In Confidence

Office of the Minister for Economic Development

Chair, Cabinet Legislation Committee

Regulatory Systems Amendment Bills: Approval for Introduction with additional provisions

Proposal

1 This paper seeks Cabinet’s approval to introduce three Regulatory Systems Amendment Bills: Regulatory Systems (Building and Housing) Amendment Bill, Regulatory Systems (Commercial Matters) Amendment Bill, and Regulatory Systems (Workplace Relations) Amendment Bill (‘the Bills’) into the House of Representatives.

2 I am proposing that the Bills be introduced under Standing Order 269, which provides that the Business Committee may determine any two or more bills are cognate bills. The Committee agreed to introduce the Bills as cognate bills on 13 September 2016.

3 I also seek additional minor clarifications to be included in the Regulatory Systems (Workplace Relations) Amendment Bill, pertaining to the Employment Relations Act 2000, the Parental Leave and Employment Protection Act 1987 and in the Regulatory Systems (Commercial Matters) Amendment Bill the Construction Contracts Amendment Act 2015.

Policy

4 The three Regulatory Systems Amendment Bills are are omnibus bills that contain amendments to legislation to improve regulatory systems that the Ministry of Business, Innovation and Employment (‘MBIE’) is responsible for. The Bills will make minor amendments to 20 statutes falling under the Building and Housing, Commerce and Consumer Affairs, Communications, Energy and Resources, and Workplace Relations and Safety portfolios.

5 The proposed changes to the individual statutes are uncontroversial and do not warrant stand-alone bills. However, the benefits of the changes across all portfolios taken together are sufficient to justify the Bills. Together, the amendments will make a significant improvement to the effectiveness and efficiency of the regulatory systems affected.

6 Cabinet approved the majority of the three Bill’s policies in 2014 [CAB Min (14) 21/5] and CAB Min (14) 23/6 refer]. The approvals in the Commerce and Consumer Affairs portfolio included:

a. amending the Companies Act 1993 and the Insolvency Act 2006 so that it is certain that trusts are able to obtain the benefits available to companies and individuals under the netting provisions in those Acts;

b. amending the Insolvency Act 2006 to provide the Official Assignee with the power to apply to the court to challenge the validity of a trust, regardless of whether the bankrupt could have done so prior to the bankruptcy;

c. transferring jurisdiction for resolving expense disputes relating to failed takeover offers made under the Takeovers Code from the courts to the Takeovers Panel;

d. and 28 minor and technical changes to ten statutes contained in Annex 1 to the paper under EGI (14) 127.

7 In December 2015, as a result of further consultation during the drafting process, Cabinet approved additional policy changes, rescinded previous decisions, and approved the release of the Exposure Draft of the Bill for public consultation [CAB (15) Min 0274 refers].

8 The additional policy changes were to:

a. amend the Friendly Societies and Credit Unions Act 1982 to permit friendly societies to use electronic and postal voting for general and special resolutions;

b. make minor amendments to the Financial Markets Conduct Act 2013 to improve consistency within that Act and ensure it applies as intended;

c. amend the Companies Act 1993, in line with a proposed amendment to the Financial Markets Conduct Act 2013, and clarify the information provision requirements of directors from specific overseas jurisdictions that have been recognised for enforcement purposes;

d. amend the Unit Titles Act 2010 to extend incidental rights as between the common property and units as provided under a unit plan, and clarify requirements relating to the assessment and reassessment of ownership or utility interests by a body corporate;

e. amend the Financial Service Providers (Registration and Dispute Resolution) Act 2008 to extend the Registrar’s power to initiate deregistration of a financial service provider; and

f. make four minor changes to the Building Act 2004.

9 Cabinet also approved to rescind amendments relating to:

a. two amendments to the Financial Advisers Act 2008, which are no longer deemed to be necessary following consultation with the Financial Markets Authority; and

b. proposed amendment to the Unit Titles Act 2010 which was incorrectly described (a replacement proposal is outlined above).

10 As a result MBIE released an Exposure Draft of the Regulatory Systems Amendment Bill and targeted consultation on specific technical amendments, further additional policy matters and the withdrawal of the credit unions related provisions required Cabinet approval in May 2016 [CAB-16-MIN 0211].

New proposed clarifications

11 Since Cabinet’s policy approvals in May 2016, four new proposed minor and technical clarifications have been included in the Regulatory Systems (Workplace Relations) Amendment Bill under the Workplace Relations and Safety portfolio. The proposed clarifications are required to reflect the original policy intent of the changes to the

Employment Relations Act 2000 and the Parental Leave and Employment Protection Act 1987, as approved by Cabinet [CAB Min (15) 8/9, CAB-15-Min-0237].

12 These clarifications are drafting adjustments to clarify the agreed intent of certain provisions in the Acts as amended by the Employment Standards Legislation Bill, which came into force on 1 April 2016. The changes are to:

a. amend the Employment Relations Act 2000 to clarify the intended purpose of the provision which extends liability for breaches of employment standards to persons other than the employer through the concept of ‘a person involved in a breach’[Cab Min (15) 8/9];

b. three minor and technical amendments to the Parental Leave and Employment Protection Act 1987 to improve clarity and certainty in the legislation with respect to preterm payments and parental leave payments [CAB-15-MIN-0237], and to allow the Parliamentary Counsel Office to update the payment rates in the legislation each year.

13 In addition, I recommend amending the Construction Contracts Amendment Act 2015 so that the provisions relating to retentions only apply to new contracts entered into after 31 March 2017. Although this was the policy intention [EGI Min (14) 20/7], the Act has been interpreted as applying to existing as well as new contracts. If the Act applied to existing contracts as of 31 March 2017, the implications for the construction industry would be significant and negative. There is likely to be widespread non-compliance, with many firms being unable to meet their obligations, and therefore being technically insolvent.

Regulatory impact analysis

14 Three changes under the Commerce portfolio were sufficiently material to justify regulatory impact analysis. A regulatory impact statement (RIS) for those proposed policy changes relating to netting and trusts; sham trusts under the Insolvency Act 2006; and expense disputes under the Takeovers Act 1993 was prepared in accordance with the necessary requirements and was submitted to Cabinet at the time that approval for those changes was sought and Cabinet approved the changes [EGI Min (14) 14/6 refers].

Parliamentary stages

15 Under Standing Order 269 the House or the Business Committee may determine any two or more bills are cognate bills. Such a determination may be made in respect of bills before or after their introduction, and may relate to any or all of the first, second, and third readings of the bills concerned.

16 Cognate bills that are set down on the Order Paper for the same stage are taken as one question for the purpose of the debate, provided that the member in charge of a cognate bill or bills may require the bill or bills to be set down separately.

17 The three Regulatory Systems Amendment Bills are omnibus bills and are being introduced as a cognate bill to be considered by the following select committees:

a. Regulatory Systems (Commercial Matters) Amendment Bill to be considered by the Commerce Select Committee

b. Regulatory Systems (Building and Housing) Amendment Bill to be considered by the Local Government and Environment Select Committee

c. Regulatory Systems (Workplace Relations) Amendment Bill to be considered by the Transport and Industrial Relations Select Committee.

Compliance

18 The Bills comply with the:

a. principles of the Treaty of Waitangi;

b. rights and freedoms contained in the New Zealand Bill of Rights Act 1990 and the Human Rights Act 1993;

c. principles and guidelines set out in the Privacy Act 1993;

d. Legislation Advisory Committee (LAC) Guidelines on Process and Content of Legislation; and

e. the disclosure statement requirements (attached to this paper).

Consultation

Public sector organisations

19 The following departments and public bodies have been consulted on the development of the Bills: the Ministry of Justice, the Treasury, Land Information New Zealand, Inland Revenue Department, Financial Markets Authority, Reserve Bank, and the Commission for Financial Capability.

20 The Department of the Prime Minister and Cabinet has been informed.

Private sector organisations

21 Details of the proposed amendments have been published on MBIE’s website and the Exposure Draft of the Regulatory Systems Bill was released for public consultation in December 2015.

22 Several private sector organisations have provided comments through MBIE’s targeted and public consultation processes, including Buddle Findlay, Chapman Tripp, Co-op Money, New Zealand Post, New Zealand Mail, DX Mail, Freightways and Fastway Couriers.

Binding on the Crown

23 The provisions in the Bills will bind the Crown to the extent that the principal Acts bind the Crown.

Creating new agencies or amending law relating to existing agencies

24 The Bills do not create any new agencies.

Allocation of decision making powers

25 The Bills propose transferring responsibility for adjudicating expense claims that result from an unsuccessful takeover attempts from the High Court to the Takeovers Panel, and providing a right of appeal to the High Court.

26 The Ministry of Justice has confirmed that the criteria relating to the qualifications and responsibilities of decision makers and the procedures they follow have been applied.

Associated regulations

27 Regulations will not be required to bring the Bills into operation.

28 The Bills propose to make minor changes to transfer provisions from the Financial Markets Conduct Act to regulations and vice versa. Consequential amendments will be needed to the Financial Markets Conduct Regulations 2014.

29 Changes to the Unit Titles Regulations 2011 will be completed to reflect amendments in the Regulatory Systems (Building and Housing) Amendment Bill.

Other instruments

30 The Bills do not include any provision empowering the making of other instruments that are deemed to be legislative instruments or disallowable instruments, or both.

Definition of Minister/department

31 There are no definitions in the Bills that require clearance from the Cabinet Office.

Commencement of legislation

32 The following come into force on the day after the date of Royal assent:

a. Subpart 12 of Part 1 and Schedule 2 (which relate to the Takeovers Act 1993 in the Regulatory Systems (Commercial Matters) Amendment Bill

b. Sections 133 and 134 (which relate to the Gas Act 1992 in the Regulatory Systems (Commercial Matters) Amendment Bill)

c. Clause 2 (which relates to the Regulatory Systems (Workplace Relations) Amendment Bill Bill).

33 Subpart 7 of Part 1(which relates to the Financial Markets Conduct Act 2013) comes into force 1 year after Royal assent or an earlier date appointed by Order in Council (once necessary preparations have been made for compliance with the new provisions). Section 8 (which relates to levies under section 53ZE of the Commerce Act 1986) comes into force on 1 July 2019. The remaining provisions (the majority of the Bill) come into force 2 months after Royal assent.

34 Part 4 (which relates to the Construction Contracts Act 2002 in the Regulatory Systems (Commercial Matters) Amendment Bill) comes into force on 31 March 2017.

35 The Regulatory Systems (Building and Housing) Amendment Bill comes into force 2 months after Royal Assent.

Parliamentary stages

36 I propose that the Bills be introduced into the House of Representatives in October 2016 and the Regulatory Systems (Commercial Matters) Amendment Bill, be referred to the Commerce Select Committee, the Regulatory Systems (Building and Housing) Amendment Bill be referred to the Local Government and Environment Select Committee and the Regulatory Systems (Workplace Relations) Amendment Bill be referred to the Transport and Industrial Relations Select Committee. The Bills should be passed by April 2017.

Recommendations

The Minister for Economic Development recommends that the Committee:

1 note that the Regulatory Systems (Building and Housing) Amendment Bill, the Regulatory Systems (Commercial Matters) Amendment Bill, and the Regulatory Systems (Workplace Relations) Amendment Bill (the Bills) hold a category 2 priority on the 2016 Legislation Programme (must be passed in 2016);

2 note that the Business Committee agreed that the proposed that the Bills be approved as omnibus bills and be considered as cognate bills under Standing Order 263 and 269;

3 agree that the new clarifications pertaining to the Employment Relations Act 2000, the Parental leave and Employment Protections Act 1987;

4 agree that the new proposed clarification pertaining to the Construction Contracts Amendment Act 2015 be included in the Regulatory Systems (Commercial Matters) Amendment Bill;

5 approve for introduction, subject to the final approval of the government caucus the:

5.1 the Regulatory Systems (Commercial Matters) Amendment Bill,

5.2 the Regulatory Systems (Building and Housing) Amendment Bill

5.3 and the Regulatory Systems (Workplace Relations) Amendment Bill

6 agree that the Bills be introduced in October 2016;

7 agree that the Government propose that:

7.1 Regulatory Systems (Commercial Matters) Amendment Bill is referred to the Commerce Select Committee

7.2 Regulatory Systems (Building and Housing) Amendment Bill is referred to the Local Government and Environment Committee

7.3 Regulatory Systems (Workplace Relations) Amendment Bill is referred to the Transport and Industrial Relations Select Committee

7.4 the Bills are enacted by 31 March 2017.

Publicity

8 authorise the Ministry of Business, Innovation and Employment to place this paper, the Disclosure Statement and the Regulatory Systems Bills: Additional Policy Approvals paper on its website, subject to the redactions;

9 note that the Minister for Economic Development will issue a media statement on the Regulatory Systems Amendment Bills as a whole.

Hon Steven Joyce

Minister for Economic Development

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