Christine Milne: Why is Facebook considered a small company by ASIC? [Estimates]
The Australian Greens Leader, Senator Christine Milne, uses Senate estimates to ask the Australian Securities and Investments Commission (ASIC) why they classify large multinational companies, such as Facebook, to be small companies.
CHAIR: Senator Milne.
Senator MILNE: Thank you, Chair. I will only take a few minutes. I have some questions in particular with regard to the relief that ASIC provides to companies that are part of foreign-controlled groups that are not large. They do not have to provide annual financial reports. I want to ask in particular about Facebook Australia. Is it true that Facebook Australia has not filed any annual financial report for the years 2009 to 2013 because, it says, it is not part of a large group?
Mr Price : We will take that on notice, if we can, please. But it is the case that Facebook has indicated that they are able to avail themselves of that particular exemption to the law; that is correct.
Senator MILNE: They say they are able to do that because they must be permitted to under the law. Did ASIC, through class order 98/98, give relief to those companies? Is it an actual ASIC action that has allowed these companies to avoid putting in annual financial reports?
Mr Price : As I say, I would prefer to take that question on notice, if I can, just to make sure that I get the correct answer.
Senator MILNE: This is an issue with regard to tax evasion. As you would be very well aware, there has been a lot about this. This is an actual ASIC order.
Mr Price : Yes.
Senator MILNE: Can you tell me whether or not ASIC made that order?
Mr Price : Certainly ASIC makes a number of financial reporting relief orders. The order you refer to, which is in relation to small proprietary companies controlled by foreign-owned companies, is an order that has been in place, as I understand, since 1998. It is up to companies to work out whether they fall within the terms of that order, at least initially. Then ASIC has an active program to identify and follow up on companies that appear to be required to lodge financial reports but, in fact, have not done so.
Senator MILNE: Has ASIC pursued Facebook? I do not think by any stretch of the imagination you could suggest that Facebook is anything other than a large company.
Mr Price : As I say, I would prefer to take that question on notice, if I might.
Senator DASTYARI: Mr Price, you are taking that on notice. I assume you are saying that you have to check your facts as to whether that is the case or not. Is that something that you could possibly do over the lunch break?
Mr Price : I am not sure. I will make some inquiries, but I am not sure.
Senator MILNE: What I am asking is: is that the case and why has not ASIC followed that up? I am also asking it on notice, then, if you cannot give it to me now.
Mr Price : Yes, sure.
Senator MILNE: How many subsidiaries of large foreign-controlled corporations are exempted under this same provision from making annual financial reports?
Mr Price : I doubt we will be able to provide you with the answer to that question, and the reason is that these exemptions operate in such a way that, if my memory is right, you do not need to notify us if you are relying on the exemptions. If you meet the various conditions that are set out, you are able, as of right, to rely on that particular exemption.
Senator MILNE: So basically any company can just say, 'Oh, no; the company that owns us is a small company and therefore we are exempt.'
Mr Price : Any company can take the risk of breaching the law and risk the consequences that penalties will flow when it is found that they are breaching the law.
Senator MILNE: What is the audit that ASIC does on all these relief orders to check out whether this is true or not?
Mr Price : In terms of what checking do we do to make sure that people are complying with individual class orders? Typically we would not undertake such a process. That is part of our general surveillance to see that people are complying with the law.
Senator MILNE: But you have just said that people would be running the risk of penalties being imposed and you have just told me that you do not even audit it. So I would suggest that there is no risk.
Mr Price : No. You are asking me whether we go through each and every class order and make sure that people are compliant. That extends way beyond financial reporting. We have very many class orders that cover disclosure, takeovers, financial reporting. If you are asking me whether we run an active program to identify companies that appear to be required to lodge financial reports but do not, the answer is yes, we run an active program to identify and follow up on companies that appear to be required to lodge financial reports but are not so lodging them.
Senator MILNE: It is the 'appear to be required to' bit. You have said that, if they are a subsidiary of a company that is not large, they do not have to. So their legal teams would say that they do not have to?
Mr Price : Correct.
Senator MILNE: If they declare their parent company to be small?
Mr Price : Yes.
Senator MILNE: What I am asking is: what actual auditing do we do to make sure that we are not being conned by a company like Facebook, by a company like any other of the large corporations?
Mr Price : Just to make sure that I understand exactly what you are asking for, you are asking for details of what the program is, what we do to identify those companies that should be reporting but may not be reporting; is that correct?
Senator MILNE: And I am asking you: how many companies in this regard are currently exempted from providing financial accounts? I am asking, in particular, about Facebook. And I am asking, in particular, whether an audit or any investigation has ever been done of Facebook Australia to see whether it is a wholly owned subsidiary of a small company.
Mr Price : I am happy to take those questions on notice. I will see whether I can get some answers during the break.