AARON GILMORE (National) : It is a pleasure to rise and speak on this legislation again. This is about the third time I have spoken on this legislation, and I have been following the conversations today and earlier conversations. Again, this is neat legislation that reduces compliance costs and helps to get New Zealand growing again. It helps us to raise capital a little bit smarter, a little bit cheaper, and a little bit faster, and that has to be a good thing. As many speakers have said today, the legislation is about widening and deepening our capital markets.

I must go on and talk a little bit about some of the good work that has been done by the Commerce Committee, which I do not have the pleasure of being a member of. I know that the chairman of that committee has done a reasonably good job. It is surprising to hear me thank that member, but I think she did a good job on this legislation. The Capital Market Development Taskforce, led by Rob Cameron, did a very good job, as well. He is my former employer, so I would be remiss in not saying that Mr Cameron did a good job.

Hon Lianne Dalziel: Did he set up the stock exchange as well?

AARON GILMORE: Who knows? I think a good job was done all round on this legislation, and I think no one will dispute that reducing the cost of raising capital is a good thing.

I would like to spend a bit of time talking about practical examples that may arise around reducing some of the costs of raising capital. The initiatives in this legislation will do some really good things and have some unintended consequences that will be really good. I would like to touch on that.

Typically, when one raises capital, it costs $10,000 to $50,000 to do a prospectus. I have gone through this process myself both in a personal capacity and in a professional capacity. That is $10,000 to $50,000 that one does not really want to spend on a lawyer or an accountant for the body one is working for. There are number of approved advisers helping people do prospectuses and investment statements. Imagine how much money may be saved as a result of that reduced compliance cost. I have a feeling that about 100 companies a year, at an absolute minimum, go through a process that this legislation might apply to.

If we think about those 100-odd companies and about the $10,000 to $50,000 per company in costs that might be saved, we can see an amount somewhere in the region of $1 million to $5 million per annum that some legal firm might not get. That money could be reinvested back into productive parts of the economy, particularly in those areas where those firms that are going through either rapid growth or capital shortage may need it.

It is incredibly difficult for those companies to raise money in any shape or form during the early stages when they need either working capital or financial capital to buy plant and equipment. I have worked alongside many friends who are entrepreneurs, and I know it is very hard to raise capital. People try to find an angel investor, a venture capital fund, or some other organisation, and the last thing those people want to do, as entrepreneurs, is spend money. Every dollar they spend on lawyers or accountants is a dollar they will not spend reinvesting in their business so that it will rapidly grow. We have had some fantastic examples of companies in New Zealand that had very small amounts of seed capital or initial capital but have gone on to do amazingly great things.

I want to talk further about some examples of the $1 million to $5 million that will be saved from lawyers and accountants out there. I am sure they will not thank us for taking away some of their fees—there will be one or two fewer legal or accounting bashes, because they have a bit less income. But that money will instead be available for investing in early-stage companies.

I spoke briefly about a couple of those early-stage companies in earlier readings of this legislation. I want to touch on one of them, and that is Trade Me. Trade Me went from one guy operating out of his Holden HQ in the back his garage to being a successful company that sold for about $700 million. Throughout that process there were about 16 or 17 shareholders, if I recall correctly, who brought in expertise and capital. Around only $1 million of total capital was actually invested in Trade Me, for a resulting outcome of $700 million.

If, through this legislation, we can free up somewhere between $1 million and $5 million by reducing compliance costs, then that money could be invested in early-stage companies like Trade Me, instead of being spent on our good friends the lawyers and accountants of New Zealand. One or two of those companies could go on to be a success and make $600 million or $700 million for their shareholders, and that is what we as the Government are concerned about. We want to get New Zealand growing faster, and we want to get productivity up. I think that is a wonderful thing. Seeing more of those things in Government is something that we are very keen on doing. The Government wants to raise productivity and get more bang for the buck in terms of those early-stage companies.

I want to talk a bit about some of those wasted costs and about some of the highly successful New Zealand businesses that reprioritise some of those costs. Typically, if one is a partner in a legal or accounting firm, one would want to rake in somewhere between $1 million and $5 million per year in fees. In this legislation we are probably talking about putting one partner in a legal firm or a couple of partners in an accounting firm out of work. They will probably have to reprioritise themselves out of being a lawyer or accountant writing prospectuses and do something a lot more productive. Who knows; they might end up having an epiphany and doing some amazing things.

In one story I read recently, someone who was working in an accounting firm went on to set up a company called Working Style. It is a wonderful company. It is the sponsor of the All Black suits, and it is a wonderful example of what might happen, as it was founded by an accountant. Maybe an accountant will be freed up from doing these prospectuses, and he or she might go on to found a company. Who knows? That gentlemen or lady with all that extra time—there are more and more ladies in the accounting profession now, I have found—could go out and create a new company. That would make New Zealand grow a bit faster and be more productive. In this day and age, when access to capital is very hard to get, those people may find a new lease of life.

Another interesting thing is not just the cost of raising capital or the saving of money with reduced prospectuses; it is much more than that. One of the biggest things is speed. There is no point getting capital to people if it is 3 weeks or even 3 days too late. Many companies fail not because they cannot make money in terms of profitability but because they cannot get any cash. At a time like this, with the credit crunch we have globally, the ability to access cash is critical. This legislation will allow companies to get cash faster.

Dr Cam Calder: Extraordinarily good!

AARON GILMORE: What extraordinarily good legislation! The unintended positive consequences of legislation like this are amazing. I do not think people have cottoned on to that.

Yes, this legislation will reduce compliance costs and reduce the need for companies to spend that $10,000 or $50,000. But, equally, it will mean that things will go faster. If venture capital investors want to have the ability to invest, they can not only do it at a cheaper rate but they can do it faster. They do not have to sit and wait for their lawyers or accountants to come back with 50,000 drafts of a 150-page prospectus or investment statement. They could probably get it done in an afternoon.

Companies that want access to capital from investors will, because of the exemptions in this legislation, get access to their funds faster. That might mean we save one or two companies that might be close to the edge, because they will be able to access funds faster, instead of going through major capital raising and all the required paperwork. How great would that be! Those are amazing unintended positive consequences of this legislation. If we can save one or two companies from going bust, that would be amazing.

I want to touch quickly on another provision in the legislation, which has been talked about, and that is the wealthy investor exemption. Well, I have been a wealthy investor—one finds a small fortune by starting with a large fortune! If a wealthy investor starts with a small fortune and does not know what to do, I can tell members that he or she will end up with no fortune very quickly. This legislation gives those wealthy investors the ability to front up and say that they are signing away their rights to have access to additional information. I want to leave it there. This is great legislation with amazing levels of unintended positive consequences, and I commend it to the House. Thank you.

The ASSISTANT SPEAKER (Eric Roy): The question is that the motion be agreed to. Those of that opinion will say Aye. Those of the contrary opinion will say No. The Ayes have it.