Bill Introduced To Prevent Foreign Abuse Of New Zealand Company Laws – What It Means For You

Despite our notable reputation as one of the least corrupt countries in the world, New Zealand remain subject to criticism for its weak company laws that are too easily exploited by international crime syndicates. There is a concern that ‘loop-holes’ in our company laws allow foreign fraudsters to set up shell companies in New Zealand, which are then used to conduct fraud such as tax evasion and money laundering overseas.

The concern that inadequacies in our domestic legislation could cause serious detriment to our international trade has resulted in a call for law reform. The Companies and Limited Partnerships Amendment Bill (‘CLPA Bill’) was introduced to Parliament on 13 October 2011. Its purpose is to reassert and strengthen our company laws. If passed by Parliament, the CLPA Bill will amend the Companies Act 1993 (‘Companies Act’) by:

• requiring each company registered in New Zealand to have a director or agent to be resident in New Zealand;
• granting additional powers to the Registrar of Companies to investigate and manage non-compliant companies;
• banning directors of non-compliant companies from assuming management positions in other companies for up to five years;
• striking companies off the Companies Register for supplying inaccurate information or continued non-compliance with the Companies Act;
• better aligning requirements under the Companies Act with the Limited Partnerships Act 2008 to prevent similar exploitations; and
• classifying serious breaches of directors’ duties as criminal offences.

The Government is also seeking to introduce anti-money laundering legislation in 2013 to further safeguard and scrutinise the operation of companies. In a report titled “Strengthening New Zealand’s Resistance to Organised Crime”, the Ministry of Justice further proposes new laws to effect:

• an improvement of domestic and international information sharing;
• an enhancement of anti-money laundering and crime proceeds recovery measures;
• a reduction in the misuse of current legal arrangements;
• protection against cyber-crime;
• prevention of corruption and bribery; and
• the disruption of identity crimes.

It is hoped that these initiatives will give greater confidence in our domestic company laws and restore our image as a safe country in which to conduct business.

We will keep you posted on further developments as they occur.