Companies and Limited Partnerships Amendment Bill

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01 July 2013

posted in Business | Legislation | International | Company Law

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The Companies and Limited Partnerships Amendment Bill (Bill), currently before Parliament, proposes a number of changes to the Companies Act 1993 and the Limited Partnerships Act 2008. The proposed changes relate to:

  • prevention of New Zealand’s registration system for companies and limited partnerships being misused by overseas entities, including:
    • a requirement for all New Zealand registered companies to have a director who lives in either New Zealand or an enforcement country (i.e. a country with which New Zealand has reciprocal arrangements for the enforcement of low level fines), with corresponding requirements for the general partner of New Zealand registered limited partnerships; and
    • extending the powers of the Registrar to regulate companies and limited partnerships, and a requirement for additional information in respect of directors and general and limited partners to be provided at registration;
  • criminalisation of breaches of certain directors’ duties; and
  • creation of a new process for regulating the amalgamations and schemes of arrangement for code companies under the Companies Act.

Director/General Partner Requirement

Under the Bill, all future and existing New Zealand registered companies and limited partnerships will need to comply with the requirement to have:

  • at least one New Zealand resident director or a director who is resident in an enforcement country (and is a director of a company registered in that enforcement country), in respect of companies; and
  • at least one general partner who is:
    • a natural person who lives in New Zealand or an enforcement country (and is a director of a company registered in that enforcement country); or
    • a partnership governed by the Partnership Act 1908 and that has one or more partners who are natural persons living in New Zealand or an enforcement country; or
    • a company registered under the Companies Act 1993. Such a company will be required by the above changes to the Companies Act to either have a director who is resident in New Zealand or in an enforcement country (and is a director of a company registered in that enforcement country),

in respect of limited partnerships.

A transitional period will apply to allow existing companies and limited partnerships sufficient time to comply with the proposed changes.

Additional Information Requirements

Information on the date and place of birth and residential addresses of directors of companies or partners of limited partnerships who are natural persons will need to be provided to the Registrar at registration and kept up to date. Notwithstanding the fact that the Bill has not yet been passed, in some instances, we are already being asked to provide this information to the Registrar when incorporating new companies. The name of a company’s ultimate holding company (if it has one) will also be required to be disclosed at registration and kept up to date.

Enhanced Powers of Registrar

Under the Bill, the Registrar will have the power to find out, for law enforcement purposes, information about the beneficial ownership of, or those who have controlling interests in, companies and limited partnerships (including, for example, directions or delegations in relation to a power of control) relating to the management or administration of a company or limited partnership.

The Bill also expands the grounds on which the Registrar may remove a company from the register, including, where:

  • the Registrar has reasonable grounds to believe that the company, or one or more of its directors, officers, or shareholders, has intentionally provided the Registrar with inaccurate information; or
  • the Registrar has reasonable grounds to believe that the company, or one or more of its directors, officers, or shareholders, has failed to comply with duties relating to the company under the Act of the Financial Reporting Act 1993 in a "persistent or serious way”.

Criminalisation of breaches of certain directors’ duties

The Bill introduces criminal sanctions for breaches of certain directors’ duties. Directors will face criminal sanctions if:

  • they act in bad faith towards the company, believing the conduct is not in the best interests of the company, and knowing, or being reckless as to whether, the conduct will cause serious loss to the company or benefit someone other than the company (Best Interests Duty); or
  • they allow the company’s business to be carried on in a manner that causes serious loss to the company’s creditors, knowing that a serious loss will be suffered by the creditors as a result, and the creditors did not give their prior consent to that conduct.

There is a defence available in relation to a breach of the Best Interests Duty in relation to holding companies and joint ventures provided that the relevant conduct was in the best interests of the holding company or shareholders respectively, the constitution of the company expressly permits the directors to act in the best interests of the holding company or shareholders respectively, and in respect of joint ventures, that the shareholders have given their prior consent to the relevant conduct.

POSTED BY
01 July 2013

posted in BusinessLegislationInternationalCompany Law

VIEWED 3973 TIMES

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