Faafoi Kris: Companies and Limited Partnerships Amendment Bill — In CommitteeText is incorporated into the Bound VolumeFaafoi Kris: Companies and Limited Partnerships Amendment Bill — In Committee[Sitting date: 18 June 2014. Volume:699;Page:18661. Text is incorporated into the Bound Volume.]KRIS FAAFOI (Labour—Mana):I will speak to Part 1 of the Companies and Limited Partnerships Amendment Bill. Can I first of all thank the Minister in the chair the Minister of Commerce for taking a call to respond to some of the issues that were raised by my colleagues—Hon Member: He responded quite well.KRIS FAAFOI: Yes he did respond quite well actually to be fair to my colleagues David Parker and Dr David Clark by first of all acknowledging that the rather large Supplementary Order Paper 465 that layers over Part 1 is not in fact the big document that was claimed earlier but is worked into the new revision-tracked version of the bill. We do acknowledge that Minister.Also there was the point that David Parker the deputy leader of the Labour Party raised around trying to get the balance right between companies and directors who look to take action in what you would call desperate times for some firms where they have to consider whether their actions may be considered either reckless or actions that are needed to take a company or a partnership that is in a precarious position back into a safe position. He also talked about where the line may be drawn in terms of the willingness of those directors to take some action that they may deem necessary but which they may think may not be the wisest move if that action may be seen as a criminal action under the law as it was first drafted. Thank you very much Minister for taking the opportunity to answer some of those questions.But as I mentioned first—Hon Simon Bridges: Don’t worry Kris. Remember what I said last night. You’ll be all right. You’ll be here after the election.KRIS FAAFOI: Thank you for that. But as I mentioned first there is a rather significant Supplementary Order Paper that layers over Part 1 of this bill. Although I was not on the Commerce Committee I think that because of the way that the bill was presented back to the House before Supplementary Order Paper 465 was added to this bill in its current form the select committee and the officials who were dealing with this bill did find themselves in a bit of a conundrum. They thought there were still issues about getting the balance right in terms of being specific about the criminality that may be acted and making sure that there was some in layman’s terms wriggle room there for directors to make sure that they could take action that they saw fit if they were in dire straits with that firm. I think that in the commentary on the bill the select committee did point that out.If I can take the opportunity just to quote from the commentary on the bill where the Commerce Committee says: “However we are aware that the bill could be perceived by directors and their advisers to criminalise legitimate business risk-taking behaviour. We have therefore sought an appropriate balance between encouraging positive entrepreneurial behaviour and imposing clear and effective sanctions on behaviour that crosses a criminal threshold.” But the commentary went on to say that the committee does not recommend any changes other than minor drafting and would support “further consideration of the drafting of these new offences to ensure that the provisions are expressed in a way that provides clear guidance to directors and does not have a chilling effect on legitimate business ...”.So I think what you have got here is a strange position where the Commerce Committee identified that there was a problem which was that it thought the legislation had to be much more specific in terms of what the criminal actions might have been but it could not offer up a remedy for that conundrum that it found itself in which I guess meant that Supplementary Order Paper 465 had to come into play. We have looked at Supplementary Order Paper 465. I understand that we believe that it does strike the right balance to make sure we are very specific about the criminal behaviour that can be outlined as the Minister said around intent where there could be actions taken by directors and where there could be criminal behaviour and the other side of the equation where drastic action needs to be taken by directors to ensure that a company can stay afloat.This bill does have the support of the Labour Party. We know that New Zealand has a very good reputation in terms of the ability of people to come here and do business but we also know that lately there have been instances that have gained not just local media attention but also global media attention where people have taken it upon themselves to exploit the good reputation that New Zealand has by using shell companies to take advantage of the legislation that we have and taking advantage of our good name. So we do believe that this piece of legislation is necessary to make sure that that reputation stays intact.But we do know that this legislation has been on the Order Paper for some time. I believe it was introduced in about 2012—halfway through that year—so 2 years later we have got a piece of legislation that has had the support of this House to quite a strong degree being put forward. It does beef up the rules around the Companies Act and gives more powers to the registrar which has had the full support of this side of the House for some time. So we question why it has taken so long to get to the stage where it is now where it progresses to the final stages of becoming legislation.It may be the fact that we are very unlikely to see any controversial legislation come through this House now because we have seen one member of the House former ACT leader John Banks have to resign. What we may get is a lot of what you may call rather mundane legislation that the Government may have to start putting through this House because it simply does not have the numbers to get anything controversial through any more. So what you might be seeing is a Government petering out over the next 2½ months here in the House and simply not being able to implement its far-right agenda because Mr Banks is no longer here. That is upsetting I guess for the Government members but good for us on this side of the House because we have seen the kind of legislation that has been passed with the support of Mr Banks which has concerned the sale of quite a number of our State-owned assets and also a controversial move to introduce what the Government members over on that side call partnership schools but that are quite well-known as charter schools on this side of the Chamber.One other part of the legislation that we do support is the increase of penalties for any directors who undertake criminal behaviour which is specifically laid out in Part 1. Those increases see a maximum imprisonment sentence of 5 years I believe and also a maximum fine of $200000 for each offence that occurs. I think that does send a pretty strong message to anyone who is either here in New Zealand or overseas that if they are caught contravening this legislation a pretty harsh penalty will be imposed upon them.Just going back to be specific about Part 1 I think it is clause 4 that introduces a rather large new section 138A into the Companies Act which gives quite new powers to the Registrar of Companies to investigate and deal with non-compliance with the Companies Act. This includes I understand the power to flag companies on the register that are under investigation. That is a new power and it is a good power given to the registrar because of some of the concerns that I have mentioned before around overseas interests that are coming here to use New Zealand companies as shell companies to basically act illegally under that shell company.It will also allow the removal of companies from the register if they provide inaccurate information or persistently fail to comply with the Act. I guess that we hope that the Registrar of Companies is given the resources to be able to monitor that quite closely. I think that if you have got well-resourced people—again probably from overseas—who are taking advantage of that loophole you want to make sure that you are able to monitor that quite closely. Also the registrar will be able to ban directors of those companies from taking part in the management of any company for up to 5 years. I think it goes without saying that anyone who gets themselves involved with that kind of behaviour is not the kind of person we want to be a company director here in New Zealand.We do support this bill. It does contain some good measures to ensure that when doing business in New Zealand the reputation of New Zealand is upheld. We do have some concerns as I have said around the timing of the bill—the fact that it has taken so long and also the fact that it is here now so late in the piece and why it is here. It is quite clearly because John Banks is no longer here.