On 24 June 2014, legislation came into force amending the
Companies Act 1993 (the "Act") and the Limited Partnership Act
The significant changes are as follows:
Connection to New Zealand
- One or more directors of a New Zealand company to live (i.e. to
be ordinarily a resident):
- in an "enforcement country"* and be a director of a company
which is registered in the enforcement country.
- One general partner of a limited partnership will also have to
meet the residency criteria.
The requirements are intended to ensure that there is an
identifiable person with a connection to the company who can be
questioned about the activities of the company and who could be
held to account for the company's actions.
Breach of the requirement to have a New Zealand resident
director, or general partner, could result in the company, or
partnership, being removed from the register.
Transitional provisions mean that a New Zealand resident
director will need to be appointed by those companies who don't
have one by the end of this year.
The Act has been amended to criminalise breaches of certain
directors' duties, a director will have committed an offence if he
- Exercises power or performs his or her duties in bad faith,
knows the conduct is not in the best interests of the company and
knows that the conduct will cause serious loss to the company.
- Knowingly and dishonestly permits the company to incur a debt
and the company is, or becomes insolvent, at the time of, or as a
result of, incurring the debt.
The penalty for breach of these new provisions is imprisonment
for up to 5 years, or a fine of up to $200,000.
Notice of changes to ultimate holding
A new provision in the Act requires the board of directors to
notify the Registrar of Companies (the "Registrar") where there is
any change in the information of the company's holding company.
Directors are liable for a fine of up to $10,000 for failing to
provide the updated information.
Enhanced powers of the Registrar
The Act is been amended to allow the Registrar to remove a
company from the register where the Registrar has reasonable
grounds to believe that:
- the company is not carrying on business;
- there is no proper reason for the company to continue in
- the company has failed to respond to a request from the
Registrar for certain information (relating to the disclosure of
interests, as referred to below);
- one or more of the directors or shareholders has intentionally
provided the Registrar with inaccurate information; or
- the company, or one or more of the directors, or shareholders
has failed, in a persistent or serious way, to comply with the
duties relating to the company under the Act or the Financial
Reporting Act 1993 ("FRA").
The amendments include provisions to allow objections to be
lodged against a notice of removal given by the Registrar and for
the Registrar or a Court to restore a company or a limited
partnership to the register.
In addition, for the purpose of New Zealand complying with its
obligations under international anti-money laundering treaties, the
Registrar may require persons to disclose:
- their interests in shares in a company and their interests in
- their control over shares in a company;
- the nature of any powers of direction they have over the
management or administration of a company or a limited
Information obtained by the Registrar under the new provisions
can be made available to a wide range of New Zealand Government
We recommend that:
Company's identify now whether they fulfil the one New Zealand
director (or deemed New Zealand director) requirement, and if not,
consider how best to fulfil that requirement, while also
considering their wider corporate governance and management
We note that:
There exists a real risk of companies being removed from the
register for failing to provide information as and when requested
by the Registrar, or where the company, its directors (which may
include only one director) or more interestingly its shareholders,
are in serious or persistent breach of the Act or the FRA.
*An "enforcement country" is a country with which New
Zealand has a reciprocal arrangement for the enforcement of
low-level criminal fines.