Dalziel Lianne: Business Law Reform Bill — Second Reading 
Dalziel Lianne: Business Law Reform Bill — Second Reading 
[Volume:634;Page:6146] 
Hon LIANNE DALZIEL (Minister of Commerce) 
: 
 I move  
That the Business Law Reform Bill be now read a second time 
. This is the third Business Law Reform Bill to come before the House. It is part of a programme of regular incremental reforms to improve our business laws. Most of the changes in the bill are not dramatic but improve the law in small ways. When those changes are taken together the bill will make a significant contribution to keeping our business laws efficient effective and up to date and will reduce unnecessary costs for business. 
The Business Law Reform Bill contains 60 clauses amending five business law statutes. It includes amendments to the Financial Reporting Act 1993 the Companies Act 1993 the Friendly Societies and Credit Unions Act 1982 the Insurance Companies’ Deposits Act 1953 and two technical changes to the Dumping and Countervailing Duties Act 1988. 
As the explanatory note of the bill states most of the amendments are based upon suggestions from business law practitioners enforcements agencies and the business community itself. It was these practitioners and members of the business community as well as industry associations who took the time to make submissions on the bill to the Commerce Committee. I acknowledge their experience and thank them for their advice in getting the bill to this stage. 
Some of the changes the bill makes are purely technical and I do not want to discuss those. Instead I want to talk briefly about areas of the bill where significant changes to our business laws are being made. The first relates to financial reporting. The proposed changes to the Financial Reporting Act 1993 are aimed at generally improving the workability of the financial reporting system and reducing business compliance costs. In particular the bill will remove excessive compliance requirements on many small companies and overseas companies. Exempt company provisions are expanded to now include a two-out-of-three test: total assets of no more than $1 million and/or turnover of under $2 million and/or five or fewer fulltime-equivalent employees. I note from the select committee’s report that there has been some debate about clause 28 which allows for these thresholds to be amended by the Governor-General by Order in Council. I appreciate the select committee’s report. Basically as the specialist committee it has determined that the risk of proceeding with this provision would be minimal so I thank it for considering that matter and reporting back in that regard. 
The bill also includes a new exemption-making power that will empower the Accounting Standards Review Board to make exemptions from approved financial reporting standards. This is intended to be a safety-valve provision. The purpose of it is to recognise that on rare occasions international financial reporting standards may not always be fully applicable to New Zealand circumstances. This exemption power has been designed to be used very rarely if ever. Divergence between standards in different sectors can lead to lower levels of accountability and transparency and applicants will need to make very strong cases in order to obtain an exemption. The select committee in its report has drawn attention to the submissions that opposed the granting of the exemption-making power and I know that the Accounting Standards Review Board was one of those. I appreciate the detail with which the select committee has both considered and responded to the concerns that were raised by the Accounting Standards Review Board and others. I accept its reasoning in rejecting those submissions and pursuing what is indeed intended to be a transparent process. 
One of the key aims of the bill is to reduce compliance costs resulting from administrative procedures. In this regard the bill also proposes to exempt some overseas companies from some of the reporting requirements imposed on those companies registered under the Companies Act. Changes are also proposed that are aimed at reducing the cost of distributing reports to shareholders. Companies will inform shareholders that the annual report can be obtained in hard copy or electronically. 
I think though that the most important change in this legislation—one that I believe will help shareholders have a clear understanding of what it is that is being reported to them—is the ability for companies to offer shareholders concise annual reports more suited to the needs of ordinary investors and not requiring legal or accounting advice to interpret what in many instances are much more complex statements. 
Currently inactive companies are required to file financial statements with the Registrar of Companies that contain little or no new information. The bill removes these filing requirements for inactive companies. It will also improve enforcement by introducing an infringement notice system for company directors who fail to file their company’s financial statements with the Registrar of Companies by the due date. This will have a significant deterrent effect in my view and ensure that financial statements are indeed filed on time. 
Proposed changes to the Companies Act 1993 further improve enforcement by extending the management and director banning provisions to persons who have been banned in certain overseas jurisdictions. Together with the exemptions of some overseas companies from some of the filing requirements imposed on overseas companies registered under the Companies Act these changes will improve the trans-Tasman business environment and promote single economic market agenda objectives between New Zealand and Australia. 
 The bill also proposes to prohibit entities incorporated or established in New Zealand from using the word “insurance” or other similar terms in their names or from holding out overseas that they are New Zealand insurers when they are not in fact carrying on insurance business in New Zealand. There are now automatic exemptions to this proposed ban for insurance workers and industry associations; both groups submitted on the bill and actually fall outside the objective we had intended to meet with this legislation. This change to the Insurance Companies’ Deposits Act is to prevent entities from representing that they are supervised under New Zealand’s insurance regulatory regime when they are not and is necessary to prevent potential damage to New Zealand’s reputation internationally through companies behaving in that way. 
The changes to the Friendly Societies and Credit Unions Act 1982 provide some of changes that have been long awaited. However substantive reform still awaits the review of financial products and providers that is currently in the market for consultation. 
In conclusion although the bill deals with a range of amendments the amendments are united by the aim of keeping our business laws up to date clear efficient and effective. The changes will help business by removing unnecessary compliance costs. I thank the members of the Commerce Committee for their work in considering this bill—I actually believe they were quite outstanding—and again acknowledge the contributions of those who provided submissions on the bill. I commend the bill to the House.