Minister of Commerce Simon Power has recently announced proposed
changes to the Companies Act 1993 that will require all
New Zealand incorporated companies to have either a New Zealand
resident director or a local agent. At present, although all New
Zealand companies are required to have a New Zealand registered
office and address for service, there is no requirement that any of
the directors be resident in New Zealand.
What is the reason for the changes?
In the press release announcing the proposed changes Mr Power
stated that the measures are designed to shore up New Zealand's
company registration process against criminal activity from
overseas. According to Mr Power 'our company registration
processes are highly-respected but there have been increasing
threats to our international reputation posed by overseas interests
which use New Zealand-registered companies to undertake criminal
activity. These changes will help ensure New Zealand retains its
position as one of the best places in the world to do
New Zealand has one of the most liberal regimes in the world for
incorporating companies and is ranked number one in the world
according to the World Bank Ease of Starting a Business Index with
an average time to start a business of just one day. This compares
to an average period of 13 days for the United Kingdom and six days
for the United States. This liberal regime is of benefit to New
Zealand companies, and overseas companies wishing to do business in
New Zealand, but it also makes New Zealand potentially attractive
to international criminal groups. This is particularly the case as
there is currently no requirement for any of the information
provided in relation to the details of directors or shareholders of
a company to be verified. This year a New Zealand registered
company, SP Trading Limited, was used to charter a Georgian plane
to fly 35 tonnes of North Korean explosives and anti-aircraft
missiles to Iran. The arms were seized in Bangkok airport. As Mr
Power has identified, New Zealand does not want to become a haven
for international crime and terrorism.
This latest move by the Government, along with the recent
passing of the Anti-Money Laundering and Countering Financing of
Terrorism Act 2009, can be seen as attempting to bring New Zealand
into line with overseas standards relating to the regulation of
organised crime and terrorism. It will also bring New Zealand into
line with Australia, which has similar requirements.
What will be the consequences of the changes
The proposed changes will affect a number of overseas companies
that operate businesses in New Zealand. All companies that
currently have solely overseas boards will need to appoint a New
Zealand director or local agent. Importantly, the New Zealand
resident directors or agents will be responsible for ensuring
companies provide accurate information to the Registrar of
Companies and will be liable if companies breach their filing
requirements under the Companies Act. It is stated in the press
release that the changes will also apply to New Zealand limited
partnerships. However, it is not clear whether the changes will
also apply to branches of overseas companies registered in New
Zealand. Further information will be available once the bill is
introduced to Parliament.
What other changes are proposed?
In addition to the requirements for a New Zealand resident
director or local agent Mr Power also announced enhanced powers for
the Registrar of Companies to deal with companies where there is a
concern that the information about the company on the register is
false or misleading. The Registrar will be entitled to take action
to remove a company from the register in these circumstances.
When will these changes be introduced?
The press release states that a bill will be introduced to
Parliament next year. The resulting Act will come into force some
time after that. It is not clear if there will be a transition
period allowing existing companies some time to comply with the new
regime. We will issue a further update once a draft bill is
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