Gina Rinehart wants to be like building magnate Len Buckeridge. The BGC boss never has to tell the world how much money he makes, but ASIC is telling Mrs Rinehart she has to.
At first glance, this seems highly inequitable. They both run huge businesses through private companies, but only one of them has to lodge annual financial accounts with the corporate regulator.
Mrs Rinehart’s company Hancock Prospecting Pty Ltd has applied to ASIC for an exemption from the reporting requirements, but ASIC has said no way (see news story).
It’s not the first time a private company has gone down this path.
In 2008, Brisbane company Dynamic Supplies Pty Ltd – a major national distributor of printing equipment – sought a similar exemption, once again without success.
After being knocked back by ASIC, it appealed to the Administrative Appeals Tribunal, just as Mrs Rinehart plans, and appealed again to the Federal Court.
In each case, ASIC prevailed, on the basis that Dynamic Supplies is a “large proprietary company” – that means it has revenue of $25 million or more, its gross assets exceed $12.5 million and it has 50 or more employees.
Therefore, it must lodge annual accounts with ASIC, which journalists and anybody else can access.
ASIC’s policy is that it will only grant relief if it is satisfied that special circumstances exist; typically, this requires the company in question to show that lodging its accounts would impose an unreasonable burden, such as a competitive disadvantage.
Evidently, Mrs Rinehart’s company has failed this test.
How, then, does Len Buckeridge’s company BGC (Australia), and certain other large proprietary companies, avoid lodging annual accounts?
The explanation goes back to 1995, when the Corporations Act was modernised. Before then, there was a category called “exempt proprietary companies”.
To qualify, a company had to be wholly owned by “natural persons”; i.e. individuals, as opposed to a public company or a trust.
BGC passed this test – it is wholly owned by Len Buckeridge.
Hancock Prospecting failed the test, because it is 23.4 per cent owned by the Hope Margaret Hancock Trust, which was set up by Lang Hancock to protect the interests of his grandchildren.
It’s the very same trust that has led to the dramatic falling out between Mrs Rinehart and three of her children, John Hancock, Bianca Rinehart and Hope Welker.
BGC continues to benefit from its exempt status. It is now categorised as a ‘grandfathered’ large proprietary company.
So long as BGC meets the relevant criteria – defined in section 319(4) of the Corporations Act, if any readers want to see the finer details – it will continue to be ‘grandfathered’ and will never have to disclose how much profit Len Buckeridge makes every year.
But with an estimated turnover of $3 billion from its building, contracting, mining and manufacturing operations, we're sure its a lot.