On 14 May 2007, the Governor-General made orders and regulations to give effect to the changes in the Companies Act 1993 and Financial Reporting Act 1993 contained in the Business Law Reform legislation enacted in late 2006. The main effects of these instruments are set out below.
We expect that some of these new provisions will decrease costs for many companies - significant savings should result from a reduction in costs associated with printing and sending hard copy annual reports to each shareholder.
Changes in annual reporting to shareholders
From 18 June 2007, the amendments to section 209 of the Companies Act 1993 will allow a company to send to its shareholders a notice containing information about the availability of its annual report rather than the annual report itself. From 18 June, shareholders who want an annual report will need to opt in to receive one – a reversal of the current position in which shareholders must opt out if they do not wish to receive an annual report. The board of a company will be able to send to each shareholder, instead of an annual report, a notice that:
- The shareholder has a right to receive an annual report or (if the company has prepared one) a concise annual report on request, free of charge.
- The shareholder may obtain a copy of the annual report online.
- If applicable, the board has prepared a concise annual report. The requirements for a concise annual report are discussed below.
A shareholder must respond within 15 working days requesting a copy of the annual report (and/or concise annual report, if applicable) if they wish to receive a hard copy. The board is then obliged to send a copy of the relevant document as soon as practicable. If a shareholder doesn’t reply it is assumed that they will, if they wish, access the annual report online.
Shareholders may not waive both the right to receive an annual report and the right to receive notice of the annual report.
Requirements for a concise annual report
The new Companies Act regulations set out for the first time the requirements for concise annual reports. A report must describe any changes in the nature of the business of the company or any of its subsidiaries, and any changes in the class of business in which the company has an interest, whether as a shareholder of another company or otherwise. It must also include for the relevant accounting period, either:
- Financial statements (or, if applicable, group financial statements); or
- Summary financial statements (or, if applicable, group financial statements).
Exemption from filing information for certain overseas companies
On 1 September 2007, the new sections 332A and 343A of the Companies Act 1993 will come into force. These will exempt overseas companies incorporated in Australia from having to file with the New Zealand Companies Office certain information regarding the company’s incorporation and governance.
Disqualification of directors who have been disqualified from acting as directors in Australia
The amended section 151(2) of the Companies Act 1993 also comes into force on 18 June 2007. Under it, a person who has been disqualified in a ‘prescribed’ overseas jurisdiction from ‘being a director or promoter of, or being concerned or taking part in the management of, a company’, is automatically disqualified from acting as a director in New Zealand. Existing directors are exempted from this disqualification.
Australia is the only jurisdiction currently prescribed for these purposes under the Companies Act regulations.
On 18 June, the following other provisions will also come into force:
- The exemption for directors of non active entities from the requirement to prepare financial statements under the Financial Reporting Act 1993.
- New criteria allowing exemptions to be granted by the Securities Commission and the Registrar of Companies in certain extenuating circumstances.
- The new infringement offence regime under the Financial Reporting Act 1993.
On 11 August 2007, new provisions of the Financial Reporting Act 1993 will come into force which extend the definition of ‘issuer’ to include certain persons that receive money raised from the issue of securities to the public from a conduit issuer. Directors of these persons are required to comply with the obligations of issuers under the Act.
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This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.