Norman Russel: Companies and Limited Partnerships Amendment Bill — First Reading 
Text is incorporated into the Bound Volume 
Norman Russel: Companies and Limited Partnerships Amendment Bill — First Reading 
[Sitting date: 24 July 2012. Volume:682;Page:3860. Text is incorporated into the Bound Volume.] 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I rise to speak on behalf of the Green Party on the Companies and Limited Partnerships Amendment Bill. The Green Party will be supporting this bill. This bill I think demonstrates in a way that perhaps few others do the poor economic management of the Government. This is a problem in the New Zealand economy—the problem with regard to the lax law around company registrations. This has been a problem in New Zealand for a number of years and it has resulted in many New Zealand - registered companies being engaged in very large-scale tax-laundering and fraud internationally. The New Zealand Government has been aware of this problem for some time. In fact under written questions that I put in 2011 the then Minister of Commerce Simon Power said that Cabinet had agreed to the proposals to fix this up on 28 July 2010. So nearly 2 years ago to the day when Cabinet finally managed to get around to agreeing to do something to fix this major problem which is damaging New Zealand’s international reputation the bill finally appears in the House. 
 However in the meantime—remember the Cabinet decision was on 28 July 2010—in 2011 the Green Party got a bit bored waiting for the Government to do anything about it and started asking a lot of questions about it and raising the issue in the media. We were concerned about the damage that was happening to New Zealand’s international reputation as a result of our very poor company registration process and we made the offer to the Government at the time that we would support legislation in order to make urgent reforms to company law reforms that were urgently needed back then in 2011. But the Government still did absolutely nothing. It sat on its hands. It was drafting a bill. There was nothing in front of this Parliament. 
And then on 8 February this year finally the EU had enough of New Zealand. The European Union decided that it was time to remove New Zealand from the European Union white list—along with Russia because it was so corrupt—because our laws around company registration are so terrible and so weak and so many New Zealand companies are being used in international fraud. So on 8 February 2012 New Zealand was removed from the EU white list and now in July 2012 we finally have the bill before Parliament on which the decision was made nearly 2 years ago. If the Government had followed the Green Party advice in September last year and actually introduced the legislation that we told it to introduce to tighten up the rules around the registration of companies in New Zealand New Zealand would not have been removed from the EU white list. If the Government had not had all sorts of other priorities—mining or whatever—and if it had actually focused on making sure that legitimate New Zealand businesses were operating under a proper regulatory framework around the registration of companies then New Zealand businesses would not now be facing the increased cost that this Government has imposed on them because of New Zealand’s removal from the EU white list. No doubt many other regulatory agencies all around the world are now watching New Zealand companies with distrust because so many New Zealand companies have been involved in fraud and money-laundering—companies that are registered in New Zealand but in fact have overseas controllers. 
At that time we told the Government that it needed to change the rules and the Government did nothing. The Government sat on its hands. As a result it has now imposed a whole new layer of cost and regulatory burden on New Zealand companies that are trying to operate internationally because it refused to introduce the rules that were needed back then to tighten up the registration around New Zealand companies. The problem was—and the problem still is until this law gets changed—that basically a person can register a company in New Zealand but there is no requirement for that person to have a New Zealand - resident administrative agent. What this bill does is begin the process of making sure that the registration of companies in New Zealand meets the bare minimum of good practice internationally. And the fact that the Government has delayed this bill for so long—2 years after Cabinet made the decision—has imposed more costs on New Zealand business as a result of its inaction. 
The other part of the bill—aside from requiring a New Zealand - resident administrative agent for companies and limited partnerships—will enhance the Registrar of Companies’ power to regulate companies and limited partnerships and it will criminalise some breaches of directors’ duties. What this bill does is start to improve the process of registration of New Zealand companies so that it is harder to register hundreds and hundreds of companies in New Zealand and so that someone cannot just pick any particular residential address they like but have the company controlled from overseas and then used in international criminal activities which many New Zealand - based companies have been used for. 
However even though the Government has sat on its hands for years and even though it knew of the problem and was told of the problem—the Green Party told the Government what was going on—it did nothing to fix the problem and so has imposed more costs on New Zealand business. So much for all the Government’s rhetoric about decreasing cost. It does not regulate properly; it adds cost to business. This bill even now it has come in is still quite weak. It falls short of best practice. This bill does not require registered companies to obtain Inland Revenue Department numbers. This bill does not address the problems around nominee directors. 
Without addressing these problems it is still an improvement—no question about it—and for that reason we will be supporting this bill. However it still does not go far enough in terms of international best practice. If we want New Zealand companies to be viewed as credible organisations internationally we need a regulatory framework in New Zealand that makes sure that we have best practice in New Zealand and that companies in New Zealand cannot be easily used to engage in international fraud and criminal activity. That is what has been happening in New Zealand. 
We have had over 2000 companies taken off the companies register because they are probably engaged in illegal activities. No doubt it is a greatly larger number than that. Certainly in his responses to the questions that we put to Simon Power in 2011 he said that it was hard to actually know how many New Zealand companies were engaged in this kind of illegal activity internationally. 
When we put these kinds of proposals to the National Party the National Party says: “Oh that’s the nanny State.” They go: “Oh you can’t have proper regulation of companies; that’s the nanny State.” They go: “Oh you wouldn’t want to do that; it restricts business.” Actually it is the exact opposite. By having a proper regulatory framework around the registration of companies in New Zealand we facilitate New Zealand businesses doing their work internationally. So the fact that National has sat on its hands because of its anti-regulatory knee-jerk reaction to any proper regulatory framework has meant that New Zealand’s international reputation has already been damaged because so many New Zealand - registered companies have been involved in very large-scale fraud corruption and money-laundering. It means that New Zealand has been taken off the EU white list—thank you very much Mr Foss and Mr Power for slowing down this process so much that we have been taken off the EU white list causing more cost for New Zealand companies. It means that it is harder for businesses in New Zealand to do international business. No longer do others look at New Zealand business and go: “Well New Zealand businesses are the best in the world—high quality no corruption.” Instead they go: “Oh New Zealand businesses have been involved in many very prominent international fraud and criminal money-laundering cases all over the world.” And that is why we have been taken off the EU white list. 
So yes we will be supporting this bill. It is way too late—it is 2 years too late possibly more. The Government had ample opportunity to progress this bill before. We offered the political support to get it through the House. We put pressure on the Government as did others in the media over a very long period to try to get this law in place. But because the Government took so long our reputation has been damaged and we have been taken off the EU white list. We urgently need to fix the law around the registration of companies and I hope that when this bill goes through the Commerce Committee we will improve it further. And I hope the Government does not drag the chain at the select committee as much as it dragged the chain between now and when Cabinet made the decision—nearly 2 years ago on 28 July 2010—to fix this thing. Yet tonight is the first time we have seen this bill in front of the House. So when the Government says: “Oh we’re all pro-business” it is not really—it is not really. It just has a knee-jerk anti-regulatory response and the effect of that sometimes is that it makes it very difficult for businesses to operate internationally and adds more costs to them. We need a good regulatory framework around the way business operates so that New Zealand businesses can go into the world and people know that our domestic regulatory framework stops the kind of corruption money-laundering and criminal activity that we have seen out of New Zealand - registered companies that are being operated by overseas criminal syndicates. We will be supporting this bill to go to the select committee; we hope it improves. Thank you.