Important Updates in the World of Business

The Government is taking further steps to modernise the (somewhat archaic) Companies Act 1993 (the Act), with Hon Andrew Bayly, Minister of Commerce and Consumer Affairs, recently announcing the Government's backing for a comprehensive reform package.

The broad purpose of these reforms is to simplify business in New Zealand, including by reducing business compliance costs – all of which is good news and potentially long overdue.

The reforms are set to roll out in two phases starting in 2025:

• Phase 1: The focus here will be on updating and modernising the Act, simplifying compliance for businesses, and strengthening measures to prevent unethical and illegal business practices.
• Phase 2: This second phase will involve the Law Commission reviewing the directors' duties set out in the Act, giving particular attention directors’ liability, sanctions, and enforcement.  Some of this review has come off the back of the Mainzeal case – see our article on that here.

What Will Happen in Phase 1?

Time to bring the Act into the 21^st century

The Act is some 30 years old, and is still a key piece of legislation for businesses operating in New Zealand.  Time has obviously moved on, and the amendments to the Act seek to bring it into the present, by:

• simplifying the process for share capital reduction, reducing the need for expensive and time-consuming court approvals;
• similarly, enabling more broad use of unanimous shareholder consent processes (e.g. for share issues or conversions, and the company acquiring its own shares to be held as treasury stock);
• updating the definition of "major transaction" to exclude those transactions that solely a company’s capital structure (e.g. share issues, buy-backs, declaring dividends and redeeming shares), but also to provide that a series of transactions that are related to each other can also be caught by the definition;
• enabling certain company documents to be accessed online rather than manually; and
• introducing procedures for managing unclaimed dividends where a shareholder cannot be contacted.

Know who you’re dealing with

One of the key aims of the reforms is to strengthen the processes for identifying and preventing unethical/illegal business practices; this involves being able to more easily identify persons in control, while still protecting their privacy.  This will include:

• introducing unique identifiers for directors and general partners of limited partnerships; and
• allowing directors to use services addresses in the company’s public records, rather than their private residential addresses.

Protection for creditors if it all goes wrong

These proposed amendments will seek to incorporate the recommendations of the Insolvency Working Group set up in 2015, and importantly will extend the “claw back period”, within which related party transactions undertaken prior to liquidation can be voided, to four years.

NZBN? What’s that?

Most of us are familiar with the concept of an NZBN, but more commonly use the more traditional Companies Office number when referring to companies.  The proposed amendment would seek to increase the use of the NZBN, potentially improving business efficacy and identification.

What next?

All going well, the bill to introduce Phase One will be introduced in 2025 at which stage submissions will be open to the public. 

But I’m not happy with this?

If you are keen to find out more, including what you need to do to make a submission, please get in touch.