Companies (Minority Buy-out Rights) Amendment Bill — First Reading 
Companies (Minority Buy-out Rights) Amendment Bill — First Reading 
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Companies (Minority Buy-out Rights) Amendment Bill 
First Reading 
Hon LIANNE DALZIEL (Minister of Commerce) 
: 
 I move  
That the Companies (Minority Buy-out Rights) Amendment Bill be now read a first time. 
 It is my intention to refer the bill to the Commerce Committee.  
The purpose of the bill is to amend the minority buy-out provisions in the Companies Act 1993 in accordance with the recommendations set out in the Law Commission report  
Minority Buy-Outs 
 which was written as a result of Justice Doogue’s decision in  
Natural Gas Corporation Holdings Ltd v Infratil 1998 Ltd 
. That case concluded that the provisions could do with some further clarity in order to make the minority buy-out rights more beneficial and workable. The case highlighted the fact that the law did not provide a basis upon which the shares at issue were to be dealt with at the time the company was required to pay the shareholder. 
The amendments to the minority buy-out provisions include providing clarity surrounding the value of the shares to be purchased from a shareholder to ensure that the value is an honest estimate. To achieve this the bill requires that the share offer to the shareholder be accompanied by a statement outlining for the shareholder how a fair value for the shares was determined. The amendments also provide that the price of the shares in a minority buy-out be calculated from the date the company gives the shareholder notice agreeing to buy back the shares but that the calculation of the value of the shares must not take into account any fluctuations that have occurred due to the triggering event except in times when a shareholder is being eliminated against the shareholder’s will. Thirdly the amendments clarify and expand the powers of the arbitrator to determine the share price in a minority buy-out. 
The company has three options at a time a shareholder invokes the minority buy-out provisions. It can agree to the purchase of the shares apply to the court for an exemption from the requirement to purchase the shares or arrange to have rescinded the special resolution that led to the minority buy-out provisions being exercised. Currently only in times of an amalgamation is the company obliged to send to each shareholder of a company a statement setting out the rights of the shareholder in the amalgamation. This bill extends that obligation to any situation where there is a special resolution. 
The bill also clarifies for the parties involved the time of the transfer of shares from the shareholder to the company. The legal title of the shares and the voting rights attaching to them remain with the shareholder until such time as the price is ascertained and paid in full. However after an original offer has been made and the company has paid the shareholder a provisional payment any purported disposition of the shares of the shareholder except in favour of the company will be of no effect. 
To conclude I tell the House that the bill establishes a much more clear and transparent process for calculating the price of shares in a minority buy-out situation and addresses the particular issues raised in the Infratil case. I commend the bill to the House. 
GERRY BROWNLEE (National—Ilam) 
: 
 I welcome the Companies (Minority Buy-out Rights) Amendment Bill being referred to the Commerce Committee and National will most certainly give it the attention that it deserves. But anyone listening to that speech by the Minister in charge of the bill Lianne Dalziel factual and accurate though it was could well ask himself or herself what on earth this is all about. Although the Minister talked about the appropriately stated movements that occur in these situations I do not think she gave a fair outline of the circumstances this provision may trigger or for that matter what it is all about. So I will take some time in the House this morning to explain exactly how all this works.  
It is interesting that yesterday the House passed the provisions for the KiwiSaver legislation and the idea of that is to encourage more New Zealanders to save and to invest for their future. Many of those accumulated funds will end up being invested in companies that are domiciled both in New Zealand and overseas. When the companies are domiciled in New Zealand these laws will apply to shareholdings in those companies. The Companies (Minority Buy-out Rights) Amendment Bill is about giving shareholders or the representatives of shareholders an opportunity to exercise their judgment about the wisdom of holding shares where there might be a transaction inside the company that they have disagreed with.  
The provisions of the Companies Act say that shareholders have a specific right to engage in a discussion and then have a vote over major transactions within the company—over mergers and acquisitions inside the company and over a range of activities that are inside the normal activities of the company. These provisions are there to try to give the shareholders the right to determine what happens to that company. For example they can decide whether to liquidate the company. Those are rights that are held by the shareholders as opposed to the executive of the company and they are there to protect the investment that New Zealanders make in any particular entity.  
So how do these provisions kick in? Let us say that Company A decides it is going to expand by making an acquisition of Company B. The first company would be required to go to its shareholders to get a resolution empowering it to go into that particular transaction. Some of the shareholders might say no. They may then find themselves in a minority. So Company A goes ahead and acquires Company B. Those who had disagreed with that might say that this acquisition will cost them that the value of their investment will decline because of the move and that therefore they have the right to require the company to buy them out.  
We could give plenty of examples of such situations occurring where a big company has decided to take over another one because it might be in trouble—struggling just a little bit—and because it looked like a good acquisition at the time and as though there was a profit down the line somewhere if the big company could get it to go. I will not mention names but one only needs to look at the airline industry to see numerous examples of this sort of situation occurring. In a number of cases—and for various reasons I will not mention names—those companies fail and the investment by the shareholders is of course in that circumstance completely lost.  
This legislation protects those who have disagreed with that activity right at the start of the new entity coming together. They are able to say to the company: “I want to be bought out.”  
Hon Lianne Dalziel 
: That’s before the amalgamation. 
GERRY BROWNLEE 
: Yes that is right. The Minister actually knows a bit about this and I appreciate her nodding and affirming that what I am saying is absolutely correct. 
Hon Lianne Dalziel 
: Before the amalgamation. 
GERRY BROWNLEE 
: Well of course “before” Minister. [ 
Interruption 
] “Of course Minister. Yes Minister. Yes Minister.” That is what they say all the way through the Beehive all the time. The officials over there just say “Yes Minister.” even though they are not particularly happy with the current Government because the way it treats State servants is quite unbelievable. The Labour Government has no respect for State servants so its Ministers are just getting the “Yes Minister.” treatment from the public servants—and so they should.  
The decision is made by the shareholder who says: “I don’t want to be part of this. Buy me out.” This bill puts in place a number of technical measures for determining the value of those shares and then for the way in which the transactions between the exiting shareholder and the company are to be purported. It does as the Minister said come from the Infratil case and I think it is worth considering what the judge said in that case which was heard by the courts in the year 2000. He said: “It is common ground that the minority buy-out rights sections are defective.” So the judge identified that there was a problem with our current law that led to this new law coming on. He made a number of points about the rights of minority shareholders in these circumstances and continued: “However here there is a relatively substantial sum of money involved.”—there always is in these cases—“In other cases there could be a substantial number of shareholders involved.”—there usually is—“While the Law Commission and the legislature may have been wise to avoid the complexity of some of the North American legislation it would seem essential that if the minority buy-out rights sections are to be effective they should be urgently reconsidered.”  
The judge’s advice is to urgently reconsider things. That is why we have the legislation in front of us today but it is interesting to consider this idea that we should have done something urgently. In the judge’s conclusion to his judgment he refers to a statutory vacuum and said: “I regard the section as substantially flawed …” He is talking about the Companies Act and minority buy-out provisions as they existed. 
Hon Lianne Dalziel 
: 1993—who was the Government then? 
GERRY BROWNLEE 
: Interestingly the Minister over there is giving a bit of a commentary and I appreciate that. If only she had used up her 10 minutes she could have had so much more to say. The judge said: “If the minority buy-out rights sections are to be beneficial and workable they should”—as already indicated—“be urgently reconsidered.”  
This is how the Labour Government deals with small investors in this country. We are now under urgency urgently dealing with this matter 8 years after the judge said it would be a good idea. Unbelievable! What is more we had to look at dog control legislation first and consider that before we got to this. I think that indicates the priority that the current Government put on business in this country. We welcome this bill coming before the select committee because I think we will have to do some work around some of those calculation provisions. It is obvious that if there are a large number of people particularly in the executive of any particular business recommending a course of action to shareholders they will put as much gloss on that as they possibly can. It seems to us that to then have the right to subsequently value shares for the purpose of the minority buy-out is a little bit on the offside.  
One thing that worries me is that quite often these acquisitions are financed—[ 
Interruption 
] The Minister keeps shaking her head. I know it is difficult for her to understand. Goodness me I am trying to make it as easy as I can for her. Clearly those officials up in her office whom she and the rest of that Labour Government have brassed off have simply nodded at her and said “Yes Minister!” and told her she was right when she had got it wrong. But a lot of those acquisitions will be financed by some pretty heavy borrowing and what is really a concern here is how far those agreeing shareholders will have to agree to an extra level of debt in order to be able to cover the buy-out of those who have said no. That is a perfectly reasonable thing; the Minister can think about that. If 20 percent of the company says “No I don’t want to be in this.” and the company offers $100 for that company over there it will cost it $120 actually to go through with the acquisition we would assume.  
That issue is something we need to get much more clearly defined in the bill because shareholders expect the executive of their company to give them a good deal. That is why they hold the investment in the first place; they want to get a return on it. But I wonder where the requirement is in the bill—I cannot see it from the first reading that I have given the bill—that all shareholders are told the real cost of the acquisition and the buy-out costs. That provision does not seem to be there I tell the Minister but she should not worry: National will come to her rescue.  
National will be looking at this legislation very positively in the Commerce Committee. I think we will probably have to bring in some independent advisers on this one. I can see us bringing in some independent advisers because it is a very complex bill and I am distressed that the Minister does not understand it all. 
MARTIN GALLAGHER (Labour—Hamilton West) 
: 
 That was a bit of a worrying speech actually—particularly as I understand that the speaker apparently is the chair of the Commerce Committee. But I certainly hope that the Minister Lianne Dalziel will be instructing officials to give the committee a full briefing— 
Hon Lianne Dalziel 
: Oh no! They need an in-depth briefing after listening to that. 
MARTIN GALLAGHER 
: Well I want the Minister to make sure she gives the select committee every assistance. That is very important. Having said that I tell members that I do appreciate the member opposite. He is chair of the Commerce Committee and I am sure that he tries to do a very good job. I hope he does. But again I sense a degree of frustration because at least we now have a Minister who is addressing quite an important issue. I want to make the point—and I think in fairness the previous speaker did make this point—that the provisions of the Companies Act 1993 require currently that the company offers a fair and reasonable price to the shareholder for the shares but provide no guidance as to how a fair and reasonable price is calculated. Indeed the current law does not require that the company give any information to the shareholder on the basis of its valuation for the buy-out.  
The good thing about this legislation is that it will provide for a fairer and more transparent transaction process for the minority shareholder and it strengthens their minority buy-out rights. I am looking forward to the select committee looking at this bill clause by clause and line by line.  
I will make one other point: this is another good move for what I call the mum and dad shareholders. If we can improve this law around the rights of the minority in a company that will encourage people actually to invest. We so need to build a savings culture and an investment culture in this country. This legislation will encourage people to invest in companies in this country and I think that anything we can do to encourage ordinary people to invest in our economy particularly by way of purchasing shares and to improve and strengthen their particular rights in these particular cases is to be encouraged.  
I commend this bill and look forward— 
Gerry Brownlee 
: Why? The man doesn’t even know what’s in it. 
MARTIN GALLAGHER 
: Well actually I think I know a heck of a lot more of what is in it than the chair of the Commerce Committee—he should be afraid; he should be very afraid. But I am not going to take any more time now. The Minister has given this Parliament an assurance that she will make her officials fully available to the select committee on what I think is a very positive bill. Thank you. 
SIMON POWER (National—Rangitikei) 
: 
 Well I thank the member Martin Gallagher for that analysis of company law and minority share buy-outs. I am sure that in the fullness of time he will take the opportunity to come to the Commerce Committee when we are considering this bill and share his wisdom with the rest of us—and with those independent advisers whom Mr Brownlee has spoken about—in his own airy sort of way.  
In actual fact the Companies (Minority Buy-Out Rights) Amendment Bill is serious legislation. This bill amends the 1993 Act to clarify the buy-out provisions for dissenting shareholders in times of a special resolution. The key objective is to improve the practical operations of that minority buy-out regime in order to ensure it functions efficiently cost-effectively appropriately and without flatulence.  
The major difficulty with this particular legislation is that unfortunately it has not come about because of a technical issue that proved difficult for a one-off minority buy-out; it has come about of course as a result of the Infratil - Natural Gas case and a decision by Justice Doogue in July 2000. In fact I think I am right in saying that it was Justice Doogue who was on the bench the day I was admitted as a barrister and solicitor. I am pretty sure it was Justice Doogue and what a fine fellow he was. He congratulated me. I could be wrong but I am pretty sure it was Justice Doogue.  
The difficulty of course is that it leads to a wider question a question that I have raised in this House on a number of occasions which concerns the fact that the Government’s response to Law Commission recommendations is nothing if not consistent—that is whatever the Law Commission recommends the Government puts into legislation within a certain period of time. Of course that begs the question that is on everybody’s minds today: what do the Ministry of Economic Development and the commerce unit do and more particularly what is the Ministry of Justice doing while the Commerce Commission continues to make that huge number of references by way of legislative change? 
However in this particular case the Minister of Commerce is right to move this bill to the House. In fact National as my colleague Gerry Brownlee has said will support the passage of this bill through its first reading and pending the advice the select committee receives no doubt—in my opinion anyway—for its second and third readings as well.  
You see the intention of the minority buy-out provisions is to provide an exit regime for those shareholders who are dissenting and who have unsuccessfully opposed a fundamental change to the structure or operation of the company. In amongst Mr Brownlee’s contribution where he talked about some of the practical examples where this regime may have assisted he was dead right when he talked about the borrowing implications for the company once the dissenting shareholders had exited the company following the transaction. He questioned whether that increased borrowing would be incorporated in the valuation of shares post or pre - minority buy-out and what effect that would have on the dividend return to those remaining shareholders.  
Of course balancing up the rights of the minority shareholders who look to exit on a dissenting transaction presents one of the most complex and difficult matters for directors of a company. It concerns their duty to shareholders as opposed to their duty to the company. Those are two quite different things. The fundamental duty is to the company but the secondary or less significant duty is to the shareholder. Not all directors understand the difference between those particular transactions and if it is the matter of the health of the company and indeed of its remaining shareholders because of the borrowings-to-asset ratios remaining following a minority buy-out dissenting view then that creates a really interesting paradigm for directors to make these decisions in.  
It is hoped that this bill will assist those directors in making a decision that will work for the health of the company. Of course—as the Hon Paul Swain will know—the last thing the health of any company needs is a group of dissenting shareholders who do not want to be party to a major or indeed a significant transaction. But at the same time the rights of the remaining shareholders in a secondary sense will have to be balanced against that fundamental duty of directors. 
Hon Paul Swain 
: As long as it clarifies it. 
SIMON POWER 
: The Hon Paul Swain who has had a bit of experience in this area as a Minister for State Owned Enterprises is dead right when he says that as long as the legislation clarifies that point that will help. We do not want directors to be put into a position where the minority buy-out regime complicates and makes more convoluted the series of duties that the directors have to weigh up when considering the implications of a buy-out for dissenting shareholders in a time of a special resolution.  
Now I know my colleague Judith Collins who was a company lawyer in a previous life will have a firm understanding of the technical issues surrounding this matter and I welcome her 17½ minute contribution to the debate on this bill because I think it would be worth hearing. I was only fortunate enough to be practising for a very short time and of course I feel a little humble in the presence of those who practised in a much more technical area than me. I have offered only a general overview. The extent of my knowledge of these matters pales compared with the contribution made by the member from Hamilton West Martin Gallagher. But nevertheless his contribution was valuable because it provided a springboard for a more detailed discussion on some of these issues. He brushed over it in a general sense but his understanding of the more complex innuendoes surrounding the conflicting duties was apparent in some of the language he used during the course of his contribution.  
As the bill says the important thing here—and this is echoed by the chipping contributions of the Hon Paul Swain—is to simplify and clarify the regime. The minority buy-out provision should have the following key features. I am sure the House will indulge me as I work my way through page 2 of the explanatory note. The first key feature is: “an obligation on the company of a minority buy-out to send to each shareholder of the company a statement setting out the rights of shareholders”. That is fine; that makes good sense. In fact I would be very surprised if that was not followed today under the existing regime. The second point is: “that the share offer for a minority buy-out be accompanied by a statement outlining for the shareholder how a fair value for the shares was determined:” We should remember that that particular statement should also perhaps include—in my opinion—a statement to remaining shareholders about what the increased borrowing means for their shareholding value and potential dividend stream once the buy-out occurs. The third point states: “the valuation of the shares … should be calculated as … on the date the company gives notice”. There is no problem with that.  
The fourth point states that the valuation “should be adjusted to leave out of account any change in the valuation attributable to the event”. Well this is the key point that Mr Brownlee drew our attention to during the course of his contribution—at what point does that consequent liability get married in or weighed in as part of the remaining valuation of those shares? We need to say that in determining the valuation the adjustment needs to leave out of account the effect of a triggering event and if the shareholder and company cannot come to an agreement the price will be determined by arbitration.  
Those last few clauses are pretty standard stuff really. We know—and I say this particularly to New Zealand First and my colleague over there Peter Brown—that this is not without its complications. I hope Peter Brown’s contribution to the House acknowledges the fact that although the House appears to be waving this legislation through to a select committee these are important matters of commercial and company law that should not be underestimated in terms of any potential conflict and application of duties that may arise in the public company or State-owned enterprise environment.  
I have to say the only thing that worries me is that if Mr Brownlee as chairman of the Commerce Committee moves to make the Law Commission its independent adviser we may not get the answer to some of those questions. 
PETER BROWN (Deputy Leader—NZ First) 
: 
 I am very pleased to follow that member Simon Power because in large measure he outlined in some detail the concerns as he saw them about this bill. 
Pansy Wong 
: Oh. 
PETER BROWN 
: No he did. He did quite a good job. It must be the morning for complimenting National members because I actually thought Gerry Brownlee started off very well when he opened up and gave the public who might well be listening to this some background on what it is all about. But he got into the frivolous stuff towards the end.  
I am not sure that I understood Simon Power on this issue. He will probably tell me whether I have understood but he seemed to put a lot of emphasis on the concern he has in regard to the directors of a company. I do not want to undermine the directors of a company who have huge responsibilities when it comes to minority shareholder buy-out but my concern and New Zealand First’s principal concern is for the minority shareholders. I think this bill goes quite some way towards addressing those concerns. Simon Power started to read the eight bullet points from page 2; he started to go through them one by one. That was in fact my intention also but he stole my thunder and I will not bother. But I will touch on one or two points.  
There is an obligation here for the company involved in a minority buy-out to communicate with the shareholders and to tell them their rights—what they are entitled to and what have you. There is also an obligation to tell the shareholders how the value of the share was determined. Those are very important points. This bill is based around the case  
Natural Gas Corporation Holdings Ltd v Infratil 1988 Ltd 
 but I recall that when BNZ was sold some years ago a number of minority shareholders did not think they were getting a fair deal. They held out and in the end they got a pittance and were not listened to; as I understand it they just got cheques in the mail. Of course we all know what happened to BNZ after that.  
So those are the two factors—first to communicate with shareholders and to tell them their rights which is an important innovation and secondly to tell the shareholder how the value of the share was arrived at. The final point which Simon Power touched on is to explain to the shareholders that they have got the right to go to arbitration if they cannot reach an agreement. As I say there are eight points here. Some of them are very technical and would take a longer time to explain to the House than I have. This is a bill that I think is— 
Paula Bennett 
: Is Tauranga rebelling? 
PETER BROWN 
: Is the member asking me a question? Because I am prepared to answer it. 
Paula Bennett 
: Yeah how does your Tauranga electorate feel about the Electoral Finance Bill? 
PETER BROWN 
: Oh the Tauranga electorate totally supports it. I just digress; I actually went to a public meeting held in the Tauranga electorate on Monday. The people asked all the questions about the bill that they were concerned about and they were totally supportive when I was there. I understand that Winston not only had been there before me but has given an interview to Audrey Young explaining all of the differences. I have not read that article but I had it reported back to me and I have to say that the way in which Audrey has printed it is quite different from what Winston told her. I say there could well be a suggestion of a lack of media ethics in the way that issue is reported.  
I can tell members that I spoke to the Tauranga chairman this morning about another matter and he is quite content. He said the issues that concerned him—and some concerns were raised with him—have all been addressed. Is the member happy with that explanation? I am running out of time.  
Coming back to this bill I say that we think that those three factors in the list of eight on page 2 of the explanatory note are very important. The last one I touched on was the ability of the minority shareholder to go to arbitration if he or she is not happy with the situation. We think this bill is worthy of support and New Zealand First will support it going to a select committee. 
JUDITH COLLINS (National—Clevedon) 
: 
 I am grateful for the opportunity to speak in support of the Companies (Minority Buy-out Rights) Amendment Bill. Unfortunately like much of the legislation in the dying days of the Labour Government it is too little too late. As the contributions from the National side of the House have shown we in the National Party take seriously the rights of minority shareholders. One reason we do that is the headlines—for instance this one in the  
New Zealand Herald  
today: “Mortgage worries … fewer people taking loans as the housing market cools.” This could be considered a good thing except for the fact that the sharemarket has not been a place of safety for many investors—many mum and dad investors—in New Zealand. After 8 long years of a Labour Government the sharemarket is still not a place of safety. This Labour Government has spent an awful lot of time castigating people who buy more than one house which is very interesting because Chris Carter the former Minister of Housing has several houses. The Government spends a lot of time saying to people: “You shouldn’t be buying up houses and renting them out to people. You shouldn’t be doing these things. You should invest in other things.” Well what are the other things? Mum and dad investors with $40000 or $100000 to invest have to look not at commercial buildings because they cannot afford those but at a place like the sharemarket. 
Those investors should be able to rely on the sharemarket regulated by this Government and also by the New Zealand Exchange as a place where they can have a modicum of safety for their investment. But the fact is—and it is a sad fact—that votes are what count. In the sharemarket a person who has more money in shares will have more of a say. It is not untrue and it is not an exaggeration to say that most of the shares in the New Zealand sharemarket would be controlled by either big investment companies like AMP or by other private equity funders and shareholders. Those are the people who effectively control much of the wealth in the sharemarket. Yes we have lots of mum and dad investors lots of people out there with their life savings extra to their house in the sharemarket but those people effectively do not get much of a say except for the one meeting they get in the form of an AGM each year. 
What happens is that some of the company directors are appointed as independent directors. I would like to deal with the fiction that I see around the issue of independent directors. I ask members to just look at this example of an independent director: John Maasland who was chair of the airport company. John Maasland was acting as the independent director making decisions he felt were in the best interests of the company so instantly he was given the word that he would be shifted on because the big shareholders—the Manukau City Council and others—would make sure that he is not the independent chairman. That is obviously a right; it is allowed under the law. But why do we put so much faith in a situation that is effectively fictional because the independent directors like all other directors are in fact elected at the AGM? They are elected by the shareholders and if the shareholder voting power is with a great big investment company the great big investment company will decide whether that director stays the next year. So we put an awful lot of pressure onto our independent directors without actually giving them the ability to be truly independent without the fear that they are going to lose their positions. I pay tribute to some of the independent directors whom I have worked with and whom I have seen over the years make decisions that have been truly in the best interests of the company even if a particular majority shareholder or a very powerful shareholder did not like those decisions because they were not necessarily in the interests of that shareholder. 
It is very important for us to understand that we will not become a wealthy country until we have a sharemarket that the people of New Zealand can have true and total faith in and we will never have that if we consistently think that just because something is legal then it is OK. Well it is not always OK. In fact we find over the years that many minority shareholders have felt that they have had very little voice. I welcome the attempts of the Government to do something about that—around the valuation of minority shares and the buy-up provisions. But I would also say to the Government that we can say all we like about going off to arbitration and about taking court actions to protect one’s interests as a minority shareholder but the vast majority of our minority shareholders are mum and dad investors who are aged 65-plus and who will never go off to take complicated expensive and very very tiresome legal action to protect their rights. It is important that we start to address the culture that has allowed some companies—in my opinion—not to do the right thing by minority shareholders. Of course democracy is one of those things that are great when they work for one and not so great when they do not. For some minority shareholders the democracy of the share voting power can have very disastrous consequences. 
I am very concerned that the Government in its last dying days is now talking about minority shareholders rights. Having said that I ask what it is doing about the agencies that were set up to protect some of these people—that is the Serious Fraud Office and others? It has brought the Serious Fraud Office back into the Ministry of Justice—a ministry that has shown itself to be completely in with the police. The Ministry of Justice shows itself so completely incapable of coming up with any policy that it now relies on Sir Geoffrey Palmer at the Law Commission to put forward all its policy. That seems to me to be an indication that we need to go significantly further than the provisions that people are talking about in this bill. 
I also take the opportunity to acknowledge the work of some of our commentators in this shareholding area—the work of people like Bryant Gaynor for instance in the  
New Zealand Herald  
who has— 
Hon Paul Swain 
: Brian. 
JUDITH COLLINS 
: I did say Brian did I not? I did say Bryant. I am sorry I meant to say Brian. I thank Mr Swain. Brian Gaynor has spent a huge amount of time and effort looking at companies in many cases from the minority shareholder point of view. Over the years as a company director Mr Gaynor has been extremely irritating at times but the fact is that the work he does is extremely helpful to many independent and small investors who have had to look at the  
New Zealand Herald  
to get a view as to whether they should be investing. Sometimes unfortunately with the way in which initial public offerings are handled through sharebroking companies and through the financial markets the commissions that are paid and the deals that are done mean that the independent advice tends to come from people like Brian Gaynor—and I should say from the work of people like Bruce Sheppard from the New Zealand Shareholders’ Association. People like him have been willing to come out and sometimes make a bit of a stunt in the old AGM and carry on in some way that certainly gets some notice. But behind all the stunts and the rhetoric these people are with others standing up for the rights of minority shareholders. I know it is not always a view that is particularly popular around the board tables but I believe it is extremely important that New Zealand get rid of its cowboy reputation in relation to its companies. 
I do not believe that this Government will necessarily regulate a change in attitude but I do not think we need to look too far to see that there have been a lot of people not only in the sharemarket area but in the finance company area who have made a lot of money out of a lot of very small investors and who are not held to account. They are certainly not held to account anywhere except in the court of public opinion. When we look at why New Zealanders have so much faith in investing in property I think we do not need to look very far to see that a lot of it is to do with a lack of faith in the way in which some few—I say “some” because it is certainly not all—few people have manipulated minority shareholders for their own ends. 
This is a bill that is well overdue. However it is only a very small attempt at a very late stage by this Government to do anything for minority shareholders. National will certainly support the bill going to a select committee. We will hope to see something better come through after that process; we will certainly be putting big efforts into that. 
Dr PITA SHARPLES (Co-Leader—Maori Party) 
: 
 Tena koe Madam Assistant Speaker; tena tatou katoa. The Maori Party comes to this bill aware that many of our whanau hapu and iwi are taking up the company structure as laid out in the Companies Act 1993. Whale Watch Kaikoura Maori active-wear brand Kia Kaha Clothing Mai Media Ltd and Shotover Jet Ltd are all examples of Maori organisations that have been attracted to the company structure as a mechanism for their commercial operations. These international market leaders see the provisions of the Companies Act as providing them with a robust structure for economic benefits to be realised for the capital growth of their assets and to ensure financial benefits go to individual shareholders.  
However we do realise that the company structure may not be appropriate for hapu or iwi whose objectives are solely or primarily political social or cultural. The company structure may not be suitable to meet the non-commercial objectives of whanau hapu and iwi and we recognise that as one of the limitations of the current companies legislation. We take all of these factors and interests into mind when we consider the amendments mooted in this Companies (Minority Buy-out Rights) Amendment Bill.  
This bill seeks to improve buy-out regimes when minority shareholders have elected to have their shares purchased by the company. The current legislation has made it easier to operate as a company with particular attention having been given to decreasing the set-up costs and making name approvals available almost immediately. But issues are still apparent particularly around the concept of minority shareholding.  
From the outset we know that the concept of minority shareholding has always been one of those issues that has turned whanau hapu and iwi off the company structure in the first place. The requirement that those with interests must hold shares has created practical difficulties for hapu and iwi due to the complexity of identifying all the persons to whom the shares should be issued. This bill assumes that hapu and iwi have worked through all of those issues and have come out the other end. In other words in the situation of a dissenting vote minority shareholders have willingly elected to have their shares purchased by the company and the process of this bill is necessary to ensure their shares are valued fairly.  
In general terms the minority buy-out regime is triggered in response to a dissenting vote—that is where the shareholder exercises the votes pertaining to that shareholder's shares against a proposal and that proposal is agreed to by the required majority of shareholders that shareholder is entitled to require the company to purchase those shares in accordance with section 111 of the Companies Act 1993. Both the Law Commission and Justice Doogue concluded that the Companies Act 1993 was actually defective in its failure to set out a workable method when such a situation occurred. Therefore the challenge for this bill is all around how to value minority shareholding when a minority shareholder has elected to have his or her shares purchased by the company under section 111 of the Act. In fact Justice Doogue was so convinced of the failings of this particular legislation that he referred in his 2000 report to a “statutory vacuum” and stated the specific section was “substantially flawed”. We in the Maori Party are therefore pleased to receive this legislation to ensure that the minority buy-out rights are to be both beneficial and workable.  
We do not have a great deal more to add to this debate other than to note with depressing consistency that this bill appears to be another bill before the House in which there has been little if any consultation with Maori. We were unable to confirm what the nature of the consultation with Maori companies or Maori company directors had been in the Law Commission review or if there had been any consultation with Maori in the drafting of this bill. Our experience to date would tell us there has been none. However we will support this bill going to a select committee and we hope that this will provide an opportunity for the independent voice of Maori to be heard. Thank you. 
Hon PAUL SWAIN (Labour—Rimutaka) 
: 
 I would like to address a couple of points made by Judith Collins and also Simon Power who I thought made quite a useful contribution. But the first thing I would like to know is why the National Party is filibustering on this kind of legislation. I hear that it is supporting it and what I am interested to know— 
Gerry Brownlee 
: I accept the questions that Mr Swain is asking us and I seek the leave of the House to take 2 minutes to answer them. 
The ASSISTANT SPEAKER (Ann Hartley) 
: The member has sought leave for that purpose. Is there any objection? There is objection. 
Hon PAUL SWAIN 
: A very simple answer to the question would easily suffice here. It may be because those members had a bit of trouble at the post-media do last night. There was a bit of grumpiness and now they are trying to take a bit of utu; that is what it might be about. I wonder whether National Party members know the saying “Cutting off one’s nose to spite one’s face” and over there is a particularly large nose and not a very pretty face. 
Gerry Brownlee 
: That is what Doctor Cullen has done; silly man! He should have talked to us before he talked to Vernon. 
Hon PAUL SWAIN 
: Was this because of last night? That is the only thing I can think of. 
Gerry Brownlee 
: No it’s nothing to do with last night. 
Hon PAUL SWAIN 
: Well I take the member’s word that it is nothing to do with last night because he is an honourable member. I presume the National Party is going to be supporting this legislation because it is good legislation.  
I want to take up the first point that Judith Collins made. She said that the Government has not done much in this area until now. Of course that is completely not the case. When the Labour Government came in in 1999 I had the privilege and honour to be the Minister of Commerce and one of the things we looked at was the problem we had not only with company law but also with the rights of minority shareholders. We got to work putting into place the Takeovers Code that the National Party had agreed to in Government but had decided not to implement because of pressure from the Business Roundtable. We got it under way straight away to give minority shareholders rights at a time of takeovers.  
Then there was a whole lot to do with insider trading to make sure that the torch went on to insider trading and exposed it in order to protect minority shareholders. Now we are bringing forward the Companies (Minority Buy-out Rights) Amendment Bill. It is more really good progressive business legislation— 
Gerry Brownlee 
: It’s 8 years late! 
Hon PAUL SWAIN 
: Well this has been a very very busy Government. We have had lots of legislation to bring through not only in this area but also in transport health and education. There is so much to do in so little time which is why we need to be able to continue on for the next 3 years as the programmes and projects are not yet finished.  
Simon Power raised what I thought was quite a reasonable point. He essentially said that in the case of a company director or company directors trying to make a decision about where the company should go they not only need to take into account the health of the company but also need to take into account what is potentially the outcome for some minority shareholders who for example are opposed to a decision to amalgamate and then decide that they want the buy-out rights. That has to be factored into the decision. I think what this bill is trying to do is clarify the rights of minority shareholders who are in that position.  
It is not just on the question of amalgamation; it is also to do with times of special resolution because that is not specifically mentioned in the legislation. If there is a special resolution it clarifies for example what the rights are in the case of a company’s constitution being imposed or removing a restriction on a company’s activities. Someone might be opposed to that and want to buy out. It may be a major transaction that the minority shareholders might not be keen on or as I said before an amalgamation proposal. At the moment the old legislation says they do have rights but it does not really clarify what those rights are. I think the most important piece of clarification is to say that at the time of the opportunity for the minority shareholders to buy out there firstly needs to be clarity around the value of the shares to be purchased from a shareholder to ensure the value is an honest estimate. What is an honest estimate? That is a fair point.  
The second point is that the price of the shares at that moment in a minority buy-out will be calculated from the date the company gives the shareholder notice agreeing to buy back the shares. That is fair enough. But of course there could be some fluctuations around that time as always happens when this kind of activity goes on. The legislation says that the calculation of the value of the shares must not take into account those fluctuations. Of course thirdly if an arbitrator is in place then it clarifies and expands the powers of the arbitrator to determine the share price in a minority buy-out situation.  
So this is a good situation. I come back to Simon Power’s point which was that we need to have some certainty and some clarification so that for example directors do not get themselves into the position where they do not take a positive step in the interests of the company because they are concerned about the impact potentially of those who are opposed to it and then exercise their minority buy-out rights.  
I think where Simon Power got to in the end was that provided there was clarity in the legislation he would support it. I think it does provide that clarity. Of course the opportunity with this legislation is that it will go to a select committee—the Commerce Committee I presume chaired by Gerry Brownlee—[ 
Interruption 
] No I actually think he does not do a bad job to be perfectly frank. A good meeting is a quick meeting as I have always said. I hold to that particular principle. Of course it is an electronic committee so some members have struggled but it is a very good committee. Gerry Brownlee seems to have mastered the new technology— 
Hon Darren Hughes 
: He’s always logging off. 
Hon PAUL SWAIN 
: Yes logging off and on when the time suits. I think the important thing is that this bill will go to the Commerce Committee. I expect there will be quite a lot of submissions from the business community and rightly so. I think it will be really interesting to hear whether what is in the bill before us will meet the needs of shareholders. I am sure that people will come up and say “You’ve forgotten about this. You should do this. What about that?”. I am sure that under the leadership of Gerry Brownlee and with the hard-working and conscientious members of that select committee we will come back to the House with possibly a new and improved proposal.  
It is with great pleasure that I support this legislation. It is another arrow in the quiver of important business legislation that this very busy and business-friendly Government has introduced into the House. That is another reason why we need to be able to continue with our work after the next election because there is so much more to do. With that I commend this bill to the House. 
KEITH LOCKE (Green) 
: 
 The Green Party will be supporting the Companies (Minority Buy-out Rights) Amendment Bill. We listened with rapt attention to the very profound comments from the previous speaker Paul Swain and from Gerry Brownlee. We are most upset that we are not represented on the Commerce Committee that this legislation will be going to and that we will not be able to hear the wisdom of not only the members and the chairperson but also the many presenters. 
Gerry Brownlee 
: You can seek leave. We would love to have you there. 
KEITH LOCKE 
: Thank you for that invitation. We will look closely at taking it up. 
I am sure that the interests of the minority shareholders will be protected. However I listened very closely to Pita Sharples’ speech and there is a lot of work to be done to make sure that this legislation is applicable to Maori trusts and the like. Thank you. 
PANSY WONG (National) 
: 
 It is a pleasure to take a call on this bill. Personally I am supporting this bill to the Commerce Committee only because of the brilliant chairmanship of Mr Gerry Brownlee. I have confidence only in him and because he is supported by our brilliant Simon Power the legal brain. I think this bill has to go through a close scrutiny. I point out that it is no wonder the Hon Paul Swain who was previously the Minister of Commerce did not bring any changes to the minority buy-out section because from the content of his speech we are quite sure he was not sure what was being proposed and the way it was going to change.  
First of all I would like to tackle two issues. One is the technical valuation of the shares. I contrast the statement that this bill is going to give a practical and constructive method for the valuation of the shares for a company upon request by the minority shareholder that wants its shares to be purchased by the company. Under the Companies Act 1993 upon receiving that notice the directors would have to nominate a fair and reasonable price for the shares to be acquired. But in the proposed changes the bill says that that price must be an honest estimate of the value on the day etc. I hope the excellent chairman Gerry Brownlee during the select committee deliberations will ask the officials to provide some evidence of dishonest estimates that have been proven to have happened in regard to all these minority shares bought out throughout this period without these amendments.  
We all know that lawyers love to spend time challenging and debating a new word or new phrase whenever they have been introduced into legislation. I am sure every commercial lawyer in the country is now sharpening his or her pencil and starting to interpret what the politicians who are trying to pass the first reading of this important bill mean. This bill is part of the urgency motion. They must have meant something given that in the present Act all it says is that the director has to give an estimate of the fair valuation of the shares but now we are inserting a clause stating that the price must be an honest estimate. How does one define “honest”? Should the directors immediately go external seeking an independent estimate of that? Have the directors up until now or before the bill is to be passed demonstrated that they have not been giving an honest estimate of the value?  
It seems to me that apart from this word “honest” the bill also specifies a couple of days regarding when the valuation has to be given; it specifies some parameters and says that first of all we have to ascertain the value of the total shares in each class and then each class will be adjusted to exclude some fluctuation before and after the event.  
I personally think that these three additional amendments that have been brought into this new bill will not give much direction to the valuation of the shares to be bought out from those minority shareholders. I am looking forward to the diligent National members on the Commerce Committee getting a detailed briefing from the officials and asking for an explanation step by step of how that would actually help the practical and efficient way of valuing shares.” As one of the three qualified accountants in the House I have long been resigned to the fact that the valuation of shares is really an art and not a science. We could go outside and get a valuation of what they call a “going concern” selling the business if it is to continue or we can get a replacement value or historical value which nobody believes is fair. Therefore I hardly believe that what is contained in the new bill will achieve that workability and efficiency etc. As I say the only saving grace is that the bill is being referred to the Commerce Committee which happens to be chaired by the brilliant Gerry Brownlee. The members on the National side I am sure will ask those hard questions.  
The other subject I want to touch on is that of minority buy-outs. Quite interestingly in the case of a public company situation or even a medium-sized company nowadays I really wonder at the meaning of the word “minority”. A 10 percent shareholder in a public company can be a cornerstone shareholder and in effect one would hardly describe that person as a minority shareholder. He or she probably has as a representative one or two of the board members. So I want to know whether in those circumstances those board members would excuse themselves or whether they are collectively still able to come up with what we would call an honest estimate.  
When we think of a minority shareholder in the traditional sense we think about shareholders who are helpless and may be subject to the tyranny of large-parcel shareholders. But in the current day minority shareholders themselves can be quite influential and substantial shareholders who may not agree or indeed may even stand up to the other shareholders who are actually true minority shareholders because of the small parcels of shares they hold.  
This bill in my mind has not quite addressed or really come up to the play with the modern scenario of what a minority shareholder can be. What I am alluding to is that I do not believe there is a practical framework to work out the value of shares. If we consider the current definition of a minority shareholder we see that the shareholder can actually be quite substantial in a company and invariably that situation will lead to litigation. It will also lead to arbitration.  
So as we look at this bill we are not sure that in fact it will bring efficiency or effectiveness. The reason is that Parliament tends to be quite slow. We tend to be reactive as was demonstrated by the former Minister of Commerce Paul Swain. He acknowledged there was a problem with minority shareholders’ buy-out rights 8 years ago and what did Labour do? The outgoing dying Labour Government has introduced 8 years later under urgency a solution to fix it. That solution might have been fine 8 years ago but 8 years later things have moved on. Therefore the solution here really will not in my mind contribute to a lot of difference. Ultimately if it is a lot easier for a listed company to look at the valuation of the shares—and I thought that might be one of the practical suggestions to save on litigation etc.—I wonder whether the select committee can look into the practical suggestion of having an independent valuation triggered early on in the piece rather than having the board of directors going away and trying to interpret how and in what circumstances they can prove to others that they have given an honest estimate of the value of those shares. Maybe they should just agree on a framework as to how they can appoint an independent valuer for those shares. I have lots of doubts and my only confidence is in the supreme chairmanship of the committee. 
DAVE HEREORA (Labour) 
: 
 I take this opportunity to take a short call on the Companies (Minority Buy-out Rights) Amendment Bill. I stand in support of this bill. As a member of the Commerce Committee I take a particular interest in the buy-out provisions and the application of these provisions and I compare that to the debate we had on the Waka Umanga (Maori Corporations) Bill last evening on the issues surrounding iwi structures and trying to marry that up with other legal identities in order to give them the opportunity to be able to compete in today’s economy. So as a member of the committee I will be taking a particular interest in those comparisons and I look forward to a robust analysis of this draft and to supporting the committee’s recommendations to the House. 
Dr RICHARD WORTH (National) 
: 
 I join with those members of the House from both sides who have praised the wisdom of the chairman of the Commerce Committee to which committee this bill is to be referred. It is invidious to deal with the issue at length but I certainly recognise his artful insight his scintillating contribution to chairmanship of the committee and his dogged determination to do right by those who appear before the select committee. 
The Companies (Minority Buy-out Rights) Amendment Bill is interesting legislation but it is certainly not without complexity. That is why National supports its referral to the select committee. We think though that in the context of the submissions that will likely be received changes to the bill will be necessary and it is appropriate to enter that caution at this particular point. Some philosophical issues underpin minority buy-out rights legislation. But in essence the position is that if the goalposts are moved despite the shareholder’s opposition he or she is entitled to decide that he or she no longer wishes to be a player and is also entitled to be protected from losing financially by reason of his or her decision to leave the field. 
The intended functioning of buy-out provisions has been described in a number of ways by a number of academic writers and I simply cite an article that appeared in the 1997  
Columbia Business Law Review 
 by that well-known commentator Alexander Khutorsky. In an article under the subject heading “Coming in from the cold: reforming shareholders’ appraisal rights in freeze-out transactions” he stated: “In theory the existence of appraisal statutes has a two-pronged effect on merger transactions. First the appraisal remedy is supposed to guarantee that dissenting shareholders get a fair price for their equity stakes. This prong of the appraisal statute is embodied by a procedural scheme whose end result is a judicial valuation of the minority stake in the target with attendant money damages where appropriate. Perhaps more important than the actual exercise of the remedy is the ex ante effect which the mere existence of the remedy is supposed to produce. This second prong works by inhibiting the incentives of majority owners to act strategically by providing for the possibility of a threat of litigation and uncertain damage awards. The corporate planner’s assumed preference for certainty coupled with potential cash-flow constraints in meeting potentially sizable judicial awards should encourage the planner majority owner to offer fair consideration in freeze-out transactions.” 
In a New Zealand context the inadequacy of our current regime emerged a number of years ago when the Natural Gas Corporation and Infratil were locked in litigation in 2000. In very general terms what happened was that Infratil was the first minority shareholder to invoke the minority buy-out provisions to force the Natural Gas Company to buy its 6.7 percent stake in the Natural Gas Company after it opposed the $824 million takeover of energy retailer TransAlta. Infratil was unhappy with the $1.30 provisional price set by the Natural Gas Company but after the company sought a declaratory judgement to get control of the Infratil shares Infratil was forced to hand over title to those shares and the price was later set at $1.68 after protracted arbitration.  
The current statutory regime is easily explained. The broad scheme of the New Zealand Statute as far as it is relevant to matters that arise on this bill is that the shareholder must give notice of an intention to invoke the procedure within 10 working days of the passing of the resolution. The board within 20 days of receiving the shareholder’s notice must then elect one of a number of courses of action and notify the shareholder of its election. Those courses of action are: first to back away from the resolution that has triggered the shareholder’s notice; second to agree to buy the shareholder’s shares or procure a third party to do so; and third to seek an exemption under section 114 or 115 of the Act. In very general terms those sections empower the High Court to excuse compliance by the company on financial or just and equitable grounds.  
So if the company agrees to buy within 5 working days of notifying its election it must notify the shareholder of the price it is prepared to pay. If that price is unacceptable to the shareholder the company must be notified forthwith whereupon the issue of the price must be referred to arbitration and within 5 days the company must pay the price it has nominated. Each side is bound by the decision of the arbitrator. If the price is fixed by the arbitrator at more than the company’s proposal then the company must pay the shortfall. If the arbitrator fixes the price at less than the company originally offered then the amount paid in excess of that amount is recovered by the company from the shareholder and the arbitrator has the power to award interest. 
These deficiencies in the legislation were very clearly laid out in the Infratil case. In a comment that is often made in connection with buy-out rights the lack of detail was trenchantly criticised in the existing regime. The judge said in the course of that judgment—I am referring to paragraph 4 of the judgment—“It is common ground that the minority buy-out rights sections are defective. Although they provide for the company to nominate a fair and reasonable price for the shares to be acquired they do not state at what date that price is to be ascertained. Nor do the sections make any provision for the company in nominating the fair and reasonable price to give any information to the minority shareholder of the basis of the valuation. Nor do the sections provide any mechanism for the completion of transactions falling within them. As already noted section 112(4) is silent as to the basis upon which the shares at issue are to be dealt with at the time when the company is required to pay the provisional price. Nor has the arbitrator power to make orders in respect of the completion of the transaction following the arbitration. Having created minority buy-out rights the Act fails to provide for important features of the transactions that can arise under them. In the context of the Act as a whole and its history that is understandable. However here there is a relatively substantial sum of money involved. In other cases there could be a substantial number of shareholders involved.”  
Against the background of that decision the issue went off to the Law Commission and after what others have described as a substantial period of delay now comes to this House in terms of the Companies (Minority Buy-out Rights) Amendment Bill. The bill contains a helpful explanatory— 
Gerry Brownlee 
: I raise a point of order Madam Speaker— 
Hon Dr Michael Cullen 
: I raise a point of order Madam Speaker. 
The ASSISTANT SPEAKER (Ann Hartley) 
: Dr Michael Cullen. 
Gerry Brownlee 
: That is outrageous! I have never seen anything so biased in all my life. 
The ASSISTANT SPEAKER (Ann Hartley) 
: The member is to withdraw that remark please. 
Gerry Brownlee 
: What are the rules around here? I raised a point of order on the bell. I was clearly the first person to raise a point of order; the audiotape will demonstrate that perfectly clearly. The videotape of it will also show that very clearly. You looked my way then immediately turned to Dr Cullen. It would appear now that the Chair is totally complicit in the Government’s determination to jackboot all over the democracy and conventions of this county. I will not apologise for saying that.  
The ASSISTANT SPEAKER (Ann Hartley) 
: Mr Brownlee the call is mine as I have explained to you several times. 
Gerry Brownlee 
: I raise a point of order Madam Speaker. Let us be clear on what the sequence of events has been here. I sought a point of order and you chose not to accept it but instead turned deliberately to Dr Cullen and took his point of order. I have now expressed my disappointment about the biased nature in which the Chair has operated in this particular case and I have further alleged that the Chair is complicit with the Government in trying to expedite a piece of business for the Government that will see the democratic rights of New Zealanders trampled all over. Now apparently you are simply saying that you have told me the rules before that there are really no consequences to what I said and that we are going to hear from Dr Cullen because we have some time limits here that we need to address. Madam Assistant Speaker you are in a very difficult position because you either have to take some pernicious action against me or effectively revisit the way in which the House operates when circumstances like this arise. This will be precedent setting. 
Hon Dr Michael Cullen 
: The member seems to think there is some sort of strange complicity to achieve some device. Far from raising a point of order to expedite business I was raising the point of order to slightly delay some business of the House. I was going to seek leave—I will do that in a moment and explain why—for the next item of business which is the Mauao Historic Reserve Vesting Bill’s first reading to begin at 2 o’clock. I understand that some people are still on their way and that more people can probably be here at 2 o’clock than are here at the moment. I know that Opposition members are very sensitive about the  
New Zealand Herald  
editorial this morning and feel they have to beat their chests but the Government intends that the House carry on in urgency to complete first readings and that we will come back next week because most of us are going to be here anyway.  
I now seek leave for the House to rise for luncheon then to begin again at 2 o’clock for the first reading of the Mauao Historic Reserve Vesting Bill. 
The ASSISTANT SPEAKER (Ann Hartley) 
: Before we do that because the point of order was raised before the question had been put on the previous bill and the speaker had finished I will put that question first.  
Gerry Brownlee 
: I raise a point of order Madam Speaker. You cannot put the question because Mr Worth has not finished his allotted time. I raised a point of order—which was ignored—on the bell meaning that he still has 2 minutes to speak. 
The ASSISTANT SPEAKER (Ann Hartley) 
: I thought he had finished. OK; we will do that. 
Hon Dr Michael Cullen 
: If Mr Worth wishes to carry on speaking for 2 minutes then I am very happy for him to do so. I am fascinated by his erudite explanation of this bill which I trust will be noted fully in the next  
New Zealand Herald  
editorial. 
The ASSISTANT SPEAKER (Ann Hartley) 
: I would just like to say as I relayed to Mr Brownlee before that it is my decision about the call. As well if the member wants to criticise the Chair then he knows the proper procedure for doing so. 
Dr RICHARD WORTH 
: I am grateful for the opportunity of continuing this speech on the Companies (Minority Buy-out Rights) Amendment Bill. I was just about to turn to the substance of the bill in the short time I had remaining having made comments to set a broad contextual framework for what that position might be. 
One of the issues that will be looked at when the bill comes to the select committee will be the appointment of advisers. This is the type of legislation where I believe that independent advisers should be engaged. The reason for that without in any way criticising those officials who will be drafted into the task of providing support and assistance on the bill is that there needs to be a hard-headed commercial look at this legislation. The issues are easily identified but their solutions perhaps are not so easily identified.  
Certainly the following key features need to be considered. First of all there needs to be an obligation on the company of a minority buy-out to send to each shareholder of the company a statement setting out the rights of shareholders when a special resolution triggers the minority buy-out provisions in the Act.  
Sitting suspended from 1 p.m. to 2 p.m. 
Bill read a first time.  
Bill referred to the Commerce Committee.