One change, now in force, was the creation of new criminal offences for serious breaches of directors’ duties. It is now an offence where:
These changes were introduced following the wide-scale collapse of finance companies between 2006 and 2012. The collapse of these companies left many ‘mum and dad investors’ stripped of their nest eggs. There was concern following the collapse of these companies that it was sometimes not possible to take action against directors for their reckless or dishonest conduct (although many were prosecuted under provisions in the Securities Act, Financial Reporting Act and the Crimes Act). In introducing the new offences, the Government sought to balance the effect of potential criminal liability deterring people from becoming directors or taking business risk, against the need to deter dishonesty and prevent the substantial harm resulting from breaches of directors’ duties.
The new offences require that the mental elements of dishonesty, bad faith, knowledge and belief must be proved beyond reasonable doubt. These are high thresholds, and should put honest directors at ease.
Other changes to the Act relate to the registration of companies. For companies that were formed before 1 May 2015 (existing companies), these changes are being introduced in a staggered way.
Since 1 July 2015, existing companies have been required to provide to the Registrar of Companies the dates and places of birth of all directors and details of any Ultimate Holding Company (if applicable). The personal details of directors will not be publicly available. However, details of any Ultimate Holding Company will be publicly available.
From 28 October 2015, existing companies will need to ensure they have at least one director that either lives in New Zealand, or who lives in Australia and is also the director of a company incorporated in Australia. Details of that Australian company must be provided to the Registrar (which includes ACN, name and registered office address). This requirement already applies for all newly incorporated companies.
All this information will be required in order to file an annual return. Failure to file an annual return will result in steps being taken to remove the company from the register.
These changes have been made in an attempt to protect New Zealand’s international reputation, by seeking to reduce the misuse of the New Zealand company registration process by overseas individuals and groups, who have used companies incorporated in New Zealand to facilitate crime.
Other changes include enhancing the powers of the Registrar of Companies and changes to the provisions about changing control of companies, to align the Act with the provisions of the Takeovers Code.
For more information about how these changes might affect you, contact us for advice.