Legislation to amend the Companies Act is currently making its way through Parliament under the omnibus Regulatory Reform Bill and the Companies and Limited Partnerships Amendment Bill. The Regulatory Reform Bill is close to completing the Committee of the whole House stage and should have its third reading soon. However, the Companies and Limited Partnerships Amendment Bill is still awaiting its first reading.
Amendments introduced by the Regulatory Reform Bill
The key amendments introduced by the Regulatory Reform Bill clarify and confirm the lawfulness of electronic communication with shareholders and the provision for shareholder participation in meetings by way of audio, audio and visual or electronic means. In practical terms the changes will allow companies to:
- send all notices, statements, reports, accounts and other documents to shareholders and creditors by email, provided the recipient has notified the company that it wishes to receive such documents by electronic means;
- utilise electronic voting systems; and
- hold company meetings through new technology such as live streaming of meetings.
The Regulatory Reform Bill also:
- repeals the requirement for listed companies to send each shareholder a notice advising that it has acquired its own shares on a stock exchange, as this is already covered by NZX's listing rules; and
- removes the requirement for an arbitrator to set an interest rate where a company is buying out a minority shareholder and the buyout does not require arbitration.
The Companies and Limited Partnerships Amendment Bill 2011
In brief, the Companies and Limited Partnerships Amendment Bill amends the Companies Act by:
- tightening the requirements around company registration and company directors to assist in the prevention of New Zealand companies being used for criminal activity in overseas jurisdictions;
- criminalising the breach of two existing directors' duties (namely, the duty of directors to act in good faith and in the best interests of the company and the duty of directors not to agree to, or cause or allow, company business to be carried on in a manner likely to create a substantial risk of serious loss to the company's creditors). Both offences will require actual knowledge for criminal liability; and
- prohibiting 'code companies' (as defined in the Takeovers Code) from undertaking long-form amalgamations under Part 13 of the Companies Act and providing more rigorous voting thresholds and additional judicial oversight for court-approved schemes of arrangement, amalgamation, or compromise under Part 15 of that Act.
Further details of these proposed amendments are discussed in Issue No. 13 of Corporate Reporter.