Andrew Bayly: Commerce Minister on the incoming changes to the Companies Act

Balancing directors' safety and accountability is the goal of the Commerce Minister's shake up of the Companies Act.  

Andrew Bayly is looking to make it harder to "phoenix", in which assets are transferred from indebted companies to new ones, leaving the former to face insolvency.   

He says they want to make it easier to catch directors doing the wrong thing, which will be done by assigning every director a unique digital number. 

Another measure is allowing directors to take their home addresses off the companies register.  

Andrew Bayly says there's a perception of risk, especially among female directors, and they will instead be able to list a more work-related address such as an office, or a related entity like a lawyer or an accountant. 

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Episode Transcript

Speaker 1 (00:00):
More reform of business is coming away. The company's actor
is set to get its first proper update in some
thirty years, and phoenixing is going to be addressed. That's
when one company is liquidated and another one begins without
all the debt being paid off. Commerce and Consumer Fairs
Minister Andrew Bailey is with us on this Andrew morning
to you.

Speaker 2 (00:15):
Oh, good morning mate.

Speaker 1 (00:16):
The companies act as far as these things without being
too dry about this, as far as these things go,
how complex is it and how bigger upheaval is this?

Speaker 2 (00:24):
Well, look, there's elements that are simply out of date.
It's about three pages of amendments we're going to make.
But essentially what we're doing is modernizing elements of it
to make it easier for companies to operate. We're simplifying
it and we're digitizing it. So for instance, why do
you have to send out your end report by post?
Why can't you just put on a website and tell

(00:44):
people where that that is. So that's the first big
chunk of the reforms. The second bit is about this
phoenixing which you've been talking about. But that what we
want to do is make sure that directors can protect
themselves if they think they've got security issues, so they
don't have to record their private address, but they do
have to have an address where they can be served

(01:06):
to notice or you can find them. But related to that,
we're going to give every director an ID a number,
because it's often very difficult to track what directors are
doing and what companies are associated with, and so by
giving that, we're giving them a number, we can do that.
You look, for instance, if you look at John Smith
and the company's office, there's twenty seven pages of John

(01:28):
Smith as directors. And then the third element of the
package is that we're going to do a fundamental review
of the duty and liabilities of directors and doing that
with Paul Goldsmith as a Minister of Justice. But we're
going to start that next year because unfortunately the last
many years, increasingly directors duties and liabilities have been ill

(01:53):
defined or less clear than they ought to and that's
what we can do.

Speaker 1 (01:57):
Let me come back to that in mind, because that's
the most interesting part. The phoenixing thing with the number.
The number seems the most obvious thing in the world.
Why hasn't somebody done it before?

Speaker 2 (02:08):
Oh? Look, I can't understand it. I don't know. I
can't explain.

Speaker 1 (02:13):
Because it's also numerous problems, don't you, Yeah, yeah.

Speaker 2 (02:17):
It does. It's a smart way. And also we're going
to actually pick up some insolvency law changes that would
recommend back in twenty fourteen the previous government National government did,
so we're also going to do put that in there.
And the issue with it is it's I still about
the John Smith's example before. It's very easy for directors

(02:40):
say I'm John Smith, and then next a time they
put their record their details, it might be John R. Smith,
or it might be John Robert Smith, or it might
be Jonathan Smith. And therefore that's the easiest way of
stopping this. And you know what's the bit I'm really
worried about the Phoenix thing of the of companies is
that the the whole issue is when you have small debts.

(03:02):
Let's say you're doing a bathroom extension. I don't I'm
not getting at a building industry particularly, but let's so
you are doing a bathroom extension. You give a builders
money and then they don't complete the job and they
move on set up a new company the next day
and just put twenty twenty four on it, many of
those claims and never picked up. No one ever knows
about them because people don't have the money to chase them.

(03:24):
So this is part of the package. It's not just
the number, but I've also been talking to insultancy practitioners
to make sure that they've got the ability to record
those types of activities and then we can track them
over time, because ultimately we want to get rid of
those poor performing, you know, directors and managers who don't
do a good job and do it quite deliberately.

Speaker 1 (03:44):
No exactly. I know you weren't picking on the building industry,
but it does actually happen quite a bit in the
building industry, and there are plenty of stories of it.
As far as the duties and of directors are concerned,
what are you looking to do? Because how many directors
in this country sit on boards or take a board
job and then get pinged for something they didn't have
any idea they were potentially going to get pinged for.

Speaker 2 (04:06):
Yeah, well, there's multiple dimensions to this. The biggest issue,
I think the fundamental issue is would you like to
be a director now? And to be honest, a director
and I probably would not do right unless they paid
me a lot of money and that's wrong. What we
want is people to be able to think that they
are quite happy to be a director. Obviously, we don't

(04:28):
want to cut away from the obligation that you can't
act recklessly or net didn't all that sort of stuff right,
That we're not cutting away that. But the issue now
we've got is that some court cases have come down
with mainsil was one, but the other big area government
has been very good at piercing the corporate veil using

(04:49):
a technical term where directors are now personally liable for things.
So I'll give you an example climate related disclosures. We've
got a brand new regime in New zenand no one
knows only it's world famous in New Zealand. But directors
are personally liable for the reports. Even though it's just
coming into play now for a lot of lists of
company people, that's kind of an obligation, so a personal

(05:12):
liability if they get the report wrong. We've got other
liabilities that have been put through into a piece of
legislation that now make directors personally liable. Now. Ultimately, the
whole thing about company's law, which set up in sixteen
seventeenth century was about allowing people to take reasonable risks,
but not extreme risks, and what we've done now has

(05:34):
made it very blurred. And ultimately, you know, experienced directors
should and we should be encouraging them to be helping
startups taking risks at that point. Many people wouldn't want
to do it now because of this. And that's the
way we want to grow the economy and have the
money to build schools and hospitals and all that sort
of stuff. We need successful economy and we need to

(05:54):
support our business and our companies to be able to
do that, and right now it's a bit of a barrier.

Speaker 1 (06:00):
Very well said, Andrew, have a good week in appreciate
your times always, Andrew Bailey, Commerce and Consumer Affairs Minister.
I think I'm not being unfair and suggesting that might
be another bloke who's across as Brief as well.

Speaker 2 (06:09):
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Speaker 1 (06:12):
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