New Zealand: New director requirements and disclosure obligations for New Zealand companies
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New Zealand: New director requirements and disclosure obligations for New Zealand companies

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Tim Stewart


Hamish Journeaux

New requirement for director to live in New Zealand, Australia or other 'enforcement country'

The place of incorporation and country where a company's directorial control is centred may have important implications for the tax residence of the company. For this reason, requirements regarding the residence of directors will often be relevant to tax advisers and tax managers of multinational groups with operations in New Zealand.

A New Zealand incorporated company must have one or more directors. Since May 1 2015 any newly incorporated company has had to satisfy a new requirement ('director requirement') that at least one of its directors must either live in New Zealand; or live in an 'enforcement country' and be a director of a company registered in that country.

A country may be designated an enforcement country by Order in Council if the country has an agreement with New Zealand that allows for the "recognition and enforcement there of New Zealand judgments imposing regulatory regime criminal fines". At present, the only enforcement country is Australia.

Existing companies have until October 28 2015 to comply with the director requirement. If a company has not complied with the director requirement by this time it may be deregistered for not meeting the essential requirements of a company under the Companies Act 1993.

Rationale for change

The director requirement addresses concerns that foreign persons may be using New Zealand companies to undertake unlawful activity. The director requirement is intended to deter such activity by requiring that at least one director be subject to the powers of enforcement agencies, and so can be held accountable for any wrongdoing by a company incorporated in New Zealand.

The director requirement also addresses concerns that increased criminal activity by New Zealand companies is in part caused by foreign trust and company service providers promoting the use of New Zealand corporate structures in situations where there is no real connection with New Zealand. While the current regime allows for the incorporation of New Zealand companies without involvement by any New Zealand resident, the director requirement will mean that foreign trust and company service providers will require a New Zealand resident (or resident of an enforcement country) to act as a director for the company.

Other changes

Other rules directed at reducing misuse and increasing the accountability of New Zealand companies are also now in force:

Breaches of certain directors' duties are subject to criminal penalties.

A company is required to publically disclose its ultimate holding company (if it has one). This information is provided upon incorporation for new companies and is provided in a company's annual return for existing companies. This requirement is designed to allow people dealing with a company to know where control ultimately lies.

A company is required to provide details of a director's date and place of birth to the Registrar of Companies. The information is provided when a new director is appointed, upon incorporation for new companies, and in companies' annual returns filed after July 1 2015 for existing companies. This is designed to help enforcement agencies correctly identify directors in an investigation, particularly in situations where two or more individuals share the same name. This information will not be publically available.

The Registrar of Companies now has the power to require the provision of information identifying the ultimate ownership and control of a company. Among other things, these powers will allow the Registrar to identify the beneficial owner of shares held on trust, as well as identify the individuals who control the management of a company.

Tim Stewart (tim.stewart@russellmcveagh.com) and Hamish Journeaux (hamish.journeaux@russellmcveagh.com)

Russell McVeagh

Tel: +64 4 819 7527 and +64 9 367 8037

Website: www.russellmcveagh.com

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