Corporate Reporter SEPTEMBER 2016

WELCOME to Issue No. 42 of

Corporate Reporter, Bell

Gully's regular round-up of

corporate and general

commercial matters,

designed to keep you

informed on regulatory

developments, legislation

and cases of interest.

IN BRIEF

Items in this issue include:

• The FMA updates market participants on proposed FMC Act

exemptions,

• Consultation on targeted exemptions for foreign investments,

• The NZX consults on an exposure draft of an updated

corporate governance code,

• Consultation on changes to the anti-money laundering and

countering of terrorism laws,

• Commerce Commission consults on draft consumer credit fees

guidelines,

• Resident director requirements clarified, and

• The latest media releases from the New Zealand Commerce

Commission and the Australian Competition and Consumer

Commission.

CORPORATE REPORTER – SEPTEMBER 2016 2

CONTENTS

CAPITAL MARKETS

Further relief for offers made under employee share purchase schemes

Major reform of financial service advisers and providers regimes proposed

Upcoming reform for foreign trust disclosure rules

MBIE and the FMA are consulting on funding and charges

ASIC report on IPO due diligence has lessons for New Zealand issuers

MBIE consults on retirement savings in bankruptcy

FMA updates market participants on proposed FMCA exemptions

European Commission recognises New Zealand’s audit oversight regime

FMA consults on draft conduct guide for financial service providers

FMA releases report on its review of corporate governance disclosures

NZX consults of an exposure draft of an updated corporate governance code

MERGERS & ACQUISITIONS

Takeovers Panel consults on reducing costs for small Code companies

MoU between the Takeovers Panel and the FMA

Takeovers Panel updates guidance on control and association

Consultation on targeted exemptions for foreign investments

COMMERCIAL

Consultation on changes to anti-money laundering and countering financing of terrorism laws

Consultation on draft consumer credit fees guidelines

CORPORATE

Further consultation on tax treatment of employee share schemes

MBIE consults on insolvency practitioner regulation and voluntary liquidations

Further streamlining of distribution requirements for company annual reports proposed

Resident director requirements clarified

COMPETITION AND CONSUMER LAW

The latest media releases from the New Zealand Commerce Commission

The latest media releases from the Australian Competition and Consumer Commission

NEED MORE INFORMATION? For more information on any of the items in the Corporate Reporter, please contact your usual Bell Gully adviser or any member of Bell Gully’s Capital Markets, Commercial, M&A or Competition teams. Alternatively, you can contact the editor Diane Graham by email or call her on 64 9 916 8849.

Disclaimer

This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. You should take legal advice before applying the information contained in this publication to specific issues or transactions.

CORPORATE REPORTER – SEPTEMBER 2016 3

CAPITAL MARKETS

Regulatory developments

Further relief for offers made under employee share purchase schemes

The Financial Markets Conduct (Employee Share Purchase Schemes) Exemption Notice 2016 came into force

in August 2016. Click here to read it.

This notice addresses issues which were the subject of Financial Markets Authority consultations in 2015 (see

here and here). Market participants were concerned that the scope of the employee share purchase scheme

disclosure exclusion in schedule 1 of the Financial Markets Conduct Act 2013 (FMCA) would not cover some

situations provided for under existing exemption notices for the Securities Act regime. This included allowing:

employees to participate in share purchase schemes through other entities (such as family trusts) or relatives

(or to companies controlled by any of those persons), and

savings scheme securities to be offered as part of employee share schemes.

The exemption notice recognises both of these situations by providing for exclusions from the disclosure regime

in Part 3 of the FMCA (and the governance regime in Part 4 of the Act for offers of debt securities), subject to the

same conditions, where practicable, as apply to offers made under the exclusion in schedule 1 of the FMCA.

Offers of savings scheme securities (which are offers of debt securities under the FMCA) made in connection with

an employee share purchase scheme are also subject to the conditions:

that the employee share purchase scheme is also offered in a specified overseas jurisdiction (which are listed

in the exemption notice), and

that provide for the money paid to acquire the debt securities to be held in a separate bank account.

The exemption notice also covers offers which would otherwise be caught by certain technical issues relating to

the operation of the 10% limit on the number of equity securities issued or transferred in a 12-month period in the

schedule 1 exclusion (for example, where a separate class of non-voting equity securities has been established

for an employee share purchase scheme).

Major reform of financial service advisers and providers regimes proposed

The Ministry of Business, Innovation and Employment (MBIE) has recommended major reforms to the Financial

Advisers Act 2008 (the FAA) and its companion statute, the Financial Service Providers (Registration and Dispute

Resolution) Act 2008 (the FSPA).

The FAA regulates financial advisers and the FSPA requires financial service providers to register on the

Financial Service Providers Register (the FSPR) and, in certain circumstances, to join a dispute resolution

scheme.

The introduction of these Acts (which have been in full force since 2011) resulted in tighter regulation of financial

service providers in New Zealand. However, the financial advisers regime is widely considered to be

unnecessarily complicated, and the FSPR has been subject to perceived misuse by offshore financial institutions.

MBIE has undertaken a detailed assessment and consultation on the operation of the Acts. The review took

18 months to complete and MBIE issued its final report on the review in July 2016. The report recommends major

CORPORATE REPORTER – SEPTEMBER 2016 4

reforms to both Acts. Draft legislation to implement these reforms is expected to be available prior to the end of

2016.

Overview of reforms

On the basis that the recommendations contained in the report will be adopted by Parliament, the reforms will

include the following sweeping changes to the FAA and the FSPA.

FAA changes

The requirement for personalised advice to be provided by a natural person will be removed, along with

complexities in key definitions that underpin the financial advisers regime. This is intended to allow for the

provision of digital financial product advice (also commonly known as robo-advice) and, more generally, to make it

easier for financial advisers to provide consumers with the advice they want and need.

The current four categories of advisers (being, “authorised financial advisers”, “qualifying financial entities (or

QFEs)”, “registered persons” and “QFE advisers”) will be replaced with three streamlined categories, namely:

financial advisers,

financial advice firms, and

agents (being agents of financial advice firms).

The current licensing regime for authorised financial advisers and QFEs will be replaced with a new licensing

regime that will require all financial advice firms (and robo-advice platforms) to be licensed.

Disclosure requirements are to be simplified and shortened to include core information about the scope of the

service, remuneration (including commissions) and competence. A universal Code of Conduct, together with new

client-care obligations will also be introduced.

The new regime will address the issue of conflicted remuneration and will impose a new requirement for financial

advice firms to proactively manage conflicts of interest (including on behalf of their agents).

FSPA changes

One of the unanticipated consequences of the current FSPA regime has been the number of offshore entities with

minimal connection to, or operations in, New Zealand seeking to be registered on the FSPR. This has been done

to create the impression that the entities are prudentially supervised in New Zealand, which is not the case (the

register is simply a register of entities who are active in the financial services sector). Some steps have already

been taken to reduce this activity (through amendments to the FSPA in 2014). To further address this, the report

recommends that the territorial scope of the FSPA be amended, so that entities can only be registered on the

FSPR if they are (or will be):

in the business of providing financial services, not just back-office administrative services, from a place of

business in New Zealand,

in the business of providing financial services to New Zealanders, or

otherwise required to be licensed under any other New Zealand legislation.

The report also recommends that certain Dispute Resolution Scheme rules be aligned under the FSPA, and that

financial service providers be required to provide information about dispute resolution when a consumer

complains.

A copy of the report is available here.

CORPORATE REPORTER – SEPTEMBER 2016 5

Upcoming reform for foreign trust disclosure rules

Following the release in April 2016 of the so-called “Panama Papers”, the Government is expected to introduce

legislation to action recommended reforms to New Zealand’s trust disclosure rules.

The changes to the foreign trust disclosure rules (to be principally contained in a tax bill expected to be introduced

to Parliament by the end of the year) are expected to follow the recommendations made in a Government

commissioned independent report prepared by tax expert, John Shewan Government Inquiry into Foreign Trust

Disclosure Rules (the Report).

Click here to read the Government Inquiry into Foreign Trust Disclosure Rules: Government’s Response, which

sets out the issues identified in the Report, the recommendations and the Government’s response.

Minister of Finance Hon Bill English has noted “The changes to the foreign trust rules are a matter that the

Government intends to move quickly on. The Government intends to introduce legislation to require a register that

is searchable by Internal Affairs and the Police, and annual disclosure requirements in the coming months.”

MBIE and the FMA are consulting on funding and charges

The Ministry of Business, Innovation and Employment (MBIE) and the Financial Markets Authority (FMA) are in

the process of reviewing the FMA and External Reporting Board (XRB) levies, and fees for services provided by

the New Zealand Companies Office (Companies Office) to ensure that the FMA, the XRB and the Companies

Office are funded sustainably.

The review also considers how the FMA’s funding is split between industry levies and taxpayer funds. The

Government’s preferred position is for the additional funding required for the FMA to come from financial market

participants via the existing FMA levy. This approach represents an increase of up to 70% of the FMA’s total

funding from FMA levies.

More details on the proposed changes can be found in the July consultation paper which is available here.

Submissions on that consultation will be considered by the FMA and MBIE before the Ministry makes

recommendations to the Minister.

It is expected that the changes arising from this review will be in place by 1 July 2017.

ASIC report on IPO due diligence has lessons for New Zealand issuers

An Australian regulator’s report highlighting concerns about the quality of due diligence processes in some initial

public offerings (IPOs) should be noted by New Zealand issuers.

The report, issued by the Australian Securities and Investments Commission (ASIC), raises concerns about the

quality of due diligence processes, particularly among small to mid-sized issuers. It warns that while benefits were

evident from a robust due diligence process, poor quality processes carried significant consequences. It also

found a large variation in the quality of advisers engaged to assist on due diligence processes.

Given the similarity in securities laws and practice in New Zealand, the Australian report provides useful learnings

for New Zealand issuers and advisers.

For Bell Gully commentary on this report (ASIC Report 484), refer to our earlier update here.

CORPORATE REPORTER – SEPTEMBER 2016 6

MBIE consults on retirement savings in bankruptcy

The Ministry of Business, Innovation and Employment (MBIE) is considering how a bankrupt person’s retirement

savings should be treated, and in particular, whether those funds should be made available to repay creditors.

At present, whether or not a bankrupt can retain their retirement savings depends on the interaction of the

KiwiSaver Act 2006, the Insolvency Act 2006, individual retirement schemes’ trust deeds, and the outcome of two

court cases.

MBIE proposes to create a uniform approach to the treatment of bankrupt persons’ retirement savings, and is

seeking submissions on its discussion document Accessibility of retirement savings in bankruptcy for the

repayment of creditors.

Submissions close on 30 September 2016. Click here for more information.

Financial Markets Authority (FMA)

FMA updates market participants on proposed FMCA exemptions

The FMA is working on a number of matters which require FMA legislative notices to be put in place before the

two-year transition period for the full implementation of the Financial Markets Conduct Act 2013 (FMCA) ends on

30 November 2016. To keep the market informed of its progress and plans, the FMA has been regularly updating

the market. The latest of these updates was released last month and is available here.

Disclosure, governance and financial reporting exemptions for overseas issuers

Some of the key proposed legislative notices are exemptions required for overseas issuers. A number of new

class exemptions will ensure that the flexibility provided to overseas issuers under the Securities Act regime will

continue under the FMCA. In particular, the FMA has confirmed that disclosure and governance exemptions will

be available to overseas issuers:

where the issuer makes an offer to existing holders of financial products listed in a specified overseas

jurisdiction (likely to be Australia, Canada, France, Germany, Ireland, the Netherlands, Singapore,

Switzerland, South Africa, the United Kingdom and the United States of America) and a number of New

Zealand investors incidentally receive that offer (such as an offer under a multi-national employee share

purchase scheme, a rights offer, or offers arising from reconstructions where securities are offered as the

consideration for the acquisition or cancellation of other securities), or

where the offer is an offer of financial products that are or will be approved for trading on the London Stock

Exchange, the Nasdaq Stock Market or the New York Stock Exchange.

This proposed relief continues the relief available under the existing Securities Act (Overseas Companies)

Exemption Notice 2013 and the Securities Act (Overseas Listed Issuers) Exemption Notice 2002.

Both of these exemptions will be subject to a number of conditions to ensure that the overseas issuers comply

with broadly equivalent disclosure, financial reporting and governance requirements in their own overseas

jurisdictions.

CORPORATE REPORTER – SEPTEMBER 2016 7

Overseas GAAP and auditors allowed for some entities

The FMA has also agreed to allow overseas entities with a primary listing on an overseas market in specified

jurisdictions to use their overseas financial statements and auditors as an alternative to the financial statement

and audit requirements in Part 3 (for disclosure in offer documents) and in Part 7 (for ongoing financial reporting

requirements) of the FMCA.

Relief for existing Securities Act issuers

The FMA has confirmed that overseas issuers which have securities already issued under certain Securities Act

class exemptions (and some individual exemptions) will be granted exemptions from the governance, financial

reporting and audit obligations as well as the on-going disclosure obligations that would otherwise apply under the

FMCA after 30 November 2016. These exemptions will be consistent with the terms and conditions of the

proposed class exemptions for offers made by overseas issuers under the FMCA regime.

Additional exemptions recognising overseas regimes

In brief, a number of other exemptions have been proposed by the FMA to facilitate overseas regimes, including:

overseas banks offering simple call debt securities in New Zealand: overseas banks in certain

recognised jurisdictions will be able to make offers of ‘simple debt products’ such as call deposits and term

deposits on a similar basis to those offered by New Zealand registered banks under the exclusion in

Schedule 1 of the FMCA,

overseas registered banks and licensed insurers: the FMA has agreed to enhance the Financial Markets

Conduct (Overseas Registered Banks and Licensed Insurers) Exemption Notice 2015, which exempts

overseas registered banks and overseas insurers from financial reporting and audit obligations of the FMCA,

to:

- allow Australian qualified auditors to audit New Zealand business financial statements,

- remove the New Zealand-specific financial statement dating and signing requirements, so that signing

procedures used in other jurisdictions may be used instead, and

- allow sufficient time for the lodging of financial statements in New Zealand compatible with the

requirements of the recognised overseas regimes, and

overseas auditors will be recognised for custodian assurance engagements: the FMA has decided to

grant exemptions for overseas custodians from certain recognised jurisdictions from requirements under the

Financial Markets Conduct Regulations 2014 and the Financial Advisers (Custodians of FMCA Financial

Products) Regulations 2014 to obtain an annual assurance engagement from a New Zealand qualified

auditor.

Proposed relief for existing employee share schemes

The FMA has agreed to grant exemptions from financial reporting requirements and the on-going disclosure and

governance requirements under the FMCA for New Zealand issuers that have only offered under the Securities

Act (Employee Share Purchase Schemes – Unlisted) Exemption Notice 2011(or under any related individual

exemption notices). This aligns the obligations of these companies with those making offers under the FMCA

Schedule 1 exclusion for employee share purchase schemes, the Financial Markets Conduct (Employee Share

Purchase Schemes) Exemption Notice 2016 and the proposed treatment of overseas employee share purchase

schemes noted above.

Other proposed relief

The latest regulatory update also outlines proposed relief for:

cooperative companies and industrial and provident societies,

CORPORATE REPORTER – SEPTEMBER 2016 8

offerors of horse bloodstock syndicates and bloodstock companies,

custodians of property schemes, and

forestry schemes.

Timing

Many of these proposed exemptions were expected to be finalised by the end of July 2016, however this deadline

has since passed and no updated timetable has been given. The exemption notices will be available on FMA’s

website here.

European Commission recognises New Zealand’s audit oversight regime

The European Commission has announced its recognition of the New Zealand audit oversight regime as

equivalent to EU standards, permitting New Zealand regulated auditors to operate in the European Union.

This recognition will allow New Zealand auditors to continue to audit financial statements of entities listed on EU

markets. It will also allow the EU audit oversight authorities to conclude co-operative agreements with the FMA.

Click here for the FMA’s full press release.

FMA consults on draft conduct guide for financial service providers

The FMA is inviting submissions until 31 October 2016 on a draft guidance note: “A guide to the FMA’s view of

conduct”.

This guide is primarily for directors and senior managers of financial service providers licensed under the

Financial Markets Conduct Act 2013 (FMCA). Its aim is to provide principles-based guidance about how the FMA

will examine whether financial service providers are demonstrating good conduct under the FMCA. This includes

discussion on how the FMA thinks about licensing (and re-licensing), supervision, monitoring, and enforcement.

Questions to indicate what the FMA will be looking for and asking about are included in the guide. But the guide

should not be viewed as a checklist or manual.

A copy of the draft guide is available here.

FMA releases a report on its review of corporate governance disclosures

The FMA has completed its review of 45 listed and unlisted companies’ websites and annual reports to determine

how public disclosures by companies are addressing the nine corporate governance principles set out in the

FMA’s 2014 Corporate Governance Handbook. The FMA also recently asked institutional investors how they rate

the current corporate governance standards in New Zealand.

The resulting report indicates that there is still work to be done, especially by unlisted companies. The FMA found

that, on average, listed companies disclosed 67% of all the information recommended by the FMA whereas non-

listed companies only disclosed, on average, 24% of all the information recommended by the handbook.

The listed companies were selected to provide a cross-section of companies. The unlisted companies were

selected from the Financial Service Provider Register.

CORPORATE REPORTER – SEPTEMBER 2016 9

Chief areas of concern for institutional investors were board composition and performance, reporting and

disclosure, and remuneration.

A copy of the report is available here.

A copy of the 2014 Corporate Governance Handbook is available here.

NZX Limited (NZX)

NZX consults on an exposure draft of an updated corporate governance code

NZX is seeking feedback on an exposure draft of an updated corporate governance code (the draft NZX Code)

following on from the submissions NZX received on a discussion paper released in November 2015. Submissions

of the draft NZX Code close on 14 October 2016.

The draft NZX Code follows a three-tiered approach, which was generally supported by the submitters who

participated in the November consultation. The top tier sets out the principles, which are closely based on those

contained in the Financial Markets Authority’s 2014 ‘Corporate Governance in New Zealand Principles and

Guidelines’ handbook for directors, executives and advisers (the FMA Handbook) so that issuers who are

currently choosing to report against the FMA Handbook do not have to try to match their reporting to two different

reporting codes. The second tier sets out recommendations which will apply on a “comply or explain” basis. The

final tier contains commentary which explains how issuers can meet each recommendation and outlines

additional optional guidance for issuers in areas where NZX thinks the suggested approaches reflect good

practice.

As part of the update, NZX has focused on four areas which have gained increased importance for investors in

recent years. This includes:

environmental, social and governance (ESG) reporting,

reporting on board diversity,

health and safety risk management, and

director and CEO remuneration reporting requirements.

NZX expects to be in a position to seek FMA approval of the proposed rule amendments later this year. The

actual implementation date will be subject to feedback NZX receives from submitters, but NZX has indicated that

the updated NZX Code could come into effect in the first quarter of 2017. This would mean that issuers with

balance dates ending either 31 December or 30 June would need to commence reporting under the new regime

for periods ending 30 June 2017 and onwards.

A copy of the consultation paper is available here and the draft NZX Code is available here. Further background

information is available on NZX’s website here.

CORPORATE REPORTER – SEPTEMBER 2016 10

MERGERS AND ACQUISITIONS

Takeovers Panel

Panel consults on reducing costs for small Code companies

The Takeovers Panel is seeking feedback on whether to extend the coverage of the Takeovers Code (Small

Code Companies) Exemption Notice that was granted in July 2015 (the Small Companies Exemption), but has

only been relied on once since its enactment. A copy of the consultation paper is available here.

This is seen as an interim measure by the Panel, as it is also working on a longer-term legislative solution through

amendments to the Takeovers Code (the Code) to address the disproportionate cost burden associated with

Code compliance for small Code companies. The amendments being considered include a possible change to the

statutory threshold for being a Code company.

The purpose of the Small Companies Exemption is to reduce costs associated with complying with the Code by

allowing small, unlisted Code companies (with total assets of $20 million or less) to opt out of the Code when

raising capital by share allotments. The Panel is considering extending the exemption to allow these companies to

also opt out of all other transactions and events (other than full or partial takeover offers made under rule 7(a) or

7(b) of the Code) that are subject to shareholder approval (such as acquisitions and buybacks).

Submissions close on 23 September 2016.

MoU between the Panel and the FMA

The Takeovers Panel has signed a Memorandum of Understanding (MoU) with the Financial Markets Authority

(FMA). The MoU sets out a framework for engagement and cooperation between the two regulators, taking into

account their respective roles.

Panel updates guidance on control and association

The Takeovers Panel has updated its Guidance Note on Control and Association to incorporate the Panel’s

comments on association and lock-up agreements and shareholders’ agreements set out in Code Word 39.

Overseas Investment

Consultation on targeted exemptions for foreign investments

As foreshadowed in May this year (see our earlier update here for details), the Treasury has now prepared draft

amendments to the Overseas Investment Regulations 2005, and an amended Gazette Notice issued under the

Overseas Investment Act 2005, to implement five targeted exemptions for the overseas investment regime.

Briefly, the five exemptions propose to:

exempt from the requirement to first advertise land on the open market acquisitions of leasehold farmland,

where the cumulative duration of the lease is for a term of not more than twenty years,

CORPORATE REPORTER – SEPTEMBER 2016 11

exempt leasehold land from screening where a previously consented lease is being re-granted on

substantially the same terms and conditions, and the substantive ownership of the property in question, is

unchanged,

exempt transactions from one overseas person to another for specified land that is of a small scale and that

has previously been screened,

exempt certain transactions where consent is required as a result of certain Public Works Act 1981 actions,

and

exempt custodians who are overseas persons but who hold investments on behalf of New Zealand investors

from the requirement for consent for those investments only.

The Treasury is seeking feedback on both the drafting of the Regulations and Gazette Notice by 7 October 2016.

A copy of the consultation paper is available here.

COMMERCIAL

Regulatory developments

Consultation on changes to anti-money laundering and countering financing of terrorism laws

Following on from the Prime Minister’s announcement in June 2016 that the Government will accelerate

Phase Two of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the AML/CFT Act)

regime, the Ministry of Justice is now seeking feedback on the proposed changes. Submissions close on

16 September 2016.

The first phase of the AML/CFT Act came into force in 2013. It currently applies to a range of businesses

including banks, casinos, certain trust and company service providers and certain financial advisers, among

others. Under Phase Two the AML/CFT Act will be extended to cover additional professions and business sectors

that are at high risk of being misused by criminals; including lawyers, accountants, real estate agents,

conveyancers, some additional gambling operators and some businesses that deal in high-value goods.

In addition to seeking feedback on the extension of the regime to the Phase Two entities, the Ministry is seeking

feedback on a number of proposed changes which will also affect Phase One entities. This includes:

whether the suspicious transaction reporting process should be expanded from a transaction-based model to

an activity-based model – that is, whether suspicious activity should be reported, not just actual transactions,

how existing information sharing arrangements could be enhanced (particularly for the purposes of detecting

tax evasion),

whether current third party reliance provisions are appropriate,

whether it’s appropriate to extend the scope of trust and company service providers, and

whether it’s appropriate to expand the types of low-risk institutions that reporting entities are allowed to

conduct simplified due diligence on.

The Government intends to introduce a Bill to Parliament later this year, and have it passed by July 2017. After

that, businesses will be given a period of time to prepare for the changes, but it is the Government’s intention that

the Act should come into force as soon as practically feasible.

Click here to read the consultation paper.

CORPORATE REPORTER – SEPTEMBER 2016 12

Consultation on draft consumer credit fees guidelines

The Commerce Commission is consulting on updated draft consumer credit fees guidelines. A copy of the

guidelines is available here.

The draft guidelines describe the Commission’s view on how lenders should approach setting their fees in order

to comply with the Credit Contracts and Consumer Finance Act 2003 (CCCFA). They set out the general

principles that lenders should take into account and give examples of how these principles might apply in practice.

They also give guidance on whether or not particular types of costs can be included in fees.

The Commission’s previous fee guidelines were published in 2010 and remained in draft pending the outcome of

litigation brought by the Commerce Commission to test what constituted an “unreasonable” fee prohibited by the

CCCFA. For details on that litigation see our earlier article: The final word on fee reasonableness.

The updated draft guidelines also take into account amendments to the CCCFA which came into force in

June 2015.

Submissions close on 24 October 2016. The Commission expects to finalise the guidelines early in 2017.

Further details are available on the Commission’s website here.

CORPORATE

Regulatory developments

Further consultation on tax treatment of employee share schemes

The Inland Revenue has issued an update on the proposed changes to the employee share scheme tax rules

released in May this year. Click here to read our previous article.

The update (Tax treatment of employee share schemes – further consultation) revises the May proposals in light

of submissions received and invites further comment by 30 September 2016.

For information on the revised proposals see Bell Gully’s earlier publication: Inland Revenue updates share

scheme tax proposals.

MBIE consults on insolvency practitioner regulation and voluntary liquidations

In November last year a working group of insolvency experts was set up by the Government to review

New Zealand’s corporate insolvency laws. The working group reported back to the Minister last month with the

first of two reports: ‘Review of Corporate Insolvency Law: Report No. 1 of the Insolvency Working Group, on

insolvency practitioner regulation and voluntary liquidations'.

The Ministry of Business, Innovation and Employment (MBIE) is now seeking feedback on the working group’s

recommendations, which include two main changes for the regulation of insolvency practitioners:

CORPORATE REPORTER – SEPTEMBER 2016 13

introducing a licensing system for insolvency practitioners, and

implementing, with some enhancements, the Insolvency Practitioners Bill (which is currently before

Parliament) regardless of whether the statutory occupational regulation system also set out in the Bill is

introduced.

The working group is of the view that much of the harm raised by aspects of the voluntary liquidation process

would be reduced by the licensing of insolvency practitioners, but it has also made recommendations for

improving the law relating to voluntary liquidations such as:

assigning a publicly searchable unique identification number to existing and future directors,

requiring the consent of the petitioning creditor for the voluntary appointment of liquidators or administrators,

and

providing the ability for the liquidator to void, with limited exceptions, the transfer of a company’s assets once

the liquidation order is made.

Submissions close on 7 October 2016. For further details click here.

Further streamlining of distribution requirements for company annual reports proposed

A Member’s Bill has been introduced by National MP, Matthew Doocey, to remove the requirement for those

companies under a statutory obligation to prepare an annual report to send their shareholders in each financial

year either a hard copy of their annual report or a written notice (often referred to as the ‘section 209 notice’)

setting out details of how to obtain a copy of their annual report.

Instead, under the Bill a company will be subject to a one-off obligation to inform shareholders of their rights

regarding access to its annual reports. If the Bill is passed, shareholders will continue to have a right to receive

hard copies of annual reports if they request the company to send them one.

A copy of the Companies (Annual Report Notice Requirements) Amendment Bill is available here. The Bill is still

awaiting its first reading.

News from the Companies Office

Resident director requirements clarified

Recent amendments to the Companies Act 1993 require New Zealand incorporated companies to have at least

one director who:

lives in New Zealand, or

lives in an enforcement country (at present, only Australia) and is a director of a company that is registered in

that country.

The term ‘lives in New Zealand’ is not defined in the Act. However, following a recent High Court case which

considered what matters will be relevant in reaching a determination on whether a director “lives in New Zealand”

(see Re Carr [2016] NZHC 1536), the Registrar of Companies has provided further guidance on how this statutory

requirement will be interpreted by the Registrar on the Companies Office’s website here.

Drawing on tax legislation, the Registrar of Companies considers that the statutory requirement will be satisfied

where a director is present in New Zealand for more than 183 days in total in a 12-month period. However, if a

director is not present for that time period it does not mean that the requirement cannot be satisfied. The policy

behind the resident director requirement is to ensure that there is capacity to enforce obligations against the

CORPORATE REPORTER – SEPTEMBER 2016 14

companies and their directors. In light of this, the Registrar has indicated that she will also consider such matters

as the actual time the director spends in New Zealand, the director's connection and ties to New Zealand and the

manner of the director's living when in New Zealand. No one factor will be determinative. The key issue the

Registrar considers is whether the combination of those factors is such that obligations can be enforced against

the company and the director.

This is the same approach that was taken by the High Court in Re Carr. In that case, the High Court found that

the director met the statutory requirement because although he did not meet the “183 days” test his situation

nevertheless was sufficient to satisfy the statutory purpose of the requirement. In particular, the director:

spends a significant period of time in New Zealand,

owns several New Zealand properties, including a home where his partner lives for most of the year,

has a number of New Zealand companies that employ staff that he supervises,

has a New Zealand bank account, and

is a member of several New Zealand clubs and organisations.

COMPETITION AND CONSUMER LAW

New Zealand Commerce Commission (NZCC)

Speeches

The NZCC has issued the following speech:

An insider’s reflections on merger clearances – 28 June 2016

Principal Counsel, Competition, David Blacktop presented to LEANZ.

Click here for more

Media releases

The NZCC has issued the following media releases:

Industry regulation and regulatory control

NZCC to investigate deregulating Spark’s resale services

The NZCC has completed its five yearly review of Schedule 1 of the Telecommunications Act 2001 and confirmed

it will investigate whether Spark’s resale voice services should be deregulated.

Spark’s resale voice services have enabled retail service providers to offer retail fixed-line phone services without

having to invest in their own infrastructure. These resale services were originally introduced with the Act in 2001

and were subsequently amended in 2011.

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NZCC releases draft report on Fonterra’s 2015/16 base milk price calculation

The NZCC has released its draft report on Fonterra’s base milk price calculation for the 2015/16 dairy season.

The base milk price is the price Fonterra pays to farmers for raw milk and it is currently set by Fonterra at $3.90

per kilogram of milk solids for the 2015/16 season just ended. The report does not cover the forecast 2016/17

price of $4.25 that Fonterra recently announced.

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CORPORATE REPORTER – SEPTEMBER 2016 15

NZCC warns Wellington Electricity over quality standards

The NZCC has issued a warning letter to Wellington Electricity Lines Limited after it failed to comply with

minimum standards for network reliability in 2013 and 2014.

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Mergers and acquisitions

Vodafone and Sky seek clearance for merger

The NZCC has received two clearance applications relating to the proposed merger of Vodafone New Zealand

Limited and Sky Network Television Limited. The NZCC has published a Statement of Preliminary Issues relating

to the proposed merger.

Sky is seeking clearance to acquire up to 100% of the assets and/or shares of Vodafone NZ. In a separate

application, Vodafone Europe B.V. is seeking clearance to acquire up to 51% of the shares in Sky.

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NZCC clears Fletcher Building and Higgins merger

The NZCC has given clearance for Fletcher Building Holdings New Zealand Limited (Fletcher Building) to

acquire Higgins Group Holdings Limited (Higgins).

The clearance covers Higgins’ road surfacing and road maintenance, civil structure and construction products,

including most of its aggregates and bitumen businesses.

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NZCC considers rendering merger

The NZCC has received an application for the Wallace Group Limited Partnership to acquire up to 100% of the

assets and business of Wallace Corporation Limited, Farm Brands. This comprises of Farm Brands Limited, Farm

Brands Asset Management Limited and South Canterbury By-Products (2009) Limited and Keep It Clean Limited.

The NZCC has published a statement of preliminary issues outlining the key competition issues that the NZCC

considers will be important in deciding whether or not to grant clearance.

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Boehringer Ingelheim applies for clearance to acquire Merial from Sanofi

The NZCC has received an application from Boehringer Ingelheim International GmbH seeking clearance to

acquire 100% of the shares and assets in Merial, the animal health business of Sanofi SA.

Boehringer Ingelheim and Sanofi are global manufacturers of pharmaceutical and vitamin products for humans

and for animals, which they each distribute in New Zealand.

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NZME/Fairfax merger update

The NZCC has agreed an extension with NZME and Fairfax on their application seeking authorisation to merge

their New Zealand media operations and will now make its final decision by 15 March 2017. As part of the

standard authorisation process the NZCC intends to release a Draft Determination by early November.

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NZCC authorises commingling of racing betting

The NZCC has granted authorisation to the New Zealand Racing Board to allow it, subject to certain restrictions,

to commingle totalisator horse and greyhound racing betting pools with Tabcorp Wagering Manager (Vic) Pty Ltd

in Australia.

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CORPORATE REPORTER – SEPTEMBER 2016 16

Telecommunications

NZCC seeks feedback on domestic backhaul services

The NZCC has released a discussion paper seeking information on domestic ‘backhaul’ services. Questions

asked in the paper cover how the services have evolved – given the rapid changes in the telecommunications

market – and whether regulation may need to be altered to best promote downstream competition for the long

term benefit of consumers.

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Market behaviour

Bayleys and Success Realty to pay $2.2m and $900,000 in penalties in real estate price fixing case

Bayleys Corporation Limited and Hamilton-based Success Realty Limited have been ordered to pay penalties of

$2.2 million and $900,000 respectively following penalty hearings in the Auckland High Court.

Bayleys and Success, which operates under the Bayleys brand, are among 13 national and regional real estate

agencies the NZCC filed court proceedings against in December 2015. The proceedings relate to three separate

alleged price fixing and anti-competitive agreements in response to Trade Me changing its fees for listing

properties for sale on its website.

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Consumer issues

NZCC files charges over ECE subsidy misrepresentations at Auckland pre-school

The NZCC has filed charges in the Auckland District Court against Kowhai Montessori Pre-School Limited and its

former director and manager Rebecca Brindle, following an investigation into allegations they misrepresented to

parents the subsidy the pre-school received under the Government’s Early Childhood Education scheme.

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SmartStore charged over its customer agreements

Mobile trader, Smart Shop Limited (trading as SmartStore) pleaded guilty to 11 charges brought by the NZCC for

its loan contracts and extended warranty agreements.

The charges alleged inadequate disclosure of key information to customers about their loans and extended

warranty agreements, and misrepresentations about consumers’ rights under the Consumer Guarantees Act

1993.

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Budget Loans and Evolution Finance found guilty on 106 FTA charges

Finance companies Budget Loans Limited and Evolution Finance Limited have been found guilty in the Auckland

District Court on 106 charges brought by the NZCC under the Fair Trading Act 1986.

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NZCC files charges against Harmoney over marketing campaign

The NZCC has filed Fair Trading Act charges in the Auckland District Court against peer-to-peer lender

Harmoney alleging it misled consumers into believing they had been pre-approved for a personal loan.

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NZCC files charges against Youi insurance

The NZCC has filed charges in the Auckland District Court against insurance firm Youi NZ Pty Limited, alleging it

employed misleading sales techniques when attempting to sell policies to consumers who were only seeking a

quote.

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CORPORATE REPORTER – SEPTEMBER 2016 17

Acute Finance charged over unreasonable fees and repayment waiver

Acute Finance Limited has pleaded not guilty to five charges brought by the NZCC under the Credit Contract and

Consumer Finance Act 2003 about its credit fees and its repayment waiver.

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NZCC files charges against Trustpower over misleading broadband offer

The NZCC has filed charges in the Auckland District Court against Trustpower Limited over its marketing and sale

of its bundled electricity and unlimited data broadband offer.

The seven charges laid under the Fair Trading Act relate to Trustpower’s television, online and billboard

advertising between March and July 2015 promoting a $49 a month for 12 months unlimited data broadband plan.

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123 Mart charged over safety standard of children’s toys and nightwear

The NZCC has filed 28 charges against The 123 Mart Limited relating to 10 children’s toys and five clothing items

it sold between April 2013 and June 2016.

123 Mart has pleaded not guilty to all of the Fair Trading Act 1986 charges.

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NZCC files charges against Auckland mobile trader, Zee Shop

Mobile trader Zee Shop Limited appeared in the Auckland District Court in relation to 15 charges brought by the

NZCC relating to its lending practices.

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$1.5 million in fees and interest returned to borrowers after insufficient disclosure Lenders Adelphi Finance Ltd and Shaw Personal Finance Ltd have refunded customers or reduced customer

account balances by over $1.4 million and $100,000 respectively after the NZCC warned they were likely to have

breached consumer credit laws.

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Duvets sold as ‘premium alpaca’ contained mostly sheep’s wool

Rotorua business Budge Collection Limited and sole director, Sun Dong Kim, were convicted and fined a total of

$71,250 in Auckland District Court after each pleading guilty to four charges of misrepresenting how much alpaca

fibre was in their duvets.

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NZCC asks the Court to clarify how credit law applies to Harmoney

The NZCC is seeking clarification from the Auckland High Court about how the Credit Contract and Consumer

Finance Act 2003 applies to consumer loans entered into with peer-to-peer lender Harmoney Limited.

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Energy retail contracts reviewed by NZCC for unfair terms

As part of an ongoing review of standard form consumer contracts, the NZCC has released a report detailing its

findings in the energy retail sector.

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Godfreys pleads guilty to charges over extended warranty agreements

New Zealand Vacuum Cleaner Company Limited (trading as Godfreys) has pleaded guilty to 10 charges brought

by the NZCC in relation to the extended warranty agreements it sold to consumers.

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CORPORATE REPORTER – SEPTEMBER 2016 18

AirAsia warned over opt out pricing and processing fee

Malaysian airline Air Asia X Service Pty Limited has agreed to end its pre-selection of checked baggage and

change how it discloses its processing fee when selling flight tickets to New Zealand customers online.

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Australian Competition and Consumer Commission (ACCC)

Selected ACCC media releases

The ACCC has issued the following media releases:

Mergers and acquisitions

ACCC will not oppose acquisition of Asciano by Qube, Brookfield and others

The ACCC will not oppose the proposed acquisition of Asciano Limited by a consortium comprising Qube

Holdings, Brookfield Infrastructure Partners LP and a group of global investment funds.

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ACCC accepts Metcash undertaking paving way for Home Timber bid

The ACCC will not oppose a bid from Metcash to acquire rival hardware wholesaler Home Timber & Hardware

from Woolworths after accepting a court-enforceable undertaking from Metcash.

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Market behaviour

ACCC takes action against alleged cartel conduct in the polycarbonate roofing industry

The ACCC has instituted proceedings in the Federal Court against four companies and three individuals for

alleged cartel conduct in relation to the supply of polycarbonate roof sheeting to retailers in Australia.

Click here for more

Agreement to restrict advertising of infant formula

The ACCC has re-authorised an agreement between manufacturers and importers of infant formula that prohibits

them from advertising and promoting formula for babies under 12 months of age directly to the public. This five-

year agreement is designed to promote breastfeeding in Australia, which has significant public health benefits.

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Australia’s first criminal cartel charge laid against NYK

Following an investigation by the ACCC, Nippon Yusen Kabushiki Kaisha (NYK), a global shipping company

based in Japan, has pleaded guilty to criminal cartel conduct in the Federal Court.

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ACCC proposes to deny authorisation of real estate advertising collective negotiations

The ACCC has issued a draft determination proposing to deny authorisation to Property Media Group Pty Ltd

(PMG). PMG is seeking to collectively bargain and boycott suppliers of online and print real estate advertising,

including realestate.com.au and domain.com.au.

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Telecommunications

ACCC calls for better broadband speed information

The ACCC wants to see consumers provided with better information about broadband speeds, to improve

competition and consumer outcomes in the retail broadband market.

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CORPORATE REPORTER – SEPTEMBER 2016 19

Consumer issues

Unilever and Smith's pay penalties for misleading healthy food representations

Unilever Australia Limited and The Smith’s Snackfood Company Pty Ltd have each paid a penalty of $10,800

following the issue of infringement notices by the ACCC for misleading healthy food representations.

The ACCC had reasonable grounds to believe both companies made false or misleading representation on the

packaging of popular products they supply that the products had been approved or were suitable as healthy

options for school canteens.

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ACCC takes action against Volkswagen over diesel emission claims

The ACCC has instituted proceedings in the Federal Court of Australia against German company Volkswagen

Aktiengesellschaft and its Australian subsidiary, Volkswagen Group Australia Pty Ltd, alleging they engaged in

misleading or deceptive conduct, made false or misleading representations and engaged in conduct liable to

mislead the public in relation to diesel vehicle emission claims.

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CORPORATE REPORTER – JULY 2016 22

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ACCC takes action against Heinz over nutritional claims on food for 1-3 year olds The ACCC has commenced proceedings in the Federal Court against H.J. Heinz Company Australia Ltd in relation to its Little Kids Shredz products. The ACCC alleges that Heinz made false and misleading representations, and engaged in conduct liable to mislead the public, in relation to the nature, characteristics and suitability of these products. Click here for more

ACCC takes action against e-cigarette suppliers for alleged misleading “no toxic chemicals” claims The ACCC has commenced separate proceedings in the Federal Court against two e-cigarette online retailers alleging that they made false or misleading representations and engaged in misleading conduct by making statements on their websites that their e-cigarette products did not contain toxic chemicals. Click here for more

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