that we achieve the ultimate goal of repealing red tape.

We are delivering practical relief from red tape across all industries and sectors of society, including in the not-for-profit space. We are reducing the government's footprint and getting out of the way. We want to make it easier for businesses and individuals to focus their energies, ultimately, on what it is that adds to their bottom line and creates more jobs for our society.

The bill before us today, therefore, represents another step in that methodical process that I referred to earlier. The amendments in this bill collectively reduce compliance costs on business by around $14 million a year. The bill contains a range of common-sense measures that not only remove unnecessary regulation but also clarify existing regulatory obligations and enhance the efficiency of government, benefiting all.

In discussing these changes in more detail, I want to turn firstly to the amendments to the Corporations Act and, in particular, to a change that is very, very welcome in the business community—the abolition of the 100-member rule. Currently, directors of a company must hold a general meeting—at the company's expense, of course—if requested to do so by 100 shareholders; the 100-member rule. While this rule may have made sense at some companies that are of smaller size, at larger corporations it is likely that 100 shareholders represent a very small percentage of the total shareholders. Frequently, in a large publicly listed company, that could be less than one per cent of the share capital of that company. At the same time, the resolutions proposed by the shareholders who at times call those meetings often receive very little support; but the cost of holding these general meetings is a burden on the company and ultimately reduces shareholders' returns. A great example is that Woolworths was forced to call a general meeting a couple of years ago at the behest of 0.05 per cent of shareholders—or some 210 shareholders out of the total share register of 417,000. That special meeting cost Woolworths nearly $2 million.

The government is seeking to strike a better balance between the interests of minority shareholders and the shareholders as a whole. We are removing the ability of 100 shareholders with voting rights to call a general meeting and hence saving the business and shareholders from having to foot the bill for that potentially costly process. But we are not throwing the baby out with the bathwater: we are retaining key rights so that shareholders will still have their voices heard. The five per cent rule will continue so that shareholders with five per cent of voting rights can still call a general meeting, holding directors and the company to account for their decisions. Importantly, the rights of 100 shareholders to put forward resolutions for the agenda of a general meeting or circulate material to other shareholders still remain firmly in place.

It is estimated that business will save around $1½ million per annum in compliance costs as well. The government has consulted widely on this measure and other measures contained in this bill. It is important to note that the measure has broad support from industry stakeholders such as the Australian Institute of Company Directors, the Governance Institute of Australia and the Business Council of Australia as well as, importantly, shareholder groups such as the Australian Shareholders' Association.

This bill also contains a range of other meaningful amendments to the Corporations Act. Remuneration reporting requirements are improved, saving around $8½ million in compliance costs. The government recognises that unlisted companies should not have to prepare a remuneration report. Quite simply, in those situations a remuneration report is not relevant. Unlike the situation with listed companies, the report does not have to be adopted by shareholders and therefore is not subject to the two-strikes test which can lead to a spill of the board if the report is rejected in those particular circumstances. Once again, we are doing away with paperwork that is superfluous but costly.

The bill also clarifies some confusion in the existing law around when entities, including companies, can change their end-of-year date. One measure that particularly pleases me is that the bill removes some nonsensical requirements with respect to auditors. Currently, the law requires certain companies limited by guarantee to appoint an auditor, even though they are not required to undertake an audit. That is a completely bizarre feature of the current law.

As we remove this requirement, we will also remove a $4 million compliance cost burden on business. Importantly, this change will predominantly benefit companies with a not-for-profit focus, as I foreshadowed earlier, freeing them up to concentrate on what they do best. If they are not required to conduct an audit, they will not be required to appoint an auditor. Many sports and recreation organisations, community service organisations, education related institutions and religious institutions around the country, including in my electorate of Deakin, have already welcomed this change in advice to me.

Let me briefly now turn to the amendments to the Australian Securities and Investments Commission Act, which are contained in schedule 2 of the bill. These amendments seek to improve the efficiency of government, because, just as we endeavour to help business become more efficient and productive by removing red tape, we must also look at government's processes through the same prism. ASIC is no different.

We are also improving the efficiency of the operation of the Takeovers Panel. The panel's operations are currently being hindered by the requirement—quite a bizarre requirement—that the panel can only operate if members are physically located in Australia. Obviously, members are appointed from the private sector and hold senior positions in banks, law firms and large corporations. As you can imagine, these people are frequently required to travel overseas for work, preventing them from fulfilling their panel obligations even though modern technology would allow them to do so. With this bill, we are removing the geographical restriction on the panel's existing powers, so that members can continue to carry out their important role in helping toresolve disputes over takeover bids.

F inally, the Corporations Legislation Amendment (Deregulatory and Other Measures) Bill gives the Remuneration Tribunal additional remuneration-setting responsibilities. We all know that t he t ribunal is an independent body skilled in reviewing and determining remuneration. It will improve administrative efficiency and ensure greater consistency if the t ribunal is given the power to review and set remuneration for the chairs and members of several boards that currently fall under the jurisdiction of the m inister and the Financial Reporting Council—a good streamlining exercise.

The b ill before us today is yet another example of our commitment to charting a new deregulatory course in this country . We are committed to a new approach ; one where we ask first, what is the purpose, the cost and the impact of the proposed initiatives, before we haphazardly regulate—in stark contrast to the Rudd-Gillard-Rudd governments. Everyone in the g overnment , from the Prime Minister and the cabinet down, is constantly asking : d o we need this piece of legislation; do we need this regulation? We ask it incessantly, a nd our approach is working. As Jennifer Westacott, CEO of the Business Council of Australia, put it: ' Finally, we ha ve reached a turning point in dealing with the high costs and inefficiencies faced by business and consumers every day. ' As I said earlier, we have now delivered more than $2.1 billion in red tape savings , and the scissors are still out. The benefits are being felt right across the community, and we are asking the community to help us to continue to deliver red tape relief.

The b ill before us today represents another incremental movement— $14 million a year in savings — but we are still searching for more , and the Australian people can play their part . In fact, many of the ideas to cut red tape which are in this bill today came from members of the community. The repeal of red tape in this country is a big challenge, but we have risen to that challenge. We have more than doubled our red tape reduction target, and we will not let up . A ll the small savings that we can find do add up .

I thank you , Mr Acting Deputy Speaker, for the opportunity to speak in support of the saving s and efficiency measures in th is bill before us today. I commend the bill to the House.

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

Ian Goodenough (Moore, Liberal Party) Share this | Link to this | Hansard source

In speaking in support of the Corporations Legislation Amendment (Deregulatory and Other Measures) Bill 2014, I would say that the corporate governance reforms being proposed are in the context of maintaining the competitiveness of Australian industry in the face of growing competition from emerging countries in our region and capitalising on the economic development opportunities provided by recent free trade agreements. A more efficient private sector will be the key to economic growth and prosperity for our nation.

Currently, the cost of compliance with government legislation and regulation continues to be a major impediment for businesses across Australia. If our domestic industry is to be competitive then the administrative burden of excessive bureaucracy must be lifted. Business leaders in my electorate have raised concerns that their operations are being restricted by an increasingly complex multi-tiered regulatory system, often so complex and technical that it is necessary to engage specialist consultants to achieve compliance. Small businesses to large corporations engaged in multimillion dollar projects alike are affected. The cost of compliance, coupled with additional project holding costs imposed by delays, has a detrimental effect on the financial viability of both business operations and key economic development projects.

The challenge for the Australian government is to foster a strong, competitive environment by reversing overregulation, addressing the factors which increase the cost of doing business in Australia and reforming the regulatory system to increase productivity. The development of strong policies for the business sector in the areas of corporate governance, financial services regulation and industry are required to promote the economic development of our nation.

Since being elected, this government has introduced more than 400 measures across the whole of government, resulting in a net reduction of over $2.1 billion in compliance costs. During this process, approximately 11,000 pieces of legislation and regulation have been repealed, removing some 57,200 pages from the statute books. The coalition government is addressing the way policymakers approach the issue of future regulation across government departments with the introduction of mandatory regulatory impact statements for all cabinet submissions and a deregulation unit in every portfolio. This will ensure that new regulation is introduced sparingly and as a means of last resort.

As I have previously stated in this parliament, the greatest challenge facing Australia in the 21st century is increased international competition from emerging economies in our region. In a globalised economy with free trade and mobility of investment capital across international borders, a nation's economic performance will determine living standards. Over the next decades, Australia will face unprecedented competition for resources and energy as populations seek to improve their standards of living. We will be competing with billions of people who value education and are prepared to work long hours to produce, earn, save and invest to get ahead economically.

This bill is part of the Abbott government's legislative agenda on deregulation. It contains a number of measures designed to improve productivity, competitiveness and the efficiency of government processes and which are expected to reduce business compliance costs by approximately $14 million a year. The proposed amendments achieve a fair and equitable balance between safeguarding consumer and shareholder rights and eliminating unnecessary red tape which is constricting business whilst maintaining accountability and transparency and promoting adequate disclosure.

Firstly, this bill seeks to abolish the existing requirement for directors of public companies to hold a general meeting at the request of a minimum of 100 shareholders—in a bid to prevent the calling of meetings for frivolous or trivial reasons. Experience has shown that activist and lobby groups with less than one per cent of the shareholding in public companies have been able to call general meetings—at significant administrative cost to the public companies—in order to move resolutions which have attracted little support. It is proposed that the new threshold for calling a general meeting be at least five per cent of the votes that may be cast at a general meeting. It is estimated that this measure will save businesses around $1.5 million per annum in compliance costs and it is supported by industry groups such as the Australian Institute of Company Directors, the Governance Institute of Australia and the Business Council of Australia, as well as shareholder groups such as the Australian Shareholders' Association. Groups comprising a minimum of 100 shareholders will continue to be able to put resolutions on the agenda of general meetings and be able to circulate statements to other shareholders.

Secondly, the bill proposes to remove the requirement for unlisted disclosing entities to prepare remuneration reports. This measure is expected to save unlisted disclosing entities approximately $8.5 million in compliance costs. The remuneration reports are not relevant in the case of non-listed entities because, unlike listed entities, unlisted entities are not required to have their remuneration report adopted by shareholders.

Thirdly, the bill attempts to clarify circumstances in which entities, including companies, registered schemes and other disclosing entities, may change their financial year end dates. The bill clarifies, but does not change, the legal operation of the existing law. This measure will put beyond doubt the conditions under which directors can determine that a financial reporting year is to be shorter than 12 months by more than seven days.

Fourthly, the bill contains an amendment which seeks to exempt certain companies limited by guarantee from the need to appoint an auditor. This change is expected to predominantly benefit public entities with a not-for-profit focus, such as sporting and recreation related organisations, community service organisations, education-related institutions and religious organisations. Currently, all public companies are required to appoint an auditor even if they are not required to conduct a full audit of their financial records. This unnecessarily imposes a $4 million compliance burden on business, which this bill seeks to reverse.

A fifth measure proposed gives the Remuneration Tribunal the authority to set the remuneration of the chair and members of the Financial Reporting Council, the Australian Accounting Standards Board and the Auditing and Assurance Standards Board. This will bring the setting of remuneration of those office holders into line with the remuneration setting of public officers more broadly and improves the efficiency of government processes.

Lastly, this bill aims to streamline the operation of the Takeovers Panel by allowing the panel to perform functions whilst members telecommute from overseas. It removes an outdated procedure requiring members to be present in Australia, which is likely have a positive impact on business through the more efficient resolution of applications being considered by the Takeovers Panel.

The package of reforms contained in the Corporations Legislation Amendment (Deregulatory and Other Measures) Bill 2014 will serve to ensure that the Australian economy is able to compete on a level playing field with emerging economies in our region. The growth of free trade within a globalised economy characterised by mobility of capital and investment across national borders requires the Australian economy to be in good shape to stay competitive with the rest of the world. I commend the bill to the House.

Andrew Laming (Bowman, Liberal Party) Share this | Link to this | Hansard source

This is a very valuable opportunity, in the couple of minutes I have, to highlight the unconscionable conduct of Australia's most dishonest NGO, GetUp! In 2012, GetUp! thought it would be an impressive stunt to use flaws in the Corporations Law to have 204 of their members call a $2 million meeting of the full membership and board of Woolworths—costing millions of dollars and forcing up the price of groceries. It was a stunt that, in the end, secured the support of only three per cent of those who attended—with, obviously, 97 per cent voting against the motion. This was an appalling display by a completely untrustworthy NGO. GetUp! is an organisation that has been consistently opaque in its objectives. It has a number of shadowy figures that support many of its elusive and fairly dodgy objectives, many of which are designed to be significantly anti-coalition.

The Corporations Law could in fact do with a fair bit of tightening up—$14 million of compliance requirements are removed with these changes. To think that we could have a Labor government for six years that thought it was utterly appropriate for a company limited by guarantee to be forced to appoint an auditor even if they are not required to provide an audit report—what an extraordinary omission! But then, if for six years you basically regard business as the enemy of the state, you can live with that kind of inadequate Corporations Law and do nothing about it. I am glad to say the coalition are doing something about it.

The changes in the Corporations Legislation Amendment (Deregulatory and Other Measures) Bill 2014 are , in many cases, minor tightenings. There are small changes to the Remuneration Tribunal. We are better balancing the rights of shareholders. We are making sure that, if 100 shareholders wish to put something on the agenda for the next meeting of the board of a publicly listed company, that can still occur. Shareholders also still have a significant say over remuneration. Twenty-five per cent of shareholders voting no on remuneration in two successive meetings can force a spill—all of that still exists. So the Corporations Law will be significantly improved at every level and $14 million dollars in utterly ridiculous compliance costs will be removed from Australian businesses. This is the kind of thing the coalition is getting on with doing. It raises the obvious point: why couldn't six years of Labor government carry out these fairly elementary reforms? The simple answer is that it was beyond their wit. They are a Labor government that never worked with business. They regarded them as the enemy of the state. Of course, times are changing and we are improving things for business in this country.

Debate interrupted.