Private companies put case against reporting

BY MARTA STEEMAN

The Government is already pouring cold water on a proposal being mooted to force large private businesses to reveal financial information.

The financial statements of privately-owned companies are confidential but the Economic Development Ministry has a discussion paper circulating which includes a proposal to require large private companies to file public accounts annually.

Reasons offered include that the failure of a large private company could have a substantial impact and therefore was of public interest. Access to information would be useful to creditors and customers who prepaid for goods and services. Submissions are due by the end of January.

Well-known companies in Canterbury that are large, privately-owned and likely to be caught by the proposal would be department store Ballantynes, fish processors Independent Fisheries and United Fisheries, Tait Electronics, Gough Holdings and Skope Industries.

Nationally, the companies include New Zealand's largest family-owned corporation, Todd Corporation, and supermarket operator Foodstuffs.

Also less well-known companies such as local construction companies might also have to reveal their financial details.

The discussion paper proposes private companies that would have to file public accounts would be those with two of three criteria: revenues each year of at least $20 million and assets of $10m and/or have at least 50 full-time equivalent employees.

However, yesterday a spokesman for Commerce Minister Simon Power indicated the proposal does not have support.

The ministry was seeking views on all aspects of the financial reporting framework and this was part of it. The discussion paper was also aimed at reducing compliance costs, particularly for small companies, the spokesman said.

"It's unlikely the minister would recommend to cabinet that that particular recommendation go ahead," the spokesman said.

With regard to the rest of it, the minister was waiting for submissions.

At present, companies required to publish annual accounts are companies that have public shareholders, those that have issued debt securities such as bonds or debentures and companies with an overseas controlling shareholder.

Christchurch chartered accountant and consultant Sue Sheldon is putting together a submission for Independent Fisheries and will be talking to other large local companies impacted by the proposal.

Independent Fisheries director Mike Dormer said:

"In essence it's a form of socialism."

Companies would have to disclose revenue, expenses, capital expenditure and profit.

"It basically gives your competitors an insight into how you run," Dormer protested.

"The other thing, it plays into the hands of the unions."

He said he was surprised such a measure was being proposed under a National government.

He knew Prime Minister John Key and Finance Minister Bill English fairly well.

"I can't for the moment think why they would want to push something like this," Dormer said.

"Capitalism is one of everybody for yourself, setting up a business and making a profit. It's hard enough to make a profit now in New Zealand without government interference.

"That's all it is. It's a socialist intervention."

Five years ago a similar measure was proposed by the Labour government but dumped after fierce opposition.

Dormer said it was fanned along by a large accountancy firm who could see more auditing business for itself.

"Being private in business is paramount to success," he said. The only people who had the right to the information were Inland Revenue.

Commercial refrigeration and heating manufacturer Skope Industries chairman and co-owner Robert Stewart said he thought the proposal was a leftover from a package of measures by the former Labour government to strengthen the arms of the unions in negotiations with employers.

"I'm surprised the National government is pursuing it because it was so unpopular with private companies before."

He questioned who would gain from the knowledge of another business other than competitors and unions.

"I know from personal experience, competitors use that information," Stewart said.

Wellington lawyer Pip England at Chapman Tripp said he could not see the Government backing this particular change.

Several lobbyists and public relations specialists were already preparing submissions for affected companies. He was working on a submission for clients.

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