The Companies and Limited Partnerships Amendment Bill was passed
into law on 24 June 2014. The Bill creates two separate Acts, the
Companies Amendment Act 2014 and the Limited Partnerships Amendment
The new legislation seeks to protect New Zealand's
international reputation as a trusted place to do business by
making it more difficult for overseas criminal organisations to
misuse New Zealand shell companies and limited partnerships.
Commerce Minister Craig Foss described the changes as an
"important part of the Government's Business Growth Agenda
to improve regulation and lift confidence in New Zealand's
Key Changes to the Companies Act 1993 and the Limited
Partnerships Act 2008
New criminal offences for
There has long been a statutory duty on company directors to act
in good faith and in what that director believes to be the best
interests of the company when exercising powers or performing
duties. The changes introduce a new criminal offence where a
director exercises powers or performs duties in bad faith towards
the company and knows that the conduct is not in the best interests
of the company and knows that the conduct will cause serious loss
to the company.
Similarly, the Companies Act has been amended such that it will
now also be a criminal offence for a director to dishonestly fail
to prevent the company from incurring a debt when the director
knows that the company is insolvent or will become insolvent by
incurring the debt.
Both of the new offences are punishable by up to five years'
imprisonment or a fine of up to $200,000.
Resident director or general partner
Companies will soon need to have at least one director who:
is resident in New Zealand; or
who is resident in an "enforcement country" and is a
director of a company incorporated in that enforcement
An enforcement country is a country with which New Zealand will
have reciprocal enforcement arrangements. These countries have not
yet been confirmed, but it is likely that they will include
Australia and the United Kingdom.
Similarly, limited partnerships will need:
at least one general partner who lives in New Zealand; or
at least one general partner who lives in, and is a director of
a company in, an enforcement country; or
a general partner that is a partnership governed by the
Partnership Act 1908 and has at least one partner who lives in New
Zealand or who lives in, and is a director of a company in, an
enforcement country; or
at least one general partner that is a company registered under
the Companies Act 1993 and complies with the director requirements
of that Act.
Also, directors will need to provide their date and place of
birth at the time of registration of a company or when new
directors are appointed to an existing company. These details will
not be publicly available. The same information will be required in
relation to every general partner who is a natural person and every
general partner's director, partner or general partner who is a
Every company that has an "ultimate holding company"
will need to disclose details of that ultimate holding company and
will need to notify the Registrar each time the ultimate holding
Further powers of Registrar:
The Registrar of Companies will have enhanced powers to
investigate non-compliance by companies and limited partnerships,
including powers to identify the true owner of a company or a
limited partnership by enquiring about the individuals
"controlling" them. The Registrar will also have the
power to remove a company or a limited partnership from the
register in certain circumstances.
The legislative changes align the provisions of the Companies
Act 1993 dealing with schemes and amalgamations for "code
companies" with the provisions of the Takeovers Code.
When do these changes take effect?
The new criminal offences for directors and the alignment of the
reconstruction provisions came into force on 3 July 2014. The
remaining changes take effect in July 2015, unless commenced
earlier by Orders in Council. There will be a further 180 day
period for existing companies to comply with the resident director
requirement after those provisions come into force.
For further information on the changes to the Companies Act 1993
and the Limited Partnerships Act 2008, please contact our business
team at Cavell Leitch. Our business team members are experts in all
aspects of legal business advice and compliance and are more than
happy to discuss any questions you may have.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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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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