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The GCSB Amendment Bill: Is the Government spying on us?

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Introduction

The divisive Government Communications Security Bureau Amendment Bill (the Bill) was passed into law after its third reading on 21 August 2013 by a vote of 61 to 59. It amends the Government Communications Security Bureau Act 2003 (the Act), the Inspector-General of Intelligence and Security Act 1996 (IGISA), and the Intelligence and Security Committee Act 1996 (ISCA).

It is currently proposed that the Bill will be divided into three separate amending Bills, each corresponding to their respective Act.

The history of the Government Communications Security Bureau

The New Zealand Government has recognised the need for signals intelligence, technical security, and communications security since the Second World War. However, these services were historically provided for by various agencies such as the New Zealand Defence Force and the New Zealand Security Intelligence Service (NZSIS). It was not until Prime Minister Robert Muldoon approved the formation of the Government Communications Security Bureau (GCSB) in 1977 that these activities were centralised in the GCSB.

In early 2000 it was decided that the GCSB should have a statutory basis similar to the NZSIS and so began an extensive legislative process and public consultation that culminated in the the Act coming into effect on 1 April 2003.

The Government Communications Security Bureau Act 2003

The Act sets out the GCSB’s objective as contributing to the national security of New Zealand by providing the New Zealand Government with foreign intelligence. The external oversight of its activities is set out in the IGISA and ISCA.

The Act essentially provides that the three core functions of the GCSB are information assurance and cyber security; foreign intelligence; and cooperation with and assistance to other entities. It sets out that the GCSB:

  • Can gather intelligence through spying on foreigners;
  • Cannot spy on New Zealanders to gather intelligence;
  • Protects New Zealand Government communications from cyber attack; and
  • Assists domestic agencies like the NZSIS, the New Zealand Defence Force and the New Zealand Police (although it does not specify the manner in which it does this)
The Government Communications Security Bureau Amendment Bill

On 15 April 2013, John Key, as Prime Minister and hence Minister responsible for the GCSB, announced the introduction of the Bill, which was seen as an attempt to strengthen the oversight regime of New Zealand’s intelligence community. However, the Bill has been met with significant controversy, with opposition arguing it will have potentially invasive impacts on the New Zealand public.

The three main purposes of the Bill are:

  • To provide a clear governing framework for GCSB activities;
  • To update this framework to accommodate changes in the security and public environment since the Act; and
  • To enhance external oversight mechanisms by strengthening and improving the offices of the Inspector-General of Intelligence and Security (IGIS) and the Parliament’s Intelligence and Security Committee (ISC) functional capabilities.

So, bearing these in mind, what exactly are the amendments the Bill makes to the three acts it purports to amend?

With respect to the Act:

  • The GCSB will continue to collect foreign intelligence, and will still be prevented from spying on New Zealanders under this function (as is the case in the Act). However, this protection will only extend to private communications and not to metadata (data logs) or conversations that could reasonably be expected to be interrupted;
  • The GCSB will be allowed to assist the NZSIS, the New Zealand Police and the Department of Defence in spying on New Zealanders but only to the extent these agencies are authorised under warrant or statute to do so;
  • The GCSB’s cyber security function will be extended from protection of Government communications only to private-sector cyber systems as well, if they are deemed important enough to New Zealand;
  • A written reporting requirement on the GCSB to maintain records of warrants and authorisations;
  • Certain principles of the Privacy Act 1993 may be modified to allow the GCSB to achieve its functions more effectively and efficiently; and
  • An increase in the maximum penalty for unauthorised disclosure of information.

While the main amendments are directed toward the Act, the Bill also affects the IGISA and ISCA.

The IGIS is supposedly a source of independent external oversight that is responsible for examining issues of legality and propriety. Under the Bill the key amendments to the IGISA are:

  • The working nature of the IGIS is extended to include regular examination of issues affecting operational activities;
  • The IGIS is able to conduct its own independent inquiries;
  • IGIS reports will be unclassified (up to a certain point); and
  • The pool of potential IGIS candidates extends beyond retired High Court Judges.

The ISC is the parliamentary mechanism of oversight for intelligence agencies and examines efficacy, efficiency, budgetary and policy issues.

Under the Bill the key amendments are:

  • The Prime Minister must relinquish the Chair of the ISC if reviewing an intelligence agency they are ministerially responsible for; but can nominate the Deputy Prime Minister or the Attorney-General to act as an alternate chair; and
  • Subject to sensitive information restrictions, the ISC will also be required to table its reports in the House and make them publicly available.
The future

In light of the recent intelligence scandal surrounding Kim Dotcom and the media furore created by Edward Snowden’s acknowledgment of the National Security Agency’s use of ‘PRISM’ in the United States, the public has been put on red alert and are generally calling for greater transparency and accountability for intelligence and security services.

The Snowden issue is particularly relevant to New Zealand due to its membership with the ‘Five Eyes’ spying alliance initiative between the United States, Australia, Canada and Britain.

Make of it what you will, whether the Bill achieves its desired status within New Zealand is still unclear. However, what is evident will be the continuing debate and controversy this Bill will stimulate over the coming months, and even years, as the New Zealand public wait with bated breath to see the true effect this Bill will have on their personal privacy.

If you would like further information please contact Laura Monahan on 07 958 7479.

What you need to know if you are an executor under a will

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Who is an executor?

An executor is the person (or persons) appointed under a will to carry out the terms of the will. Executors are often referred to in a will as trustees or personal representatives.

Being an executor is an important role and it is essential that you are aware of the legal requirements and duties involved.

This information is provided as a general guide about an executors’ role. Please note this is not an exhaustive list and circumstances will vary depending on the particular will, estate, property and persons involved. If you require further information on your particular situation, please seek specific legal advice.

Funeral arrangements and costs

One of the first steps with an estate is the funeral arrangements, which are generally up to you as executor to decide. Executors are usually guided by any wishes set out in the will, together with the wishes of the immediate family.

In most cases, the will authorises payment of all funeral costs to be paid by the estate, which is to be arranged by the executor. You need to ensure the estate has enough money to pay for the funeral and other expenses.

If the estate is “cash poor” (for example, if the assets are tied up in property), the executor may pay the funeral expenses personally and be reimbursed from the estate later.

The requirement for probate

As an executor you may be required to obtain probate for the will. This depends on the value of the estate assets and is required if the deceased owned land (except jointly owned land, which passes by survivorship). Some estates with minimal assets do not require probate.

Probate is a certificate from the High Court approving the will and authorising the executor to deal with the estate assets in accordance with the will.

The lawyer involved will prepare the necessary documents for you. The executor signs a document swearing that they will carry out his or her duties as executor.

Listing the assets and liabilities of the deceased

You will need to compile a list of all assets and liabilities that the deceased had at the date of death.

Assets could include property, shares, investments, bank accounts, term deposits, bonus bonds, personal items, vehicles etc. The liabilities of the deceased will include any debts owing by the deceased, mortgage payments, loans, power, phone and other every day bills and debts.

Part of your role as executor will be to close bank accounts, pay debts and cancel power, phone and other applicable accounts.

If you are unsure about what assets and liabilities the deceased had, we suggest you talk to the deceased’s family, lawyer or accountant.

Keep accounts

An executor is also required to keep proper financial records and, in some cases, file tax returns. If the deceased had an accountant, we suggest you involve the accountant in this process.

The Court has the right to require financial records to be produced, so it is important these are accurate and up to date.

Distribute the estate to the beneficiaries

An important part of your role is ensuring the assets of the estate are distributed (paid out or transferred) to the beneficiaries of the will.

If the will includes legacies (specific gifts of cash to certain people) to be paid, these legacies are to be paid first. Once all debts and legacies have been paid, the remainder of the assets are paid to the beneficiaries as set out in the will.

As an executor, you also need to be aware of any potential claims against the estate. As a general rule, the executor may distribute an estate six months after probate has been granted if no claims have been made. Executors should be careful if distributing before the six month period has lapsed, as they could then be held personally liable for any claims against the estate. In such cases, it may take much longer to distribute than the six month period.

Trusts and life interests

Under the will, you may be responsible to set up a trust. A trust is required where a beneficiary of the will is under 18 years of age or mentally incapable, or if there are specific instructions to establish a trust in the will. The role of the executor is to establish the trust required by the will and oversee the administration of that trust.

Also, if the deceased’s will grants a life interest to someone, the estate cannot be wound up until after that person dies. A life interest gives a person a right to benefit from the assets of the deceased for that person’s lifetime.

Claims against the estate

As mentioned above, an important aspect of being an executor is being aware of and dealing with any claims against the estate.

Depending on the circumstances, a claim could be made by a spouse, partner, children, other family members or people who are seeking to enforce a promise or gift for services. A claim must be resolved before the estate can be distributed otherwise the executor may be personally liable.

What happens if a person dies without a will?

Where a person dies without making a will, or if the will is invalid, the rules set out in the Administration Act 1969 will apply. In this case, there is no executor automatically appointed.

The usual situation is that the next of kin (spouse, partner, child etc) must apply to the Court for “letters of administration”. A person who is appointed as administrator has the same powers and duties as an executor. However, the assets of the estate will be distributed to beneficiaries according to the formula set out in the Administration Act 1969, rather than the will.

General Matters

The role of executor can be time consuming and you cannot charge for your time, unless there is a specific clause confirming you can (normally for professional executors, such as lawyers or accountants).

There are important legal requirements and duties imposed on an executor. If you require information on your particular situation, please seek legal advice.

If you would like further information please contact Amanda Hockley on 07 958 7451.

Duties of trustees: What you NEED to know as a trustee

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Trustees and trusts

New Zealand has more trusts per capita than any other country in the world. New Zealanders want trusts. But do we really understand them?

In recent times, the creation of trusts has slowed but there has been an increase in beneficiary interest in trusts – in particular, requests for information from and claims against trustees.

In order to avoid disputes and defend claims, it is essential that trustees understand and comply with their duties.

Duties of a trustee

The key duties of trustees are:

  • To always act and make decisions in the best interests of the beneficiaries – this must be the main consideration of the trustees at all times;
  • To remain impartial between beneficiaries – this does not necessarily mean that all beneficiaries receive an equal share, but the trustees must consider all the beneficiaries equally;
  • To benefit the correct beneficiaries – trustees will be liable if they wrongly benefit people who are not beneficiaries of the trust;
  • To act unanimously – unless the trust deed states otherwise, the trustees must make decisions together;
  • To actively participate – a trustee cannot “sit back” and rely on the co-trustees to make the decisions;
  • To invest and manage the trust assets with care, diligence and skill as a prudent business person would. Professional trustees have a higher standard and must exercise the level of care, diligence and skill that a prudent person in that profession would;
  • To not profit personally from their position as trustee – this requires trustees to act voluntarily and without payment for their services, except in specific circumstances;
  • To understand and comply with the terms of the trust deed, other trust documents, the Trustees Act 1956 and all trust property;
  • Not to delegate their decision-making powers, except in very specific circumstances (i.e. where a trustee is overseas or physically unable to participate);
  • To keep proper records and give information as required if that information is necessary to ensure that the trustees have acted properly.

The above duties apply regardless of whether you are a trustee of a family trust or an executor appointed under a will.

Proposed changes

The New Zealand Law Commission is currently reviewing the law of trusts in New Zealand. Part of that review has been the proposal of a new Trusts Act to replace the current Trustee Act 1956. The final report by the Law Commission is due to be released towards the end of 2013.

Conclusion

In summary, the times – and trusts – are changing. If you are a trustee and have any doubts about your duties or the way the trust is being run, you should seek legal advice.

If you would like further information please contact Amanda Hockley on 07 958 7451.

Franchise disputes: What does that dispute resolution clause mean?

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Like any contract, your Franchise Agreement is likely to include a “Dispute Resolution” clause which sets out the process if things go wrong. While dispute resolution clauses can vary, the key features are typically the same.

The process will generally include a number of steps which escalate in terms of complexity and therefore cost. The intention is that it is in the parties’ best interests that the dispute is resolved as quickly and cheaply as possible.

Set out below is what you might see in a typical Dispute Resolution clause.

Good faith/mutual negotiation

This is often found as a first step in the process (including in the Franchising Association template clause). There are no hard and fast rules as to what this means but, if included, it generally means a party cannot simply escalate the dispute without first undertaking some sort of discussion or correspondence setting out the issues.

Mediation

Mediation is typically the first “formal” step. It is formal in that it requires the involvement of a third party whose job is to try and help the parties towards a resolution. Key features of mediation:

  • It will start as a face to face meeting between the parties (and/or their lawyers) and the mediator;
  • It is “without prejudice”. This means that unless you reach an agreement, any concession made at the mediation will be “off the record” and cannot be referred to at a later point;
  • The mediator’s role is to facilitate discussion and ensure the parties have their say; and
  • The mediator will not make a decision. It is up to the parties to reach an agreement if they can.
Arbitration

If the parties could not agree at mediation (or did not have to go through mediation), Arbitration is usually the next step. It is best thought of as a private Court proceeding. Key features are:

  • The process can be tailored to suit the nature and complexity of the dispute;
  • It is typically faster and more cost effective than a Court proceeding; and
  • The arbitrator will make a decision that will be binding on the parties.
Things to look out for

Do you actually have a dispute? – While “dispute” is often not defined in franchise agreements, a common sense definition is typically applied. For example, if there is simply a debt owed by the franchisee to the franchisor, that is not in itself a dispute which would trigger the Dispute Resolution clause.

Are the steps compulsory? – Key words to look out for are “may”, “must” and “shall’. It is not uncommon to see a clause along the lines of “the parties may refer the dispute to mediation”. Therefore unless the parties agree, the mediation step may not occur. There is of course the ability for the parties to vary the dispute resolution process, if they both agree.

Summary

It is important to have an understanding of what your dispute resolution process is. There is a real risk that if you get it wrong (such as missing a compulsory step), you could significantly complicate the process and potentially compromise a later binding decision.

Daniel is an Director in our Dispute Resolution Team and can be contacted on 07 958 7477.

Phoenix law and the Companies Act

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Introduction

A “phoenix company” is a company which has emerged from the collapse of another through insolvency. The new company is set up to trade in the same or similar trading activities as the former, and is able to present the appearance of “business as usual” to its customers. In this instance the owners and managers decide to abandon a failed company and start a similar business with a new company. Phoenix companies, as the name suggests, rise from the ashes of failed companies with similar names and similar or the same directors.

The provisions under the 1993 Act

The phoenix law provisions are set out in sections 386A to 386F of the Companies Act 1993 (“the Act”). In summary these provisions prohibit a director of a failed company from being a director of, or involved in the promotion, formation or management of a company that has a similar name to that of the failed company. The new company is referred to as “a phoenix company” in that it arises out of the ashes of the old company by virtue of it having many of the same personnel, and usually the key assets, of the former company.

Likewise, a director of a failed company may not be involved in the carrying on of a business that has the same or similar name to that of the failed company. Under a specific criteria, the law allows a liquidator to sell a business to a related party of the old company.

Section 386D of the Act

The phoenix law prohibitions mentioned cease to apply if the parties adopt the “successor company procedure” established under the Act.

Under this procedure, the “phoenix” or successor company must acquire the whole, or substantially the whole, of the business of the former company from a liquidator or receiver of it, or under a deed of arrangement made under the Act. The creditors of the former company must be notified of the acquisition and of the relevant other details including the proposal that the former directors become directors, or involved in the management of the successor company.

Creditors may be placed in an awkward position when they ask for payment from the phoenix company only to be told that their debts are owed by the former company only. Creditors are more likely to be misled by the directors starting a company with a new name than one with the old name. Yet, the regime has no application where a new name is used.

Alternatively, the purpose of the regime may be to deny the director and shareholders advantages that there might be in using the company’s name, otherwise the phoenix company would not want to adopt a similar name. It is not apparent that any difficulty arises where the relevant director has paid full value for the goodwill associated with the name. The Courts have noted that any goodwill must be provided for in the acquisition of the former company’s assets by the phoenix company. Even where it is only the name that is common to the former company, the law may allow the liquidator of the former company to recover payment for its use. However, the nature of the new provisions provides an incentive to ensure that adequate value is paid for the use of the name.

At the same time the successor procedure may slow down the restructuring of businesses because of the need to ensure that the transferring company goes into liquidation, receivership or voluntary administration before a transfer of the assets occurs.

Example from case law

In Sojourner v Robb [2008] 1 NZLR 751 (CA) the relevant company had a successful engineering business making fibreglass and other products, including small boats, bus bodies, and shower enclosures for bathrooms. It extended into building large catamarans on commission which proved uneconomic and led to a dispute with the plaintiff.

The defendants responded by causing the company to cease to trade, and by transferring most of its assets to a new company with a very similar name. While realistic prices were paid for the tangible assets, nothing of substance was paid for the goodwill of the old business. The directors and staff moved to the new company, and business returned to normal. In the High Court, Judge Fogarty found that the defendants were in breach of their duties of loyalty to the company by failing to obtain value for the company’s goodwill, a figure estimated to be in the region of several hundred thousand dollars.

It appears that as part of the restructuring the directors paid off the general creditors of the company, but left nothing for the claims of the plaintiff. It is suggested here that directors, even after insolvency, can pay some creditors ahead of others if there is good reason to do so. It is doubtful whether this is consistent with the general duties, after insolvency, for directors to preferentially pay some creditors, nor to withhold payment deliberately to shut out a particular claimant.

The Court decided that directors must ensure that they do not profit from the transfer of assets to the phoenix company. Where the assets have a greater value to them, as associates of the phoenix company, than to the market, they would be accountable for that difference. That obligation applies as much to the sale of the company’s goodwill as to its other assets. Where directors want the new company to continue to use the old company’s name is a strong indication that there is some goodwill attached to the old company’s business. The Court of Appeal affirmed that the onus lies on the directors to show that a sufficient amount was paid. Given that on the facts of this case nothing was paid, the defendants were vulnerable to a sum being awarded against them.

Conclusion

Both directors and creditors of companies need to be aware of the phoenix law provisions. Directors need careful legal advice to ensure their companies are not engaging in illegitimate phoenix activity. In addition, creditors of companies should take legal advice, as the new provisions open up potential liability against those who may be involved in such activity.

Jerome is a Senior Solicitor in our Māori Legal Team and can be contacted on 07 958 7427.

Further changes to the taxation of lease payments

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Introduction

There have been a number of changes in relation to lease inducement and lease surrender payments in 2013. Previously, lump sum payments to terminate or to induce entry into leases were treated as capital even though these payments were generally in substitution for rental income. From 1 April 2013, these payments are no longer treated as capital. Inland Revenue is now proposing broader changes to payments relating to leases, other interests in land, and licences to use land.

Proposed changes

The broad principle underlying the proposal is that a payment to acquire, dispose of, or terminate an interest in land or a licence to use land should be treated as income to the recipient and (if the deductibility tests are met) as deductible to the payer. This rule applies even where such amounts  would ordinarily be of a capital nature. A new rule would allocate income or expenditure (as the case may be) evenly over the life of the relevant right for the recipient or payer.

The latest proposals, if passed into law, will affect tax treatment of payments relating to land rights:

  • From 1 April 2014 at the earliest;
  • With a life of less than 50 years (not including periods of renewal or extension);
  • In relation to commercial leases and other land rights (but does not apply to residential tenancies).

There is a matching deduction provision which would apply to such payments. As part of “rationalising” the existing rules, the “right to use land” category of depreciable intangible property would be repealed.

Examples

Some examples of application include:

  • Contributions toward fit-out costs;
  • Payments associated with the assignment of a lease. Where an incoming tenant is making a  payment for the transfer of a lease with a term  of less than 50 years, the payment would result in taxable income to the exiting tenant. The exiting tenant would be required to return its income when derived because it is exiting the lease and has no remaining term over which to spread the income. The incoming tenant would be required to spread the expenditure over the remaining term of the lease.

Under current law, the assignment payment would generally be a non-taxable capital receipt for the exiting tenant and depreciable to the incoming tenant.

Conclusion

Landlords and tenants need to be aware that the tax treatment of lump sum payments relating to commercial leases or other land rights is now subject to two separate stages of reform, each with a different application date.

If you would like further information please contact Dale Thomas on 07 958 7428.

Resource Management Act side agreements: Is it acceptable to purchase approvals?

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The Resource Management Act 1991 (“RMA”) sets out the process undertaken by consent authorities (i.e. District and Regional Councils) in relation to applications for resource consents. Such applications are processed on a notified or non-notified basis, which determines the extent of public participation in the process.

There are two levels of notification, either full public notification or limited notification to adversely affected persons. When determining whether an application is to be notified and to what extent (a decision which is usually delegated to a council officer), the officer must among other aspects consider whether the application will have “more than minor” adverse effects on the environment. However, when evaluating those effects the officer must disregard effects on people who have given their written approval (in addition to a number of other matters). As a result of this test, applicants can avoid notification of an application (to the extent public notification is not required) by obtaining written approval from affected persons. One way of getting this approval is to enter into so called “side agreements”.

What is a side agreement?

A side agreement is a private arrangement between the applicant and an affected person (who would otherwise have been notified of the application and would have been entitled to participate in the decision-making process). Such agreements are entered into on a private, contractual basis and do not form part of the resource consent process.

A side agreement allows an applicant to effectively purchase the approval from affected persons, usually by offering a monetary sum which adequately takes into account the effects that person will suffer. In 1998, the then Parliamentary Commissioner for the Environment, Morgan Williams, described it as follows:

“Side agreements are any agreements entered into to obtain the written approval of an affected person. [They] may avoid notification of an application, seek to mitigate adverse environmental effects, or to realise an opportunity for financial gain.”

Based on the fact that side agreements are separate from the resource consent process, the officer managing the resource consent application does not need to be informed of the fact that a side agreement has been entered into, let alone its content. This means that the consent authority will have to rely solely on the information provided by the applicant in deciding whether the application should be approved or not.

What does the Environment Court say?

So far, the Environment Court has acknowledged that side agreements are entered into but has chosen to not interfere with or comment on the ethics of this practice. In BP Oil NZ Ltd v Palmerston North City Council *1995+ NZRMA 504, Judge Treadwell noted that it is of no concern to the Court to investigate whether written approvals from affected persons have been enticed by unconscionable means:

“[It] is open to a developer in terms of the Act [to pay for consents from affected persons] because a person who considers he may be adversely affected can effectively be compensated for that fear.”

More recently in Waitakere City Council v Estate Homes Ltd *2007+ 2 NZLR 149, the Supreme Court made the following statement in relation to the ability of applicants to enter into side agreements:

“There is an obvious alternative to the approach taken by the Council in this case of using the statutory planning consent process … It would be open, although not necessarily as advantageous to local authorities, for them to proceed by way of side agreements with developers to undertake certain work, and provide where necessary additional land, for an agreed amount of compensation. Such side agreements could be reached prior to consent decisions being taken by the local authorities. This approach would dispense with the need for councils to impose conditions requiring additional services and works, while at the same time committing themselves to payments for the additional element.”

This topic has been the subject of much debate among lawyers and planners alike and the practice continues to raise qualms about its appropriateness.

What are the disadvantages?

The disadvantages of side agreements are numerous. Perhaps one of the most significant disadvantages is the fact that these agreements do not have to be entered into on the basis of a resource management purpose, whereas consent conditions (which are imposed as a way to take into account effects on affected persons) are usually imposed as a way to mitigate adverse effects on the environment.

There is also a general fear of proposals being lazily evaluated when all affected persons have given their written approval. The danger in applications being less vigorously assessed by the consent authority is the increased risk that private interests are given priority, usually at the cost of the purpose of the RMA which is to ensure sustainable management of our natural and physical resources.

Concerns have also been raised about the potential for financial imbalances between the parties. Such an imbalance can give rise to a couple of situations:

  • The prospect of receiving a financial payout could lead to threats of objections when in actual fact none would be lodged; and
  • Affected persons with limited means could be “bullied” into signing side agreements which do not address actual environmental concerns.

The lack of consideration for adverse effects on the environment and the risk of compromising environmental values also affects future owners of a site, who are unable to take part in the process and gain no benefit from the side agreement. As a result, side agreements effectively only address private interests of the current owner/s.

Are there any advantages?

As with any private arrangements, there are of course benefits to side agreements as well. One obvious advantage is that based on the voluntary nature of entering into a contract, it is unlikely that an agreement would be entered into unless all parties are satisfied that the monetary sum received justifies the environmental outcome. In actual fact it is simply a transfer of work from the applicant to the party receiving the money (who is then able to undertake any necessary work which remedies the adverse effects).

In addition, private arrangements at least have the ability to create flexible and innovative compromises. Whilst side agreements usually consist of compensation in the way of money, there is nothing to stop parties from agreeing to more inventive terms which adequately accommodate the concerns of the affected party. This could for instance include a design improvement better tailored to the environment, as noted by the Supreme Court in Waitakere.

The result of an applicant obtaining written consents from all affected parties is a reduction in processing time of consent applications. This frees up time for the consent authority and allows an officer to spend time on other matters.

Concluding remarks

Arguably, private arrangements have a place in the resource management process just as they do in other areas of law. The question is what actions the Environment Court and/or consent authorities could or should take in relation to such arrangements and whether there is any ability to control what terms are entered into between parties affected by a resource consent application. To ensure that the purpose of the RMA ultimately continues to be upheld, it is important that these agreements are subject to at least some public scrutiny. Whether the right place for such scrutiny is in the Environment Court is questionable given the current statutory restrictions for this Court to review such agreements.

If you would like further information please contact Dale Thomas on 07 958 7428.

Implementation Anti-Money Laundering and Countering Financing of Terrorism Act 2009

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The legislation

On 30 June 2013 the Anti-Money Laundering & Countering Financing of Terrorism Act 2009 came into force. The new legislation aims to identify money laundering proceeds which have been generated from underlying criminal activities.

What is money laundering and terrorist funding?

“Money Laundering” is the process of disguising money that has originated from illegal activities, which is then ‘laundered’ in an attempt to make the money appear as if it has come from a legitimate source.

Financiers of terrorist activities adopt similar techniques to money launderers, with an emphasis on concealing the identity of the individuals or groups involved in the transaction. An example may be transferring $9,999.99 between individuals to avoid reaching the $10,000.00 threshold which could automatically trigger a financial institution to look further into the transaction.

The impact on New Zealand

Despite New Zealand being geographically distant from international terrorism, New Zealand is not immune to terrorist activities. With advances in technology, it is now much easier for criminals/terrorist to take advantage of countries with minimal money laundering or terrorism regulations. Terrorists do this by depositing and withdrawing money through other countries banking systems, therefore minimising the threat of being caught by their own country’s authorities.

By implementing this legislation, New Zealand is building and enhancing its international reputation. New Zealand cannot be seen as a ‘weak link’ as this could detrimentally affect New Zealand businesses which may be subject to costs, delays and other barriers when trading internationally.

How will it affect consumers?

Customers of a financial institution (including banks and finance companies) may notice more stringent processes in comparison to the period prior to the legislation coming into effect. A request to your bank which may have once seemed relatively simple, may now involve customers having to provide copies of additional documentation, such as certified copies of photo identification, confirmation of address, or a pay slip to verify the source of income.

When requesting a service or product from a financial institution, each component of the requests must be assessed by the financial institution in order to be legally compliant. A customer will be required to provide identification; provide details of individuals who will benefit from the transaction and may be required to justify the transaction among other things.

All information gathered under the new legislation is protected in accordance with the Privacy Act 1993.

If you would like further information please contact Laura Monahan on 07 958 7479.

Feedback sought on possible tax changes for deregistered charities

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Introduction

IRD has released a consultation paper seeking feedback on proposals to clarify the tax rules that apply when a charity is removed from the Department of Internal Affairs’ Charities Register.

There are many benefits for an entity which qualifies as a registered charity, including tax-exempt status. However when a charity is deregistered it can face significant tax consequences, depending on the reason for deregistration. This issue has resulted in uncertainty for some entities.

The paper seeks to canvass public opinion on proposed changes to the tax rules that could help to deal better with the varied circumstances of charities when they are deregistered. These include:

  • Clarifying how the general tax rules, including the company, trust or other entity-specific regimes, apply to deregistered charities;
  • Establishing the opening values of any depreciable property or consideration for any financial arrangements held by a deregistered charity when it becomes a tax-paying entity; and
  • Prescribing specific timing rules for when the tax provisions apply.

Feedback is also being sought on whether additional measures might be helpful to ensure that affected charities are aware of their tax obligations following deregistration.

The complete paper is available on the IRD website.

Proposed solution

The paper outlines the proposed solution as follows:

Situation
Timing
A charity that came into existence after 1 July 2008 has been deregistered by the Department of Internal Affairs.Subject to tax on income earned from the effective date of deregistration.
A charity that came into existence after 1 July 2008 has been deregistered because it was found by Charities Services or the Courts not to have a charitable purpose.Subject to tax on income earned from the date on which the entity was found not to have a charitable purpose.
A charity that came into existence after 1 July 2008 has voluntarily deregistered and Inland Revenue has found the entity not to have had a charitable purpose.Subject to tax on income earned from the date on which the entity was found not to have a charitable purpose.
Before 1 July 2008 Inland Revenue had confirmed that the charity was entitled to the charities related income tax exemption and Charities Services (or its predecessor) has either declined its application or deregistered the charity, after 1 July 2008.Subject to tax on income earned from 1 July 2008.
Before 1 July 2008 the charity made a self assessment that it was eligible for the charities related income tax exemption and Charities Services (or its predecessor) has either declined its application or deregistered the charity after 1 July 2008.Subject to tax on income from 1 July 2008. Such charities might be required, however, to provide evidence to Inland Revenue that they were eligible for the charities-related income tax exemption before 1 July 2008.
A charity that came into existence after 1 July 2008 has been deregistered by Charities Service.Subject to tax on income earned from the effective date of deregistration.

Source

If you would like further information please contact Jessica Middleton on 07 958 7436.

Employment Relations Amendment Bill: Potential changes to consider

Posted on by au_common_admin
Introduction

The Employment Relations Amendment Bill was introduced into Parliament on 26 April 2013 and passed its first reading on 5 June 2013. The Bill introduces many changes to the Employment Relations Act 2000 relating to the following key areas:

  • Restructuring and the Privacy Act
  • Collective Bargaining
  • Trial periods
  • Flexible working hours
  • Part 6A (vulnerable workers)
  • Rest and meal breaks;
  • Strikes and lockouts
  • Employment Relations Authority decisions
Restructuring and the Privacy Act

Following the recent Employment Court decisions, some uncertainty arose in terms of what information employers are required to release to those interviewed for prospective jobs. The Amendment Bill provides a specific list of information which an employer does not have to disclose particularly in relation to confidential information.

Collective bargaining
Concluding bargaining

Currently the parties in employment relationships are required to conclude bargaining on collective employment agreements unless there is a real reason not to do so. In addition to this, the parties are also required to continue bargaining even though when deadlock has been reached. The Amendment Bill seeks to remove the requirement to continue bargaining when deadlock has been reached and repeals the section which requires parties to conclude a collective agreement. The Amendment Bill emphasises good faith negotiations rather than negotiations merely for statutory requirements.

Initiation of bargaining timeframes

The current law allows for different time periods between employer and employee for initiating bargaining when renewing existing collective agreements. The Amendment Bill seeks to align both employer and employee time limits for the various steps that are to taken.

Opting out of multi-employer bargaining

Under the Amendment Bill, multi-employer bargaining may be opted out of within a ten day period. This must be by notice and must be served on all parties without going through the current provisions and steps for bargaining to reach settlement.

Ending collective bargaining

Currently the Act assumes that parties will continue to bargain until settlement is reached. The Amendment Bill seeks to allow parties who are no longer interested in bargaining to ask the Employment Relations Authority to declare bargaining as concluded.

Offering the collective agreement to new employees

Currently when a new employee begins employment where collective agreements are available, the employee has benefit of the terms and conditions under the collective agreement (for the first 30 days) and any specific individual terms negotiated. The Amendment Bill removes the automatic adoption to the collective agreement terms and conditions availability but rather allows the employer to inform the employee about these should they wish to be part of it.

Flexible working
Reasons for requests

Currently employees have a statutory right to request flexible working hours when three criteria apply (care of another person; six months service to the employer and the employee has not made a request in the last twelve months). The Bill removes these criteria allowing any employee to make a request at any time.

Timing of response by employer

Currently an employer is required to respond within three months. Should the Bill be passed, employers must respond within one month.

Part 6A

Part 6A was inserted in 2004 and substituted in 2006 as a protection for employees (typically in service industries) who have been affected by a restructure followed by the same or a similar service being done by another employer. The Bill allows for more certainty and security for “vulnerable workers” in terms of the time by which employees must choose to transfer by, liability for transferring service-related entitlements, change of pay rates and conditions, and the transfer of information.

Meal and rest breaks

The proposed amendments would take away the stringent regime for meal breaks allowing employees to take breaks when reasonable and necessary in the course of work period. Meal and rest breaks must provide the employee with reasonable opportunity to rest, attend to personal matters, for refreshments and be appropriate for the duration of the work period.

Strikes and lockouts

The Bill allows employers to deduct pay for a partial strike by employees to the value of productivity that was lost during the strike time (apart from a lawful partial strike on health and safety grounds). In order for the strike to adhere to statutory requirements, the employer must be given notice, following which the employee must be notified of any deductions that are to be made. Minimum wage provisions will not apply to the extent that the person is paid less than the minimum wage because of a deduction due to a partial strike.

Employment Relations Authority decisions

The Bill will require the Authority to deliver a written decision within three months of the investigation meeting as well as giving an initial indication of what the findings of the ERA might be.

How this will affect you

The Bill sets out a number of potential changes to the current Act. It is important to note that these changes are not in effect yet, and there are a number of steps in the process before any of these changes can take effect. There have been no dates indicated at this stage.

If you would like further information please contact Renika Siciliano on 07 958 7429.

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