EXEMPT PROPRIETARY COMPANY ANNUAL REPORTING REQUIREMENTS: PUBUC INTEREST OR BUREAUCRATIC EMPIRE-BUILDING?

Abstract: Australian small business enterprises, operated as exempt proprietary companies, are exposed to numerous statutory requirements. The Corporations Law Simplification Taskforce has proposed a number of changes with the stated objective of minimising the statutory burdens faced by small business. One of the recommendations of the taskforce is that most exempt proprietary companies be exempted from the requirement to supply key financial data in annual returns lodged with the Australian Securities Commission. This paper provides a review of the existing statutory responsibility for exempt proprietary companies to prepare annual returns including key financial data and lodge them with the ASC. A common justification offered for the introduction and continued maintenance of annual reporting requirements has been the protection of the public interest. The “public choice” theory of regulation provides alternative explanations for the regulation, including the promotion of producer interests or the promotion of the interests of the regulatory agency responsible for the administration of the legislation, the Australian Securities Commission, and other government departments such as Attorney-General's, Finance and Treasury. The existence of alternative explanations raises the possibility that the regulation is not motivated exclusively by the public interest. Indirect evidence of the usefulness of the annual reporting requirements was gathered with a consideration of the quality of the key financial data disclosed in annual returns. More than 40% of the annual returns lodged by a sample of exempt proprietary companies, during the years 1986 to 1989, contained key financial data which was inconsistent with being extracted from a properly prepared balance sheet (where assets minus liabilities equal shareholders' equity). The possibility that the maintenance of annual reporting requirements is not in the public interest, and the limited reliability of key financial data disclosures made, offers some support for the recent recommendations of the Corporations Law Simplification Taskforce that annual reporting requirements for small business enterprises be modified.     

The Local Regulatory State: A Case of Double Standards?

Two starkly contrasting strategies are discernible in the way local authorities currently approach and go about their regulatory and enforcement responsibilities. On the one hand, a “deterrence” strategy of “pursue and punish” is robustly pursued in many local areas in relation to individuals who infringe and contravene local regulations, notably in relation to “street scene” issues of littering, waste/recycling and materials sorting/separation, smoking in public places, parking, cycling on pavements, feeding pigeons, and so on, while, on the other, a much more positive “compliance” strategy of “counsel and conduce” is widely promoted and pursued in relation to the regulation of standards in local businesses, for example, in relation to public and environmental health/hygiene, health and safety in the workplace, animal welfare, and licensing of premises.

Why do local authorities operate with such apparent double standards? Why do comparatively minor infringements by local citizens so frequently result in the summary imposition of fixed penalties (which can be quite punitive for those on low incomes) while at the same time local businesses are mostly treated to a regulatory culture which is much more sympathetic and supportive in promoting compliance with the rules? This article draws on research conducted in different local regulatory settings which illustrates the two contrasting regimes in practice. It presents five propositions which help us to understand and explain the apparent double standards and it concludes by considering the steps that might be taken to ensure a more equitable and consistent local regulatory framework for the future.