The government has announced a suite of changes to the Companies Act 1993 aiming to improve fairness and the ease of doing business in New Zealand. The reform is expected to take place in two phases.
Phase One: The first phase focuses on the modernisation and simplification of the Act to better reflect a more evolved business and technological landscape.
Specific proposed changes include:
- Providing a process for reducing the share capital of a company that does not require court approval
- Amending the definition of ‘major transaction’ to exclude transactions relating to the capital structure of a company and clarify that a series of related transactions are captured by the definition
- Adding additional types of transactions that can be approved by unanimous shareholder consent
- Allowing companies to mingle unclaimed dividends with other funds after two years
- Assigning unique identifiers to directors to prevent ‘phoenixing’ (where a new company is registered to take over an insolvent or unsuccessful one), and
- Allowing directors and shareholders to have their residential addresses removed from the Companies Register, resolving safety and privacy concerns.
- Changing the default settings for constitutions so that actions of a company are mandatory, as opposed what is currently opt in provisions. The reforms include actions such as share buy backs, the reissue of shares held as treasury stock, division of the share register, and director indemnification and insurance ‘unless expressly prohibited by a company’s constitution’.
- Repealing the Directors’ Duties Amendment Act as it is considered unnecessary as a director, without this clause, is able to place weight on factors other than maximisation of profit.
- Allowing share registers to reflect a trust as a shareholder of a company (rather than trustees)
Further insolvency law amendments are also being proposed, including extended claw back periods, preference for long service leave and greater honouring of gift cards.
Phase Two: The second phase will involve a Law Commission review of directors’ duties and related issues such as director liability, sanctions and enforcement. The bill introducing Phase One is expected to be introduced in early 2025 and Phase Two will closely follow.
