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.     

Federal Aid to Local Governments in the West: An Irony of the Reagan Revolution

Despite the fact that the Reagan election was viewed as a power shift toward the West, the decade of the 1980s produced cruel disappointment. The region was generally left out of the economic recmery of the nation because of the bust in the agricultural and mineral industries. These state and local gmernments which sufferfrom high costs and low resources were particularly dependent on the national gmernment at the very time when the Reagan Administration was cutting federal aid and transferring power to the states. Unlike Nixon's New Federalism which helped the state and local governments of the West, Reagan's policies caused their relative position in federal aid flows to deteriorate. Although the Reagan revolution in cutting domestic programs was viewed as the embodiment of western rugged individualism, the region lost in terms of federal aid to small rural local governments.