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Upcoming Changes to Company and Director Requirements
What Directors Need To Know
The Companies and Limited Partnerships Amendment Bill 2011 has passed the select committee stage and is on its way to becoming law. This Bill contains changes surrounding the incorporation of companies and directors’ responsibilities. Foreign owned companies may be particularly concerned with the forthcoming residency requirements.
1. Residency of Directors
The Government has a concern about companies registered in New Zealand having no person actually in New Zealand who can take responsibility if things go wrong. The Minister of Commerce considered introducing complex requirements for a New Zealand-resident agent of the company, but the Commerce Committee has stripped this down to a simple but potentially difficult rule: the company must have at least 1 director who is resident in New Zealand, or, in some circumstances, resident in an “enforcement country”.
Regulations will list the enforcement countries, but generally these are countries with which New Zealand has a reciprocal arrangement enabling punishment of directors residing in those countries for New Zealand crimes.
There is expected to be a transitional period of up to a year after the date the Bill is given royal assent, after which a non-compliant company may face being struck off the register if it was required to and has not appointed a New Zealand-resident director.
2. Incorporation Matters
The Companies Office already holds information relating to each New Zealand-registered company – however, the range of information required is soon to increase.
Firstly, directors will need to provide more personal details about themselves. Secondly, if the company is a subsidiary it must provide a range of specified details about its “Ultimate Holding Company”, including an address for service, which are to be available for public inspection. Failure to provide this information may result in fines against the company or directors.
This is a brief summary of some of the changes coming through parliament tightening enforcement of Company Law. There are others in the works. For example, the Law Society has objected to controversial criminal sanctions against directors who cause the company to carry on business in a manner which causes serious loss to the company’s creditors.
These changes may affect you soon. Note that the Bill itself is subject to change as it passes the final stages towards becoming law. Please speak to one of our Commercial Law team to see how Fortune Manning can help with your company’s legal needs.