Most Read Contributor in New Zealand, September 2016
The Regulatory Reform Bill will "slash red tape",
according to its sponsor, Rodney Hide. And indeed the Bill will
remove a lot of unnecessary bureaucratic clutter. But, almost by
definition, most of the changes – while useful - are
small and technical in nature.
In our view more substantial amendment to the Companies Act 1993
is required to fix long-standing technical gaps and to catch up
with the modernisation of company law in other countries.
The omnibus Bill had its first reading last week. This Brief
Counsel summarises the key amendments of relevance to business.
Changes to the Companies Act and Unit Trusts Act
Electronic documentation, voting and meeting participation
These changes were sought by the Listed Companies Association
(LCA) executive in April 2009 and have been more recently endorsed
by the NZ Shareholders' Association and Minister of Commerce
Simon Power. The changes will reduce compliance costs and bring
New Zealand into line with other jurisdictions.
Schedule 1 to the Companies Act will be amended to explicitly
allow electronic voting on the appointment of proxies and on
resolutions put (or to be put) to a shareholders' meeting. This
clarification is necessary to remove doubts raised by some lawyers
- incorrectly in our view - that this is not permissible under
Provisions in sections 388, 390 and 391 of the Act will also be
amended to make it clear that shareholders may opt to receive
The LCA executive (of which Chapman Tripp Partner Roger Wallis
is a member) estimates that aggregate cost savings of around NZ$1.5
million a year could be generated among listed companies assuming a
30% uptake of electronic voting facilities and use of these
facilities for one voting process per shareholder each year.
The requirement that a listed company must notify each
shareholder when buying back its own shares on the stock exchange
(Section 65(2A) of the Act) will be repealed. This will remove a
totally redundant compliance cost as NZX Listing Rule 7.12 already
requires companies to advise the stock exchange of an on-market
buy-back by the end of the same trading day.
Other changes will:
enable the establishment of an interest rate for minority
buy-outs without the need to employ an arbitrator where the price
of the shares has not been subject to arbitration (this will also
remove an unnecessary administrative cost)
improve the effectiveness of the voluntary administration
regime by requiring that the termination of a DOCA (deed of company
arrangement) must be notified to the Registrar of Companies
(thereby providing an easy mechanism for interested parties to
check whether a DOCA is still in place)
include the receiver's obligation for rent and other
payments under pre-receivership leases and hiring agreements among
the exceptions to the voidable insolvent transaction regime in the
Companies Act (giving landlords and businesses which lease
equipment certainty when entering into such transactions with
enable managers of unit trusts to distribute accounts and
financial statements electronically.
Changes to the application of the Takeovers Regime
The application of the Takeovers Code is unnecessarily broad
and, in the
view of the Panel, extends to closely–held companies
with few shareholders and/or shareholders who do not hold voting
rights. The cost of compliance in these circumstances is relatively
substantial and the benefit to shareholders is minimal as they will
already be in a position to know the merits of the transaction.
The amendments will:
clarify that the '50 or more shareholders' definition
of 'specified company' and 'Code company' does not
include shareholders whose shares do not confer voting rights
increase the threshold at which a company becomes a 'Code
company' to '50 or more shareholders and 50 or more share
parcels' The Panel has previously issued a
guidance note stating that joint shareholders should each be
regarded as separate shareholders when calculating the '50
shareholder' test. Whilst we do not agree that the guidance
note correctly states the law, the Bill will put this aspect beyond
clarify that transactions or events which start under the Code
must be completed under the Code, and
enable divisions of the Panel under the Takeovers Act to make
decisions by way of written resolution and to recognise the
validity and effect of the takeovers laws of other countries in
respect of foreign upstream acquisitions.
For further information, please contact the laywers who are
featured as authors.
The information in this article is for informative purposes
only and should not be relied on as legal advice. Please contact
Chapman Tripp for advice tailored to your situation.
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The Hon'ble High Court of Bombay has held that where a Scheme of Amalgamation is executed between two companies registered in two different states [...], then the said two orders are two independent instruments.
Lawyers are pretty good at figuring it out quietly and amicably among themselves, without recourse to a public courtroom.
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