Clark DavidCOMPANIES OFFICE REGISTERS FUNDING VALIDATION BILLFirst ReadingHon Dr DAVID CLARK (Minister of Commerce and Consumer Affairs): I present a legislative statement on the Companies Office Registers Funding Validation Bill.DEPUTY SPEAKER: That legislative statement is published under the authority of the House and can be found on the Parliament website.Hon Dr DAVID CLARK: I move That the Companies Office Registers Funding Validation Bill be now read a first time. This bill validates the past collection and use of fees by the New Zealand Companies Office. In a few moments I'll say more about the bill and how it supports the Government's plan to improve the way our Companies Office is funded but first I would like to explain to the House the background to the Government's intention to introduce this bill and for it to pass through all stages under urgency. The context is important to understand why the Government is taking decisive steps and I want to be transparent and open in the House.Our Companies Office has been a critical part of New Zealand's society and economy for many years. It's well-known that the Companies Office maintains a register of companies operating in New Zealand that contains important information about businesses and makes this information accessible to the public. The Companies Register therefore builds trust and confidence in the economy helping to make New Zealand a transparent fair and easy place to do business. It's probably less well-known that the Companies Office also has responsibility for maintaining 15 other registers that support economic and community activity in New Zealand. As well as companies it registers other entities including incorporated societies retirement villages and limited partnerships. The Companies Office also maintains lists of licensed auditors and insolvency practitioners and it maintains registers for disclosure of financial products and security interests over personal property. All of these registers have information that is searchable by the public. The role of the Companies Office has evolved over time. It's taken on more and varied responsibilities across our economy and community. At the same time it has had to evolve to keep up with new and emerging information technology. During the course of a routine fees review last year by the Companies Office it came to light that there was a mismatch between the primary legislation governing the Companies Office and the registers and their fees and the Companies Office actual funding practices. The Government recognises that this is a problem that needs to be resolved. The problem has arisen in circumstances where the primary legislation was based on there being 16 separate registers. However that doesn't reflect the reality that the modern Companies Office administers a registry system with 16 different interconnected registers. They're all housed within what we call the Companies Office and to a varying degree they share infrastructure technology solutions staff know-how and other resources. Indeed the same individual is currently the registrar for all of the registers except for the New Zealand Business Number Register. That set-up has in turn made it difficult for the Companies Office to keep the costs of running the registers entirely separate. Another issue is that some of the smaller registers maintained by the Companies Office have not been recovering enough in fees for those registers to be fully self-funded. So to fill these gaps the Companies Office has used surplus funds it's received in fees from the users of other registers to make up shortfalls not realising that that cross-subsidisation was not consistent with the legislation itself. For something of a time line just for the benefit of the House it's clear that the funds have been moved between registers since at least the formation of the Ministry of Business Innovation and Employment in 2012—obviously decisions were taken then about how things were done—but it seems likely that it's been occurring for some time far longer. In 1995 the Companies Office started using a memorandum account and that memorandum account shows surplus and deficits. There's only one memorandum account for the whole Companies Office rather than for each register so any surpluses collected by the Companies Office or any of its registers has been in this memorandum account since 1995. That suggests that the separation of funds register by register intended by Parliament has not been happening since then. Originally any surpluses showing in the memorandum account were returned to the Crown at the end of each financial year but in 2011 that practice changed when surpluses began being managed internally. The issue came to light in 2021 when the Companies Office undertook a review of fees of all of its registers at the same time. In doing so it became apparent that the Companies Office practices did not match with the legislation. So last year the Government allocated $3.7 million to alleviate the cross-subsidisation issue in the immediate term and with this legislation we're taking the first step to further resolve these issues—that's with this validation bill. I say that's only the first step because the Government also plans to introduce another bill to Parliament to allow for the introduction of levies that can be used across the 16 registers that the Companies Office operates: the Companies (Levies) Amendment Bill. That will lead to more appropriate and less siloed funding for the 16 registers and any new registers that are created in the future so it will give the flexibility to do what makes sense in practice. Now it's possible obviously that talking about two distinct bills may be a source of confusion so just to be clear I think it's helpful for members to distinguish between the two bills to remember that the bill before us now the validation bill looks backwards. It's a retrospective bill. It fixes what's happened in the past. The second bill by contrast that is yet to come the Companies (Levies) Amendment Bill looks forward and allows for Companies Office users to be charged levies to help pay for the corporate registry system that they share.I hope to introduce that second bill to the Parliament before too long and I'll ask for it to be referred in due course to the Finance and Expenditure Committee for a full select committee process—certainly four months. That will give the public an opportunity to submit on the reforms that we legislate for so that will be a full process. Companies Office users will be able to participate in that select committee process and also in a consultation in relation to regulations that will then be made under that bill. The consultation document will go through who should pay for the levies how much the levies should be and the underlying analysis for those levy proposals. I'm seeking to take this validation bill through all stages under urgency. That's for two main reasons. First it will allow the Companies Office to use its existing surplus funds to cover shortfalls on registers while we put the long-term funding plan in place and that's important otherwise we would have to inject more Crown funding into the Companies Office or immediately raise fees which for example for an incorporated society would mean raising fees immediately by $200 I think—$200? I'm now not certain of that. Several hundred in any case. Many societies of course are not-for-profit entities doing good things in the community so we don't want to do that without a full and appropriate process.The second reason is that if we went through a normal statutory process we'd leave the Crown open to uncertainty and risk that comes with that including that some of the past money collected as fees may need to be refunded and while that's likely to be extremely modest sums the cost of administering a complex regime to work out who would be owed what retrospectively where they live now who's responsible for an incorporated society who was then—you can imagine that the cost of the bureaucracy involved would be likely to be unreasonable and outweigh any benefits that might accrue to individuals. I don't think people in this House would want that particularly when nobody has raised any concerns about the way it's being run currently. That just wouldn't make sense. So to move forward we're drawing a line under these possibilities here in urgency and are looking forward to the future with a new modern and streamlined funding regime for our Companies Office. So I commend this bill to the House. DEPUTY SPEAKER: The question is the motion be agreed to.