Connell Brian: Business Law Reform Bill — Second Reading 
Connell Brian: Business Law Reform Bill — Second Reading 
[Volume:616;Page:11900] 
BRIAN CONNELL (National—Rakaia) 
: 
 I find myself agreeing very much with the last speaker. This might be a red-letter day to a very large degree. The bill contains changes to 13 business law statutes so in every sense it is an omnibus bill. The aim of the bill is to make the law clearer more efficient and more effective. It will have a significant and positive impact on business law and accordingly the National Party supports it. 
Interestingly I note that a number of the amendments have been suggested by some of the National Party’s strongest supporters; people like the law practitioners enforcement agencies and the business community generally. [ 
Interruption 
] National to the core as one of my colleagues called out. We have 49 percent of the polls soon to be 60 percent—we are on a roll. 
The bill has three main aims: one to remove unnecessary compliance costs; two to clarify ambiguities and uncertainties; and three to update law and remove conflicts within and between legislation. These are all very commendable but I have to wonder about this Government’s ability to deal with the issue of compliance costs reduction. Under this Government—and it is now a fact—compliance costs have risen to a record high. The average-sized business in this country now experiences compliance costs of $52000. That is a huge figure. As a rule of thumb it might interest members to know that for every dollar businesses spend they have to make $7 to pay for it. That is the ratio most businesses work on when they are restructuring. 
Currently New Zealand business is drowning in red tape and compliance costs and I fear it will destroy business confidence. In the good times businesses can carry increased compliance costs. They may not like it— 
Pansy Wong 
: They shouldn’t have to. 
BRIAN CONNELL 
: It is not a good time. The member is quite right—they should not have to. But most businesses can sort of roll their shoulders and take another blow. What happens when the bad times bite—times like now—the cost of compliance starts to squeeze margins. The reason for that is that these compliance costs are institutionalised into the business. The owners shareholders and management of those businesses have no ability to control those costs. Margins get squeezed as the top line turns down and what happens is that a number of businesses then go out of business or at least cease to be as competitive as they were. 
Reducing compliance costs is not about playing around with the margins as this legislation reports. It is more than just changing this form that form or doing away with a prospectus. In my experience if one wants to stop doing things one actually has to stop doing things. That might sound overly simplistic but that is the reality. That is what National will do for businesses in this country. We will just exempt some of them from some of these hideous costs. 
I believe that Labour members have trouble intellectualising that. How can they believe on the one hand that they will reduce compliance costs when on the other hand they introduce law like the Employment Relations Law Reform Bill which is more concerned about looking after their union buddies than actually dealing with the people whose businesses they are attacking. 
I now turn my attention to the Securities Act. Clause 90 amends section 5 of this Act by providing for a number of exemptions from the Act’s disclosure provisions. This deals with wealthy or experienced investors. In particular I want to deal with the inherent contradiction in my view of what this Government defines as wealthy. One is deemed wealthy under this legislation if one earns $200000 or one has net assets of $2 million. If one meets these criteria one is deemed able to make one’s own investment decisions. 
Hon David Carter 
: Cabinet Ministers are. 
BRIAN CONNELL 
: Cabinet Ministers are. 
Pansy Wong 
: The threshold is too low. 
BRIAN CONNELL 
: A colleague says the threshold is too low. The question is what happens if one earns $199000 a year and one’s net assets are only $1.9 million? Is that person in a position to make informed investment decisions? The Labour Government says that person is not wealthy not capable. It is just an arbitrary line in the sand. The Labour Government says that some investors in this country are not able to make those decisions. If we allow that that is fair enough I know of some people who meet these criteria despite really not having the financial investment acumen to be able to make those decisions. The point I want to make is this. [ 
Interruption 
] There is a guest member in the House. She used to do something really important but I cannot remember what it was now. 
Hon Chris Carter 
: She used to be wealthy. 
BRIAN CONNELL 
: Is that what it was? She used to have a real job. She used to turn up and make a contribution. Now she sits at the back and just calls out. 
The contradiction is this: if for the purposes of this Act people are considered wealthy because they earn $200000 a year or have net assets of $2 million why is it that they are defined by this Government as being wealthy under this law but for the purposes of taxation are considered to be wealthy if they earn $38000 a year? Why is one considered wealthy if one earns $38000 a year if this is what this Government really believes? Mr Cullen and the Government are applying a double standard. 
 The other issue that I want to canvass relates to some of the other disclosure requirements. The Securities Commission has generated exemptions from the disclosure requirements of the Securities Act to Australian-registered management investment schemes and Great Britain collective investment schemes. It was discovered that a number of overseas issuers had breached the conditions of the exemption notices under which they were operating. Many of these breaches simply related to the late filing of documents with the Registrar of Companies. Most were simply clerical errors and some did not even realise that they had to register. 
In most situations investors understood that they had read or that they had been given the opportunity to read the disclosure documents. It made no difference at all in terms of the performance of the fund or whether they would have invested in that fund. Yet some investors have tried to use this loophole to gain compensation for their investments because some of the funds have performed poorly. Quite bizarrely because of the way this loophole was being exploited some of the issuers were caught in the position of having to repay in cases where the funds had over performed and that was simply unfair. The reality is that failure to file documents has little to do with the performance of the funds and issuers have been caught in an impossible situation. 
I believe that the select committee has done a good job and has addressed this issue by introducing a procedure that grants relief to issuers. It is similar to the Illegal Contracts Act but designed specifically for securities law. This will enable issuers to seek relief by going to the courts and will apply retrospectively. Generally I do not support retrospective legislation but in this case I think it is sensible. 
Hon David Carter 
: It’s logical. 
BRIAN CONNELL 
: I support it because there is logic to it as my colleague Mr Carter has said. It is sensible law and I come back to the point where I started. We support this legislation. I think it will improve the wider environment for—[ 
Interruption 
] It supports more broadly the commercial environment that some of these companies have to operate in.