As mentioned in our August 2012 Banking and Commercial Law legal update the Companies and Limited Partnerships Amendment Bill proposes to amend both the Companies Act 1993 and the Limited Partnerships Act 2008. The most significant of these are:
- Requiring companies and limited partnerships to have a New Zealand resident director or agent
- Criminalising certain serious breaches of the directors' duty to act in good faith and in what the director believes to be the best interests of the company (section 131) and the directors' duty not to trade recklessly (section 135).
The Bill passed its first reading on 24 July 2012 and was referred to the Commerce Select Committee. The Commerce Select Committee Report was released on 11 December 2012 and, in relation to the changes noted above, recommended that:
- The requirement for companies and limited partnerships to have a New Zealand resident director or agent be removed. This has been replaced with a less compliance intensive requirement for, in relation to companies, a resident director or a director who is resident, and director of a company incorporated, in an enforcement country. An enforcement country is one which New Zealand has reciprocal enforcement arrangements for low level fines. It is likely that, initially, only Australia will qualify as an enforcement country. For limited partnerships, the requirement is now that, where the general partner is a natural person, the requirements are the same as for directors of companies, alternatively, the general partner can be a partnership governed by the Partnership Act 1908 or a company registered in New Zealand.
- The date and place of birth of directors of companies or partners of limited partnerships who are actual persons be collected at registration (but not publicly available), and similar details to be collected for existing directors by the Registrar in a manner yet to be determined.
- On registration and within 20 working days of any change a company must disclose the name of the company's ultimate holding company if it has one (which will be publicly available).
- Consideration should be given to the wording of the sections criminalising breaches of sections 131 and 135 of the Companies Act to ensure that legitimate business risk taking is not criminalised. However, no substantive amendments were made to the wording in the Bill.
The lead time to enable compliance will be six months. The Bill has not yet had its second reading and there may yet be further changes.