As we reported previously the Companies Amendment Act 2014 (‘the Act’) became effective from 1 May 2015. As highlighted to you in an earlier publication, a significant change as a result of this new legislation, is the requirement for all companies registered in New Zealand to have at least one New Zealand resident director. This has meant, that all new incorporated companies were required to have one New Zealand resident director registered on incorporation and existing New Zealand companies had a 180-day transition period to conform and comply with this new requirement. Accordingly, the key date for this new rule to be complied with for existing companies was the 28th of October 2015.
As this deadline has now passed the Companies Office is acting on its notice to take necessary action to address non-compliance. It is therefore important that action is taken now to ensure you are compliant with this rule.
Who qualifies as a New Zealand Resident director?
To qualify as a New Zealand resident director, you must be a person who lives in New Zealand. The Act does not provide a definition for the term ‘lives in New Zealand’ however, the current interpretation is that the person must be present in New Zealand for more than 183 days (6 months) in a 12-month period.
The Act also allows for a person who lives in Australia and is also a director of an Australian incorporated company. This is because there is a reciprocal agreement between the two nations (this does not extend to the Rugby however).
What information must be provided for registration?
Evidence required by the Companies Office includes:
- Certified copy of director's consent form signed by every person named as a director of the company.
- Proof of residency for every person named as a director of the company such as power, gas or phone or local municipal rates demand. If you intend to have an Australian resident director to satisfy this new requirement, it is important that you notify the Companies Office of this.
- Proof of identity such as certified copy of that person's passport.
The Act will also require all directors to disclose their date and place of birth to the Companies Registrar. This information will remain confidential to the New Zealand Companies Office and will not be published on the public register.
What must you do now?
From the discussions held with the Companies Office we understand that they are currently following up on notifications issued to all Companies to ensure this new rule is complied with. As a general outline of process and procedure we understand that the following is occurring:
- Directors of the Company would have received notification via letter
- Companies have until the 19th of November to remedy non-compliance (this can change depending on the notification period included in the notice to directors)
- If non-compliance is not remedied, the Companies’ Office will then issue public notice to de-register the Company from the Companies Register.
- Companies will then have 20 days (or period included in notice) to object,
Section 40 of the Act includes grounds for objection and the process that must be taken. A copy of the Amendment Act can be found via the following link The Companies Amendment Act 2014
To Branch or not to Branch?
It is important to note that the above rule does not apply to companies that have been incorporated overseas, but operate a registered entity here in New Zealand (i.e. a New Zealand branch). We do advise caution if you are looking to incorporate a New Zealand Branch or change from a Company to a Branch to avoid appointing a New Zealand (or Australian) director. We would suggest that careful consideration of the changes to financial reporting obligations placed upon Companies operating a branch in New Zealand. These changes link to audit and filing requirements which may add a new audit requirement which in turn will result in additional compliance costs. For more information on financial reporting requirements we refer you to an earlier publication on financial reporting changes Financial reporting changes
We urge you to review your current directorships to ensure the need to comply with the New Zealand director rule is adequately satisfied. This will ensure you are not caught by the consequences of non-compliance. This will also present a great opportunity to ensure information kept on the Companies Office is correct and up to date.
Based on our experience thus far, the companies most at risk appear to be those that are overseas owned and operate a New Zealand subsidiary. At RSM we are assisting our clients meet their obligations by liaising with the Companies Office. If you need assistance, please do not hesitate to contact any one of our partners or senior management team.