The measures would not apply to trusts, for which more onerous tax reporting obligations have already taken effect.
An international trend towards greater transparency for corporate ownership structures has emerged in recent years. The UK, for example, introduced in 2016 a publicly accessible register administered by Companies House that, with some exceptions, records certain details of 'persons with significant control' of companies and limited partnerships. There are other examples in other jurisdictions. In light of these developments, the New Zealand Ministry of Business, Innovation and Employment (MBIE) is undertaking public consultation in relation to the existing transparency of ownership structures that include New Zealand companies and limited partnerships.
The MBIE has released a discussion document, entitled 'Increasing the Transparency of the Beneficial Ownership of New Zealand Companies and Limited Partnerships', on which it seeks public comment. The document canvasses a number of proposals requiring New Zealand companies and limited partnerships to record, update and disclose information relating to the natural persons who ultimately own or exercise control over them. The MBIE's preferred option at the moment, which bears some similarities to the UK system, is that these entities are required to provide certain information about the controlling individuals to the Registrar of Companies. That information would then be publicly available on the Companies Office online register.
The main objective of the proposals is to prevent the misuse of New Zealand corporate structures, and to supplement existing regulatory regimes that apply to certain activities but not necessarily to the legal entity. For instance, New Zealand's anti-money laundering and counter-financing of terrorism regime was extended with effect from July 1 2018 to impose due diligence and reporting obligations on a wider range of organisations, but these extended obligations may not capture information about New Zealand corporate entities that are not trading and do not engage with an entity with reporting obligations.
The discussion document provides some early detail as to some of the key design features of the proposals. The proposed formulation of who may be considered a 'beneficial owner' is wide reaching. The prescriptive limbs capture individuals owning more than 25% of a corporate entity, or holding or controlling more than 25% of the voting rights in a company. In addition, individuals who exercise control over the entity through close personal and family relationships, or contractual arrangements, or a power to appoint and remove directors, general partners or senior managers and also those who hold senior management positions, may be required to have their interests recorded and details disclosed.
The beneficial owner definition, as proposed (albeit in early draft form) may impact on the efficacy of some legitimate arrangements. Custodian shareholders are sometimes used by individuals or groups of individuals who want their financial interest in an entity to remain private, although if caught by the beneficial owner definition, details relating to those individuals may be required to be disclosed.
The MBIE has also released a discussion document, entitled 'Publication of Directors' Residential Addresses on the Companies Register', which discusses whether directors (and shareholders) should have their residential addresses published on the Companies Register, as is presently required in New Zealand. This second paper assumes the introduction of a requirement for directors of New Zealand companies to have a unique director identification number. At this stage, the MBIE is proposing to allow directors (and shareholders) to elect to have an address for service published as opposed to their residential addresses. The MBIE is also seeking public submissions on this discussion document.
Although these proposals are in their preliminary stages, the indication is that there will be changes ahead in respect of the public availability of beneficial ownership information for New Zealand companies and limited partnerships (and certain other corporate information).
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