Tremain Chris: Securities Disclosure and Financial Advisers Amendment Bill — In Committee 
Tremain Chris: Securities Disclosure and Financial Advisers Amendment Bill — In Committee 
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CHRIS TREMAIN (National—Napier) 
: 
 It is always a pleasure to rise and speak after a member who has the level of experience in the business community that Mr Aaron Gilmore has. 
Charles Chauvel 
: Self-confidence! 
CHRIS TREMAIN 
: No it is. 
Hon Darren Hughes 
: Stop laughing! 
CHRIS TREMAIN 
: It is an absolute pleasure to have members on this side of the Chamber who have been out there raised capital in the financial markets and dealt with the issues that come along with that. 
Tonight I want to focus on the Securities Disclosure and Financial Advisers Amendment Bill and at this point in the debate on Part 1 I want to discuss clause 4 “Interpretation” and also clause 5 “Construction of references to offering securities to the public”. Before I do that I say that this particular bill responds to the current international financial crisis by removing unnecessary impediments to the raising of capital while ensuring the timely disclosure of relevant information to prospective investors. Members of the public will be wondering how this particular bill helps businesses to raise capital and what the issue is with regard to that. The fact of the matter is that we have been through a financial crisis of huge magnitude over the last year to 18 months. The issue here is the credit crunch which has made it very difficult for businesses to raise debt on financial markets. 
One example from the Hawke’s Bay of this issue is a business with a total balance sheet of about $10 million that had about $8 million in borrowings and about $2 million in equity. All of a sudden with the credit crunch the banks came back to this particular company and said they were no longer prepared to lend to the level of debt at 80 percent and equity at 20 percent and they wanted to see that come back to debt at 60 percent and equity at 40 percent. That was all very well but for a company like that to come up with $2 million in equity overnight is quite simply impossible. It is just impossible for shareholders in a small company to raise $2 million out of their back pockets. It puts huge pressure on these companies to raise extra equity and that starts to push them very close to a position where the banks come in and say they are actually going to wind the businesses up. That has a huge impact on jobs in this country and has a downstream impact on suppliers who provide goods and services to those companies. 
That is why a bill like this is so important. It puts a focus back on what is a rare commodity at the moment: capital. Over the previous year or so we have been financing companies by debt and now there is a focus on bringing more capital into them so a bill such as this is particularly important. Under the runaway credit economy businesses were able to get to a position where they were financed by up to 90 percent debt and 10 percent equity. Although that might have provided a much better return on invested equity for shareholders the fact is that it became pretty risky. When the credit markets tightened and banks came in and said they were sorry but 10 percent equity was no longer any good and they wanted companies to be back at a level of 60 percent debt and 40 percent equity that put huge pressure on companies. This Government through Minister Simon Power has stood up and asked how we can make it easier even in difficult conditions—because capital is really rare at the moment—to get more capital into those businesses. That is what this bill does. 
Part 1 deals with the Securities Act 1978. It is a substantive part of this bill and it deals with a number of sections of that Act. In the interpretation clause there are a couple of definitions that simplify disclosure and prospectuses. We are trying to take the compliance costs out of complex prospectuses once again making it easier for capital to get into not only small businesses but also medium-sized and larger businesses. Having a simplified disclosure prospectus will certainly do that. Part 1 does a range of things. The amendments will make things easier for both stock market - listed companies and unlisted businesses. Overall I think Part 1 will improve that Act.