Connell Brian: Business Law Reform Bill — Instruction to Committee In Committee 
Connell Brian: Business Law Reform Bill — Instruction to Committee In Committee 
[Volume:616;Page:12411] 
BRIAN CONNELL (National—Rakaia) 
: 
 I have been waiting for some time for an opportunity to speak to the Business Law Reform Bill and the whip insisted I take it. The whip was begging for the opportunity himself and I am sure that as the night progresses he might take a call and demonstrate that he like myself has a very great knowledge of this legislation. I am a little surprised at the outset that the Government wants to go through this bill part by part because this is legislation that I think most members of the Commerce Committee of which I was a member agreed to. I was prepared to ease its passage through the House as quickly as possible. But having now insisted on taking the bill part by part we will do just that and will pick up some of the issues that are of importance. 
The first component in Part 1 is the Building Societies Act of 1965. The area that is of most interest to me is the statement in section 93(1A) inserted by clause 5 that “Summary financial statements prepared under section 91A must—(a) give a true and fair view of the matters to which they relate;”. When we think it through that is entirely sensible. I can think of a situation I was in in one of the corporates I worked for where there was an issue of a statement that proved not to be correct; it misled investors. There was an action taken against the corporation I was working for. Of course I want to make it clear that I had no responsibility for that component. In fact the reason I was brought into the business was to try to clear up some of these reporting matters. 
Pansy Wong 
: What were you trying to do? 
BRIAN CONNELL 
: I was clearing up the mess that had been created as a consequence of a financial statement that had misled investors. 
The other relevant point in section 93(1A) is that summary financial statements must: “(b) comply with generally accepted accounting practice as defined in section 3 of the Financial Reporting Act 1993; and (c) be in the form and contain the information that may be prescribed.” Again I have to say that this is sensible legislation. When we discussed this aspect in the select committee the Law Society and the accounting bodies that were represented were of an opinion that this was necessary and of course we agreed with their direction. 
Clause 6 “New section 95 substituted” deals with the signing of financial statements and summary of financial statements. In particular it states: “(1) The financial statements required by sections 91 and 92 and any summary financial statements prepared under section 91A must be signed on behalf of the board of directors by 2 directors of the society.” The reason for that is simply to signal that what was being signed was the intention of the board and that no one member of the board could sign any declaration or any statement that was not covered off by two directors. This is really a security issue. 
 Subsection (2) states: “The financial statements referred to in subsection (1) must be approved by the board of directors before they are signed on their behalf.” Again this is just a good management and good governance issue and one would expect this sort of activity to take place. Subsection (3) states: “If the financial statements referred to in subsection (1) have not been signed and a copy of them is issued circulated or published the society and every officer of the society who is in default is guilty of an offence.” 
Of course this is an issue that captured the select committee’s interest because this is very significant. It has implications across the industry generally. The Law Society in particular took an interest in this component and was at pains to point out that this had to be drafted in this way to send clear signals to directors and officers of building societies that if they engaged in a practice whether deliberately or otherwise there would be consequences of their actions. So it is a component that the select committee supported. Again I personally supported it and I was able to refer back to an incident when I had been involved in a corporate. 
This is the type of thing that really does focus one’s attention. It galvanises people’s attention to make sure that the activities that people are engaged in and the undertakings that they are employed to undertake are done in a lawful way and that they are protecting investors’ investments.