Prior to parliament dissolving before the recent general elections, the Companies and Limited Partnerships Amendment Bill was introduced into parliament. If passed, the Bill is set to amend the Companies Act 1993 and Limited Partnerships Act 2008.
Companies and Limited Partnerships Amendment Bill
At a high level, the purposes of the Bill are to “increase confidence in New Zealand’s financial markets and in New Zealand’s regulation of” companies and limited partnerships, and to “ensure New Zealand remains a trusted place to do business”. In order to help achieve this purpose, the Bill is set to make the following changes:
- Introducing a requirement for all New Zealand companies and limited partnerships to have a New Zealand resident agent where the company or limited partnership, broadly, does not have a director or general partner that is resident in New Zealand or an “enforcement country”. An “enforcement country” is an overseas country where New Zealand judgments can be enforced and will be specified in yet to be made regulations. Companies and limited partnerships may be removed from the register if this obligation is not complied with.
- The Registrar of companies and limited partnerships will be given increased powers to allow the Registrar to take action where there are concerns that a company or limited partnership is not being used for legitimate business reasons. In this regard, the Registrar will be provided with stronger investigative and removal powers, along with the power to warn the public about suspect entities by placing a note of warning in the register.
- Companies will be restricted from using amalgamations under the Companies Act 1993 to avoid takeovers code obligations. The Bill is also set to introduce higher standards for court-approved schemes of arrangement, amalgamation, or compromise involving companies subject to the takeover code.
- The Bill seeks to introduce criminally liability for directors where there are serious breaches in relation to their duties under section 131 (duty to act in good faith and in the best interests of the company) and section 135 (not to carry on business in a manner likely to create a substantial risk of serious loss to the company’s creditors). A director will commit an offence if he or she commits a breach of these directors’ duties either knowing that the breach is seriously detrimental to the interests of the company or that the breach will result in serious loss to the company’s creditors. Those directors convicted of such offences can be imprisoned for up to five years or fined up to $200,000.
If you would like to discuss the implications of these proposed changes, please call a member of our business law team.