Mayne Wetherell has produced a guide to doing business in New Zealand to provide overseas investors, and their advisers, with information about investing here.
The guide summarises inbound investment, immigration, investment structures, financial services regulation, tax, securities, takeovers, intellectual property, employment, land law, and trade practices.
Useful links to market events and commentary.
Supreme Court rules property developer breached duties
A Supreme Court ruling has underlined the need for company directors not to breach their duties towards other creditors if the company is in or near insolvency. The court has upheld a High Court decision which ruled the director of a property development company, Debut Homes, breached three of his director’s duties and must contribute towards the company's liquidation. The court’s panel of judges said when a company became insolvent, there were ''statutory priorities for the distribution of funds to creditors, and mechanisms to ensure these are not circumvented''. ''If a company reaches the point where it is clear that continued trading will result in a shortfall to creditors and the company is not salvageable, then continued trading will be in breach of section 135, unless formal or informal mechanisms in the nature set out above are used.'' Directors also had an obligation under section 136 to not enter into debts where there were ''no reasonable grounds to believe the company will be able to perform its obligations when they fall due''. The situation was made worse by his conflict of interest, ''having given personal guarantees of the secured debts owed by Debut''. It confirmed the general security agreement should be set aside and compensation made, as well as costs of $25,000.
Companies Office: Safe harbour for company directors for ends 30 September
The temporary ‘safe harbour’ provisions for company directors insolvency-related duties has now expired. The ‘safe harbour’ from ss 135 and 136 of the Companies Act 1993 was outlined in the COVID-19 Response (Further Management Measures) Legislation Act 2020 and was intended to provide relief to company directors facing insolvency as a result of COVID-19. It was due to and did expire on 30 September 2020 as planned.
Reserve Bank: Maintaining monetary and financial stability and delivering on our commitments
The Reserve Bank (RBNZ) has released its annual report for the 2019-2020 year. In the recent press release the RBNZ outlines its ‘highlights’ included in this year’s Annual Report, including; 1) successfully launching a new payment and settlement system, 2) Completing our bank capital requirement decisions; 3) Supporting work to modernise the Reserve Bank’s governance, operating powers and objectives through new Reserve Bank legislation and 4) Agreeing a new Funding Agreement for the next five years. The report states that the surplus for the year is $371 million. While this is an increase of $128 million on the previous financial year, the RBNZ have recommended, and the Minister of Finance has agreed, that no dividend will be paid to the Crown for 2019-20, given the uncertainty about further actions that might be needed to achieve its policy objectives and the impacts of COVID-19 on the New Zealand economy.
Insolvency Practitioners Register Goes Live
The recently enacted Insolvency Practitioners Regulation Act requires all insolvency practitioners to be licensed, and meet regulated minimum standards of honesty and competence, in order to take on any insolvency engagement (e.g. liquidation, receivership or administration). The publicly accessible Register identifies if an insolvency practitioner is licensed and has relevant information on their professional history, allowing businesses to make informed decisions about insolvency engagements. The Registrar of Companies has published minimum standards, conditions and requirements for ongoing competence for the licensing of insolvency practitioners, and minimum standards for the accreditation of bodies.
Beehive: New Zealand first in the world to require climate risk reporting
New Zealand will be the first country in the world to require the financial sector to report on climate risks, the Minister for Climate Change James Shaw announced today. The new regime will be on a comply-or-explain basis, based on the Task Force on Climate-related Financial Disclosures (TCFD) framework, which is widely acknowledged as international best practice. Businesses covered by the requirements will have to make annual disclosures, covering governance arrangements, risk management and strategies for mitigating any climate change impacts. If businesses are unable to disclose, they must explain why. In total, around 200 organisations will be required to disclose their exposure to climate risk. This includes large Crown Financial Institutions, such as ACC and the NZ Super Fund. If approved by Parliament, financial entities could be required to make disclosures in 2023 at the earliest.
Companies Office: Safe harbour for company directors to expire 30 September
The Companies Office reminds company directors that the temporary "safe harbour" from their insolvency-related duties will expire on 30 September 2020 as planned. "The Government introduced a temporary change to the Companies Act earlier this year to ease pressure on company directors facing significant liquidity problems as a result of COVID-19. Company directors who have made use of the safe harbour are encouraged to start preparing for their insolvency related directors’ duties resuming on 30 September. Any company director who has concerns about meeting these duties is encouraged to seek legal advice. "While the safe harbour will no longer be available after 30 September, the Government can re-instate the provision quickly should there be a need to do so. "Other forms of financial support are still available for business in difficulty as a result of COVID-19, such as Business Debt Hibernation (BDH), which is available until 24 December 2020.