The Companies Act faces its biggest overhaul in decades, with a University of Auckland conference set to explore the proposed reforms and omissions.
New Zealand’s Companies Act is on the brink of its most significant update in decades, with proposed reforms set to reshape how businesses operate.
Among the key proposals is the introduction of unique identifiers for company directors, a move aimed at combating phoenixing – the practice of directors closing failing companies only to relaunch under a slightly different name.
The reforms also aim to enhance the uptake of the New Zealand Business Number (NZBN), a unique global identifier for businesses, and to improve outcomes for creditors in insolvency cases.
Despite these promising changes and others, critics argue that the reforms focus too heavily on straightforward fixes while sidestepping opportunities for greater change. This sentiment will be part of the discussions at an upcoming conference – ‘Corporate Law at a Crossroads: Reforming the Companies Act’ hosted by the New Zealand Centre for Law and Business.
Bringing together academics, policymakers, practitioners and other key stakeholder organisations, the conference will examine the proposed reforms and explore what’s missing from the government’s agenda.
Organisers Dr Lynn Buckley and Dr Peter Underwood see the reforms as a missed opportunity to tackle pressing issues like environmental and social considerations in corporate governance.
“The removal of the express reference to the ability of company directors to consider environmental, social and governance (ESG) factors in their decision-making is a backward step,” says Underwood.
“The government seems focused on tidying up some archaic bits of the Companies Act but has missed the bigger picture: responsible capitalism. We’re in the midst of an economic and environmental crisis, and the reforms fall short of addressing broader challenges.”
Buckley shares similar concerns, highlighting the government’s decision to scrap a proposed beneficial ownership register. Such a register would have required businesses to disclose shareholders with significant influence, increasing transparency and accountability.
“This was a golden opportunity to shine a light on the often-opaque structures of corporate control,” she says. “It seems strange that while we’re pushing for unique identifiers and upping the use of business numbers, we’re not addressing who influences corporations. Dropping this proposal also feels like a step back.”
The conference will also delve into the Law Commission’s planned review of directors’ duties, particularly in the context of insolvency. Current practices often leave creditors with inequitable outcomes during the liquidation process. Proposed changes, such as extending the clawback period for transactions, aim to ensure creditors receive a fairer share.
“We’ve seen it with the collapse of Mainzeal and other companies, where some of the creditors get totally shafted, so we have to make the landscape fairer for our creditors, and that is hopefully one of the good things that will come out of looking at those directors’ duties and insolvency,” says Buckley.
With the legislative proposals expected to take shape next year and the Law Commission’s review set to span two years, Buckley and Underwood stress the urgency of contributing to the conversation.
“We’re at the start of a massive shift in company law,” says Buckley. “This conference is about asking the hard questions and ensuring that these reforms reflect modern business realities while holding corporations accountable to society.”
Until now, discussions have been limited primarily to small, interested parties.
The conference aims to broaden the conversation, says Underwood, “so when the government invites feedback next year, we’re ready to respond”.
