- Hon Andrew Bayly
A raft of reforms to modernise and simplify company law will make New Zealand an easier and safer place to do business Commerce and Consumer Affairs Minister Andrew Bayly says.
“To rebuild the economy and increase the value of our exports, we need to ensure our companies are not hamstrung by out-of-date laws and onerous red tape, while also making sure there are safeguards in place to deter bad actors and dodgy business practices.
“The changes announced today will help deter poor and illegal business practices and reduce the burden of compliance for businesses.
“I am sure many Kiwis have heard stories of companies that go bankrupt leaving behind debts, only for effectively the same company to pop up somewhere else under a different name. This is often referred to as ‘phoenixing’ and is clearly not fair or right.
“The Government’s package of reforms includes changes to improve insolvency law and combat phoenixing so that when companies go bust, it’s fairer for creditors and other changes that will make it harder for directors to dodge their debts and continue practicing.
“Company directors will be assigned a unique identification number which will improve transparency and make it easier for creditors and law enforcement to trace individuals. Meanwhile, directors will have the option to remove their home address from the Companies Register which will address significant safety and privacy concerns, while still ensuring that directors are findable and accountable.
“The Companies Act is a foundational piece of legislation for our economy. It sets the rules for the birth, life and death of all our companies, of which there are over 730,000.
“However, the Act has not been substantially updated in 30 years and as a result aspects of it do not reflect the modern business environment and hamper growth and innovation.
“For example, there are still requirements for certain types of information to be physically published in the newspaper or mailed out to shareholders. Practices like share buybacks, which used to be rare but are now commonplace, must be permitted in the company’s constitution, which only two of seven companies have. Simiarly, if a company wants to reduce its share capital it has to seek approval by going to court which is time consuming and expensive.
“These reforms bring the law into the 21st century and enable companies to focus on growing their core business, rather than retrofitting their practices to appease out of date legislation.”
Media contact: Grace Ridley-Smith, +64 21 804 628
Notes to editors
The second phase of reforms will start with a review of directors’ duties and related issues of director liability, sanctions, and more effective enforcement. This stage will look at the issues raised in Mainzeal case, and it is also an opportunity to look more widely at a number of related issues. This has been agreed to be by Justice Minister, Paul Goldsmith who has recommended the Law Commission carry out the review, starting in 2025.
