Reprint as at 13 May 2016

Coat of Arms of New Zealand

Companies Act 1993

Public Act
 
1993 No 105
Date of assent
 
28 September 1993
Commencement
 
see section 1(2)
Note

Changes authorised by subpart 2 of Part 2 of the Legislation Act 2012 have been made in this official reprint.

Note 4 at the end of this reprint provides a list of the amendments incorporated.

This Act is administered by the Ministry of Business, Innovation, and Employment.

Contents

Title
1Short Title and commencement
2Interpretation
3Public notice
4Meaning of solvency test
5Meaning of holding company and subsidiary
6Extended meaning of subsidiary [Repealed]
7Control defined
8Certain matters to be disregarded
9Act binds the Crown
10Essential requirements
11Right to apply for registration
12Application for registration
13Registration
14Certificate of incorporation
15Separate legal personality
16Capacity and powers
17Validity of actions
18Dealings between company and other persons
19No constructive notice
20Name to be reserved
21Name of company if liability of shareholders limited
22Application for reservation of name
23Change of name
24Direction to change name
25Use of company name
26No requirement for company to have constitution
27Effect of Act on company having constitution
28Effect of Act on company not having constitution
29Form of constitution
30Contents of constitution
31Effect of constitution
32Adoption, alteration, and revocation of constitution
33New form of constitution
34Court may alter constitution
35Legal nature of shares
36Rights and powers attaching to shares
37Types of shares
38No nominal value
39Transferability of shares
40Contracts for issue of shares
41Issue of shares on registration and amalgamation
42Issue of other shares
43Notice of share issue
44Shareholder approval for issue of shares
45Pre-emptive rights
46Consideration for issue of shares
46AConsideration for issue of shares on registration
47Consideration to be decided by board
48Exceptions to section 47
49Consideration in relation to issue of options and convertible financial products
50Consent to issue of shares
51Time of issue of shares
52Board may authorise distributions
53Dividends
54Shares in lieu of dividends
55Shareholder discounts
56Recovery of distributions
57Reduction of shareholder liability a distribution
58Company may acquire its own shares
59Acquisition of company’s own shares
60Board may make offer to acquire shares
61Special offers to acquire shares
62Disclosure document
63Stock exchange acquisitions subject to prior notice to shareholders
64Disclosure document
65Stock exchange acquisitions not subject to prior notice to shareholders
66Cancellation of shares repurchased
67Enforceability of contract to repurchase shares
67ACompany may hold its own shares
67BRights and obligations of shares company holds in itself suspended
67CReissue of shares company holds in itself
68Meaning of redeemable
69Redemption at option of company
70Company must satisfy solvency test
71Special redemption of shares
72Disclosure document
73Cancellation of shares redeemed
74Redemption at option of shareholder
75Redemption on fixed date
76Financial assistance
77Company must satisfy solvency test
78Special financial assistance
79Disclosure document
80Financial assistance not exceeding 5% of shareholders’ funds
81Enforceability of transactions
82Subsidiary may not hold shares in holding company
83Statement of rights to be given to shareholders
84Transfer of shares
85Transfer of shares under approved system
86Transfer of shares by operation of law
87Company to maintain share register
88Place of share register
89Share register as evidence of legal title
90Directors’ duty to supervise share register
91Power of court to rectify share register
92Trusts not to be entered on register
93Personal representative may be registered
94Assignee of bankrupt may be registered
94AMeaning of ultimate holding company information
94BNotice of ultimate holding company changes
95Share certificates
95APerpetual debentures
95BPower to reissue redeemed debentures in certain cases
95CSpecific performance of contracts to subscribe for debentures
96Meaning of shareholder
97Liability of shareholders
98Liability of former shareholders
99Additional provisions relating to liability of shareholders and former shareholders
100Liability for calls
101Shareholders not required to acquire shares by alteration to constitution
102Liability of personal representative
103Liability of an assignee
104Exercise of powers reserved to shareholders
105Exercise of powers by ordinary resolution
106Powers exercised by special resolution
107Unanimous assent to certain types of action
108Company to satisfy solvency test
109Management review by shareholders
110Shareholder may require company to purchase shares
111Notice requiring purchase
112Price for shares to be purchased by company determined
112APrice for shares referred to arbitration if shareholder objects to price
112BInterest payable on outstanding payments
112CTiming of transfer of shares
113Purchase of shares by third party
114Court may grant exemption
115Court may grant exemption if company insolvent
116Meaning of classes and interest groups
117Alteration of shareholder rights
118Shareholder may require company to purchase shares
119Actions not invalid
120Annual meeting of shareholders
121Special meetings of shareholders
122Resolution in lieu of meeting
123Court may call meeting of shareholders
124Proceedings at meetings
125Shareholders entitled to receive distributions, attend meetings, and exercise rights
126Meaning of director
127Meaning of board
128Management of company
129Major transactions
130Delegation of powers
131Duty of directors to act in good faith and in best interests of company
132Exercise of powers in relation to employees
133Powers to be exercised for proper purpose
134Directors to comply with Act and constitution
135Reckless trading
136Duty in relation to obligations
137Director’s duty of care
138Use of information and advice
138AOffence for serious breach of director’s duty to act in good faith and in best interests of company
139Meaning of interested
140Disclosure of interest
141Avoidance of transactions
142Effect on third parties
143Application of sections 140 and 141 in certain cases
144Interested director may vote
145Use of company information
146Meaning of relevant interest
147Relevant interests to be disregarded in certain cases
148Disclosure of share dealing by directors
149Restrictions on share dealing by directors
150Number of directors
151Qualifications of directors
152Director’s consent required
153Appointment of first and subsequent directors
154Court may appoint directors
155Appointment of directors to be voted on individually
156Removal of directors
157Director ceasing to hold office
158Validity of director’s acts
159Notice of change of directors
160Proceedings of board
161Remuneration and other benefits
162Indemnity and insurance
163Interpretation
164Injunctions
165Derivative actions
166Costs of derivative action to be met by company
167Powers of court where leave granted
168Compromise, settlement, or withdrawal of derivative action
169Personal actions by shareholders against directors
170Actions by shareholders to require directors to act
171Personal actions by shareholders against company
172Actions by shareholders to require company to act
173Representative actions
174Prejudiced shareholders
175Certain conduct deemed prejudicial
176Alteration to constitution
177Ratification of certain actions of directors
178Information for shareholders
179Investigation of records
180Method of contracting
181Attorneys
182Pre-incorporation contracts may be ratified
183Warranties implied in pre-incorporation contracts
184Failure to ratify
185Breach of pre-incorporation contract
185AJurisdiction of District Courts
186Registered office
187Change of registered office
188Requirement to change registered office
189Company records
190Form of records
191Inspection of records by directors
192Address for service
193Change of address for service
193ARectification or correction of address for service
194Accounting records must be kept
195Place accounting records to be kept
196Overview
197Non-application of subpart if alternative financial reporting duties under financial markets legislation
198Interpretation
199Determining number of shareholders
200Application of preparation provisions
201Financial statements must be prepared
202Group financial statements must be prepared
203Recognition of financial reporting requirements of overseas countries
204Financial statements for overseas company must include financial statements for large New Zealand business
205Balance date of subsidiaries
206Application of audit requirement
207Financial statements must be audited
207AAudit must be carried out in accordance with auditing and assurance standards
207BAuditor must report to shareholders
207CAuditor’s report must be sent to Registrar and External Reporting Board if requirements have not been complied with
207DApplication of registration provisions
207EFinancial statements must be registered
207FShareholders may request copy of financial statements prepared for tax purposes
207GFinancial reporting offences
207HPeriod during which company may opt in or opt out
207ICompanies with 10 or more shareholders may opt out
207JLarge companies may opt out of audit requirement
207KCompanies with fewer than 10 shareholders may opt in
207LRegistrar may grant exemptions to overseas companies
207MPublication and status of exemptions
207NConsultation
207OExemption may apply to accounting period before exemption is granted
207PAuditor must be appointed if financial statements must be audited
207QRegistrar may appoint auditor
207RResignation and casual vacancy
207SAuditor’s fees and expenses
207TAutomatic reappointment
207UReplacement of auditor
207VAuditor not seeking reappointment or resigning
207WAuditor’s attendance at shareholders’ meeting
207XInterpretation in this subpart
207YInfringement offences
207ZInfringement notices
207ZAProcedural requirements for infringement notices
207ZBPayment of infringement fee
208Obligation to prepare annual report
209Obligation to make annual report available to shareholders
209ABoard must send copy of annual report or concise annual report on request
209BAnnual report and concise annual report made available by electronic means
210Information for shareholders who elect not to receive annual report [Repealed]
211Contents of annual report
211AObligations to prepare and make available annual reports or financial statements do not apply to non-active companies [Repealed]
212Shareholders may elect not to receive documents
213Failure to disclose
214Annual return
214ARegistrar may alter New Zealand register
215Public inspection of company records
216Inspection of company records by shareholders
217Manner of inspection
218Copies of documents
219Amalgamations
220Amalgamation proposal
221Approval of amalgamation proposal
222Short form amalgamation
223Registration of amalgamation proposal
224Certificate of amalgamation
225Effect of certificate of amalgamation
225ARegisters
226Powers of court in other cases
227Interpretation
228Compromise proposal
229Notice of proposed compromise
230Effect of compromise
231Variation of compromise
232Powers of court
233Effect of compromise in liquidation of company
234Costs of compromise
235Interpretation
236Approval of arrangements, amalgamations, and compromises
236AArrangement or amalgamation involving code company
236BTakeovers code does not apply where court order under section 236
237Court may make additional orders
238Parts 13 and 14 not affected
239Application of section 233
239AObjects of this Part
239BInterpretation of some key terms
239CInterpretation of other terms
239DWhen administration begins
239EWhen administration ends
239EAVoluntary administration of licensed insurers
239FWho may be appointed administrator
239GAdministrator must consent in writing
239HWho may appoint administrator
239IAppointment by company
239JAppointment by liquidator or interim liquidator
239KAppointment by secured creditor
239LAppointment by court
239MAppointment must not be revoked
239NAppointment of 2 or more administrators
239ORemuneration of administrator
239PWhen office of administrator is vacant
239QAdministrator may resign
239RRemoval of administrator
239SAppointor may appoint new administrator to fill vacancy
239TCreditors must consider appointment of replacement administrator
239UOutline of administrator’s role
239VAdministrator’s powers
239WAdministrator is company’s agent
239XEffect on directors
239YEffect on employees
239ZEffect on dealing with company property
239AACompany officer’s liability for compensation for void transaction or dealing
239ABEffect on transfer of shares
239ACEffect on liquidation
239ADEffect on receivership
239AEAdministrator must investigate company’s affairs and consider possible courses of action
239AFDirectors’ statement of company’s position
239AGAdministrator’s right to documents, etc
239AHAdministrator may lodge report with Registrar
239AIAdministrator must report misconduct
239AJAdministrator must call creditors’ meetings
239AKConduct of creditors’ meetings
239ALJoint meetings of creditors of related companies in administration
239AMPower of court where outcome of voting at creditors’ meeting determined by related entity
239ANAdministrator must call first creditors’ meeting
239AONotice of first and subsequent creditors’ meetings
239APAdministrator must table interests statement
239AQFunctions of creditors’ committee
239ARMembership of creditors’ committee
239ASWhat watershed meeting is
239ATAdministrator must convene watershed meeting
239AUNotice of watershed meeting
239AVWhen watershed meeting must be held
239AWDirectors must attend watershed meeting
239AXDisclosure of voting arrangements
239AYCourt may order that pooled property owners are separate class
239AZAdjournment of watershed meeting
239ABAWhat creditors may decide at watershed meeting
239ABBWhat happens if proposed deed not fully approved at watershed meeting
239ABCCharge unenforceable
239ABDOwner or lessor must not recover property used by company
239ABEProceeding must not be begun or continued
239ABFAdministrator not liable in damages for refusing consent
239ABGEnforcement process halted
239ABHDuties of court officer in relation to company’s property
239ABILis pendens taken to exist
239ABJAdministration not to trigger enforcement of guarantee of liability of director or relative
239ABKMeaning of terms used in this subpart
239ABLIf secured creditor acts before or during decision period
239ABMIf enforcement of charges begins before administration
239ABNCharge over perishable property
239ABOCourt may limit powers of secured creditor, etc, in relation to property subject to charge
239ABPGiving notice under security agreement
239ABQIf recovery of property begins before administration
239ABRRecovering perishable property
239ABSCourt may limit powers of receiver, etc, in relation to property used by company
239ABTGiving notice under agreement about property
239ABUWhen liquidator may be appointed to company in administration
239ABVCourt may adjourn application for liquidation
239ABWCourt must not appoint interim liquidator if administration in creditors’ interests
239ABXEffect of appointment of liquidator
239ABYFormer administrator is default liquidator
239ABZPerson in control of company must lodge revised report with Registrar
239ACAAct of administrator in good faith must not be set aside in liquidation
239ACBVoidable transactions
239ACCWho is deed administrator
239ACDWho may be appointed deed administrator
239ACEDeed administrator must consent in writing
239ACFAppointment of deed administrator must not be revoked
239ACGAppointment of 2 or more deed administrators
239ACHWhen office of deed administrator vacant
239ACIDeed administrator may resign
239ACJRemoval of deed administrator
239ACKRemuneration of deed administrator
239ACLDeed administrator may sell shares in company
239ACMWhen this subpart applies
239ACNPreparation and contents of deed
239ACOExecution of deed
239ACPProcedure if deed not fully approved at watershed meeting
239ACQCreditor must not act inconsistently with deed, etc, before execution
239ACRCompany’s failure to execute deed
239ACSWho is bound by deed
239ACTExtent to which deed binds creditors
239ACUPerson bound by deed must not take steps to liquidate, etc
239ACVCourt may restrain creditors and others from enforcing charge or recovering property
239ACWEffect of deed on company’s debts
239ACXCourt may rule on validity of deed
239ACYAdministrator includes deed administrator
239ACZAdministrator must file accounts
239ADACreditors may vary deed
239ADBCourt may cancel creditors’ variation
239ADCTermination of deed
239ADDTermination by court
239ADETermination by creditors
239ADFCreditors’ meeting to consider proposed variation or termination of deed
239ADGAdministrator not liable for company’s debts except as provided in this subpart and in section 239Y
239ADHAdministrator liable for general debts
239ADIAdministrator’s liability for rent
239ADJAdministrator not liable for rental if non-use notice in force
239ADKCourt may exempt administrator from liability for rent
239ADLAdministrator’s indemnity
239ADMAdministrator’s right of indemnity has priority over other debts
239ADNLien to secure indemnity
239ADOCourt’s general power
239ADPOrders to protect creditors during administration
239ADQCourt may rule on validity of administrator’s appointment
239ADRAdministrator may seek directions
239ADSCourt may supervise administrator or deed administrator
239ADTCourt may order administrator or deed administrator to remedy default
239ADUCourt’s power when office of administrator or deed administrator vacant, etc
239ADVProhibition order
239ADWAdministrator must give notice of appointment
239ADXSecured creditor who appoints administrator must give notice to company
239ADYDeed administrator must give notice of execution of deed of company arrangement
239ADZDeed administrator must give notice of failure to execute deed of company arrangement
239AEADeed administrator must give notice of termination by creditors of deed of company arrangement
239AEBCompany must disclose fact of administration
239AECNotice of change of name
239AEDEffect of contravention of this subpart
239AEEEffect of things done during administration of company
239AEFInterruption of time for doing act
239AEGMutual credit and set-off
239AEHApplication of set-off under netting agreement
239AEICalculation of netted balance
239AEJMutuality required for transactions under bilateral netting agreements
239AEKWhen mutuality required for transactions under recognised multilateral netting agreements
239AELApplication of set-off under section 239AEG to transactions subject to netting agreements
239AEMTransactions under netting agreement and effect on certain sections
239AENRights under netting agreement not affected by commencement of administration
239AEOEffect of declaration of person as recognised clearing house under section 310K
239AEPTransactions under recognised multilateral netting agreement not affected by variation or revocation of declaration under section 310K
239AEQInterpretation of terms for purposes of this subpart
239AERCourt may order single administration for related companies in administration
239AESNotice that application filed must be given to administrators and creditors
239AETGuidelines for single administration order
239AEUCourt may order that related company in administration be added to existing pool
239AEVCreditors’ meetings in single administration of pool companies
239AEWPool companies may execute single deed of company administration
240Interpretation
240ALiquidation of licensed insurers
241Commencement of liquidation
241AARestriction on appointment of liquidator by shareholders or board after application filed for court appointment
241ACommencement of liquidation to be recorded
242Liquidators to act jointly unless otherwise stated
243Liquidator to summon meeting of creditors
244Liquidator to summon meeting of creditors in other cases
245Liquidator may dispense with meetings of creditors
245APower of court where outcome of voting at meeting of creditors determined by related entity
246Interim liquidator
247Power to stay or restrain certain proceedings against company
248Effect of commencement of liquidation
249Completion of liquidation
250Court may terminate liquidation
251Restriction on rights of creditors to complete execution, distraint, or attachment
252Duties of officer in execution process
253Principal duty of liquidator
254Liquidator not required to act in certain cases
255Other duties of liquidator
256Duties in relation to accounts
257Duties in relation to final report and accounts
258Duty to have regard to views of creditors and shareholders
258ADuty to report suspected offences
258BRegistrar may supply report to FMA
259Documents to state company in liquidation
260Powers of liquidator
260ALiquidator may assign right to sue under this Act
261Power to obtain documents and information
262Documents in possession of receiver
263Restriction on enforcement of lien over documents
264Delivery of document creating charge over property
265Examination by liquidator
266Powers of court
267Self-incrimination
268Power of liquidator to enforce liability of shareholders and former shareholders
269Power to disclaim onerous property
270Liquidator may be required to elect whether to disclaim onerous property
271Pooling of assets of related companies
271ANotice that application filed must be given to administrators and creditors
272Guidelines for orders
273Certain conduct prohibited
274Duty to identify and deliver property
275Refusal to supply essential services prohibited
276Remuneration of liquidators
277Rates of remuneration
278Expenses and remuneration payable out of assets of company
279Liquidator ceases to hold office on completion of liquidation
280Qualifications of liquidators
281Validity of acts of liquidators
282Consent to appointment
283Vacancies in office of liquidator
284Court supervision of liquidation
285Meaning of failure to comply
286Orders to enforce liquidator’s duties
287Meaning of inability to pay debts
288Evidence and other matters
289Statutory demand
290Court may set aside statutory demand
291Additional powers of court on application to set aside statutory demand
292Insolvent transaction voidable
293Voidable charges
294Procedure for setting aside transactions and charges
295Other orders
296Additional provisions relating to setting aside transactions and charges
297Transactions at undervalue
298Transactions for inadequate or excessive consideration with directors and certain other persons
299Court may set aside certain securities and charges
300Liability if proper accounting records not kept
301Power of court to require persons to repay money or return property
302Application of bankruptcy rules to liquidation of insolvent companies
303Admissible claims
304Claims by unsecured creditors
305Rights and duties of secured creditors
306Ascertainment of amount of claim
307Claim not of an ascertained amount
308Fines and penalties
309Claims relating to debts payable after commencement of liquidation
310Mutual credit and set-off
310ADefinitions relating to set-off under netting agreement
310BApplication of set-off under netting agreement
310CCalculation of netted balance
310DMutuality required for transactions under bilateral netting agreements
310EWhen mutuality required for transactions under recognised multilateral netting agreements
310FApplication of set-off under section 310 to transactions subject to netting agreements
310GTransactions under netting agreement and effect on certain sections
310HRights under netting agreement not affected by commencement of liquidation
310ISet-off under netting agreement not affected by notice under section 294
310JCourt may set aside bilateral netting agreement between company and related person
310KCertain persons may be declared to be recognised clearing houses
310LMatters that Bank must or may have regard to when making, varying, or revoking declaration under section 310K
310MBank may impose conditions in declaration under section 310K
310NBank to notify recognised clearing house about Bank’s intention to revoke or vary declaration under section 310K
310OTransactions under recognised multilateral netting agreement not affected by variation or revocation of declaration under section 310K
311Interest on claims
312Preferential claims
313Claims of other creditors and distribution of surplus assets
314Meetings of creditors or shareholders
315Liquidation committees
316Establishment of Liquidation Surplus Account
316ATransitional provision in relation to voidable transactions [Repealed]
316BTransitional provision in relation to Liquidation Surplus Account under section 290 of Companies Act 1955
317Removal from register
318Grounds for removal from register
319Notice of intention to remove company under paragraph (aaa), (b), (ba), (bb), (bc), (bd), or (f) of section 318(1)
320Notice of intention to remove company under paragraph (c), (d), or (e) of section 318(1)
321Objection to removal from register
322Duties of Registrar if objection received
323Powers of court
324Property of company removed from register
325Disclaimer of property by the Crown
326Liability of directors, shareholders, and others to continue
327Liquidation of company removed from New Zealand register [Repealed]
328Registrar may restore company to New Zealand register
329Court may restore company to New Zealand register
330Restoration to register
331Vesting of property in company on restoration to register
332Meaning of carrying on business
332ARegistrar may approve use of different form
333Name to be reserved before carrying on business
334Overseas companies to register under this Act
335Validity of transactions not affected
336Application for registration
337Registration of overseas company
338Use of name by overseas company
339Alteration of constitution
339ARectification or correction of name or address of person authorised to accept service
340Annual return of overseas company
340AFinancial reporting requirements for large overseas companies
341Overseas company ceasing to carry on business in New Zealand
342Liquidation of overseas company
343Attorneys of overseas companies
343AOverseas company not required to provide information, notice, or document in certain circumstances
344Overseas companies may be registered as companies under this Act
345Application for registration
346Overseas companies must be authorised to register
347Overseas companies that cannot be registered
348Registration
349Effect of registration
350Companies may transfer incorporation
351Application to transfer incorporation
352Approval of shareholders
353Company to give public notice
354Companies that cannot transfer incorporation
355Removal from register
356Effect of removal from register
357Registrar and Deputy Registrars of Companies
358District and Assistant Registrars of Companies
359Responsible District Registrar
360Registers
360ARectification or correction of New Zealand register and overseas register
360BPowers of court
360CAlteration of entries on New Zealand register and overseas register without application
361Registrar may direct transfer [Repealed]
362Registration of documents
363Inspection and evidence of registers
364Notice by Registrar
365Registrar’s powers of inspection
365APurpose of sections 365B to 365H
365BControl interests in shares (basic rule)
365CExtension of basic rule to powers or controls exercisable through trust, agreement, etc
365DExtension of basic rule to interests held by other persons under control or acting jointly
365ESituations not giving rise to control interests
365FRegistrar may require persons to disclose control interests and powers to get control interests
365GRegistrar may require disclosure about controllers or delegates of directors
365HRegistrar may specify deadlines, form, and verification for information required under section 365F or 365G
366Disclosure of information and reports
366ARegistrar’s powers to insert note of warning in register
366BRegistrar must remove note of warning
367Application of Official Information Act 1982 and Privacy Act 1993
367AConfidentiality of director information
368Appeals from decisions under section 367
369Inspector’s report admissible in liquidation proceedings
370Appeals from Registrar’s decisions
371Exercise of powers under section 365, 365F, 365G, or 365H not affected by appeal
371ASharing of information with Financial Markets Authority
372Fees
373Penalty for failure to comply with Act
374Penalties that may be imposed on directors in cases of failure by board or company to comply with Act
375Proceedings for offences
376Defences
377False statements
378Fraudulent use or destruction of property
379Falsification of records
380Carrying on business fraudulently or dishonestly incurring debt
381Improper use of “Limited”
382Persons prohibited from managing companies
383Court may disqualify directors
384Liability for contravening sections 382 and 383
385Registrar or FMA may prohibit persons from managing companies
385AAAdditional power for Registrar or FMA to prohibit persons from managing companies
385AAppeals from FMA’s exercise of power under section 385 or section 385AA
386Liability for contravening section 385 or section 385AA
386ADirector of failed company must not be director, etc, of phoenix company with same or substantially similar name
386BDefinitions for purpose of phoenix company provisions
386CLiability for debts of phoenix company
386DException for person named in successor company notice
386EException for temporary period while application for exemption is made
386FException in relation to non-dormant phoenix company known by pre-liquidation name of failed company for at least 12 months before liquidation
387Service of documents on companies in legal proceedings
387AService of documents on directors in legal proceedings
388Service of other documents on companies
388AService of other documents on directors
389Service of documents on overseas companies in legal proceedings
390Service of other documents on overseas companies
391Service of documents on shareholders and creditors
392Additional provisions relating to service
393Privileged communications
394Directors’ certificates
395Regulations
396Summary Proceedings Act 1957 amended
397Securities Transfer Act 1991 amended
398Act subject to application of Cape Town Convention and Aircraft Protocol
399Companies Act 1955 continues to apply for limited purposes
400Companies restored to register or that have ceased to be in liquidation may be reregistered
401References to companies incorporated under Companies Act 1955
Reprint notes

An Act to reform the law relating to companies, and, in particular,—

(a)

to reaffirm the value of the company as a means of achieving economic and social benefits through the aggregation of capital for productive purposes, the spreading of economic risk, and the taking of business risks; and

(b)

to provide basic and adaptable requirements for the incorporation, organisation, and operation of companies; and

(c)

to define the relationships between companies and their directors, shareholders, and creditors; and

(d)

to encourage efficient and responsible management of companies by allowing directors a wide discretion in matters of business judgment while at the same time providing protection for shareholders and creditors against the abuse of management power; and

(e)

to provide straightforward and fair procedures for realising and distributing the assets of insolvent companies

 
1 Short Title and commencement

(1)

This Act may be cited as the Companies Act 1993.

(2)

This Act shall come into force on 1 July 1994.

Part 1 Preliminary

2 Interpretation

(1)

In this Act, unless the context otherwise requires,—

accounting period, in relation to a company, means a year ending on a balance date of the company and, if as a result of the date of the registration of the company or a change of the balance date of the company, the period ending on that date is longer or shorter than a year, that longer or shorter period is an accounting period

address for service in relation to a company, means the company’s address for service adopted in accordance with section 192

annual meeting means a meeting required to be held by section 120

annual report

(a)

means a report prepared under section 208; and

(b)

does not include a concise annual report

applicable auditing and assurance standard has the same meaning as in section 5 of the Financial Reporting Act 2013

applicable financial reporting standard has the same meaning as in section 5 of the Financial Reporting Act 2013

balance date, in relation to a company or an overseas company, has the same meaning as in section 41 of the Financial Reporting Act 2013

board and board of directors have the meanings set out in section 127

charge includes a right or interest in relation to property owned by a company, by virtue of which a creditor of the company is entitled to claim payment in priority to creditors entitled to be paid under section 313; but does not include a charge under a charging order issued by a court in favour of a judgment creditor

class has the meaning set out in section 116

code company has the meaning set out in section 2(1) of the Takeovers Act 1993

company means—

(a)

a company registered under Part 2:

(b)

a company reregistered under this Act in accordance with the Companies Reregistration Act 1993

concise annual report, in relation to a company and an accounting period, means a report on the affairs of the company during that period that is prepared in accordance with the requirements prescribed in regulations made under this Act

constitution means a document referred to in section 29

control interest has the meaning set out in sections 365B to 365E

court means the High Court of New Zealand

designated settlement system has the meaning set out in section 156M of the Reserve Bank of New Zealand Act 1989

director has the meaning set out in section 126

distribution, in relation to a distribution by a company to a shareholder, means—

(a)

the direct or indirect transfer of money or property, other than the company’s own shares, to or for the benefit of the shareholder; or

(b)

the incurring of a debt to or for the benefit of the shareholder—

in relation to shares held by that shareholder, and whether by means of a purchase of property, the redemption or other acquisition of shares, a distribution of indebtedness, or by some other means

dividend has the meaning set out in section 53

document means a document in any form; and includes—

(a)

any writing on any material; and

(b)

information recorded or stored by means of a tape recorder, computer, or other device; and material subsequently derived from information so recorded or stored; and

(c)

a book, graph, or drawing; and

(d)

a photograph, film, negative, tape, or other device in which 1 or more visual images are embodied so as to be capable (with or without the aid of equipment) of being reproduced

enforcement country means a country, State, or territory outside New Zealand prescribed for the purposes of section 10(d)

entitled person, in relation to a company, means—

(a)

a shareholder; and

(b)

a person upon whom the constitution confers any of the rights and powers of a shareholder

existing company means a body corporate registered or deemed to be registered under Part 2 or Part 10 of the Companies Act 1955, or under the Companies Act 1933, the Companies Act 1908, the Companies Act 1903, the Companies Act 1882, or the Joint Stock Companies Act 1860

financial markets participant has the same meaning as in section 4 of the Financial Markets Authority Act 2011

financial product has the same meaning as in section 7 of the Financial Markets Conduct Act 2013

financial statements has the same meaning as in section 6 of the Financial Reporting Act 2013

FMA means the Financial Markets Authority established under Part 2 of the Financial Markets Authority Act 2011

generally accepted accounting practice has the same meaning as in section 8 of the Financial Reporting Act 2013

group financial statements has the same meaning as in section 7 of the Financial Reporting Act 2013

holding company has the meaning set out in section 5

interest group has the meaning set out in section 116

interested, in relation to a director, has the meaning set out in section 139

interests register means the register kept under section 189(1)(c)

licensed insurer has the same meaning as in section 6(1) of the Insurance (Prudential Supervision) Act 2010

licensed market has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2013

limited partnership has the meaning set out in section 6 of the Limited Partnerships Act 2008

listed issuer has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2013

major transaction has the meaning set out in section 129(2)

New Zealand register means the register of companies incorporated in New Zealand kept pursuant to section 360(1)(a)

ordinary resolution has the meaning set out in section 105(2)

overseas company means a body corporate that is incorporated outside New Zealand

overseas limited partnership has the meaning set out in section 4 of the Limited Partnerships Act 2008

overseas register means the register of bodies corporate that are incorporated outside New Zealand kept pursuant to section 360(1)(b)

personal representative, in relation to an individual, means the executor, administrator or trustee of the estate of that individual

pre-emptive rights means the rights conferred on shareholders under section 45

prescribed form means a form prescribed by regulations made under this Act that contains, or has attached to it, such information or documents as those regulations may require

property means property of every kind whether tangible or intangible, real or personal, corporeal or incorporeal, and includes rights, interests, and claims of every kind in relation to property however they arise

receiver has the same meaning as in section 2(1) of the Receiverships Act 1993

records means the documents required to be kept by a company under section 189(1)

redeemable has the meaning set out in section 68

registered office has the meaning set out in section 186

Registrar means the Registrar of Companies appointed in accordance with section 357(1)

related company has the meaning set out in subsection (3)

relative, in relation to any person, means—

(a)

any parent, child, brother, or sister of that person; or

(b)

any spouse, civil union partner, or de facto partner of that person; or

(ba)

any parent, child, brother, or sister of a spouse, civil union partner, or de facto partner of that person; or

(c)

a nominee or trustee for any of those persons

relevant interest has the meaning set out in section 146

secured creditor, in relation to a company, means a person entitled to a charge on or over property owned by that company

share has the meaning set out in section 35

share register means the share register required to be kept under section 87

shareholder has the meaning set out in section 96

solvency test has the meaning set out in section 4

special meeting means a meeting called in accordance with section 121

special resolution means a resolution approved by a majority of 75% or, if a higher majority is required by the constitution, that higher majority, of the votes of those shareholders entitled to vote and voting on the question

spouse, in relation to a person (A), includes a person with whom A has a de facto relationship (whether that person is of the same or a different sex) and a civil union partner

stock exchange means—

(a)

a licensed market; or

(b)

a financial product market that is authorised to operate in an overseas jurisdiction in accordance with the laws of that jurisdiction

subsidiary has the meaning set out in section 5

surplus assets means the assets of a company remaining after the payment of creditors’ claims and available for distribution in accordance with section 313 prior to its removal from the New Zealand register

ultimate holding company, in relation to a company, means a body corporate that—

(a)

is a holding company of the company; and

(b)

is itself not a subsidiary of any body corporate

ultimate holding company information has the meaning set out in section 94A

working day means a day of the week other than—

(a)

Saturday, Sunday, Good Friday, Easter Monday, Anzac Day, the Sovereign’s birthday, Labour Day, and Waitangi Day; and

(ab)

if Waitangi Day or Anzac Day falls on a Saturday or a Sunday, the following Monday; and

(b)

a day in the period commencing with 25 December in any year and ending with 2 January in the following year; and

(c)

if 1 January in any year falls on a Friday, the following Monday; and

(d)

if 1 January in any year falls on a Saturday or a Sunday, the following Monday and Tuesday.

(2)

Where,—

(a)

in relation to a company or an overseas company, any document is required to be delivered or any thing is required to be done to a District Registrar or an Assistant Registrar in whose office the records relating to the company or overseas company are kept within a period specified by this Act; and

(b)

the last day of that period falls on the day of the anniversary of the province in which that office is situated,—

the document may be delivered or that thing may be done to that District Registrar or Assistant Registrar on the next working day.

(3)

In this Act, a company is related to another company if—

(a)

the other company is its holding company or subsidiary; or

(b)

more than half of the issued shares of the company, other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital, are held by the other company and companies related to that other company (whether directly or indirectly, but other than in a fiduciary capacity); or

(c)

more than half of the issued shares, other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital, of each of them are held by members of the other (whether directly or indirectly, but other than in a fiduciary capacity); or

(d)

the businesses of the companies have been so carried on that the separate business of each company, or a substantial part of it, is not readily identifiable; or

(e)

there is another company to which both companies are related;—

and related company has a corresponding meaning.

(4)

[Repealed]

(5)

A reference in this Act to an address means,—

(a)

in relation to an individual, the full address of the place where that person usually lives:

(b)

in relation to a body corporate, its registered office or, if it does not have a registered office, its principal place of business.

(6)

An example used in this Act is only illustrative of the provisions to which it relates. It does not limit those provisions.

(7)

If an example and a provision to which it relates are inconsistent, the provision prevails.

Section 2(1) annual report: inserted, on 18 June 2007, by section 4(3) of the Companies Amendment Act (No 2) 2006 (2006 No 62).

Section 2(1) applicable auditing and assurance standard: inserted, on 1 April 2014, by section 24(6) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 2(1) applicable financial reporting standard: inserted, on 1 April 2014, by section 24(6) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 2(1) balance date: replaced, on 1 April 2014, by section 24(1) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 2(1) code company: inserted, on 3 July 2014, by section 27 of the Companies Amendment Act 2014 (2014 No 46).

Section 2(1) concise annual report: inserted, on 18 June 2007, by section 4(3) of the Companies Amendment Act (No 2) 2006 (2006 No 62).

Section 2(1) control interest: inserted, on 1 May 2015, by section 36 of the Companies Amendment Act 2014 (2014 No 46).

Section 2(1) designated settlement system: inserted, on 24 November 2009, by section 16 of the Reserve Bank of New Zealand Amendment Act 2009 (2009 No 53).

Section 2(1) enforcement country: inserted, on 1 May 2015, by section 8 of the Companies Amendment Act 2014 (2014 No 46).

Section 2(1) exempt company: repealed, on 1 April 2014, by section 24(2) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 2(1) financial markets participant: inserted, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

Section 2(1) financial product: inserted, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 2(1) financial statements: replaced, on 1 April 2014, by section 24(3) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 2(1) FMA: inserted, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

Section 2(1) generally accepted accounting practice: inserted, on 1 April 2014, by section 24(6) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 2(1) group financial statements: replaced, on 1 April 2014, by section 24(4) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 2(1) group of companies: repealed, on 1 April 2014, by section 24(5) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 2(1) licensed insurer: inserted, on 1 February 2011, by section 241(2) of the Insurance (Prudential Supervision) Act 2010 (2010 No 111).

Section 2(1) licensed market: inserted, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 2(1) limited partnership: inserted, on 1 May 2015, by section 8 of the Companies Amendment Act 2014 (2014 No 46).

Section 2(1) listed issuer: inserted, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 2(1) overseas limited partnership: inserted, on 1 May 2015, by section 8 of the Companies Amendment Act 2014 (2014 No 46).

Section 2(1) receiver: inserted, on 1 November 2007, by section 4(1) of the Companies Amendment Act 2006 (2006 No 56).

Section 2(1) relative paragraph (a): replaced, on 26 April 2005, by section 7 of the Relationships (Statutory References) Act 2005 (2005 No 3).

Section 2(1) relative paragraph (b): replaced, on 26 April 2005, by section 7 of the Relationships (Statutory References) Act 2005 (2005 No 3).

Section 2(1) relative paragraph (ba): inserted, on 26 April 2005, by section 7 of the Relationships (Statutory References) Act 2005 (2005 No 3).

Section 2(1) securities: repealed, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 2(1) spouse: replaced, on 1 November 2007, by section 4(2) of the Companies Amendment Act 2006 (2006 No 56).

Section 2(1) stock exchange: inserted, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 2(1) ultimate holding company: inserted, on 1 May 2015, by section 8 of the Companies Amendment Act 2014 (2014 No 46).

Section 2(1) ultimate holding company information: inserted, on 1 May 2015, by section 8 of the Companies Amendment Act 2014 (2014 No 46).

Section 2(1) working day paragraph (ab): inserted, on 1 January 2014, by section 8 of the Holidays (Full Recognition of Waitangi Day and ANZAC Day) Amendment Act 2013 (2013 No 19).

Section 2(3)(b): amended, on 15 April 2004, by section 3 of the Companies Amendment Act (No 2) 2004 (2004 No 24).

Section 2(4): repealed, on 5 December 2013, by section 4 of the Companies Amendment Act 2013 (2013 No 111).

Section 2(6): inserted, on 1 April 2014, by section 24(7) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 2(7): inserted, on 1 April 2014, by section 24(7) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

3 Public notice

(1)

Where, pursuant to this Act, public notice must be given of any matter affecting a company, that notice must be given by publishing notice of the matter—

(a)

in at least 1 issue of the Gazette; and

(b)

in at least 1 issue of a newspaper circulating in the area in which is situated—

(i)

the company’s place of business; or

(ii)

if the company has more than 1 place of business, the company’s principal place of business; or

(iii)

if the company has no place of business or neither its place of business nor its principal place of business is known, the company’s registered office.

(2)

Where, pursuant to this Act, public notice must be given of any matter affecting an overseas company, that notice must be given by publishing notice of the matter—

(a)

in at least 1 issue of the Gazette; and

(b)

in at least 1 issue of a newspaper circulating in the area in which is situated—

(i)

the place of business in New Zealand of the overseas company; or

(ii)

if the overseas company has more than 1 place of business in New Zealand, the principal place of business in New Zealand of the overseas company.

(3)

However, subsections (1) and (2) do not apply to the public notice required to be given by the Registrar under sections 319(1)(c), 320(1), 328(3)(a), and 360A(2)(b).

(4)

The public notice required to be given by the Registrar under the provisions referred to in subsection (3) must be given by publishing the notice in at least 1 issue of the Gazette.

(5)

The Registrar must ensure that a copy of the notice referred to in subsection (4) is available on an Internet site maintained by or on behalf of the Registrar, at all reasonable times, for a period of not less than 20 working days.

Section 3(3): inserted, on 7 July 2010, by section 4 of the Companies Amendment Act (No 2) 2010 (2010 No 53).

Section 3(4): inserted, on 7 July 2010, by section 4 of the Companies Amendment Act (No 2) 2010 (2010 No 53).

Section 3(5): inserted, on 7 July 2010, by section 4 of the Companies Amendment Act (No 2) 2010 (2010 No 53).

4 Meaning of solvency test

(1)

For the purposes of this Act, a company satisfies the solvency test if—

(a)

the company is able to pay its debts as they become due in the normal course of business; and

(b)

the value of the company’s assets is greater than the value of its liabilities, including contingent liabilities.

(2)

Without limiting sections 52 and 55(3), in determining for the purposes of this Act (other than sections 221 and 222 which relate to amalgamations) whether the value of a company’s assets is greater than the value of its liabilities, including contingent liabilities, the directors—

(a)

must have regard to—

(i)

the most recent financial statements of the company that are prepared under this Act or any other enactment (if any); and

(ia)

the accounting records of the company; and

(ii)

all other circumstances that the directors know or ought to know affect, or may affect, the value of the company’s assets and the value of the company’s liabilities, including its contingent liabilities:

(b)

may rely on valuations of assets or estimates of liabilities that are reasonable in the circumstances.

(3)

Without limiting sections 221 and 222, in determining for the purposes of those sections whether the value of the amalgamated company’s assets will be greater than the value of its liabilities, including contingent liabilities, the directors of each amalgamating company—

(a)

must have regard to—

(i)

the most recent financial statements of each amalgamating company that are prepared under this Act or any other enactment (if any); and

(ia)

the accounting records of the amalgamating company; and

(ii)

all other circumstances that the directors know or ought to know would affect, or may affect, the value of the amalgamated company’s assets and the value of its liabilities, including contingent liabilities:

(b)

may rely on valuations of assets or estimates of liabilities that are reasonable in the circumstances.

(4)

In determining, for the purposes of this section, the value of a contingent liability, account may be taken of—

(a)

the likelihood of the contingency occurring; and

(b)

any claim the company is entitled to make and can reasonably expect to be met to reduce or extinguish the contingent liability.

Section 4(2)(a)(i): replaced, on 1 April 2014, by section 25(1) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 4(2)(a)(ia): inserted, on 1 April 2014, by section 25(1) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 4(3)(a)(i): replaced, on 1 April 2014, by section 25(2) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 4(3)(a)(ia): inserted, on 1 April 2014, by section 25(2) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

5 Meaning of holding company and subsidiary

(1)

For the purposes of this Act, a company is a subsidiary of another company if, but only if,—

(a)

that other company—

(i)

controls the composition of the board of the company; or

(ii)

is in a position to exercise, or control the exercise of, more than one-half the maximum number of votes that can be exercised at a meeting of the company; or

(iii)

holds more than one-half of the issued shares of the company, other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital; or

(iv)

is entitled to receive more than one-half of every dividend paid on shares issued by the company, other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital; or

(b)

the company is a subsidiary of a company that is that other company’s subsidiary.

(2)

For the purposes of this Act, a company is another company’s holding company, if, but only if, that other company is its subsidiary.

(3)

In this section and sections 7 and 8, the expression company includes a body corporate.

Compare: Corporations Act 1989 s 46 (Aust)

6 Extended meaning of subsidiary
[Repealed]

Section 6: repealed, on 5 December 2013, by section 5 of the Companies Amendment Act 2013 (2013 No 111).

7 Control defined

For the purposes of section 5, without limiting the circumstances in which the composition of a company’s board is to be taken to be controlled by another company, the composition of the board is to be taken to be so controlled if the other company, by exercising a power exercisable (whether with or without the consent or concurrence of any other person) by it, can appoint or remove all the directors of the company, or such number of directors as together hold a majority of the voting rights at meetings of the board of the company, and for this purpose, the other company is to be taken as having power to make such an appointment if—

(a)

a person cannot be appointed as a director of the company without the exercise by the other company of such a power in the person’s favour; or

(b)

a person’s appointment as a director of the company follows necessarily from the person being a director or other officer of the other company.

Compare: Corporations Act 1989 s 47 (Aust)

8 Certain matters to be disregarded

In determining whether a company is a subsidiary of another company,—

(a)

shares held or a power exercisable by that other company in a fiduciary capacity are not to be treated as held or exercisable by it:

(b)

subject to paragraphs (c) and (d), shares held or a power exercisable—

(i)

by a person as a nominee for that other company, except where that other company is concerned only in a fiduciary capacity; or

(ii)

by, or by a nominee for, a subsidiary of that other company, not being a subsidiary which is concerned only in a fiduciary capacity,—

are to be treated as held or exercisable by that other company:

(c)

shares held or a power exercisable by a person under the provisions of debentures of the company or of a trust deed for securing an issue of debentures shall be disregarded:

(d)

shares held or a power exercisable by, or by a nominee for, that other company or its subsidiary (not being held or exercisable in the manner described in paragraph (c)) are not to be treated as held or exercisable by that other company if—

(i)

the ordinary business of that other company or its subsidiary, as the case may be, includes the lending of money; and

(ii)

the shares are held or the power is exercisable by way of security only for the purposes of a transaction entered into in the ordinary course of that business.

Compare: Corporations Act 1989 s 48 (Aust)

9 Act binds the Crown

This Act binds the Crown.

Part 2 Incorporation

Essential requirements

10 Essential requirements

A company must have—

(a)

a name; and

(b)

1 or more shares; and

(c)

1 or more shareholders, having limited or unlimited liability for the obligations of the company; and

(d)

1 or more directors, of whom at least 1 must—

(i)

live in New Zealand; or

(ii)

live in an enforcement country and be a director of a company that is registered (except as the equivalent of an overseas company) in that enforcement country.

Section 10(d): replaced, on 1 May 2015, by section 9 of the Companies Amendment Act 2014 (2014 No 46).

Method of incorporation

11 Right to apply for registration

Any person may, either alone or together with another person, apply for registration of a company under this Act.

12 Application for registration

(1)

An application for registration of a company under this Act must be sent or delivered to the Registrar, and must be—

(a)

in the prescribed form; and

(b)

signed by each applicant; and

(c)

accompanied by a document in the prescribed form signed by every person named as a director, containing his or her consent to be a director and a certificate that he or she is not disqualified from being appointed or holding office as a director of a company; and

(d)

accompanied by—

(i)

a document in the prescribed form signed by every person named as a shareholder, or by an agent of that person authorised in writing, containing his or her consent to being a shareholder and to taking the class and number of shares specified in the document; and

(ii)

if the document has been signed by an agent, the instrument authorising the agent to sign it; and

(e)

accompanied by a notice reserving a name for the proposed company; and

(f)

if the proposed company is to have a constitution, accompanied by a document certified by at least 1 applicant as the company’s constitution.

(2)

Without limiting subsection (1), the application must state—

(a)

the full name and address of each applicant; and

(b)

in relation to every director of the proposed company,—

(i)

his or her full name and date and place of birth; and

(ii)

his or her residential address; and

(iii)

if the residential address is in an enforcement country, whether the director is a director of a company that is registered (except as the equivalent of an overseas company) in that enforcement country and, if so, the prescribed information; and

(c)

the full name and residential address of every shareholder of the proposed company, and the number of shares to be issued to every shareholder; and

(ca)

the proposed company’s ultimate holding company information; and

(d)

the registered office of the proposed company; and

(e)

the address for service of the proposed company.

Section 12(2)(b): replaced, on 1 May 2015, by section 10(1) of the Companies Amendment Act 2014 (2014 No 46).

Section 12(2)(ca): inserted, on 1 May 2015, by section 10(2) of the Companies Amendment Act 2014 (2014 No 46).

13 Registration

As soon as the Registrar receives a properly completed application for registration of a company, the Registrar must—

(a)

register the application; and

(b)

issue a certificate of incorporation.

14 Certificate of incorporation

A certificate of incorporation of a company issued under section 13 is conclusive evidence that—

(a)

all the requirements of this Act as to registration have been complied with; and

(b)

on and from the date of incorporation stated in the certificate, the company is incorporated under this Act.

Separate legal personality

15 Separate legal personality

A company is a legal entity in its own right separate from its shareholders and continues in existence until it is removed from the New Zealand register.

Part 3 Capacity, powers, and validity of actions

16 Capacity and powers

(1)

Subject to this Act, any other enactment, and the general law, a company has, both within and outside New Zealand,—

(a)

full capacity to carry on or undertake any business or activity, do any act, or enter into any transaction; and

(b)

for the purposes of paragraph (a), full rights, powers, and privileges.

(2)

The constitution of a company may contain a provision relating to the capacity, rights, powers, or privileges of the company only if the provision restricts the capacity of the company or those rights, powers, and privileges.

Validity of actions

17 Validity of actions

(1)

No act of a company and no transfer of property to or by a company is invalid merely because the company did not have the capacity, the right, or the power to do the act or to transfer or take a transfer of the property.

(2)

Subsection (1) does not limit—

(a)

section 164 (which relates to injunctions to restrain conduct by a company that would contravene its constitution); or

(b)

section 165 (which relates to derivative actions by directors and shareholders); or

(c)

section 169 (which relates to actions by shareholders of a company against the directors); or

(d)

section 170 (which relates to actions by shareholders to require the directors of a company to take action under the constitution or this Act).

(3)

The fact that an act is not, or would not be, in the best interests of a company does not affect the capacity of the company to do the act.

Compare: 1955 No 63 s 18A; 1983 No 53 s 8

18 Dealings between company and other persons

(1)

A company or a guarantor of an obligation of a company may not assert against a person dealing with the company or with a person who has acquired property, rights, or interests from the company that—

(a)

this Act or the constitution of the company has not been complied with:

(b)

a person named as a director of the company in the most recent notice received by the Registrar under section 159

(i)

is not a director of a company; or

(ii)

has not been duly appointed; or

(iii)

does not have authority to exercise a power which a director of a company carrying on business of the kind carried on by the company customarily has authority to exercise:

(c)

a person held out by the company as a director, employee, or agent of the company—

(i)

has not been duly appointed; or

(ii)

does not have authority to exercise a power which a director, employee, or agent of a company carrying on business of the kind carried on by the company customarily has authority to exercise:

(d)

a person held out by the company as a director, employee, or agent of the company with authority to exercise a power which a director, employee, or agent of a company carrying on business of the kind carried on by the company does not customarily have authority to exercise, does not have authority to exercise that power:

(e)

a document issued on behalf of a company by a director, employee, or agent of the company with actual or usual authority to issue the document is not valid or not genuine—

unless the person has, or ought to have, by virtue of his or her position with or relationship to the company, knowledge of the matters referred to in any of paragraphs (a), (b), (c), (d), or (e), as the case may be.

(2)

Subsection (1) applies even though a person of the kind referred to in paragraphs (b) to (e) of that subsection acts fraudulently or forges a document that appears to have been signed on behalf of the company, unless the person dealing with the company or with a person who has acquired property, rights, or interests from the company has actual knowledge of the fraud or forgery.

Compare: 1955 No 63 ss 18C, 18D; 1985 No 80 s 2

19 No constructive notice

A person is not affected by, or deemed to have notice or knowledge of the contents of, the constitution of, or any other document relating to, a company merely because—

(a)

the constitution or document is registered on the New Zealand register; or

(b)

it is available for inspection at an office of the company.

Compare: 1955 No 63 s 18B; 1985 No 80 s 2

Part 4 Company names

20 Name to be reserved

The Registrar must not register a company under a name or register a change of the name of a company unless the name has been reserved.

21 Name of company if liability of shareholders limited

The registered name of a company must end with the word “Limited” or the words “Tāpui (Limited)” if the liability of the shareholders of the company is limited.

22 Application for reservation of name

(1)

An application for reservation of the name of a company must be sent or delivered to the Registrar, and must be in the prescribed form.

(2)

The Registrar must not reserve a name—

(a)

the use of which would contravene an enactment; or

(b)

that is identical or almost identical to the name of another company; or

(c)

that is identical or almost identical to a name that the Registrar has already reserved under this Act and that is still available for registration; or

(d)

that, in the opinion of the Registrar, is offensive.

(3)

The Registrar must advise the applicant by notice in writing—

(a)

whether or not the Registrar has reserved the name; and

(b)

if the name has been reserved, that, unless the reservation is sooner revoked by the Registrar, the name is available for registration of a company with that name or on a change of name for 20 working days after the date stated in the notice.

Section 22(2)(b): amended, on 5 December 2013, by section 6(1) of the Companies Amendment Act 2013 (2013 No 111).

Section 22(2)(c): amended, on 5 December 2013, by section 6(2) of the Companies Amendment Act 2013 (2013 No 111).

Section 22(3)(b): amended, on 1 July 1994, by section 2 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

23 Change of name

(1)

An application to change the name of a company must—

(a)

be in the prescribed form; and

(b)

be accompanied by a notice reserving the name; and

(c)

subject to the constitution of the company, be made by a director of the company with the approval of its board.

(2)

Subject to its constitution, an application to change the name of a company is not an amendment of the constitution of the company for the purposes of this Act.

(3)

As soon as the Registrar receives a properly completed application, the Registrar must—

(a)

enter the new name of the company on the New Zealand register; and

(b)

issue a certificate of incorporation for the company recording the change of name of the company.

(4)

A change of name of a company—

(a)

takes effect from the date of the certificate issued under subsection (3); and

(b)

does not affect rights or obligations of the company, or legal proceedings by or against the company, and legal proceedings that might have been continued or commenced against the company under its former name may be continued or commenced against it under its new name.

24 Direction to change name

(1)

If the Registrar believes on reasonable grounds that the name under which a company is registered should not have been reserved, the Registrar may serve written notice on the company to change its name by a date specified in the notice, being a date not less than 20 working days after the date on which the notice is served.

(2)

If the company does not change its name within the period specified in the notice, the Registrar may enter on the New Zealand register a new name for the company selected by the Registrar, being a name under which the company may be registered under this Part.

(3)

If the Registrar registers a new name under subsection (2), the Registrar must issue a certificate of incorporation for the company recording the new name of the company, and section 23(4) applies in relation to the registration of the new name as if the name of the company had been changed under that section.

25 Use of company name

(1)

A company must ensure that its name is clearly stated in—

(a)

every written communication sent by, or on behalf of, the company; and

(b)

every document issued or signed by, or on behalf of, the company that evidences or creates a legal obligation of the company.

(2)

Where—

(a)

a document that evidences or creates a legal obligation of a company is issued or signed by or on behalf of the company; and

(b)

the name of the company is incorrectly stated in the document,—

every person who issued or signed the document is liable to the same extent as the company if the company fails to discharge the obligation unless—

(c)

the person who issued or signed the document proves that the person in whose favour the obligation was incurred was aware at the time the document was issued or signed that the obligation was incurred by the company; or

(d)

the court is satisfied that it would not be just and equitable for the person who issued or signed the document to be so liable.

(3)

For the purposes of subsections (1) and (2) and of section 180 (which relates to the manner in which a company may enter into contracts and other obligations), a company may use a generally recognised abbreviation of a word or words in its name if it is not misleading to do so.

(4)

If, within the period of 12 months immediately preceding the giving by a company of any public notice, the name of the company was changed, the company must ensure that the notice states—

(a)

that the name of the company was changed in that period; and

(b)

the former name or names of the company.

(5)

If a company fails to comply with subsection (1) or subsection (4),—

(a)

the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b)

every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

Part 5 Company constitution

26 No requirement for company to have constitution

A company may but does not have to have a constitution.

27 Effect of Act on company having constitution

If a company has a constitution, the company, the board, each director, and each shareholder of the company have the rights, powers, duties, and obligations set out in this Act except to the extent that they are negated or modified, in accordance with this Act, by the constitution of the company.

28 Effect of Act on company not having constitution

If a company does not have a constitution, the company, the board, each director, and each shareholder of the company have the rights, powers, duties, and obligations set out in this Act.

29 Form of constitution

The constitution of a company, if it has one, is,—

(a)

in the case of a company registered under Part 2, a document certified by the applicant for registration of the company as the company’s constitution; or

(b)

in the case of an existing company that is reregistered pursuant to the Companies Reregistration Act 1993, a document certified by the applicant for reregistration as the company’s constitution; or

(c)

a document that is adopted by the company as its constitution under section 32; or

(d)

a document described in section 33; or

(e)

a document described in paragraph (a) or paragraph (b) or paragraph (c) or paragraph (d) as altered by the company under section 32 or varied by the court under section 34.

Section 29(c): amended, on 1 July 1994, by section 3 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

30 Contents of constitution

Subject to section 16(2), the constitution of a company may contain—

(a)

matters contemplated by this Act for inclusion in the constitution of a company:

(b)

such other matters as the company wishes to include in its constitution.

31 Effect of constitution

(1)

The constitution of a company has no effect to the extent that it contravenes, or is inconsistent with, this Act.

(2)

Subject to this Act, the constitution of a company is binding as between—

(a)

the company and each shareholder; and

(b)

each shareholder—

in accordance with its terms.

32 Adoption, alteration, and revocation of constitution

(1)

The shareholders of a company that does not have a constitution may, by special resolution, adopt a constitution for the company.

(2)

Without limiting section 117 (which relates to an alteration of shareholders’ rights) and section 174 (which relates to the right of a shareholder to apply to the court for relief in cases of prejudice), but subject to section 57 (which relates to the reduction of shareholders’ liability), the shareholders of a company may, by special resolution, alter or revoke the constitution of the company.

(3)

Within 10 working days of the adoption of a constitution by a company, or the alteration or revocation of the constitution of a company, as the case may be, the board must ensure that a notice in the prescribed form of the adoption of the constitution or of the alteration or revocation of the constitution is delivered to the Registrar for registration.

(4)

If the board of a company fails to comply with subsection (3), every director of the company commits an offence and is liable, on conviction, to the penalty set out in section 374(2).

33 New form of constitution

(1)

A company may, from time to time, deliver to the Registrar a single document that incorporates the provisions of a document referred to in paragraph (a) or paragraph (b) or paragraph (c) or paragraph (d) or paragraph (e) of section 29, together with all amendments to it.

(2)

The Registrar may, if the Registrar considers that by reason of the number of amendments to a company’s constitution it would be desirable for the constitution to be contained in a single document, by notice in writing, require a company to deliver to the Registrar a single document that incorporates the provisions of a document referred to in paragraph (a) or paragraph (b) or paragraph (c) or paragraph (d) of section 29, together with all amendments to it.

(3)

Within 20 working days of receipt by a company of a notice under subsection (2), the board must ensure that the document required by that subsection is received by the Registrar for registration.

(4)

The board must ensure that a document delivered to the Registrar under this section is accompanied by a certificate signed by a person authorised by the board that the document complies with subsection (1) or subsection (2), as the case may be.

(5)

As soon as the Registrar receives a document certified in accordance with subsection (4), the Registrar must register the document.

(6)

If the board of a company fails to comply with subsection (3) or subsection (4), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

34 Court may alter constitution

(1)

The court may, on the application of a director or shareholder of a company, if it is satisfied that it is not practicable to alter the constitution of the company using the procedure set out in this Act or in the constitution itself, make an order altering the constitution of a company on such terms and conditions that it thinks fit.

(2)

The applicant for the order must ensure that a copy of an order made under subsection (1), together with a copy of the constitution as altered, is delivered to the Registrar for registration within 10 working days.

(3)

A person who fails to comply with subsection (2) commits an offence and is liable on conviction to the penalty set out in section 373(2).

Part 6 Shares and debentures

Part 6 heading: amended, on 1 January 2008, by section 364(1) of the Property Law Act 2007 (2007 No 91).

35 Legal nature of shares

A share in a company is personal property.

36 Rights and powers attaching to shares

(1)

Subject to subsection (2), a share in a company confers on the holder—

(a)

the right to 1 vote on a poll at a meeting of the company on any resolution, including any resolution to—

(i)

appoint or remove a director or auditor:

(ii)

adopt a constitution:

(iii)

alter the company’s constitution, if it has one:

(iv)

approve a major transaction:

(v)

approve an amalgamation of the company under section 221:

(vi)

put the company into liquidation:

(b)

the right to an equal share in dividends authorised by the board:

(c)

the right to an equal share in the distribution of the surplus assets of the company.

(2)

Subject to section 53, the rights specified in subsection (1) may be negated, altered, or added to by the constitution of the company or in accordance with the terms on which the share is issued under section 41(b) or section 42 or section 44 or section 107(2), as the case may be.

Section 36(2): amended, on 3 May 2001, by section 3 of the Companies Act 1993 Amendment Act 2001 (2001 No 18).

Section 36(2): amended, on 30 June 1997, by section 2 of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

Section 36(2): amended, on 1 July 1994, by section 4 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

37 Types of shares

(1)

Subject to the constitution of the company, different classes of shares may be issued in a company.

(2)

Without limiting subsection (1), shares in a company may—

(a)

be redeemable within the meaning of section 68; or

(b)

confer preferential rights to distributions of capital or income; or

(c)

confer special, limited, or conditional voting rights; or

(d)

not confer voting rights.

Section 37(2)(a): replaced, on 1 July 1994, by section 5 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

38 No nominal value

(1)

A share must not have a nominal or par value.

(2)

Nothing in subsection (1) prevents the issue by a company of a redeemable share.

39 Transferability of shares

(1)

Subject to any limitation or restriction on the transfer of shares in the constitution, a share in a company is transferable.

(2)

A share is transferred by entry in the share register in accordance with section 84.

(3)

The personal representative of a deceased shareholder may transfer a share even though the personal representative is not a shareholder at the time of transfer.

40 Contracts for issue of shares

A contract or deed under which a company is or may be required to issue shares, whether on the exercise of an option or on the conversion of financial products or otherwise, is an illegal contract for the purposes of the Illegal Contracts Act 1970 unless—

(a)

the board is entitled to issue the shares; and

(b)

either—

(i)

the board has complied with section 47 or section 49; or

(ii)

all entitled persons agree or concur with the issue of the shares under section 107(2); or

(iii)

the contract or deed expressly provides that the contract or deed is subject to—

(A)

the board complying with section 47 or section 49; or

(B)

all entitled persons agreeing to or concurring with the issue of the shares under section 107(2).

Section 40: replaced, on 3 May 2001, by section 4 of the Companies Act 1993 Amendment Act 2001 (2001 No 18).

Section 40: amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Issue of shares

41 Issue of shares on registration and amalgamation

A company must,—

(a)

forthwith after the registration of the company, issue to any person or persons named in the application for registration as a shareholder or shareholders, the number of shares specified in the application as being the number of shares to be issued to that person or those persons:

(b)

in the case of an amalgamated company, forthwith after the amalgamation is effective, issue to any person entitled to a share or shares under the amalgamation proposal, the share or shares to which that person is entitled.

Section 41(b): amended, on 1 July 1994, by section 6 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

42 Issue of other shares

Subject to this Act and the constitution of the company, the board of a company may issue shares at any time, to any person, and in any number it thinks fit.

43 Notice of share issue

(1)

The board of a company must deliver to the Registrar for registration, within 10 working days of the issue of shares under section 41(b) or section 42 or section 107(2), a notice in the prescribed form of the issue of the shares by the company.

(2)

If the board of a company fails to comply with subsection (1), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

Section 43(1): amended, on 30 June 1997, by section 3 of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

44 Shareholder approval for issue of shares

(1)

Notwithstanding section 42, if shares cannot be issued by reason of any limitation or restriction in the company’s constitution, the board may issue shares if the board obtains the approval for the issue in the same manner as approval is required for an alteration to the constitution that would permit such an issue.

(2)

Subject to the terms of the approval, the shares may be issued at any time, to any person, and in any number the board thinks fit.

(3)

Within 10 working days of approval being given under subsection (1), the board must ensure that notice of that approval in the prescribed form is delivered to the Registrar for registration.

(4)

Nothing in this section affects the need to obtain the approval of an interest group in accordance with section 117 (which relates to the alteration of shareholders’ rights) if the issue of shares affects the rights of that interest group.

(5)

A failure to comply with this section does not affect the validity of an issue of shares.

(6)

If the board of a company fails to comply with subsection (3), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

45 Pre-emptive rights

(1)

Shares issued or proposed to be issued by a company that rank or would rank as to voting or distribution rights, or both, equally with or prior to shares already issued by the company must be offered for acquisition to the holders of the shares already issued in a manner and on terms that would, if accepted, maintain the existing voting or distribution rights, or both, of those holders.

(2)

An offer under subsection (1) must remain open for acceptance for a reasonable time.

(3)

The constitution of a company may negate, limit, or modify the requirements of this section.

46 Consideration for issue of shares

The consideration for which a share is issued may take any form and may be cash, promissory notes, contracts for future services, real or personal property, or other financial products of the company.

Section 46: amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

46A Consideration for issue of shares on registration

A shareholder is not liable to pay or provide any consideration in respect of an issue of shares under section 41(a) unless—

(a)

the constitution of the company specifies the consideration to be paid or provided for those shares; or

(b)

the shareholder is liable to pay or provide consideration for those shares pursuant to either a pre-incorporation contract (within the meaning of section 182) or a contract entered into after the registration of the company.

Section 46A: inserted, on 30 June 1997, by section 4 of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

47 Consideration to be decided by board

(1)

Before the board of a company issues shares under section 42 or section 44, the board must—

(a)

decide the consideration for which the shares will be issued and the terms on which they will be issued; and

(b)

if the shares are to be issued other than for cash, determine the reasonable present cash value of the consideration for the issue; and

(c)

resolve that, in its opinion, the consideration for and terms of the issue are fair and reasonable to the company and to all existing shareholders; and

(d)

if the shares are to be issued other than for cash, resolve that, in its opinion, the present cash value of the consideration to be provided for the issue of the shares is not less than the amount to be credited for the issue of the shares.

(2)

The directors who vote in favour of a resolution required by subsection (1) must sign a certificate—

(a)

stating the consideration for, and the terms of, the issue; and

(b)

describing the consideration in sufficient detail to identify it; and

(c)

where a present cash value has been determined in accordance with subsection (1)(b), stating that value and the basis for assessing it; and

(d)

stating that, in their opinion, the consideration for and terms of issue are fair and reasonable to the company and to all existing shareholders; and

(e)

if the shares are to be issued other than for cash stating that, in their opinion, the present cash value of the consideration to be provided for the issue of the shares is not less than the amount to be credited for the issue of the shares.

(3)

Before shares that have already been issued are credited as fully or partly paid up other than for cash, the board must—

(a)

determine the reasonable present cash value of the consideration; and

(b)

resolve that, in its opinion, the present cash value of the consideration is—

(i)

fair and reasonable to the company and to all existing shareholders; and

(ii)

not less than the amount to be credited in respect of the shares.

(4)

The directors who vote in favour of a resolution under subsection (3) must sign a certificate—

(a)

describing the consideration in sufficient detail to identify it; and

(b)

stating—

(i)

the present cash value of the consideration and the basis for assessing it; and

(ii)

that the present cash value of the consideration is fair and reasonable to the company and to all existing shareholders; and

(iii)

that the present cash value of the consideration is not less than the amount to be credited in respect of the shares.

(5)

The board must deliver a copy of a certificate that complies with subsection (2) or subsection (4) to the Registrar for registration within 10 working days after it is given.

(6)

For the purposes of this section, shares that are or are to be credited as paid up, whether wholly or partly, as part of an arrangement that involves the transfer of property or the provision of services and an exchange of cash or cheques or other negotiable instruments, whether simultaneously or not, must be treated as paid up other than in cash to the value of the property or services.

(7)

A director who fails to comply with subsection (2) or subsection (4) commits an offence and is liable on conviction to the penalty set out in section 373(1).

(8)

Nothing in this section applies to the issue of shares in a company on—

(a)

the conversion of any convertible financial products; or

(b)

the exercise of any option to acquire shares in the company.

(9)

If the board of a company fails to comply with subsection (5), every director of the company commits an offence and is liable, on conviction, to the penalty set out in section 374(2).

Section 47(8)(a): amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

48 Exceptions to section 47

Section 47 does not apply to—

(a)

the issue of shares that are fully paid up from the reserves of the company to all shareholders of the same class in proportion to the number of shares held by each shareholder:

(b)

the consolidation and division of the shares or any class of shares in the company in proportion to those shares or the shares in that class:

(c)

the subdivision of the shares or any class of shares in the company in proportion to those shares or the shares in that class.

49 Consideration in relation to issue of options and convertible financial products

(1)

Before the board of a company issues any financial products that are convertible into shares in the company or any options to acquire shares in the company, the board must—

(a)

decide the consideration for which the convertible financial products or options, and, in either case, the shares will be issued and the terms on which they will be issued; and

(b)

if the shares are to be issued other than for cash, determine the reasonable present cash value of the consideration for the issue; and

(c)

resolve that, in its opinion, the consideration for and terms of the issue of the convertible financial products or options, and, in either case, the shares are fair and reasonable to the company and to all existing shareholders; and

(d)

if the shares are to be issued other than for cash, resolve that, in its opinion, the present cash value of the consideration to be provided is not less than the amount to be credited for the issue of the shares.

(2)

The directors who vote in favour of a resolution required by subsection (1) must sign a certificate—

(a)

stating the consideration for, and the terms of, the issue of the convertible financial products or options, and, in either case, the shares; and

(b)

describing the consideration in sufficient detail to identify it; and

(c)

where a present cash value has been determined in accordance with subsection (1)(b), stating that value and the basis for assessing it; and

(d)

stating that, in their opinion, the consideration for and terms of issue of the convertible financial products or options, and, in either case, the shares are fair and reasonable to the company and to all existing shareholders; and

(e)

if the shares are to be issued other than for cash, stating that, in their opinion, the present cash value of the consideration to be provided is not less than the amount to be credited for the issue of the shares.

(3)

The board must deliver a copy of a certificate that complies with subsection (2) to the Registrar for registration within 10 working days after it is given.

(4)

For the purposes of this section, shares that are to be credited as paid up, whether wholly or partly, as part of an arrangement that involves the transfer of property or the provision of services and an exchange of cash or cheques or other negotiable instruments, whether simultaneously or not, must be treated as paid up other than in cash to the value of the property or services.

(5)

A director who fails to comply with subsection (2) commits an offence and is liable on conviction to the penalty set out in section 373(1).

(6)

If the board of a company fails to comply with subsection (3), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

Section 49 heading: amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 49(1): amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 49(1)(a): amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 49(1)(c): amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 49(2)(a): amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 49(2)(d): amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

50 Consent to issue of shares

The issue by a company of a share that—

(a)

increases a liability of a person to the company; or

(b)

imposes a new liability on a person to the company—

is void if that person or an agent of that person authorised in writing does not consent in writing to becoming the holder of the share before it is issued.

51 Time of issue of shares

A share is issued when the name of the holder is entered on the share register.

Distributions to shareholders

52 Board may authorise distributions

(1)

The board of a company that is satisfied on reasonable grounds that the company will, immediately after the distribution, satisfy the solvency test may, subject to section 53 and the constitution of the company, authorise a distribution by the company at a time, and of an amount, and to any shareholders it thinks fit.

(2)

The directors who vote in favour of a distribution must sign a certificate stating that, in their opinion, the company will, immediately after the distribution, satisfy the solvency test and the grounds for that opinion.

(3)

If, after a distribution is authorised and before it is made, the board ceases to be satisfied on reasonable grounds that the company will, immediately after the distribution is made, satisfy the solvency test, any distribution made by the company is deemed not to have been authorised.

(4)

In applying the solvency test for the purposes of this section and section 56,—

(a)

debts includes fixed preferential returns on shares ranking ahead of those in respect of which a distribution is made (except where that fixed preferential return is expressed in the constitution as being subject to the power of the directors to make distributions), but does not include debts arising by reason of the authorisation; and

(b)

liabilities includes the amount that would be required, if the company were to be removed from the New Zealand register after the distribution, to repay all fixed preferential amounts payable by the company to shareholders, at that time, or on earlier redemption (except where such fixed preferential amounts are expressed in the constitution as being subject to the power of directors to make distributions); but, subject to paragraph (a), does not include dividends payable in the future.

(5)

Every director who fails to comply with subsection (2) commits an offence and is liable on conviction to the penalty set out in section 373(1).

53 Dividends

(1)

A dividend is a distribution other than a distribution to which section 59 or section 76 applies.

(2)

The board of a company must not authorise a dividend—

(a)

in respect of some but not all the shares in a class; or

(b)

that is of a greater value per share in respect of some shares of a class than it is in respect of other shares of that class—

unless the amount of the dividend in respect of a share of that class is in proportion to the amount paid to the company in satisfaction of the liability of the shareholder under the constitution of the company or under the terms of issue of the share or is required, for a portfolio tax rate entity, as a result of section HL 7 of the Income Tax Act 2004.

(3)

Notwithstanding subsection (2), a shareholder may waive his or her entitlement to receive a dividend by notice in writing to the company signed by or on behalf of the shareholder.

Section 53(2): amended, on 1 October 2007, by section 70 of the Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 (2007 No 19).

Section 53(2): amended, on 1 October 2007, by section 219 of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

54 Shares in lieu of dividends

Subject to the constitution of the company, the board of a company may issue shares to any shareholders who have agreed to accept the issue of shares, wholly or partly, in lieu of a proposed dividend or proposed future dividends if—

(a)

the right to receive shares, wholly or partly, in lieu of the proposed dividend or proposed future dividends has been offered to all shareholders of the same class on the same terms; and

(b)

if all shareholders elected to receive the shares in lieu of the proposed dividend, relative voting or distribution rights, or both, would be maintained; and

(c)

the shareholders to whom the right is offered are afforded a reasonable opportunity of accepting it; and

(d)

the shares issued to each shareholder are issued on the same terms and subject to the same rights as the shares issued to all shareholders in that class who agree to receive the shares; and

(e)

the provisions of section 47 are complied with by the board.

55 Shareholder discounts

(1)

The board of a company may resolve that the company offer shareholders discounts in respect of some or all of the goods sold or services provided by the company.

(2)

The board may approve a discount scheme under subsection (1) only if it has previously resolved that the proposed discounts are—

(a)

fair and reasonable to the company and to all shareholders; and

(b)

to be available to all shareholders or all shareholders of the same class on the same terms.

(3)

A discount scheme may not be approved or continued by the board unless it is satisfied on reasonable grounds that the company satisfies the solvency test.

(4)

Subject to subsection (5), a discount accepted by a shareholder under a discount scheme approved under this section is not a distribution for the purposes of this Act.

(5)

Where—

(a)

a discount is accepted by a shareholder under a scheme approved or continued by the board; and

(b)

at the time the scheme was approved or the discount was offered, the board ceased to be satisfied on reasonable grounds that the company would satisfy the solvency test,—

the provisions of section 56 shall apply in relation to the discount with such modifications as may be necessary as if the discount were a distribution that is deemed not to have been authorised.

56 Recovery of distributions

(1)

A distribution made to a shareholder at a time when the company did not, immediately after the distribution, satisfy the solvency test may be recovered by the company from the shareholder unless—

(a)

the shareholder received the distribution in good faith and without knowledge of the company’s failure to satisfy the solvency test; and

(b)

the shareholder has altered the shareholder’s position in reliance on the validity of the distribution; and

(c)

it would be unfair to require repayment in full or at all.

(2)

If, in relation to a distribution made to shareholders,—

(a)

the procedure set out in section 52 or section 70 or section 77, as the case may be, has not been followed; or

(b)

reasonable grounds for believing that the company would satisfy the solvency test in accordance with section 52 or section 70 or section 77, as the case may be, did not exist at the time the certificate was signed,—

a director who—

(c)

failed to take reasonable steps to ensure the procedure was followed; or

(d)

signed the certificate, as the case may be,—

is personally liable to the company to repay to the company so much of the distribution as is not able to be recovered from shareholders.

(3)

If, by virtue of section 52(3) or section 70(3) or section 77(3), as the case may be, a distribution is deemed not to have been authorised, a director who—

(a)

ceased after authorisation but before the making of the distribution to be satisfied on reasonable grounds for believing that the company would satisfy the solvency test immediately after the distribution is made; and

(b)

failed to take reasonable steps to prevent the distribution being made,—

is personally liable to the company to repay to the company so much of the distribution as is not able to be recovered from shareholders.

(4)

If, by virtue of section 55(5), a distribution is deemed not to have been authorised, a director who failed to take reasonable steps to prevent the distribution being made is personally liable to the company to repay to the company so much of the distribution as is not able to be recovered from shareholders.

(5)

If, in an action brought against a director or shareholder under this section, the court is satisfied that the company could, by making a distribution of a lesser amount, have satisfied the solvency test, the court may—

(a)

permit the shareholder to retain; or

(b)

relieve the director from liability in respect of—

an amount equal to the value of any distribution that could properly have been made.

57 Reduction of shareholder liability a distribution

(1)

If a company proposes to alter its constitution, or to acquire shares issued by it, or redeem shares under section 69, as the case may be, in a manner which would cancel or reduce the liability of a shareholder to the company in relation to a share held prior to that alteration, acquisition, or redemption, the proposed cancellation or reduction of liability is to be treated,—

(a)

for the purposes of section 52, as if it were a distribution; and

(b)

for the purposes of subsections (2) and (3) of section 53, as if it were a dividend.

(2)

If a company has altered its constitution, or acquired shares, or redeemed shares under section 69, as the case may be, in a manner which cancels or reduces the liability of a shareholder to the company in relation to a share held prior to that alteration, acquisition, or redemption, that cancellation or reduction of liability is to be treated for the purposes of section 56 as a distribution of the amount by which that liability was reduced.

(3)

If the liability of a shareholder of an amalgamating company to that company in relation to a share held before the amalgamation is—

(a)

greater than the liability of that shareholder to the amalgamated company in relation to a share or shares into which that share is converted; or

(b)

cancelled by the cancellation of that share in the amalgamation,—

the reduction of liability effected by the amalgamation is to be treated for the purposes of section 56(1) and (5) as a distribution by the amalgamated company to that shareholder, whether or not that shareholder becomes a shareholder of the amalgamated company of the amount by which that liability was reduced.

Company may acquire its own shares

58 Company may acquire its own shares

(1)

A company may, in accordance with sections 59 to 66, section 107, and sections 110 to 112C, but not otherwise, acquire its own shares.

(2)

Shares acquired by a company otherwise than in accordance with sections 59 to 66 and 110 to 112C are deemed to be cancelled immediately on acquisition.

(3)

Within 10 working days of the purchase or acquisition of the shares, the board of the company must ensure that notice in the prescribed form of the purchase or acquisition is delivered to the Registrar for registration.

(4)

If the board of a company fails to comply with subsection (3), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

Section 58(1): amended, on 17 September 2008, by section 4 of the Companies (Minority Buy-out Rights) Amendment Act 2008 (2008 No 69).

Section 58(2): amended, on 17 September 2008, by section 4 of the Companies (Minority Buy-out Rights) Amendment Act 2008 (2008 No 69).

Section 58(2): amended, on 1 July 1994, by section 7 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

59 Acquisition of company’s own shares

(1)

Subject to section 52, a company may purchase or otherwise acquire shares issued by it if it is expressly permitted to do so by its constitution.

(2)

The purchase or acquisition of the shares must be made in accordance with section 60 or section 63 or section 65.

(3)

Nothing in this section or in sections 60 to 67 limits or affects—

(a)

an order of the court that requires a company to purchase or acquire its own shares; or

(b)

sections 110 and 118 (which relate to the right of a shareholder to require a company to purchase shares).

Section 59(3)(b): replaced, on 1 July 1994, by section 8 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

60 Board may make offer to acquire shares

(1)

The board of a company may make an offer to acquire shares issued by the company if the offer is—

(a)

an offer to all shareholders to acquire a proportion of their shares, that—

(i)

would, if accepted, leave unaffected relative voting and distribution rights; and

(ii)

affords a reasonable opportunity to accept the offer; or

(b)

an offer to 1 or more shareholders to acquire shares—

(i)

to which all shareholders have consented in writing; or

(ii)

that is expressly permitted by the constitution, and is made in accordance with the procedure set out in section 61.

(2)

Where an offer is made in accordance with subsection (1)(a),—

(a)

the offer may also permit the company to acquire additional shares from a shareholder to the extent that another shareholder does not accept the offer or accepts the offer only in part; and

(b)

if the number of additional shares exceeds the number of shares that the company is entitled to acquire, the number of additional shares shall be reduced rateably.

(3)

The board may make an offer under subsection (1) only if it has previously resolved—

(a)

that the acquisition in question is in the best interests of the company; and

(b)

that the terms of the offer and the consideration offered for the shares are fair and reasonable to the company; and

(c)

that it is not aware of any information that will not be disclosed to shareholders—

(i)

which is material to an assessment of the value of the shares; and

(ii)

as a result of which the terms of the offer and consideration offered for the shares are unfair to shareholders accepting the offer.

(4)

The resolution must set out in full the reasons for the director’s conclusions.

(5)

The directors who vote in favour of a resolution required by subsection (3) must sign a certificate as to the matters set out in that subsection, and may combine it with the certificate required by section 52 and any certificate required under section 61.

(6)

The board of a company must not make an offer under subsection (1) if, after the passing of a resolution under subsection (3) and before the making of the offer to acquire the shares,—

(a)

the board ceases to be satisfied that the acquisition in question is in the best interests of the company; or

(b)

the board ceases to be satisfied that the terms of the offer and the consideration offered for the shares are fair and reasonable to the company; or

(c)

the board becomes aware of any information that will not be disclosed to shareholders—

(i)

which is material to an assessment of the value of the shares; or

(ii)

as a result of which the terms of the offer and consideration offered for the shares would be unfair to shareholders accepting the offer.

(7)

Every director who fails to comply with subsection (5) commits an offence and is liable on conviction to the penalty set out in section 373(1).

61 Special offers to acquire shares

(1)

The board may make an offer under section 60(1)(b)(ii) only if it has previously resolved—

(a)

that the acquisition is of benefit to the remaining shareholders; and

(b)

that the terms of the offer and the consideration offered for the shares are fair and reasonable to the remaining shareholders.

(2)

The resolution must set out in full the reasons for the directors’ conclusions.

(3)

The directors who vote in favour of a resolution required by subsection (1) must sign a certificate as to the matters set out in that subsection.

(4)

A board must not make an offer under section 60(1)(b)(ii) if, after the passing of a resolution under subsection (1) of this section and before the making of the offer to acquire the shares, the board ceases to be satisfied that—

(a)

the acquisition is of benefit to the remaining shareholders; or

(b)

the terms of the offer and the consideration offered for the shares are fair and reasonable to the remaining shareholders.

(5)

Before an offer is made pursuant to a resolution under subsection (1), the company must send to each shareholder a disclosure document that complies with section 62.

(6)

The offer must be made not less than 10 working days and not more than 12 months after the disclosure document has been sent to each shareholder.

(7)

Nothing in subsections (5) and (6) applies to an offer to a shareholder by a company if—

(a)

the company is a listed issuer; and

(b)

the offer is to acquire fewer of the quoted shares of the company than the minimum holding of those shares in the company determined by the operator of the relevant licensed market.

(8)

A shareholder or the company may apply to the court for an order restraining the proposed acquisition on the grounds that—

(a)

it is not in the best interests of the company and of benefit to remaining shareholders; or

(b)

the terms of the offer and the consideration offered for the shares are not fair and reasonable to the company and remaining shareholders.

(9)

Every director who fails to comply with subsection (3) commits an offence and is liable on conviction to the penalty set out in section 373(1).

(10)

If a company fails to comply with subsection (5),—

(a)

the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b)

every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

Section 61(7): replaced, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

62 Disclosure document

For the purposes of section 61, a disclosure document is a document that sets out—

(a)

the nature and terms of the offer, and if made to specified shareholders, to whom it will be made; and

(b)

the nature and extent of any relevant interest of any director of the company in any shares the subject of the offer; and

(c)

the text of the resolution required by section 61, together with such further information and explanation as may be necessary to enable a reasonable shareholder to understand the nature and implications for the company and its shareholders of the proposed acquisition.

63 Stock exchange acquisitions subject to prior notice to shareholders

(1)

The board of a company may make offers on 1 or more stock exchanges to all shareholders to acquire shares only if it has previously resolved—

(a)

to acquire, by means of offers on 1 or more stock exchanges to all shareholders, not more than a specified number of shares; and

(b)

that the acquisition is in the best interests of the company and its shareholders; and

(c)

that the terms of the offer and the consideration offered for the shares are fair and reasonable to the company and its shareholders; and

(d)

that it is not aware of any information that will not be disclosed to shareholders—

(i)

which is material to an assessment of the value of the shares; and

(ii)

as a result of which the terms of the offer and consideration offered for the shares are unfair to shareholders accepting the offer.

(2)

The resolution must set out in full the reasons for the directors’ conclusions.

(3)

The directors who vote in favour of a resolution required by subsection (1) must sign a certificate as to the matters set out in that subsection and may combine it with the certificate required by section 52.

(3A)

Offers may be made under subsection (1) by any director or employee of the company who is authorised to do so by the resolution of the board under that subsection.

(4)

An offer must not be made under subsection (1) if the number of shares to be acquired together with any shares already acquired would exceed the maximum number of shares the board has resolved to acquire under that subsection.

(5)

An offer must not be made under subsection (1) if, after the passing of a resolution under that subsection and before the making of the offer to acquire the shares,—

(a)

the board ceases to be satisfied that the acquisition is in the best interests of the company and its shareholders; or

(b)

the board ceases to be satisfied that the terms of the offer and the consideration offered for the shares are fair and reasonable to the company and its shareholders; or

(c)

the board becomes aware of any information that will not be disclosed to shareholders—

(i)

which is material to an assessment of the value of the shares; or

(ii)

as a result of which the terms of the offer and consideration offered for the shares would be unfair to shareholders accepting the offer.

(6)

Before an offer is made pursuant to a resolution under subsection (1), the company must send to each shareholder a disclosure document that complies with section 64.

(7)

The offer must be made not less than 10 working days and not more than 12 months after the disclosure document has been sent to each shareholder.

(8)

A shareholder or the company may apply to the court for an order restraining the proposed acquisition on the grounds that—

(a)

it is not in the best interests of the company or the shareholders; or

(b)

the terms of the offer and, if it is disclosed, the consideration offered for the shares are not fair and reasonable to the company or the shareholders.

(9)

Every director who fails to comply with subsection (3) commits an offence and is liable on conviction to the penalty set out in section 373(1).

(10)

If a company fails to comply with subsection (6),—

(a)

the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b)

every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

Section 63(1): amended, on 1 July 1994, by section 10(1) of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

Section 63(1)(a): amended, on 1 July 1994, by section 10(1) of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

Section 63(3A): inserted, on 1 July 1994, by section 10(2) of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

Section 63(4): amended, on 1 July 1994, by section 10(3) of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

Section 63(5): amended, on 1 July 1994, by section 10(4) of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

Section 63(10): replaced, on 11 September 2014, by section 58 of the Companies Amendment Act 2014 (2014 No 46).

64 Disclosure document

(1)

For the purposes of section 63, a disclosure document is a document that sets out—

(a)

the maximum number of shares that the board has resolved to acquire under section 63(1); and

(b)

the nature and terms of the offer; and

(c)

the nature and extent of any relevant interest of any director of the company in any shares that may be acquired; and

(d)

the text of the resolution required by section 63(1), together with such further information and explanation as may be necessary to enable a reasonable shareholder to understand the nature and implications for the company and its shareholders of the proposed acquisition.

(2)

Nothing in subsection (1) requires the disclosure of the consideration the board proposes to offer to acquire the shares.

65 Stock exchange acquisitions not subject to prior notice to shareholders

(1)

The board of a company may acquire shares on a stock exchange from its shareholders if the following conditions are satisfied:

(a)

that, prior to the acquisition, the board of the company has resolved—

(i)

that the acquisition in question is in the best interests of the company and the shareholders; and

(ii)

that the terms of and consideration for the acquisition are fair and reasonable to the company; and

(iii)

that it is not aware of any information that is not available to shareholders—

(A)

that is material to an assessment of the value of the shares; and

(B)

as a result of which the terms of and consideration for the acquisition are unfair to shareholders from whom any shares are acquired; and

(b)

that the number of shares acquired together with any other shares acquired under this section in the preceding 12 months does not exceed 5% of the shares in the same class as at the date 12 months prior to the acquisition of the shares.

(2)

Within 10 working days after the shares are acquired, the company must send to each stock exchange on which the shares of the company are listed a notice containing the following particulars:

(a)

the class of shares acquired:

(b)

the number of shares acquired:

(c)

the consideration paid or payable for the shares acquired:

(d)

if known to the company, the identity of the seller and, if the seller was not the beneficial owner, the beneficial owner.

(2A)

[Repealed]

(2B)

Acquisitions may be made under subsection (1) by any director or employee of the company who is authorised to do so by the resolution of the board under that subsection.

(3)

If a company fails to comply with subsection (2),—

(a)

the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b)

every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

Section 65(2): replaced, on 1 July 1994, by section 11(1) of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

Section 65(2A): repealed, on 31 August 2012, by section 4(1) of the Companies Amendment Act (No 2) 2012 (2012 No 60).

Section 65(2B): inserted, on 1 July 1994, by section 11(1) of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

Section 65(3): amended, on 31 August 2012, by section 4(2) of the Companies Amendment Act (No 2) 2012 (2012 No 60).

66 Cancellation of shares repurchased

(1)

Subject to sections 67A to 67C, shares that are acquired by a company pursuant to section 59 or sections 112 to 112C are deemed to be cancelled immediately on acquisition.

(2)

Shares are acquired for the purposes of subsection (1) on the date on which the company would, apart from this section, become entitled to exercise the rights attached to the shares.

(3)

On the cancellation of a share under this section,—

(a)

the rights and privileges attached to that share expire; but

(b)

the share may be reissued in accordance with this Part.

Section 66(1): replaced, on 1 July 1994, by section 2 of the Companies Act 1993 Amendment Act (No 2) 1994 (1994 No 82).

Section 66(1): amended, on 17 September 2008, by section 5 of the Companies (Minority Buy-out Rights) Amendment Act 2008 (2008 No 69).

67 Enforceability of contract to repurchase shares

(1)

A contract with a company providing for the acquisition by the company of its shares is specifically enforceable against the company except to the extent that the company would, by performance, be unable to satisfy the solvency test in accordance with section 52.

(2)

The company has the burden of proving that performance of the contract would result in the company being unable to satisfy the solvency test in accordance with section 52.

(3)

Until the company has fully performed a contract referred to in subsection (1), the other party to the contract retains the status of a claimant entitled to be paid as soon as the company is lawfully able to do so or, prior to the removal of the company from the New Zealand register, to be ranked subordinate to the rights of creditors but in priority to the other shareholders.

Treasury stock

Heading: inserted, on 1 July 1994, by section 3 of the Companies Act 1993 Amendment Act (No 2) 1994 (1994 No 82).

67A Company may hold its own shares

(1)

Shares acquired by a company pursuant to section 59 or sections 112 to 112C shall not be deemed to be cancelled under section 66(1) if—

(a)

the constitution of the company expressly permits the company to hold its own shares; and

(b)

the board of the company resolves that the shares concerned shall not be cancelled on acquisition; and

(c)

the number of shares acquired, when aggregated with shares of the same class held by the company pursuant to this section at the time of the acquisition, does not exceed 5% of the shares of that class previously issued by the company, excluding shares previously deemed to be cancelled under section 66(1).

(2)

Shares acquired by a company pursuant to section 59 or sections 112 to 112C that, pursuant to this section, are not deemed to be cancelled shall be held by the company in itself.

(3)

A share that a company holds in itself under subsection (2) may be cancelled by the board of the company resolving that the share is cancelled; and the share shall be deemed to be cancelled on the making of such a resolution.

Section 67A: inserted, on 1 July 1994, by section 3 of the Companies Act 1993 Amendment Act (No 2) 1994 (1994 No 82).

Section 67A(1): amended, on 17 September 2008, by section 6 of the Companies (Minority Buy-out Rights) Amendment Act 2008 (2008 No 69).

Section 67A(2): amended, on 17 September 2008, by section 6 of the Companies (Minority Buy-out Rights) Amendment Act 2008 (2008 No 69).

67B Rights and obligations of shares company holds in itself suspended

(1)

The rights and obligations attaching to a share that a company holds in itself pursuant to section 67A shall not be exercised by or against a company while it holds the share.

(2)

Without limiting subsection (1), while a company holds a share in itself pursuant to section 67A, the company shall not—

(a)

exercise any voting rights attaching to the share; or

(b)

make or receive any distribution authorised or payable in respect of the share.

Section 67B: inserted, on 1 July 1994, by section 3 of the Companies Act 1993 Amendment Act (No 2) 1994 (1994 No 82).

67C Reissue of shares company holds in itself

(1)

Subject to subsection (2), section 47 shall apply to the transfer of a share held by a company in itself as if the transfer were the issue of the share under section 42 or section 44.

(2)

Section 47(2) shall not apply to the transfer of a share held by a company in itself if the share is transferred by means of a system that is approved under section 376 of the Financial Markets Conduct Act 2013.

(3)

Subject to subsection (1), the transfer of a share by a company in itself shall not be subject to any provisions in this Act or the company’s constitution relating to the issue of shares, except to the extent the company’s constitution expressly applies those provisions.

(4)

A company must not grant an option to acquire a share it holds in itself or enter into any obligations to transfer such a share if—

(a)

the company has received notice in writing of a takeover offer made under the Takeovers Code in force under the Takeovers Act 1993; or

(b)

in the case of shares that are quoted on a stock exchange, the stock exchange makes a public release that a takeover offer for more than 20% of the quoted shares is to be made.

Section 67C: inserted, on 1 July 1994, by section 3 of the Companies Act 1993 Amendment Act (No 2) 1994 (1994 No 82).

Section 67C(2): amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 67C(4): replaced, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Redemption of shares

68 Meaning of redeemable

For the purposes of this Act, a share is redeemable if—

(a)

the constitution of the company makes provision for the company to issue redeemable shares; and

(b)

the constitution or the terms of issue of the share makes provision for the redemption of that share by the company—

(i)

at the option of the company; or

(ii)

at the option of the holder of the share; or

(iii)

on a date specified in the constitution or the terms of issue of the share—

for a consideration that is—

(iv)

specified; or

(v)

to be calculated by reference to a formula; or

(vi)

required to be fixed by a suitably qualified person who is not associated with or interested in the company.

Section 68: replaced, on 3 June 1998, by section 2 of the Companies Amendment Act 1998 (1998 No 31).

69 Redemption at option of company

(1)

A company must not exercise an option to redeem shares unless—

(a)

the option is exercised in relation to all shareholders of the same class and in a manner that will leave unaffected relative voting and distribution rights; or

(b)

the option is exercised in relation to 1 or more shareholders and—

(i)

all shareholders have consented in writing; or

(ii)

the option is expressly permitted by the constitution and is exercised in accordance with the procedure set out in section 71.

(2)

A company must not exercise an option to redeem shares unless, before the exercise of the option, the board of the company has resolved—

(a)

that the redemption of the shares is in the best interests of the company; and

(b)

the consideration for the redemption of the shares is fair and reasonable to the company.

(3)

The resolution must set out in full the grounds for the directors’ conclusions.

(4)

The directors who vote in favour of a resolution required by subsection (2) must sign a certificate as to the matters set out in that subsection and may combine it with the certificate required by section 70 and any certificate required by section 71.

(5)

A company must not exercise an option to redeem shares under subsection (1) if, after the passing of a resolution under that subsection and before the exercise of the option to redeem the shares, the board ceases to be satisfied that—

(a)

the redemption of the shares is in the best interests of the company; or

(b)

the consideration for the exercise of the option is fair and reasonable to the company.

(6)

Every director who fails to comply with subsection (4) commits an offence and is liable on conviction to the penalty set out in section 373(1).

70 Company must satisfy solvency test

(1)

A company must not exercise an option to redeem a share unless the board of the company is satisfied on reasonable grounds that the company will, immediately after the share is redeemed, satisfy the solvency test in accordance with section 52.

(2)

The directors who vote in favour of exercising the option must sign a certificate stating that, in their opinion, the company will, immediately after the share is redeemed, satisfy the solvency test and the grounds for that opinion.

(3)

If, after a resolution is passed under subsection (1) and before the option is exercised, the board ceases to be satisfied on reasonable grounds that the company will, immediately after the share is redeemed, satisfy the solvency test in accordance with section 52, any redemption of the share is deemed not to have been authorised for the purpose of that section.

(4)

Every director who fails to comply with subsection (2) commits an offence and is liable on conviction to the penalty set out in section 373(1).

(5)

The provisions of section 56 apply in relation to the redemption of a share at the option of the company with such modifications as may be necessary.

71 Special redemption of shares

(1)

A company may exercise an option to redeem shares under section 69(1)(b)(ii) only if the board has previously resolved—

(a)

that the redemption of the shares is of benefit to the remaining shareholders; and

(b)

that the consideration for the redemption of the shares is fair and reasonable to the remaining shareholders.

(2)

The resolution must set out in full the grounds for the directors’ conclusions.

(3)

The directors who vote in favour of a resolution required by subsection (1) must sign a certificate as to the matters set out in that subsection.

(4)

A company must not exercise an option to redeem shares under section 69(1)(b)(ii) if, after the passing of a resolution under subsection (1) and before the option is exercised, the board ceases to be satisfied that—

(a)

the redemption of the shares is of benefit to the remaining shareholders; or

(b)

the consideration for the redemption of the shares is fair and reasonable to the remaining shareholders.

(5)

Before the option is exercised pursuant to a resolution under subsection (1), the company must send to each shareholder a disclosure document that complies with section 72.

(6)

The option must be exercised not less than 10 and not more than 30 working days after the disclosure document has been sent to each shareholder.

(7)

A shareholder or the company may apply to the court for an order restraining the proposed exercise of the option on the grounds that—

(a)

it is not in the best interests of the company or of benefit to remaining shareholders; or

(b)

the consideration for the redemption is not fair or reasonable to the company or remaining shareholders.

(8)

Every director who fails to comply with subsection (3) commits an offence and is liable on conviction to the penalty set out in section 373(1).

(9)

If a company fails to comply with subsection (5),—

(a)

the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b)

every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

72 Disclosure document

For the purposes of section 71, a disclosure document is a document that sets out—

(a)

the nature and terms of the redemption of the shares, and if the option to redeem the shares is to be exercised in relation to specified shareholders, the names of those shareholders; and

(b)

the text of the resolution required by section 71, together with such further information and explanation as may be necessary to enable a reasonable shareholder to understand the nature and implications for the company and its shareholders of the proposed redemption.

73 Cancellation of shares redeemed

(1)

Shares that are redeemed by a company pursuant to section 69 are deemed to be cancelled immediately on redemption.

(2)

On the cancellation of a share under this section,—

(a)

the rights and privileges attached to that share expire; but

(b)

the share may be reissued in accordance with this Part.

74 Redemption at option of shareholder

(1)

Subject to this section, if a share is redeemable at the option of the holder of the share, and the holder gives proper notice to the company requiring the company to redeem the share,—

(a)

the company must redeem the share on the date specified in the notice, or if no date is specified, on the date of receipt of the notice; and

(b)

the share is deemed to be cancelled on the date of redemption; and

(c)

from the date of redemption the former shareholder ranks as an unsecured creditor of the company for the consideration payable on redemption.

(2)

A redemption under this section—

(a)

is not a distribution for the purposes of sections 52 and 53; but

(b)

is deemed to be a distribution for the purposes of subsections (1) and (5) of section 56.

Section 74(1)(c): amended, on 15 April 2004, by section 4 of the Companies Amendment Act (No 2) 2004 (2004 No 24).

75 Redemption on fixed date

(1)

Subject to this section, if a share is redeemable on a specified date—

(a)

the company must redeem the share on that date; and

(b)

the share is deemed to be cancelled on that date; and

(c)

from that date the former shareholder ranks as an unsecured creditor of the company for the consideration payable on redemption.

(2)

A redemption under this section—

(a)

is not a distribution for the purposes of sections 52 and 53; but

(b)

is deemed to be a distribution for the purposes of subsections (1) and (5) of section 56.

Section 75(1)(c): amended, on 30 June 1997, by section 5 of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

Assistance by a company in the purchase of its own shares

76 Financial assistance

(1)

A company may give financial assistance to a person for the purpose of, or in connection with, the purchase of a share issued or to be issued by the company, or by its holding company, whether directly or indirectly, only if the financial assistance is given in accordance with subsection (2); and—

(a)

all shareholders have consented in writing to the giving of the assistance; or

(b)

the procedure set out in section 78 is followed; or

(c)

the financial assistance is given in accordance with section 80.

(2)

A company may give financial assistance under subsection (1) if the board has previously resolved that—

(a)

the company should provide the assistance; and

(b)

giving the assistance is in the best interests of the company; and

(c)

the terms and conditions under which the assistance is given are fair and reasonable to the company.

(3)

The resolution must set out in full the grounds for the directors’ conclusions.

(4)

The directors who vote in favour of a resolution under subsection (2) must sign a certificate as to the matters set out in that subsection and may combine that certificate with the certificate required under section 77 and any certificate required under section 78.

(5)

A company must not give financial assistance under subsection (1) if, after the passing of a resolution under subsection (2) and before the assistance is given, the board ceases to be satisfied that—

(a)

the giving of the assistance is in the best interests of the company; or

(b)

the terms and conditions under which the assistance is proposed are fair and reasonable to the company.

(6)

For the purposes of this section, financial assistance includes a loan, a guarantee, and the provision of a security.

(7)

Every director who fails to comply with subsection (4) commits an offence and is liable on conviction to the penalty set out in section 373(1).

77 Company must satisfy solvency test

(1)

A company must not give any financial assistance under section 76 unless the board of the company is satisfied on reasonable grounds that the company will, immediately after the giving of the financial assistance, satisfy the solvency test.

(2)

The directors who vote in favour of the giving of the financial assistance must sign a certificate stating that, in their opinion, the company will, immediately after the financial assistance is given, satisfy the solvency test and the grounds for that opinion.

(3)

If, after a resolution is passed under subsection (1) and before the financial assistance is given, the board ceases to be satisfied on reasonable grounds that the company will, immediately after the financial assistance is given, satisfy the solvency test, any financial assistance given by the company is deemed not to have been authorised.

(4)

Every director of a company who fails to comply with subsection (2) commits an offence and is liable on conviction to the penalty set out in section 373(1).

(5)

The provisions of section 56 apply in relation to the giving of financial assistance by a company with such modifications as may be necessary.

(6)

In applying the solvency test for the purposes of this section,—

assets excludes amounts of financial assistance given by the company at any time under section 76 or section 107(1)(e) in the form of loans; and

liabilities includes the face value of all outstanding liabilities, whether contingent or otherwise, incurred by the company at any time in connection with the giving of financial assistance under section 76 or 107(1)(e).

(7)

Nothing in subsection (6) limits or affects the application of section 4(4).

Section 77(4): amended, on 1 July 2013, by section 413 of the Criminal Procedure Act 2011 (2011 No 81).

Section 77(6): replaced, on 1 July 1994, by section 12 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

Section 77(6) assets: amended, on 15 April 2004, by section 5(a) of the Companies Amendment Act (No 2) 2004 (2004 No 24).

Section 77(6) liabilities: amended, on 15 April 2004, by section 5(b) of the Companies Amendment Act (No 2) 2004 (2004 No 24).

Section 77(7): inserted, on 1 July 1994, by section 12 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

78 Special financial assistance

(1)

Financial assistance may be given under section 76(1)(b) only if the board has previously resolved—

(a)

that giving the assistance in question is of benefit to those shareholders not receiving the assistance; and

(b)

that the terms and conditions under which the assistance is given are fair and reasonable to those shareholders not receiving the assistance.

(2)

The resolution must set out in full the reasons for the directors’ conclusions.

(3)

The directors who vote in favour of a resolution required by subsection (1) must sign a certificate as to the matters set out in that subsection.

(4)

A company must not give financial assistance under section 76(1)(b) if, after the passing of a resolution under subsection (1) and before the financial assistance is given, the board ceases to be satisfied that—

(a)

the giving of the financial assistance is of benefit to those shareholders not receiving the assistance; or

(b)

the terms and conditions under which the assistance is given are fair and reasonable to those shareholders not receiving it.

(5)

Before the financial assistance is given under section 76(1)(b), the company must send to each shareholder a disclosure document that complies with section 79.

(6)

The assistance may be given not less than 10 working days and not more than 12 months after the disclosure document has been sent to each shareholder.

(7)

A shareholder or the company may apply to the court for an order restraining the proposed assistance being given on the ground that—

(a)

it is not in the best interests of the company and of benefit to those shareholders not receiving the assistance; or

(b)

the terms and conditions under which the assistance is to be given are not fair and reasonable to the company and to those shareholders not receiving the assistance.

(8)

Every director who fails to comply with subsection (3) commits an offence and is liable on conviction to the penalty set out in section 373(1).

(9)

If a company fails to comply with subsection (5),—

(a)

the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b)

every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

79 Disclosure document

For the purposes of section 78, a disclosure document is a document that sets out—

(a)

the nature and terms of the financial assistance to be given, and to whom it will be given; and

(b)

if the financial assistance is to be given to a nominee for another person, the name of that other person; and

(c)

the text of the resolution required by section 78(1), together with such further information and explanation as may be necessary to enable a reasonable shareholder to understand the nature and implications for the company and its shareholders of the proposed transaction.

80 Financial assistance not exceeding 5% of shareholders’ funds

(1)

Financial assistance may be given under section 76(1)(c), only if—

(a)

the amount of the financial assistance, together with any other financial assistance given by the company pursuant to this paragraph, repayment of which remains outstanding, would not exceed 5% of the aggregate of amounts received by the company in respect of the issue of shares and reserves as disclosed in the relevant statements or records, and the company receives fair value in connection with the assistance; and

(b)

within 10 working days of providing the financial assistance, the company sends to each shareholder a notice containing the following particulars:

(i)

the class and number of shares in respect of which the financial assistance has been provided:

(ii)

the consideration paid or payable for the shares in respect of which the financial assistance has been provided:

(iii)

the identity of the person receiving the financial assistance and, if that person is not the beneficial owner of the shares in respect of which the financial assistance has been provided, the identity of that beneficial owner:

(iv)

the nature and, if quantifiable, the amount of the financial assistance.

(1A)

In subsection (1), relevant statements or records means—

(a)

financial statements of the company prepared for the most recently completed accounting period in accordance with generally accepted accounting practice; or

(b)

if those financial statements have not been prepared, the accounting records of the company.

(2)

If a company fails to comply with subsection (1)(b),—

(a)

the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b)

every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

Section 80(1)(a): amended, on 1 April 2014, by section 26(1) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 80(1A): inserted, on 1 April 2014, by section 26(2) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

81 Enforceability of transactions

(1)

Failure to comply with section 76 or section 78 or section 79 or section 80 does not affect the validity of a transaction.

(2)

This section does not affect a liability of a director or any other person for breach of a duty, or as a constructive trustee, or otherwise.

Cross-holdings

82 Subsidiary may not hold shares in holding company

(1)

Subject to this section, a subsidiary must not hold shares in its holding company.

(2)

An issue of shares by a holding company to its subsidiary is void and of no effect.

(3)

A transfer of shares in a holding company to its subsidiary is void and of no effect.

(4)

Where a company that holds shares in another company becomes a subsidiary of that other company—

(a)

the company may, notwithstanding subsection (1), continue to hold those shares; but

(b)

the exercise of any voting rights attaching to those shares shall be of no effect.

(5)

Where a company on reregistration under this Act in accordance with the Companies Reregistration Act 1993 held shares in another company and was a subsidiary of that other company,—

(a)

the company may, notwithstanding subsection (1), continue to hold those shares; but

(b)

the exercise of any voting rights attaching to those shares shall be of no effect.

(6)

Nothing in this section prevents a subsidiary holding shares in its holding company in its capacity as a personal representative or a trustee unless the holding company or another subsidiary has a beneficial interest under the trust other than an interest that arises by way of security for the purposes of a transaction made in the ordinary course of the business of lending money.

(7)

This section applies to a nominee for a subsidiary in the same way as it applies to the subsidiary.

Statement of shareholder rights

83 Statement of rights to be given to shareholders

(1)

Every company must issue to a shareholder, on request, a statement that sets out—

(a)

the class of shares held by the shareholder, the total number of shares of that class issued by the company, and the number of shares of that class held by the shareholder; and

(b)

the rights, privileges, conditions, and limitations, including restrictions on transfer, attaching to the shares held by the shareholder; and

(c)

the relationship of the shares held by the shareholder to other classes of shares.

(2)

The company is not obliged to provide a shareholder with a statement if—

(a)

a statement has been provided within the previous 6 months; and

(b)

the shareholder has not acquired or disposed of shares since the previous statement was provided; and

(c)

the rights attached to shares of the company have not been altered since the previous statement was provided; and

(d)

there are special circumstances that make it reasonable for the company to refuse the request.

(3)

The statement is not evidence of title to the shares or of any of the matters set out in it.

(4)

The statement must state in a prominent place that it is not evidence of title to the shares or of the matters set out in it.

(5)

If a company fails to comply with subsection (1),—

(a)

the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b)

every director of the company commits an offence and is liable on conviction to the penalties set out in section 374(1).

Section 83(2)(d): replaced, on 30 June 1997, by section 6 of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

Transfer of shares

84 Transfer of shares

(1)

Subject to the constitution of the company, shares in a company may be transferred by entry of the name of the transferee on the share register.

(2)

For the purpose of transferring shares, a form of transfer signed by the present holder of the shares or by his or her personal representative must be delivered to—

(a)

the company; or

(b)

an agent of the company who maintains the share register under section 87(3).

(3)

The form of transfer must be signed by the transferee if registration as holder of the shares imposes a liability to the company on the transferee.

(4)

On receipt of a form of transfer in accordance with subsection (2) and, if applicable, subsection (3), the company must forthwith enter or cause to be entered the name of the transferee on the share register as holder of the shares, unless—

(a)

the board resolves within 30 working days of receipt of the transfer to refuse or delay the registration of the transfer, and the resolution sets out in full the reasons for doing so; and

(b)

notice of the resolution, including those reasons, is sent to the transferor and to the transferee within 5 working days of the resolution being passed by the board; and

(c)

the Act or the constitution expressly permits the board to refuse or delay registration for the reasons stated.

(5)

Subject to the constitution of a company, the board may refuse or delay the registration of a transfer of shares if the holder of the shares has failed to pay to the company an amount due in respect of those shares, whether by way of consideration for the issue of the shares or in respect of sums payable by the holder of the shares in accordance with the constitution.

(6)

If a company fails to comply with subsection (4),—

(a)

the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b)

every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

85 Transfer of shares under approved system

(1)

Where shares in a company are transferred under a system of transfer approved under section 376 of the Financial Markets Conduct Act 2013, the company may refuse to complete or delay the registration of the transfer of the shares if—

(a)

the board resolves, within 30 working days of such date as may be specified for the purpose in the Order in Council approving the system, to refuse or delay registration of the transfer, and the resolution sets out in full the reasons for doing so; and

(b)

notice of the resolution, including those reasons, is sent to the transferor and to the transferee within 5 working days of the resolution being passed by the board; and

(c)

either—

(i)

the Act or the constitution expressly permits the board to refuse or delay registration for the reasons stated; or

(ii)

any identification number assigned to the shares or issued to the holder of the shares under a system of transfer approved under section 376 of the Financial Markets Conduct Act 2013 is not recorded on the form of transfer of the shares or otherwise communicated in writing to the company by or on behalf of the transferor.

(1A)

If shares in a company are transferred in accordance with the rules of a designated settlement system, the company may refuse to complete or delay the registration of the transfer of the shares if—

(a)

the board of the company resolves, within 30 working days of the date on which the settlement was effected, to refuse or delay registration of the transfer, and the resolution sets out in full the reasons for doing so; and

(b)

notice of the resolution, including those reasons, is sent to the transferor and to the transferee within 5 working days of the resolution being passed by the board; and

(c)

this Act or the constitution of the company expressly permits the board to refuse or delay registration for the reasons stated.

(2)

Subject to subsections (1) and (1A), if a company fails to enter or cause to be entered the name of the transferee on the share register on a transfer of shares effected in accordance with the rules of a designated settlement system, or under a system approved under section 376 of the Financial Markets Conduct Act 2013,—

(a)

the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b)

every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

Section 85(1): amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 85(1)(c): replaced, on 3 May 2001, by section 5 of the Companies Act 1993 Amendment Act 2001 (2001 No 18).

Section 85(1)(c)(ii): amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 85(1A): inserted, on 24 November 2009, by section 17(1) of the Reserve Bank of New Zealand Amendment Act 2009 (2009 No 53).

Section 85(2): amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 85(2): amended, on 24 November 2009, by section 17(2)(a) of the Reserve Bank of New Zealand Amendment Act 2009 (2009 No 53).

Section 85(2): amended, on 24 November 2009, by section 17(2)(b) of the Reserve Bank of New Zealand Amendment Act 2009 (2009 No 53).

86 Transfer of shares by operation of law

Shares in a company may pass by operation of law notwithstanding the constitution of the company.

Share register

87 Company to maintain share register

(1)

A company must maintain a share register that records the shares issued by the company and states—

(a)

whether, under the constitution of the company or the terms of issue of the shares, there are any restrictions or limitations on their transfer; and

(b)

where any document that contains the restrictions or limitations may be inspected.

(2)

The share register must state, with respect to each class of shares,—

(a)

the names, alphabetically arranged, and the latest known address of each person who is, or has within the last 10 years been, a shareholder; and

(b)

the number of shares of that class held by each shareholder within the last 10 years; and

(c)

the date of any—

(i)

issue of shares to; or

(ii)

repurchase or redemption of shares from; or

(iii)

transfer of shares by or to—

each shareholder within the last 10 years, and in relation to the transfer, the name of the person to or from whom the shares were transferred.

(3)

An agent may maintain the share register of the company.

(4)

If a company fails to comply with subsection (1) or subsection (2),—

(a)

the company commits an offence and is liable on conviction to the penalty set out in section 373(2); and

(b)

every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

88 Place of share register

(1)

The share register may, if expressly permitted by the constitution, be divided into 2 or more registers kept in different places.

(2)

The principal register must be kept in New Zealand.

(3)

If a share register is divided into 2 or more registers kept in different places,—

(a)

notice of the place where each register is kept must be delivered to the Registrar for registration within 10 working days after the share register is divided or any place where a register is kept is altered; and

(b)

a copy of every register must be kept at the same place as the principal register; and

(c)

if an entry is made in a register other than the principal register, a corresponding entry must be made within 10 working days in the copy of that register kept with the principal register.

(4)

In this section, principal register, in relation to a company, means—

(a)

if the share register is not divided into 2 or more registers, the share register:

(b)

if the share register is divided into 2 or more registers, the register described as the principal register in the last notice sent to the Registrar.

(5)

If a company fails to comply with subsection (2) or subsection (3),—

(a)

the company commits an offence and is liable on conviction to the penalty set out in section 373(2); and

(b)

every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

89 Share register as evidence of legal title

(1)

Subject to section 91, the entry of the name of a person in the share register as holder of a share is prima facie evidence that legal title to the share vests in that person.

(2)

A company may treat the registered holder of a share as the only person entitled to—

(a)

exercise the right to vote attaching to the share; and

(b)

receive notices; and

(c)

receive a distribution in respect of the share; and

(d)

exercise the other rights and powers attaching to the share.

90 Directors’ duty to supervise share register

(1)

It is the duty of each director to take reasonable steps to ensure that the share register is properly kept and that share transfers are promptly entered on it in accordance with section 84.

(2)

A director who fails to comply with subsection (1) commits an offence and is liable on conviction to the penalty set out in section 373(2).

91 Power of court to rectify share register

(1)

If the name of a person is wrongly entered in, or omitted from, the share register of a company, the person aggrieved, or a shareholder, may apply to the court—

(a)

for rectification of the share register; or

(b)

for compensation for loss sustained; or

(c)

for both rectification and compensation.

(2)

On an application under this section the court may order—

(a)

rectification of the register; or

(b)

payment of compensation by the company or a director of the company for any loss sustained; or

(c)

rectification and payment of compensation.

(3)

On an application under this section, the court may decide—

(a)

a question relating to the entitlement of a person who is a party to the application to have his or her name entered in, or omitted from, the register; and

(b)

a question necessary or expedient to be decided for rectification of the register.

92 Trusts not to be entered on register

No notice of a trust, whether express, implied, or constructive, may be entered on the share register.

93 Personal representative may be registered

(1)

Notwithstanding section 92, a personal representative of a deceased person whose name is registered in a share register of a company as the holder of a share in that company is entitled to be registered as the holder of that share as personal representative.

(2)

Notwithstanding section 92, a personal representative of a deceased person beneficially entitled to a share in a company, being a share registered in a share register of that company, is with the consent of the company and the registered holder of that share, entitled to be registered as the holder of that share as personal representative.

(3)

The registration of a trustee, executor, or administrator pursuant to this section does not constitute notice of a trust.

94 Assignee of bankrupt may be registered

(1)

Notwithstanding section 92, the assignee of the property of a bankrupt registered in a share register of a company as the holder of a share in that company is entitled to be registered as the holder of that share as the assignee of the property of the bankrupt.

(2)

Notwithstanding section 92, the assignee of the property of a bankrupt beneficially entitled to a share in a company, being a share registered in a register of that company, is, with the consent of the company and the registered holder of that share, entitled to be registered as the holder of that share as the assignee of the property of the bankrupt.

Ultimate holding company

Heading: inserted, on 1 May 2015, by section 11 of the Companies Amendment Act 2014 (2014 No 46).

94A Meaning of ultimate holding company information

For the purposes of this Act, ultimate holding company information means information about whether a company has an ultimate holding company and, if the company does, the following information:

(a)

the name of the ultimate holding company:

(b)

the ultimate holding company’s country of registration:

(c)

the ultimate holding company’s registration number or code (if any):

(d)

the registered office of the ultimate holding company:

(e)

any other prescribed information.

Section 94A: inserted, on 1 May 2015, by section 11 of the Companies Amendment Act 2014 (2014 No 46).

94B Notice of ultimate holding company changes

(1)

The board of a company must ensure that notice (in the form and manner required by the Registrar) of any changes in the company’s ultimate holding company information is delivered to the Registrar for registration.

(2)

A notice under subsection (1) must—

(a)

specify the date of the change; and

(b)

include the new ultimate holding company information; and

(c)

be delivered to the Registrar within 20 working days of the date of the change.

(3)

If a board of a company fails to comply with this section, every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

Section 94B: inserted, on 1 May 2015, by section 11 of the Companies Amendment Act 2014 (2014 No 46).

Share certificates

95 Share certificates

(1)

Subject to subsection (2), a company whose shares are subject to a listing agreement with a stock exchange must, within 20 working days after the issue, or registration of a transfer, of shares in the company, as the case may be, send a share certificate to every holder of those shares stating—

(a)

the name of the company; and

(b)

the class of shares held by that person; and

(c)

the number of shares held by that person.

(2)

Nothing in subsections (1) or (5) applies in relation to a company the shares in which can be transferred in accordance with the rules of a designated settlement system, or under a system approved under section 376 of the Financial Markets Conduct Act 2013, that does not require a share certificate for the transfer of shares.

(3)

A shareholder in a company, not being a company to which subsection (1) or subsection (2) applies, may apply to the company for a certificate relating to some or all of the shareholder’s shares in the company.

(4)

On receipt of an application for a share certificate under subsection (3), the company must, within 20 working days after receiving the application,—

(a)

if the application relates to some but not all of the shares, separate the shares shown in the register as owned by the applicant into separate parcels; one parcel being the shares to which the share certificate relates, and the other parcel being any remaining shares; and

(b)

in all cases send to the shareholder a certificate stating—

(i)

the name of the company; and

(ii)

the class of shares held by the shareholder; and

(iii)

the number of shares held by the shareholder to which the certificate relates.

(5)

Notwithstanding section 84, where a share certificate has been issued, a transfer of the shares to which it relates must not be registered by the company unless the form of transfer required by that section is accompanied by the share certificate relating to the share, or by evidence as to its loss or destruction and, if required, an indemnity in a form required by the board.

(6)

Subject to subsection (1), where shares to which a share certificate relates are to be transferred, and the share certificate is sent to the company to enable the registration of the transfer, the share certificate must be cancelled and no further share certificate issued except at the request of the transferee.

(6A)

Nothing in this section (except subsection (2)) limits or affects section 100 of the Financial Markets Conduct Act 2013.

(7)

If a company fails to comply with subsection (1) or subsection (4),—

(a)

the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b)

every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

Section 95(2): replaced, on 24 November 2009, by section 18 of the Reserve Bank of New Zealand Amendment Act 2009 (2009 No 53).

Section 95(2): amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 95(6A): inserted, on 1 July 1994, by section 13 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

Section 95(6A): amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Debentures

Heading: inserted, on 1 January 2008, by section 364(1) of the Property Law Act 2007 (2007 No 91).

95A Perpetual debentures

(1)

A term that is expressed in a debenture or in a deed securing a debenture, issued or executed by a company, is not invalid by reason only that it provides that the debenture is—

(a)

irredeemable; or

(b)

redeemable only on the happening of a contingency, however remote, or on the expiration of a period, however long.

(2)

This section applies despite anything to the contrary in section 97 of the Property Law Act 2007 or in any rule of law or equity.

Compare: 1952 No 51 s 151B

Section 95A: inserted, on 1 January 2008, by section 364(1) of the Property Law Act 2007 (2007 No 91).

95B Power to reissue redeemed debentures in certain cases

(1)

A company that has redeemed debentures previously issued by it may—

(a)

reissue the debentures; or

(b)

issue other debentures in their place.

(2)

Subsection (1) applies—

(a)

whether the debentures were redeemed before, on, or after 1 January 2008:

(b)

unless—

(i)

the company’s constitution or a contract entered into by the company contains a provision (whether express or implied) to the contrary; or

(ii)

the company has, by passing a resolution or by some other act, indicated its intention that the debentures are cancelled.

(3)

On a reissue of redeemed debentures or of other debentures in their place, the debentures are to be treated as having, and as always having had, the same priority as the redeemed debentures.

(4)

Debentures of a company deposited to secure advances from time to time (whether on current account or otherwise) are not to be treated as redeemed because the company’s account ceases to be in debit while the debentures are deposited.

(5)

Subsection (4) applies whether the debentures were deposited before, on, or after 1 January 2008.

(6)

The reissue of a debenture or the issue of another debenture in its place under this section (whether before, on, or after 1 January 2008)—

(a)

is to be treated as the issue of a new debenture for the purposes of stamp duty payable (if any); but

(b)

is not to be treated as the issue of a new debenture for the purposes of any provision limiting the amount or number of debentures to be issued.

Compare: 1952 No 51 s 151C

Section 95B: inserted, on 1 January 2008, by section 364(1) of the Property Law Act 2007 (2007 No 91).

95C Specific performance of contracts to subscribe for debentures

(1)

A court may order the specific performance of a contract with a company to take up and pay for any debentures of the company.

(2)

The court must not refuse to order the specific performance of a contract of that kind on the ground that the contract is one to lend money.

Compare: 1952 No 51 s 151D

Section 95C: inserted, on 1 January 2008, by section 364(1) of the Property Law Act 2007 (2007 No 91).

Part 7 Shareholders and their rights and obligations

96 Meaning of shareholder

In this Act, the term shareholder, in relation to a company, means—

(a)

a person whose name is entered in the share register as the holder for the time being of 1 or more shares in the company:

(b)

until the person’s name is entered in the share register, a person named as a shareholder in an application for the registration of a company at the time of registration of the company:

(c)

until the person’s name is entered in the share register, a person who is entitled to have that person’s name entered in the share register under a registered amalgamation proposal as a shareholder in an amalgamated company.

Liability of shareholders

97 Liability of shareholders

(1)

Except where the constitution of a company provides that the liability of the shareholders of the company is unlimited, a shareholder is not liable for an obligation of the company by reason only of being a shareholder.

(2)

Except where the constitution of a company provides that the liability of the shareholders of the company is unlimited, the liability of a shareholder to the company is limited to—

(a)

any amount unpaid on a share held by the shareholder:

(b)

any liability expressly provided for in the constitution of the company:

(c)

any liability under sections 131 to 137 that arises by reason of section 126(2):

(d)

any liability to repay a distribution received by the shareholder to the extent that the distribution is recoverable under section 56:

(e)

any liability under section 100.

(3)

Nothing in this section affects the liability of a shareholder to a company under a contract, including a contract for the issue of shares, or for any tort, or breach of a fiduciary duty, or other actionable wrong committed by the shareholder.

98 Liability of former shareholders

(1)

A former shareholder who ceased to be a shareholder during the specified period is liable to the company in respect of any amount unpaid on the shares held by that former shareholder or any liability provided for in the constitution of the company for which that former shareholder was liable to the company if the court is satisfied that the shareholders of the company are unable to discharge any liability—

(a)

for any amount unpaid on shares held by them; or

(b)

expressly provided for in the constitution of the company.

(2)

A former shareholder is not liable under subsection (1) for any debt or liability of the company contracted after ceasing to be a shareholder.

(3)

Subsections (1) and (2) apply, with such modifications as may be necessary, in relation to an existing company that has become reregistered under this Act in accordance with the Companies Reregistration Act 1993 and as if the reference to a former shareholder included a reference to a person who was a member of the company before the reregistration of the company.

(4)

Where a person ceased to be a shareholder of a company before the liability of the shareholders of the company ceased to be limited and became unlimited and that person has not since become a shareholder of the company, that person is liable to the company only to the same extent as if the liability of the shareholders had remained limited.

(5)

Subsection (4) applies, with such modifications as may be necessary, in relation to an existing company that has become reregistered under this Act in accordance with the Companies Reregistration Act 1993, whether or not the liability of the shareholders ceased to be limited before, on, or after the reregistration of the company and as if the reference to a person who was a shareholder included a reference to a person who was a member of the company before reregistration.

(6)

For the purposes of subsection (1), specified period means—

(a)

a period of 1 year before the date of commencement of the liquidation of the company together with the period commencing on that date and ending at the time at which the liquidator is appointed; and

(b)

in the case of a company that has been put into liquidation by the court, the period of 1 year before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date on which, and at the time at which, the order was made; and

(c)

if—

(i)

an application was made to the court to put a company into liquidation; and

(ii)

after the making of the application to the court a liquidator was appointed under paragraph (a) or paragraph (b) of section 241(2),—

the period of 1 year before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date and at the time of the commencement of the liquidation.

Section 98(6)(a): replaced, on 26 April 1999, by section 2(1) of the Companies Amendment Act 1999 (1999 No 19).

Section 98(6)(b): amended, on 26 April 1999, by section 2(2)(a) of the Companies Amendment Act 1999 (1999 No 19).

Section 98(6)(b): amended, on 3 June 1998, by section 3 of the Companies Amendment Act 1998 (1998 No 31).

Section 98(6)(c): inserted, on 3 June 1998, by section 3 of the Companies Amendment Act 1998 (1998 No 31).

Section 98(6)(c): amended, on 26 April 1999, by section 2(2)(b) of the Companies Amendment Act 1999 (1999 No 19).

99 Additional provisions relating to liability of shareholders and former shareholders

(1)

If—

(a)

a shareholder or former shareholder of a company was, at any time, liable to the company in respect of a share held by that person; and

(b)

that liability was cancelled or reduced by—

(i)

an alteration of the constitution, repurchase or redemption of the share, or amalgamation; or

(ii)

reregistration under this Act in accordance with the Companies Reregistration Act 1993; or

(iii)

a change of registration under section 30 of the Companies Act 1955; and

(c)

the company is, at the commencement of its liquidation, subject to liabilities incurred prior to the alteration of the constitution, repurchase or redemption of the share, amalgamation, reregistration, or change of registration, as the case may be; and

(d)

the assets of the company are not sufficient to discharge those liabilities in full,—

that person is liable to the company for the amount specified in subsection (2).

(2)

A person is liable under subsection (1) for the lesser of—

(a)

the amount by which the liability in respect of that share was reduced:

(b)

the amount required to be contributed in respect of each such share in order to discharge those liabilities.

(3)

The liability of a person under subsection (1) is reduced by an amount received by that person as a distribution under section 57 and recovered from that person by the company.

(4)

The amount received by a person as a distribution under section 57 is reduced by any amount recovered from that person pursuant to subsection (1).

(5)

For the purposes of this section,—

(a)

the term company includes an amalgamating company which amalgamated with 1 or more other amalgamating companies to continue as that company:

(b)

a member of a company limited by guarantee registered under the Companies Act 1955 is to be treated as if the member was, prior to reregistration of that company under this Act in accordance with the Companies Reregistration Act 1993, the holder of a share which rendered the member liable to calls not exceeding the amount of contribution specified in the memorandum of association as the amount undertaken to be contributed by that member in a winding up:

(c)

a member of an unlimited company registered under the Companies Act 1955 is to be treated as if the member was, prior to reregistration of that company under this Act in accordance with the Companies Reregistration Act 1993, the holder of a share which rendered the member liable to unlimited calls.

100 Liability for calls

(1)

Where a share renders its holder liable to calls, or otherwise imposes a liability on its holder, that liability attaches to the holder of the share for the time being, and not to a prior holder of the share, whether or not the liability became enforceable before the share was registered in the name of the current holder.

(2)

Where—

(a)

all or part of the consideration payable in respect of the issue of a share remains unsatisfied; and

(b)

the person to whom the share was issued no longer holds that share,—

liability in respect of that unsatisfied consideration does not attach to subsequent holders of the share, but remains the liability of the person to whom the share was issued, or of any other person who assumed that liability at the time of issue.

101 Shareholders not required to acquire shares by alteration to constitution

Notwithstanding anything in the constitution of the company, a shareholder is not bound by an alteration of the constitution of a company that—

(a)

requires the shareholder to acquire or hold more shares in the company than the number held on the date the alteration is made; or

(b)

increases the liability of the shareholder to the company—

unless the shareholder agrees in writing to be bound by the alteration either before, on, or after it is made.

102 Liability of personal representative

(1)

The liability of the personal representative of the estate of a deceased person, who is registered as the holder of a share comprised in the estate, does not, in respect of that share, exceed the proportional amount available from the assets of the estate, after satisfaction of prior claims, for distribution among creditors of the estate, being assets which, at the time when any demand is made for the satisfaction of the liability, are held by that personal representative on the same trusts as apply to that share.

(2)

For the purposes of this section, trust extends to the duties of a personal representative.

103 Liability of an assignee

(1)

The liability of the assignee of the property of a bankrupt, who is registered as the holder of a share which is comprised in the property of the bankrupt, does not, in respect of that share, exceed the proportional amount available from the property of the estate of the bankrupt, after satisfaction of prior claims, for distribution among creditors of the estate, being property of the bankrupt which, at the time when demand is made for the satisfaction of the liability, is vested in the assignee.

(2)

In this section, assignee means the assignee in whom the property of a bankrupt is vested pursuant to the Insolvency Act 2006.

Section 103(2): amended, on 3 December 2007, by section 445 of the Insolvency Act 2006 (2006 No 55).

Powers of shareholders

104 Exercise of powers reserved to shareholders

(1)

Powers reserved to the shareholders of a company by this Act may be exercised only—

(a)

at a meeting of shareholders pursuant to section 120 or section 121; or

(b)

by a resolution in lieu of a meeting pursuant to section 122.

(2)

Powers reserved to the shareholders of a company by the constitution of the company may, subject to the constitution, be exercised—

(a)

at a meeting of shareholders pursuant to section 120 or section 121; or

(b)

by a resolution in lieu of a meeting pursuant to section 122.

105 Exercise of powers by ordinary resolution

(1)

Unless otherwise specified in this Act or the constitution of a company, a power reserved to shareholders may be exercised by an ordinary resolution.

(2)

An ordinary resolution is a resolution that is approved by a simple majority of the votes of those shareholders entitled to vote and voting on the question.

106 Powers exercised by special resolution

(1)

Notwithstanding the constitution of a company, when shareholders exercise a power to—

(a)

adopt a constitution or, if it has one, alter or revoke the company’s constitution:

(b)

approve a major transaction:

(c)

approve an amalgamation of the company under section 221:

(d)

put the company into liquidation,—

the power must be exercised by special resolution.

(2)

A special resolution pursuant to paragraph (a) or paragraph (b) or paragraph (c) of subsection (1) can be rescinded only by a special resolution.

(3)

A special resolution pursuant to paragraph (d) of subsection (1) cannot be rescinded in any circumstances.

107 Unanimous assent to certain types of action

(1)

Notwithstanding section 52 but subject to section 108, if all entitled persons have agreed or concur,—

(a)

a dividend may be authorised otherwise than in accordance with section 53:

(b)

a discount scheme may be approved otherwise than in accordance with section 55:

(c)

shares in a company may be acquired otherwise than in accordance with sections 59 to 65:

(d)

shares in a company may be redeemed otherwise than in accordance with sections 69 to 72:

(e)

financial assistance may be given for the purpose of, or in connection with, the purchase of shares otherwise than in accordance with sections 76 to 80:

(f)

any of the matters referred to in section 161(1) may be authorised otherwise than in accordance with that section.

(2)

If all entitled persons have agreed or concur, shares may be issued otherwise than in accordance with section 42 or section 44 or section 45.

(3)

If all entitled persons have agreed to or concur in a company entering into a transaction in which a director is interested, nothing in sections 140 and 141 shall apply in relation to that transaction.

(4)

For the purposes of this section, no agreement or concurrence of the entitled persons is valid or enforceable unless the agreement or concurrence is in writing.

(5)

An agreement or concurrence may be—

(a)

a separate agreement to, or concurrence in, the particular exercise of the power referred to; or

(b)

an agreement to, or concurrence in, the exercise of the power generally or from time to time.

(6)

An entitled person may at any time, by notice in writing to the company, withdraw from any agreement or concurrence referred to in subsection (5)(b) and any such notice shall have effect accordingly.

(7)

Where a power is exercised pursuant to an agreement or concurrence referred to in subsection (5)(b), the board of the company must, within 10 working days of the exercise of the power, send to every entitled person a notice in writing containing details of the exercise of the power.

(8)

If the board of a company fails to comply with subsection (7), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

Section 107(1)(c): amended, on 3 May 2001, by section 7 of the Companies Act 1993 Amendment Act 2001 (2001 No 18).

108 Company to satisfy solvency test

(1)

A power referred to in subsection (1) of section 107 must not be exercised unless the board of the company is satisfied on reasonable grounds that the company will, immediately after the exercise of the power, satisfy the solvency test.

(2)

The directors who vote in favour of the exercise of the power must sign a certificate stating that, in their opinion, the company will, after the exercise of the power, satisfy the solvency test.

(3)

If, after a resolution is passed under subsection (1) and before the power is exercised, the board ceases to be satisfied on reasonable grounds that the company will, immediately after the power is exercised, satisfy the solvency test, any exercise of the power is deemed not to have been authorised.

(4)

The provisions of section 56 apply in relation to the exercise of a power referred to in subsection (1) of section 107, with such modifications as may be necessary.

(5)

In applying the solvency test for the purposes of section 107(1)(e),—

(a)

assets excludes all amounts of financial assistance given by the company at any time under section 76 or section 107(1)(e) in the form of loans; and

(b)

liabilities includes the face value of all outstanding liabilities, whether contingent or otherwise, incurred by the company at any time in connection with the giving of financial assistance under section 76 or section 107(1)(e).

(5A)

Nothing in subsection (5) limits or affects the application of section 4(4).

(6)

Every director who fails to comply with subsection (2) commits an offence and is liable on conviction to the penalty set out in section 373(1).

Section 108(5)(a): amended, on 15 April 2004, by section 6(1) of the Companies Amendment Act (No 2) 2004 (2004 No 24).

Section 108(5)(b): amended, on 15 April 2004, by section 6(2) of the Companies Amendment Act (No 2) 2004 (2004 No 24).

Section 108(5A): inserted, on 30 June 1997, by section 7 of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

109 Management review by shareholders

(1)

Notwithstanding anything in this Act or the constitution of the company, the chairperson of a meeting of shareholders of a company must allow a reasonable opportunity for shareholders at the meeting to question, discuss, or comment on the management of the company.

(2)

Notwithstanding anything in this Act or the constitution of the company, but subject to subsections (2A) and (3), a meeting of shareholders may pass a resolution under this section relating to the management of a company.

(2A)

The provisions of Schedule 1 govern proceedings at a meeting of shareholders at which a resolution under this section is passed except to the extent that the constitution of the company provides for matters that are expressed in that schedule to be subject to the constitution of the company.

(3)

Unless the constitution provides that the resolution is binding, a resolution passed pursuant to subsection (2) is not binding on the board.

Section 109(2): amended, on 15 April 2004, by section 7(1) of the Companies Amendment Act (No 2) 2004 (2004 No 24).

Section 109(2A): inserted, on 15 April 2004, by section 7(2) of the Companies Amendment Act (No 2) 2004 (2004 No 24).

Minority buy-out rights

110 Shareholder may require company to purchase shares

Where—

(a)

a shareholder is entitled to vote on the exercise of 1 or more of the powers set out in—

(i)

section 106(1)(a), and the proposed alteration imposes or removes a restriction on the activities of the company; or

(b)

the shareholders resolved, pursuant to section 106, to exercise the power; and

(c)

the shareholder cast all the votes attached to shares registered in the shareholder’s name and having the same beneficial owner against the exercise of the power; or

(d)

where the resolution to exercise the power was passed under section 122, the shareholder did not sign the resolution,—

that shareholder is entitled to require the company to purchase those shares in accordance with section 111.

111 Notice requiring purchase

(1)

A shareholder of a company who is entitled to require the company to purchase shares by virtue of section 110 or section 118 may,—

(a)

within 10 working days of the passing of the resolution at a meeting of shareholders; or

(b)

where the resolution was passed under section 122, before the expiration of 10 working days after the date on which notice of the passing of the resolution is given to the shareholder,—

give a written notice to the company requiring the company to purchase those shares.

(2)

Within 20 working days of receiving a notice under subsection (1), the board must—

(a)

agree to the purchase of the shares by the company; or

(b)

arrange for some other person to agree to purchase the shares; or

(c)

apply to the court for an order under section 114 or section 115; or

(d)

arrange, before taking the action concerned, for the resolution to be rescinded in accordance with section 106 or decide in the appropriate manner not to take the action concerned, as the case may be; and

(e)

give written notice to the shareholder of the board’s decision under this subsection.

112 Price for shares to be purchased by company determined

(1)

Within 5 working days of giving notice under section 111(2)(e) that the board agrees to the purchase of shares by the company, the board must give to the holder of the shares written notice of—

(a)

the price it offers to pay for those shares; and

(b)

how—

(i)

the matters in subsection (2) were calculated; or

(ii)

the price was calculated under subsection (3) and why calculating the price using the methodology set out in paragraphs (a) to (c) of subsection (2) would be clearly unfair.

(2)

That price must be a fair and reasonable price (as at the close of business on the day before the date on which the resolution was passed) for the shares held by the shareholder, calculated as follows:

(a)

first, the fair and reasonable value of the total shares in each class to which the shares belong must be calculated (the class value):

(b)

secondly, each class value must be adjusted to exclude any fluctuation (whether positive or negative) in the class value that has occurred (whether before or after the resolution was passed) that was due to, or in expectation of, the event proposed or authorised by the resolution:

(c)

thirdly, a portion of each adjusted class value must be allocated to the shareholder in proportion to the number of shares he, she, or it holds in the relevant class.

(3)

However, a different methodology from that set out in paragraphs (a) to (c) of subsection (2) may be used to calculate the fair and reasonable price for the shares if using the methodology set out in those paragraphs would be clearly unfair to the shareholder or the company.

(4)

The shareholder may object to the price offered by the board for the shares by giving written notice to the company no later than 10 working days after the date on which the board gave written notice to the shareholder under subsection (1).

(5)

If the company does not receive an objection to the price in accordance with subsection (4), the company must purchase all the shares at the nominated price no later than 10 working days after—

(a)

the date on which the board’s offer under subsection (1) is accepted; or

(b)

if the board has not received an acceptance, the date that is 10 working days after the date on which the board gave written notice to the shareholder under subsection (1).

(6)

The time periods in subsection (5) do not apply if there is a written agreement between the board and the shareholder that specifically sets a different date for purchase of the shares.

(7)

In this section, resolution means the resolution referred to in section 110 or 118 that, due to it having been passed, entitles the shareholder to require the company to purchase the shareholder’s shares in accordance with section 111.

Section 112: replaced, on 17 September 2008, by section 7 of the Companies (Minority Buy-out Rights) Amendment Act 2008 (2008 No 69).

112A Price for shares referred to arbitration if shareholder objects to price

(1)

If a company receives an objection to the price offered for shares in accordance with section 112(4),—

(a)

the following issues must be submitted to arbitration:

(i)

the fair and reasonable price for the shares, on the basis set out in section 112(2) and (3); and

(ii)

the remedies available to the holder of the shares or the company in respect of any price for the shares that differs from that determined by the board under section 112; and

(b)

the company must, within 5 working days of receiving the objection, pay to the shareholder a provisional price in respect of each share equal to the price offered by the board under section 112(1).

(2)

If the price determined for the shares—

(a)

exceeds the provisional price paid, the arbitral tribunal must order the company to pay the balance owing to the shareholder:

(b)

is less than the provisional price paid, the arbitral tribunal must order the shareholder to pay the excess to the company.

(3)

Except in exceptional circumstances, an arbitral tribunal must award interest on any balance owing or excess to be paid under subsection (2).

(4)

If a balance is owing to the shareholder, an arbitral tribunal may award to the shareholder, in addition to or instead of an award of interest, damages for loss attributable to the shortfall in the initial payment.

(5)

Any sum that must be paid in accordance with this section must be paid no later than 10 days after the date of the arbitral tribunal’s determination, unless the arbitral tribunal specifically orders otherwise.

(6)

A submission to arbitration under this section is an arbitration agreement for the purposes of the Arbitration Act 1996, and the provisions of that Act apply accordingly.

(7)

Clause 6 of Schedule 2 of the Arbitration Act 1996 may not be excluded from the arbitration agreement, and the term costs and expenses of an arbitration in that clause includes, where a balance is owing to the shareholder,—

(a)

the reasonable legal costs of the shareholder on a solicitor-and-client basis; and

(b)

the reasonable costs of expert witnesses.

Section 112A: inserted, on 17 September 2008, by section 7 of the Companies (Minority Buy-out Rights) Amendment Act 2008 (2008 No 69).

112B Interest payable on outstanding payments

(1)

Interest on any sum that must be paid under section 112 or 112A that is outstanding after the date on which it falls due is payable,—

(a)

in the case of a share price determined under section 112, at the same rate of interest as the prescribed rate under section 87(3) of the Judicature Act 1908; and

(b)

in the case of a share price determined under section 112A, on the basis and at the rate that the arbitral tribunal thinks fit having regard to all of the circumstances.

(2)

The sum on which interest is payable under subsection (1)(b) includes any interest or damages for loss awarded under section 112A.

Section 112B: inserted, on 17 September 2008, by section 7 of the Companies (Minority Buy-out Rights) Amendment Act 2008 (2008 No 69).

Section 112B(1): replaced, on 31 August 2012, by section 5(1) of the Companies Amendment Act (No 2) 2012 (2012 No 60).

Section 112B(2): amended, on 31 August 2012, by section 5(2) of the Companies Amendment Act (No 2) 2012 (2012 No 60).

112C Timing of transfer of shares

(1)

On the day on which a board gives notice under section 111(2)(e) that the board agrees to the purchase of shares by the company,—

(a)

the legal title to those shares passes to the company; and

(b)

the rights of the shareholder in relation to those shares end.

(2)

However, for the purposes of sections 112 and 112A, shareholder and holder of the shares means the person who held the legal title to the shares immediately before the board gave notice under section 111(2)(e) that the board agrees to the purchase of those shares by the company.

(3)

Subsection (2) applies despite subsection (1).

Section 112C: inserted, on 17 September 2008, by section 7 of the Companies (Minority Buy-out Rights) Amendment Act 2008 (2008 No 69).

113 Purchase of shares by third party

(1)

Sections 112 to 112C apply to the purchase of shares by a person with whom the company has entered into an arrangement for purchase in accordance with section 111(2)(b) subject to such modifications as may be necessary, and, in particular, as if references in that section to the board and the company were references to that person.

(2)

Every holder of shares that are to be purchased in accordance with the arrangement is indemnified by the company in respect of loss suffered by reason of the failure by the person who has agreed to purchase the shares to purchase them at the price nominated or fixed by arbitration, as the case may be.

Section 113(1): amended, on 17 September 2008, by section 8 of the Companies (Minority Buy-out Rights) Amendment Act 2008 (2008 No 69).

114 Court may grant exemption

(1)

A company to which a notice has been given under section 111 may apply to the court for an order exempting it from the obligation to purchase the shares to which the notice relates on the grounds that—

(a)

the purchase would be disproportionately damaging to the company; or

(b)

the company cannot reasonably be required to finance the purchase; or

(c)

it would not be just and equitable to require the company to purchase the shares.

(2)

On an application under this section, the court may make an order exempting the company from the obligation to purchase the shares, and may make any other order it thinks fit, including an order—

(a)

setting aside a resolution of the shareholders:

(b)

directing the company to take, or refrain from taking, any action specified in the order:

(c)

requiring the company to pay compensation to the shareholders affected:

(d)

that the company be put into liquidation.

(3)

The court shall not make an order under subsection (2) on either of the grounds set out in paragraph (a) or paragraph (b) of subsection (1) unless it is satisfied that the company has made reasonable efforts to arrange for another person to purchase the shares in accordance with section 111(2)(b).

115 Court may grant exemption if company insolvent

(1)

If—

(a)

a notice is given to a company under section 111; and

(b)

the board has resolved that the purchase by the company of the shares to which the notice relates would result in it failing to satisfy the solvency test; and

(c)

the company has, having made reasonable efforts to do so, been unable to arrange for the shares to be purchased by another person in accordance with section 111(2)(b),—

the company must apply to the court for an order exempting it from the obligation to purchase the shares.

(2)

The court may, on an application under subsection (1), if it is satisfied that—

(a)

the purchase of the shares would result in the company failing to satisfy the solvency test; and

(b)

the company has made reasonable efforts to arrange for the shares to be purchased by another person in accordance with section 111(2)(b),—

make—

(c)

an order exempting the company from the obligation to purchase the shares:

(d)

an order suspending the obligation to purchase the shares:

(e)

such other order as it thinks fit, including any order referred to in section 114(2).

Interest groups

116 Meaning of classes and interest groups

(1)

In this Act, unless the context otherwise requires,—

class means a class of shares having attached to them identical rights, privileges, limitations, and conditions

interest group, in relation to any action or proposal affecting rights attached to shares, means a group of shareholders—

(a)

whose affected rights are identical; and

(b)

whose rights are affected by the action or proposal in the same way; and

(c)

subject to subsection (2)(b), who comprise the holders of 1 or more classes of shares in the company.

(2)

For the purposes of this Act and the definition of the term interest group,—

(a)

1 or more interest groups may exist in relation to any action or proposal; and

(b)

if—

(i)

action is taken in relation to some holders of shares in a class and not others; or

(ii)

a proposal expressly distinguishes between some holders of shares in a class and other holders of shares of that class,—

holders of shares in the same class may fall into 2 or more interest groups.

117 Alteration of shareholder rights

(1)

A company must not take action that affects the rights attached to shares unless that action has been approved by a special resolution of each interest group.

(2)

For the purposes of subsection (1), the rights attached to a share include—

(a)

the rights, privileges, limitations, and conditions attached to the share by this Act or the constitution, including voting rights and rights to distributions:

(b)

pre-emptive rights arising under section 45:

(c)

the right to have the procedure set out in this section, and any further procedure required by the constitution for the amendment or alteration of rights, observed by the company:

(d)

the right that a procedure required by the constitution for the amendment or alteration of rights not be amended or altered.

(3)

For the purposes of subsection (1), the issue of further shares ranking equally with, or in priority to, existing shares, whether as to voting rights or distributions, is deemed to be action affecting the rights attached to the existing shares, unless—

(a)

the constitution of the company expressly permits the issue of further shares ranking equally with, or in priority to, those shares; or

(b)

the issue is made in accordance with the pre-emptive rights of shareholders under section 45 or under the constitution of the company.

Section 117(3)(b): amended, on 1 July 1994, by section 14 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

118 Shareholder may require company to purchase shares

Where—

(a)

an interest group has, under section 117, approved, by special resolution, the taking of action that affects the rights attached to shares; and

(b)

the company becomes entitled to take the action; and

(c)

a shareholder who was a member of the interest group cast all the votes attached to the shares registered in that shareholder’s name and having the same beneficial owner against approving the action; or

(d)

where the resolution approving the taking of the action was passed under section 122, a shareholder who was a member of the interest group did not sign the resolution,—

that shareholder is entitled to require the company to purchase those shares in accordance with section 111.

119 Actions not invalid

The taking of action by a company affecting the rights attached to shares is not invalid by reason only that the action was not approved in accordance with section 117.

Meetings of shareholders

120 Annual meeting of shareholders

(1)

The board of a company must call an annual meeting of shareholders to be held—

(a)

not later than 6 months after the balance date of the company; and

(b)

not later than 15 months after the previous annual meeting.

(2)

However, a company does not have to hold its first annual meeting in the calendar year of its registration but must hold that meeting within 18 months after its registration.

(3)

[Repealed]

(4)

The company must hold the meeting on the date on which it is called to be held.

Section 120: replaced, on 2 September 1996, by section 3(1) of the Companies Act 1993 Amendment Act 1996 (1996 No 115).

Section 120(1): replaced, on 1 April 2014, by section 27 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 120(2): replaced, on 1 April 2014, by section 27 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 120(3): repealed, on 1 April 2014, by section 27 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

121 Special meetings of shareholders

A special meeting of shareholders entitled to vote on an issue—

(a)

may be called at any time by—

(i)

the board; or

(ii)

a person who is authorised by the constitution to call the meeting:

(b)

must be called by the board on the written request of shareholders holding shares carrying together not less than 5% of the voting rights entitled to be exercised on the issue.

122 Resolution in lieu of meeting

(1)

Subject to subsections (2) and (3), a resolution in writing signed by not less than—

(a)

75%; or

(b)

such other percentage as the constitution may require for passing a special resolution,—

whichever is the greater, of the shareholders who would be entitled to vote on that resolution at a meeting of shareholders who together hold not less than 75% or, if a higher percentage is required by the constitution, that higher percentage, of the votes entitled to be cast on that resolution, is as valid as if it had been passed at a meeting of those shareholders.

(2)

A resolution in writing that—

(a)

relates to a matter that is required by this Act or by the constitution to be decided at a meeting of the shareholders of a company; and

(b)

is signed by the shareholders specified in subsection (3)—

is made in accordance with this Act or the constitution of the company.

(3)

For the purposes of subsection (2)(b), the shareholders are,—

(a)

in the case of a resolution under section 207I or 207J, the shareholders who together hold not less than 95% of the votes entitled to be cast on the resolution:

(b)

in any other case, the shareholders referred to in subsection (1).

(3A)

Any resolution in writing under this section may consist of 1 or more documents in similar form (including letters, telegrams, cables, facsimiles, telex messages, electronic mail, or other similar means of communication) each signed or assented to by or on behalf of 1 or more of the shareholders specified in subsection (3).

(4)

It shall not be necessary for a company to hold an annual meeting of shareholders under section 120 if everything required to be done at that meeting (by resolution or otherwise) is done by resolution in accordance with subsections (2) and (3).

(5)

Within 5 working days of a resolution being passed under this section, the company must send to every shareholder who did not sign the resolution or on whose behalf the resolution was not signed,—

(a)

a copy of the resolution; and

(b)

if the resolution was a special resolution required by section 106(1)(a) or (b), a statement setting out the rights of shareholders under section 110.

(6)

A resolution may be signed under subsection (1) or subsection (2) without any prior notice being given to shareholders.

(7)

If a company fails to comply with subsection (5),—

(a)

the company commits an offence and is liable on conviction to the penalty set out in section 373(1):

(b)

every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

Section 122(1): replaced, on 30 June 1997, by section 8(1) of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

Section 122(3)(a): replaced, on 1 April 2014, by section 28 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 122(3A): inserted, on 30 June 1997, by section 8(2) of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

Section 122(3A): amended, on 3 May 2001, by section 8 of the Companies Act 1993 Amendment Act 2001 (2001 No 18).

Section 122(5): replaced, on 17 September 2008, by section 9 of the Companies (Minority Buy-out Rights) Amendment Act 2008 (2008 No 69).

123 Court may call meeting of shareholders

(1)

If the court is satisfied that—

(a)

it is impracticable to call or conduct a meeting of shareholders in the manner prescribed by this Act or the constitution; or

(b)

it is in the interests of a company that a meeting of shareholders be held,—

the court may order a meeting of shareholders to be held or conducted in such manner as the court directs.

(2)

Application to the court may be made by a director, or a shareholder, or a creditor of the company.

(3)

The court may make the order on such terms as to the costs of conducting the meeting and as to security for those costs as the court thinks fit.

124 Proceedings at meetings

The provisions of Schedule 1 govern proceedings at meetings of shareholders of a company except to the extent that the constitution of the company makes provision for the matters that are expressed in that schedule to be subject to the constitution of the company.

Ascertaining shareholders

125 Shareholders entitled to receive distributions, attend meetings, and exercise rights

(1)

The shareholders who are—

(a)

entitled to receive distributions; or

(b)

entitled to exercise pre-emptive rights to acquire shares in accordance with section 45; or

(c)

entitled to exercise any other right or receive any other benefit under this Act or the constitution or pursuant to the terms of issue of shares—

are,—

(d)

if the board fixes a date for the purpose, those shareholders whose names are registered in the share register on that date:

(e)

if the board does not fix a date for the purpose, those shareholders whose names are registered in the share register on the day on which the board or the shareholders, as the case may be, pass the resolution concerned.

(2)

A date must not be fixed under subsection (1) that precedes by more than 20 working days the date on which the proposed action will be taken.

(3)

The shareholders who are entitled to receive notice of a meeting of shareholders are,—

(a)

if the board fixes a date for the purpose, those shareholders whose names are registered in the share register on that date:

(b)

if the board does not fix a date for the purpose, those shareholders whose names are registered in the share register at the close of business on the day immediately preceding the day on which the notice is given.

(4)

A date must not be fixed under subsection (3) that precedes by more than 30 working days or less than 10 working days the date on which the meeting is to be held.

Section 125(1)(c): replaced, on 30 June 1997, by section 9(1) of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

Section 125(1)(e): replaced, on 30 June 1997, by section 9(2) of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

Part 8 Directors and their powers and duties

126 Meaning of director

(1)

In this Act, director, in relation to a company, includes—

(a)

a person occupying the position of director of the company by whatever name called; and

(b)

for the purposes of sections 131 to 141, 145 to 149, 298, 299, 301, 318(1)(bb), 383, 385, 385AA, 386A to 386F, and clause 3(4)(b) of Schedule 7,—

(i)

a person in accordance with whose directions or instructions a person referred to in paragraph (a) may be required or is accustomed to act; and

(ii)

a person in accordance with whose directions or instructions the board of the company may be required or is accustomed to act; and

(iii)

a person who exercises or who is entitled to exercise or who controls or who is entitled to control the exercise of powers which, apart from the constitution of the company, would fall to be exercised by the board; and

(c)

for the purposes of sections 131 to 149, 298, 299, 301, 318(1)(bb), 383, 385, 385AA, 386A to 386F, and clause 3(4)(b) of Schedule 7, a person to whom a power or duty of the board has been directly delegated by the board with that person’s consent or acquiescence, or who exercises the power or duty with the consent or acquiescence of the board; and

(d)

for the purposes of sections 145 to 149, and clause 3(4)(b) of Schedule 7, a person in accordance with whose directions or instructions a person referred to in paragraphs (a) to (c) may be required or is accustomed to act in respect of his or her duties and powers as a director.

(1A)

In this Act, director, in relation to a company, does not include a receiver.

(2)

If the constitution of a company confers a power on shareholders which would otherwise fall to be exercised by the board, any shareholder who exercises that power or who takes part in deciding whether to exercise that power is deemed, in relation to the exercise of the power or any consideration concerning its exercise, to be a director for the purposes of sections 131 to 138.

(3)

If the constitution of a company requires a director or the board to exercise or refrain from exercising a power in accordance with a decision or direction of shareholders, any shareholder who takes part in—

(a)

the making of any decision that the power should or should not be exercised; or

(b)

the making of any decision whether to give a direction,—

as the case may be, is deemed, in relation to making any such decision, to be a director for the purposes of sections 131 to 138.

(4)

Paragraphs (b) to (d) of subsection (1) do not include a person to the extent that the person acts only in a professional capacity.

Section 126(1)(b): amended, on 1 May 2015, by section 37(1) of the Companies Amendment Act 2014 (2014 No 46).

Section 126(1)(b): amended, on 1 May 2015, by section 58 of the Companies Amendment Act 2014 (2014 No 46).

Section 126(1)(b): amended, on 1 November 2007, by section 36(1) of the Companies Amendment Act 2006 (2006 No 56).

Section 126(1)(b): amended, on 29 May 2004, by section 3(1) of the Companies Amendment Act 2004 (2004 No 10).

Section 126(1)(b): amended, on 3 May 2001, by section 9 of the Companies Act 1993 Amendment Act 2001 (2001 No 18).

Section 126(1)(c): amended, on 1 May 2015, by section 37(2) of the Companies Amendment Act 2014 (2014 No 46).

Section 126(1)(c): amended, on 1 May 2015, by section 58 of the Companies Amendment Act 2014 (2014 No 46).

Section 126(1)(c): amended, on 1 November 2007, by section 36(2) of the Companies Amendment Act 2006 (2006 No 56).

Section 126(1)(c): amended, on 29 May 2004, by section 3(2) of the Companies Amendment Act 2004 (2004 No 10).

Section 126(1)(c): amended, on 3 May 2001, by section 9 of the Companies Act 1993 Amendment Act 2001 (2001 No 18).

Section 126(1)(d): amended, on 1 November 2007, by section 36(3) of the Companies Amendment Act 2006 (2006 No 56).

Section 126(1)(d): amended, on 29 May 2004, by section 3(3) of the Companies Amendment Act 2004 (2004 No 10).

Section 126(1A): inserted, on 1 July 1994, by section 16 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

127 Meaning of board

In this Act, the terms board and board of directors, in relation to a company, mean—

(a)

directors of the company who number not less than the required quorum acting together as a board of directors; or

(b)

if the company has only 1 director, that director.

Powers of management

128 Management of company

(1)

The business and affairs of a company must be managed by, or under the direction or supervision of, the board of the company.

(2)

The board of a company has all the powers necessary for managing, and for directing and supervising the management of, the business and affairs of the company.

(3)

Subsections (1) and (2) are subject to any modifications, exceptions, or limitations contained in this Act or in the company’s constitution.

129 Major transactions

(1)

A company must not enter into a major transaction unless the transaction is—

(a)

approved by special resolution; or

(b)

contingent on approval by special resolution.

(2)

In this section,—

assets includes property of any kind, whether tangible or intangible

major transaction, in relation to a company, means:

(a)

the acquisition of, or an agreement to acquire, whether contingent or not, assets the value of which is more than half the value of the company’s assets before the acquisition; or

(b)

the disposition of, or an agreement to dispose of, whether contingent or not, assets of the company the value of which is more than half the value of the company’s assets before the disposition; or

(c)

a transaction that has or is likely to have the effect of the company acquiring rights or interests or incurring obligations or liabilities, including contingent liabilities, the value of which is more than half the value of the company’s assets before the transaction.

(2A)

Nothing in paragraph (b) or paragraph (c) of the definition of the term major transaction in subsection (2) applies by reason only of the company giving, or entering into an agreement to give, a charge secured over assets of the company the value of which is more than half the value of the company’s assets for the purpose of securing the repayment of money or the performance of an obligation.

(2B)

In assessing the value of any contingent liability for the purposes of paragraph (c) of the definition of major transaction in subsection (2), the directors—

(a)

must have regard to all circumstances that the directors know, or ought to know, affect, or may affect, the value of the contingent liability; and

(b)

may rely on estimates of the contingent liability that are reasonable in the circumstances; and

(c)

may take account of—

(i)

the likelihood of the contingency occurring; and

(ii)

any claim the company is entitled to make and can reasonably expect to be met to reduce or extinguish the contingent liability.

(3)

Nothing in this section applies to a major transaction entered into by a receiver appointed pursuant to an instrument creating a charge over all or substantially all of the property of a company.

Section 129(2) major transaction: replaced, on 1 July 1994, by section 17(1) of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

Section 129(2) major transaction paragraph (c): amended, on 15 April 2004, by section 8(1) of the Companies Amendment Act (No 2) 2004 (2004 No 24).

Section 129(2A): inserted, on 1 July 1994, by section 17(2) of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

Section 129(2A): amended, on 3 May 2001, by section 10 of the Companies Act 1993 Amendment Act 2001 (2001 No 18).

Section 129(2A): amended, on 30 June 1997, by section 10 of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

Section 129(2B): inserted, on 15 April 2004, by section 8(2) of the Companies Amendment Act (No 2) 2004 (2004 No 24).

130 Delegation of powers

(1)

Subject to any restrictions in the constitution of the company, the board of a company may delegate to a committee of directors, a director or employee of the company, or any other person, any 1 or more of its powers other than its powers under any of the sections of this Act set out in Schedule 2.

(2)

A board that delegates a power under subsection (1) is responsible for the exercise of the power by the delegate as if the power had been exercised by the board, unless the board—

(a)

believed on reasonable grounds at all times before the exercise of the power that the delegate would exercise the power in conformity with the duties imposed on directors of the company by this Act and the company’s constitution; and

(b)

has monitored, by means of reasonable methods properly used, the exercise of the power by the delegate.

Directors’ duties

131 Duty of directors to act in good faith and in best interests of company

(1)

Subject to this section, a director of a company, when exercising powers or performing duties, must act in good faith and in what the director believes to be the best interests of the company.

(2)

A director of a company that is a wholly-owned subsidiary may, when exercising powers or performing duties as a director, if expressly permitted to do so by the constitution of the company, act in a manner which he or she believes is in the best interests of that company’s holding company even though it may not be in the best interests of the company.

(3)

A director of a company that is a subsidiary (but not a wholly-owned subsidiary) may, when exercising powers or performing duties as a director, if expressly permitted to do so by the constitution of the company and with the prior agreement of the shareholders (other than its holding company), act in a manner which he or she believes is in the best interests of that company’s holding company even though it may not be in the best interests of the company.

(4)

A director of a company that is carrying out a joint venture between the shareholders may, when exercising powers or performing duties as a director in connection with the carrying out of the joint venture, if expressly permitted to do so by the constitution of the company, act in a manner which he or she believes is in the best interests of a shareholder or shareholders, even though it may not be in the best interests of the company.

Section 131(4): amended, on 30 June 1997, by section 11 of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

132 Exercise of powers in relation to employees

(1)

Nothing in section 131 limits the power of a director to make provision for the benefit of employees of the company in connection with the company ceasing to carry on the whole or part of its business.

(2)

In subsection (1),—

company includes a subsidiary of a company

employees includes former employees and the dependants of employees or former employees; but does not include an employee or former employee who is or was a director of the company.

133 Powers to be exercised for proper purpose

A director must exercise a power for a proper purpose.

134 Directors to comply with Act and constitution

A director of a company must not act, or agree to the company acting, in a manner that contravenes this Act or the constitution of the company.

135 Reckless trading

A director of a company must not—

(a)

agree to the business of the company being carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors; or

(b)

cause or allow the business of the company to be carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors.

136 Duty in relation to obligations

A director of a company must not agree to the company incurring an obligation unless the director believes at that time on reasonable grounds that the company will be able to perform the obligation when it is required to do so.

137 Director’s duty of care

A director of a company, when exercising powers or performing duties as a director, must exercise the care, diligence, and skill that a reasonable director would exercise in the same circumstances taking into account, but without limitation,—

(a)

the nature of the company; and

(b)

the nature of the decision; and

(c)

the position of the director and the nature of the responsibilities undertaken by him or her.

138 Use of information and advice

(1)

Subject to subsection (2), a director of a company, when exercising powers or performing duties as a director, may rely on reports, statements, and financial data and other information prepared or supplied, and on professional or expert advice given, by any of the following persons:

(a)

an employee of the company whom the director believes on reasonable grounds to be reliable and competent in relation to the matters concerned:

(b)

a professional adviser or expert in relation to matters which the director believes on reasonable grounds to be within the person’s professional or expert competence:

(c)

any other director or committee of directors upon which the director did not serve in relation to matters within the director’s or committee’s designated authority.

(2)

Subsection (1) applies to a director only if the director—

(a)

acts in good faith; and

(b)

makes proper inquiry where the need for inquiry is indicated by the circumstances; and

(c)

has no knowledge that such reliance is unwarranted.

138A Offence for serious breach of director’s duty to act in good faith and in best interests of company

(1)

A director of a company commits an offence if the director exercises powers or performs duties as a director of the company—

(a)

in bad faith towards the company and believing that the conduct is not in the best interests of the company; and

(b)

knowing that the conduct will cause serious loss to the company.

(2)

However, a director does not commit an offence under subsection (1) if the power or duty in question is exercised or performed under any of section 131(2) to (4) or is a power exercised under section 132.

(3)

A person who commits an offence under this section is liable on conviction to the penalties set out in section 373(4).

Section 138A: inserted, on 3 July 2014, by section 4 of the Companies Amendment Act 2014 (2014 No 46).

Transactions involving self-interest

139 Meaning of interested

(1)

Subject to subsection (2), for the purposes of this Act, a director of a company is interested in a transaction to which the company is a party if, and only if, the director—

(a)

is a party to, or will or may derive a material financial benefit from, the transaction; or

(b)

has a material financial interest in another party to the transaction; or

(c)

is a director, officer, or trustee of another party to, or person who will or may derive a material financial benefit from, the transaction, not being a party or person that is—

(i)

the company’s holding company being a holding company of which the company is a wholly-owned subsidiary; or

(ii)

a wholly-owned subsidiary of the company; or

(iii)

a wholly-owned subsidiary of a holding company of which the company is also a wholly-owned subsidiary; or

(d)

is the parent, child, spouse, civil union partner, or de facto partner of another party to, or person who will or may derive a material financial benefit from, the transaction; or

(e)

is otherwise directly or indirectly materially interested in the transaction.

(2)

For the purposes of this Act, a director of a company is not interested in a transaction to which the company is a party if the transaction comprises only the giving by the company of security to a third party which has no connection with the director, at the request of the third party, in respect of a debt or obligation of the company for which the director or another person has personally assumed responsibility in whole or in part under a guarantee, indemnity, or by the deposit of a security.

Section 139(1)(d): amended, on 26 April 2005, by section 7 of the Relationships (Statutory References) Act 2005 (2005 No 3).

140 Disclosure of interest

(1)

A director of a company must, forthwith after becoming aware of the fact that he or she is interested in a transaction or proposed transaction with the company, cause to be entered in the interests register, and, if the company has more than 1 director, disclose to the board of the company—

(a)

if the monetary value of the director’s interest is able to be quantified, the nature and monetary value of that interest; or

(b)

if the monetary value of the director’s interest cannot be quantified, the nature and extent of that interest.

(1A)

A director of a company is not required to comply with subsection (1) if—

(a)

the transaction or proposed transaction is between the director and the company; and

(b)

the transaction or proposed transaction is or is to be entered into in the ordinary course of the company’s business and on usual terms and conditions.

(2)

For the purposes of subsection (1), a general notice entered in the interests register and, if the company has more than 1 director, disclosed to the board to the effect that a director is a shareholder, director, officer or trustee of another named company or other person and is to be regarded as interested in any transaction which may, after the date of the entry or disclosure, be entered into with that company or person, is a sufficient disclosure of interest in relation to that transaction.

(3)

A failure by a director to comply with subsection (1) does not affect the validity of a transaction entered into by the company or the director.

(4)

Every director who fails to comply with subsection (1) commits an offence and is liable on conviction to the penalty set out in section 373(2).

Compare: 1955 No 63 s 199

Section 140(1A): inserted, on 30 June 1997, by section 12 of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

Section 140(2): amended, on 3 May 2001, by section 11 of the Companies Act 1993 Amendment Act 2001 (2001 No 18).

141 Avoidance of transactions

(1)

A transaction entered into by the company in which a director of the company is interested may be avoided by the company at any time before the expiration of 3 months after the transaction is disclosed to all the shareholders (whether by means of the company’s annual report or otherwise).

(2)

A transaction cannot be avoided if the company receives fair value under it.

(3)

For the purposes of subsection (2), the question whether a company receives fair value under a transaction is to be determined on the basis of the information known to the company and to the interested director at the time the transaction is entered into.

(4)

If a transaction is entered into by the company in the ordinary course of its business and on usual terms and conditions, the company is presumed to receive fair value under the transaction.

(5)

For the purposes of this section,—

(a)

a person seeking to uphold a transaction and who knew or ought to have known of the director’s interest at the time the transaction was entered into has the onus of establishing fair value; and

(b)

in any other case, the company has the onus of establishing that it did not receive fair value.

(6)

A transaction in which a director is interested can only be avoided on the ground of the director’s interest in accordance with this section or the company’s constitution.

142 Effect on third parties

The avoidance of a transaction under section 141 does not affect the title or interest of a person in or to property which that person has acquired if the property was acquired—

(a)

from a person other than the company; and

(b)

for valuable consideration; and

(c)

without knowledge of the circumstances of the transaction under which the person referred to in paragraph (a) acquired the property from the company.

143 Application of sections 140 and 141 in certain cases

Nothing in section 140 and section 141 applies in relation to—

(a)

remuneration or any other benefit given to a director in accordance with section 161; or

(b)

an indemnity given or insurance provided in accordance with section 162.

144 Interested director may vote

Subject to the constitution of the company, a director of a company who is interested in a transaction entered into, or to be entered into, by the company, may—

(a)

vote on a matter relating to the transaction; and

(b)

attend a meeting of directors at which a matter relating to the transaction arises and be included among the directors present at the meeting for the purpose of a quorum; and

(c)

sign a document relating to the transaction on behalf of the company; and

(d)

do any other thing in his or her capacity as a director in relation to the transaction—

as if the director were not interested in the transaction.

145 Use of company information

(1)

A director of a company who has information in his or her capacity as a director or employee of the company, being information that would not otherwise be available to him or her, must not disclose that information to any person, or make use of or act on the information, except—

(a)

for the purposes of the company; or

(b)

as required by law; or

(c)

in accordance with subsection (2) or subsection (3); or

(d)

in complying with section 140.

(2)

A director of a company may, unless prohibited by the board, disclose information to—

(a)

a person whose interests the director represents; or

(b)

a person in accordance with whose directions or instructions the director may be required or is accustomed to act in relation to the director’s powers and duties and, if the director discloses the information, the name of the person to whom it is disclosed must be entered in the interests register.

(3)

A director of a company may disclose, make use of, or act on the information if—

(a)

particulars of the disclosure, use, or the act in question are entered in the interests register; and

(b)

the director is first authorised to do so by the board; and

(c)

the disclosure, use, or act in question will not, or will not be likely to, prejudice the company.

146 Meaning of relevant interest

(1)

For the purposes of section 148, a director of a company has a relevant interest in a share issued by a company (whether or not the director is registered in the share register as the holder of it) if the director—

(a)

is a beneficial owner of the share; or

(b)

has the power to exercise any right to vote attached to the share; or

(c)

has the power to control the exercise of any right to vote attached to the share; or

(d)

has the power to acquire or dispose of the share; or

(e)

has the power to control the acquisition or disposition of the share by another person; or

(f)

under, or by virtue of, any trust, agreement, arrangement or understanding relating to the share (whether or not that person is a party to it)—

(i)

may at any time have the power to exercise any right to vote attached to the share; or

(ii)

may at any time have the power to control the exercise of any right to vote attached to the share; or

(iii)

may at any time have the power to acquire or dispose of, the share; or

(iv)

may at any time have the power to control the acquisition or disposition of the share by another person.

(2)

Where a person would, if that person were a director of the company, have a relevant interest in a share by virtue of subsection (1) and—

(a)

that person or its directors are accustomed or under an obligation, whether legally enforceable or not, to act in accordance with the directions, instructions, or wishes of a director of the company in relation to—

(i)

the exercise of the right to vote attached to the share; or

(ii)

the control of the exercise of any right to vote attached to the share; or

(iii)

the acquisition or disposition of the share; or

(iv)

the exercise of the power to control the acquisition or disposition of the share by another person; or

(b)

a director of the company has the power to exercise the right to vote attached to 20% or more of the shares of that person; or

(c)

a director of the company has the power to control the exercise of the right to vote attached to 20% or more of the shares of that person; or

(d)

a director of the company has the power to acquire or dispose of 20% or more of the shares of that person; or

(e)

a director of the company has the power to control the acquisition or disposition of 20% or more of the shares of that person,—

that director has a relevant interest in the share.

(3)

A person who has, or may have, a power referred to in any of paragraphs (b) to (f) of subsection (1), has a relevant interest in a share regardless of whether the power—

(a)

is expressed or implied:

(b)

is direct or indirect:

(c)

is legally enforceable or not:

(d)

is related to a particular share or not:

(e)

is subject to restraint or restriction or is capable of being made subject to restraint or restriction:

(f)

is exercisable presently or in the future:

(g)

is exercisable only on the fulfilment of a condition:

(h)

is exercisable alone or jointly with another person or persons.

(4)

A power referred to in subsection (1) exercisable jointly with another person or persons is deemed to be exercisable by either or any of those persons.

(5)

A reference to a power includes a reference to a power that arises from, or is capable of being exercised as the result of, a breach of any trust, agreement, arrangement, or understanding, or any of them, whether or not it is legally enforceable.

Section 146(2): amended, on 30 June 1997, by section 13 of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

147 Relevant interests to be disregarded in certain cases

(1)

For the purposes of section 148, no account shall be taken of a relevant interest of a person in a share if—

(a)

the ordinary business of the person who has the relevant interest consists of, or includes, the lending of money or the provision of financial services, or both, and that person has the relevant interest only as security given for the purposes of a transaction entered into in the ordinary course of the business of that person; or

(b)

that person is authorised to undertake trading activities on a licensed market and has the relevant interest by reason only of acting for another person to acquire or dispose of that share on behalf of the other person in the ordinary course of business of carrying out those trading activities; or

(c)

that person has the relevant interest solely by reason of being appointed as a proxy to vote at a particular meeting of members, or of a class of members, of the company and the instrument of that person’s appointment is produced before the start of the meeting in accordance with clause 6(4) of Schedule 1 or by a time specified in the company’s constitution, as the case may be; or

(d)

that person—

(i)

is a trustee corporation or a nominee company; and

(ii)

has the relevant interest by reason only of acting for another person in the ordinary course of business of that trustee corporation or nominee company; or

(e)

the person has the relevant interest by reason only that the person is a bare trustee of a trust to which the share is subject.

(2)

For the purposes of subsection (1)(e), a trustee may be a bare trustee notwithstanding that he or she is entitled as a trustee to be remunerated out of the income or property of the trust.

Section 147(1)(b): replaced, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

148 Disclosure of share dealing by directors

(1)

A director of a company that has become registered under this Act in accordance with the Companies Reregistration Act 1993 and who has a relevant interest in any shares issued by the company must, forthwith after the reregistration of the company,—

(a)

disclose to the board the number and class of shares in which the relevant interest is held and the nature of the relevant interest; and

(b)

ensure that the particulars disclosed to the board under paragraph (a) are entered in the interests register.

(2)

A director of a company who acquires or disposes of a relevant interest in shares issued by the company must, forthwith after the acquisition or disposition,—

(a)

disclose to the board—

(i)

the number and class of shares in which the relevant interest has been acquired or the number and class of shares in which the relevant interest was disposed of, as the case may be; and

(ii)

the nature of the relevant interest; and

(iii)

the consideration paid or received; and

(iv)

the date of the acquisition or disposition; and

(b)

ensure that the particulars disclosed to the board under paragraph (a) are entered in the interests register.

149 Restrictions on share dealing by directors

(1)

If a director of a company has information in his or her capacity as a director or employee of the company or a related company, being information that would not otherwise be available to him or her, but which is information material to an assessment of the value of shares or other financial products issued by the company or a related company, the director may acquire or dispose of those shares or financial products only if,—

(a)

in the case of an acquisition, the consideration given for the acquisition is not less than the fair value of the shares or financial products; or

(b)

in the case of a disposition, the consideration received for the disposition is not more than the fair value of the shares or financial products.

(2)

For the purposes of subsection (1), the fair value of shares or financial products is to be determined on the basis of all information known to the director or publicly available at the time.

(3)

Subsection (1) does not apply in relation to a share or financial product that is acquired or disposed of by a director only as a nominee for the company or a related company.

(4)

Where a director acquires shares or financial products in contravention of subsection (1)(a), the director is liable to the person from whom the shares or financial products were acquired for the amount by which the fair value of the shares or financial products exceeds the amount paid by the director.

(5)

Where a director disposes of shares or financial products in contravention of subsection (1)(b), the director is liable to the person to whom the shares or financial products were disposed of for the amount by which the consideration received by the director exceeds the fair value of the shares or financial products.

(6)

Nothing in this section applies to financial products that are quoted on a licensed market.

Section 149(1): amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 149(1)(a): amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 149(1)(b): amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 149(2): amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 149(3): amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 149(4): amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 149(5): amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 149(6): replaced, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Appointment and removal of directors

150 Number of directors

A company must have 1 or more directors (see section 10(d)).

Section 150: amended, on 1 May 2015, by section 12 of the Companies Amendment Act 2014 (2014 No 46).

151 Qualifications of directors

(1)

A natural person who is not disqualified by subsection (2) may be appointed as a director of a company.

(2)

The following persons are disqualified from being appointed or holding office as a director of a company:

(a)

a person who is under 18 years of age:

(b)

a person who is an undischarged bankrupt:

(ba)
[Repealed]

(c)
[Repealed]

(d)
[Repealed]

(e)

a person who is prohibited from being a director or promoter of or being concerned or taking part in the management of a company under section 382, 383, 385, or 385AA:

(eaa)

a person who is prohibited from being a general partner or promoter of, or being concerned or taking part in the management of, a limited partnership under section 103A, 103B, 103D, or 103E of the Limited Partnerships Act 2008:

(ea)

a person who is prohibited from being a director or promoter of, or being concerned or taking part in the management of, an incorporated or unincorporated body under the Financial Markets Conduct Act 2013 or the Takeovers Act 1993:

(eab)

in the case of a company that is an employer, a person who is prohibited from being an officer of an employer under sections 142M and 142N(1)(b) of the Employment Relations Act 2000:

(eb)

a person who is prohibited from 1 or more of the following under an order made, or a notice given, under a law of a prescribed country, State, or territory outside New Zealand:

(i)

being a director of an overseas company:

(ii)

being a promoter of an overseas company:

(iii)

being concerned or taking part in the management of an overseas company:

(ec)

a person who is prohibited from 1 or more of the following under an order made, or a notice given, under a law of a prescribed country, State, or territory outside New Zealand:

(i)

being a general partner of an overseas limited partnership:

(ii)

being a promoter of an overseas limited partnership:

(iii)

being concerned or taking part in the management of an overseas limited partnership:

(f)

a person who is subject to a property order made under section 30 or section 31 of the Protection of Personal and Property Rights Act 1988:

(g)

in relation to any particular company, a person who does not comply with any qualifications for directors contained in the constitution of that company.

(3)

A person that is not a natural person cannot be a director of a company.

(4)

A person who is disqualified from being a director but who acts as a director is a director for the purposes of a provision of this Act that imposes a duty or an obligation on a director of a company.

Section 151(2)(ba): repealed, on 5 December 2013, by section 7 of the Companies Amendment Act 2013 (2013 No 111).

Section 151(2)(c): repealed, on 5 December 2013, by section 7 of the Companies Amendment Act 2013 (2013 No 111).

Section 151(2)(d): repealed, on 5 December 2013, by section 7 of the Companies Amendment Act 2013 (2013 No 111).

Section 151(2)(e): amended, on 1 May 2015, by section 58 of the Companies Amendment Act 2014 (2014 No 46).

Section 151(2)(eaa): inserted, on 1 September 2014, by section 58 of the Companies Amendment Act 2014 (2014 No 46).

Section 151(2)(ea): inserted, on 25 October 2006, by section 25 of the Securities Amendment Act 2006 (2006 No 46).

Section 151(2)(ea): amended, on 1 December 2014, by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

Section 151(2)(eab): inserted, on 1 April 2016, by section 39 of the Employment Relations Amendment Act 2016 (2016 No 9).

Section 151(2)(eb): inserted, on 18 June 2007, by section 5(1) of the Companies Amendment Act (No 2) 2006 (2006 No 62).

Section 151(2)(ec): inserted, on 1 September 2014, by section 58 of the Companies Amendment Act 2014 (2014 No 46).

152 Director’s consent required

A person must not be appointed a director of a company unless he or she has consented in writing to be a director and certified that he or she is not disqualified from being appointed or holding office as a director of a company.

Section 152: amended, on 1 July 1994, by section 19 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

153 Appointment of first and subsequent directors

(1)

A person named as a director in an application for registration or in an amalgamation proposal holds office as a director from the date of registration or the date the amalgamation proposal is effective, as the case may be, until that person ceases to hold office as a director in accordance with this Act.

(2)

All subsequent directors of a company must, unless the constitution of the company otherwise provides, be appointed by ordinary resolution.

154 Court may appoint directors

(1)

If—

(a)

there are no directors of a company, or the number of directors is less than the quorum required for a meeting of the board; and

(b)

it is not possible or practicable to appoint directors in accordance with the company’s constitution,—

a shareholder or creditor of the company may apply to the court to appoint 1 or more persons as directors of the company, and the court may make an appointment if it considers that it is in the interests of the company to do so.

(2)

An appointment may be made on such terms and conditions as the court thinks fit.

155 Appointment of directors to be voted on individually

(1)

Subject to the constitution of the company, the shareholders of a company may vote on a resolution to appoint a director of the company only if—

(a)

the resolution is for the appointment of 1 director; or

(b)

the resolution is a single resolution for the appointment of 2 or more persons as directors of the company and a separate resolution that it be so voted on has first been passed without a vote being cast against it.

(2)

A resolution moved in contravention of subsection (1) is void even though the moving of it was not objected to at the time.

(3)

Subsection (2) does not limit the operation of section 158.

(4)

No provision for the automatic reappointment of retiring directors in default of another appointment applies on the passing of a resolution in contravention of subsection (1).

(5)

Nothing in this section prevents the election of 2 or more directors by ballot or poll.

156 Removal of directors

(1)

Subject to the constitution of a company, a director of the company may be removed from office by ordinary resolution passed at a meeting called for the purpose or for purposes that include the removal of the director.

(2)

The notice of meeting must state that the purpose or a purpose of the meeting is the removal of the director.

157 Director ceasing to hold office

(1)

The office of director of a company is vacated if the person holding that office—

(a)

resigns in accordance with subsection (2); or

(b)

is removed from office in accordance with this Act or the constitution of the company; or

(c)

becomes disqualified from being a director pursuant to section 151; or

(d)

dies; or

(e)

otherwise vacates office in accordance with the constitution of the company.

(2)

A director of a company may resign office by signing a written notice of resignation and delivering it to the address for service of the company. The notice is effective when it is received at that address or at a later time specified in the notice.

(3)

Notwithstanding the vacation of office, a person who held office as a director remains liable under the provisions of this Act that impose liabilities on directors in relation to acts and omissions and decisions made while that person was a director.

158 Validity of director’s acts

The acts of a person as a director are valid even though—

(a)

the person’s appointment was defective; or

(b)

the person is not qualified for appointment.

159 Notice of change of directors

(1)

The board of a company must ensure that notice in the prescribed form of—

(a)

a change in the directors of a company, whether as the result of a director ceasing to hold office or the appointment of a new director, or both; or

(b)

a change in the name or the residential address of a director of a company—

is delivered to the Registrar for registration.

(2)

A notice under subsection (1) must—

(a)

specify the date of the change; and

(b)

include, in relation to every person who is a director of the company from the date of the notice, the information required by section 12(2)(b)(i) to (iii); and

(c)

in the case of the appointment of a new director, have attached the form of consent and certificate required pursuant to section 152; and

(d)

be delivered to the Registrar within 20 working days of—

(i)

the change occurring, in the case of the appointment or resignation of a director; or

(ii)

the company first becoming aware of the change, in the case of the death of a director or a change in the name or residential address of a director.

(3)

If the board of a company fails to comply with this section, every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

Section 159(2)(b): replaced, on 1 May 2015, by section 13 of the Companies Amendment Act 2014 (2014 No 46).

Miscellaneous provisions relating to directors

160 Proceedings of board

Subject to the constitution of a company, the provisions set out in Schedule 3 govern the proceedings of the board of a company.

161 Remuneration and other benefits

(1)

The board of a company may, subject to any restrictions contained in the constitution of the company, authorise—

(a)

the payment of remuneration or the provision of other benefits by the company to a director for services as a director or in any other capacity:

(b)

the payment by the company to a director or former director of compensation for loss of office:

(c)

the making of loans by the company to a director:

(d)

the giving of guarantees by the company for debts incurred by a director:

(e)

the entering into of a contract to do any of the things set out in paragraphs (a), (b), (c), and (d),—

if the board is satisfied that to do so is fair to the company.

(2)

The board must ensure that forthwith after authorising the making of the payment or the provision of the benefit or the making of the loan or the giving of the guarantee or the entering into of the contract, as the case may be, particulars of the payment or benefit or loan or guarantee or contract are entered in the interests register.

(3)

The payment of remuneration or the giving of any other benefit to a director in accordance with a contract authorised under subsection (1) need not be separately authorised under that subsection.

(4)

Directors who vote in favour of authorising a payment, benefit, loan, guarantee, or contract under subsection (1) must sign a certificate stating that, in their opinion, the making of the payment or the provision of the benefit, or the making of the loan, or the giving of the guarantee, or the entering into of the contract is fair to the company, and the grounds for that opinion.

(5)

Where a payment is made or other benefit provided or a guarantee is given to which subsection (1) applies and either—

(a)

the provisions of subsections (1) and (4) have not been complied with; or

(b)

reasonable grounds did not exist for the opinion set out in the certificate given under subsection (4),—

the director or former director to whom the payment is made or the benefit is provided, or in respect of whom the guarantee is given, as the case may be, is personally liable to the company for the amount of the payment, or the monetary value of the benefit, or any amount paid by the company under the guarantee, except to the extent to which he or she proves that the payment or benefit or guarantee was fair to the company at the time it was made, provided, or given.

(6)

Where a loan is made to which subsection (1) applies and either—

(a)

the provisions of subsections (1) and (4) have not been complied with; or

(b)

reasonable grounds did not exist for the opinion set out in the certificate given under subsection (4),—

the loan becomes immediately repayable to the company by the director, notwithstanding the terms of any agreement relating to the giving of the loan, except to the extent to which he or she proves that the loan was fair to the company at the time it was given.

162 Indemnity and insurance

(1)

Except as provided in this section, a company must not indemnify, or directly or indirectly effect insurance for, a director or employee of the company or a related company in respect of—

(a)

liability for any act or omission in his or her capacity as a director or employee; or

(b)

costs incurred by that director or employee in defending or settling any claim or proceeding relating to any such liability.

(2)

An indemnity given in breach of this section is void.

(3)

A company may, if expressly authorised by its constitution, indemnify a director or employee of the company or a related company for any costs incurred by him or her in any proceeding—

(a)

that relates to liability for any act or omission in his or her capacity as a director or employee; and

(b)

in which judgment is given in his or her favour, or in which he or she is acquitted, or which is discontinued.

(4)

A company may, if expressly authorised by its constitution, indemnify a director or employee of the company or a related company in respect of—

(a)

liability to any person other than the company or a related company for any act or omission in his or her capacity as a director or employee; or

(b)

costs incurred by that director or employee in defending or settling any claim or proceeding relating to any such liability,—

not being criminal liability or liability in respect of a breach, in the case of a director, of the duty specified in section 131 or, in the case of an employee, of any fiduciary duty owed to the company or related company.

(5)

A company may, if expressly authorised by its constitution and with the prior approval of the board, effect insurance for a director or employee of the company or a related company in respect of—

(a)

liability, not being criminal liability, for any act or omission in his or her capacity as a director or employee; or

(b)

costs incurred by that director or employee in defending or settling any claim or proceeding relating to any such liability; or

(c)

costs incurred by that director or employee in defending any criminal proceedings—

(i)

that have been brought against the director or employee in relation to any act or omission in his or her capacity as a director or employee; and

(ii)

in which he or she is acquitted.

(6)

The directors who vote in favour of authorising the effecting of insurance under subsection (5) must sign a certificate stating that, in their opinion, the cost of effecting the insurance is fair to the company.

(7)

The board of a company must ensure that particulars of any indemnity given to, or insurance effected for, any director or employee of the company or a related company are forthwith entered in the interests register.

(8)

Where insurance is effected for a director or employee of a company or a related company and—

(a)

the provisions of either subsection (5) or subsection (6) have not been complied with; or

(b)

reasonable grounds did not exist for the opinion set out in the certificate given under subsection (6),—

the director or employee is personally liable to the company for the cost of effecting the insurance except to the extent that he or she proves that it was fair to the company at the time the insurance was effected.

(9)

In this section,—

director includes a former director

effect insurance includes pay, whether directly or indirectly, the costs of the insurance

employee includes a former employee

indemnify includes relieve or excuse from liability, whether before or after the liability arises; and indemnity has a corresponding meaning.

Section 162(5)(c): replaced, on 3 June 1998, by section 5 of the Companies Amendment Act 1998 (1998 No 31).

Part 9 Enforcement

163 Interpretation

In this Part, unless the context otherwise requires, the terms entitled person, former shareholder, and shareholder include a reference to a personal representative of an entitled person, former shareholder, or shareholder and a person to whom shares of any of those persons have passed by operation of law.

Injunctions

164 Injunctions

(1)

The court may, on an application under this section, make an order restraining a company that, or a director of a company who, proposes to engage in conduct that would contravene the constitution of the company or this Act from engaging in that conduct.

(2)

An application may be made by—

(a)

the company; or

(b)

a director or shareholder of the company; or

(c)

an entitled person.

(3)

If the court makes an order under subsection (1), it may also grant such consequential relief as it thinks fit.

(4)

An order may not be made under this section in relation to conduct or a course of conduct that has been completed.

(5)

The court may, at any time before the final determination of an application under subsection (1), make, as an interim order, any order that it is empowered to make under that subsection.

Section 164(1): amended, on 1 April 2014, by section 126 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Derivative actions

165 Derivative actions

(1)

Subject to subsection (3), the court may, on the application of a shareholder or director of a company, grant leave to that shareholder or director to—

(a)

bring proceedings in the name and on behalf of the company or any related company; or

(b)

intervene in proceedings to which the company or any related company is a party for the purpose of continuing, defending, or discontinuing the proceedings on behalf of the company or related company, as the case may be.

(2)

Without limiting subsection (1), in determining whether to grant leave under that subsection, the court shall have regard to—

(a)

the likelihood of the proceedings succeeding:

(b)

the costs of the proceedings in relation to the relief likely to be obtained:

(c)

any action already taken by the company or related company to obtain relief:

(d)

the interests of the company or related company in the proceedings being commenced, continued, defended, or discontinued, as the case may be.

(3)

Leave to bring proceedings or intervene in proceedings may be granted under subsection (1), only if the court is satisfied that either—

(a)

the company or related company does not intend to bring, diligently continue or defend, or discontinue the proceedings, as the case may be; or

(b)

it is in the interests of the company or related company that the conduct of the proceedings should not be left to the directors or to the determination of the shareholders as a whole.

(4)

Notice of the application must be served on the company or related company.

(5)

The company or related company—

(a)

may appear and be heard; and

(b)

must inform the court, whether or not it intends to bring, continue, defend, or discontinue the proceedings, as the case may be.

(6)

Except as provided in this section, a shareholder is not entitled to bring or intervene in any proceedings in the name of, or on behalf of, a company or a related company.

166 Costs of derivative action to be met by company

The court shall, on the application of the shareholder or director to whom leave was granted under section 165 to bring or intervene in the proceedings, order that the whole or part of the reasonable costs of bringing or intervening in the proceedings, including any costs relating to any settlement, compromise, or discontinuance approved under section 168, must be met by the company unless the court considers that it would be unjust or inequitable for the company to bear those costs.

167 Powers of court where leave granted

The court may, at any time, make any order it thinks fit in relation to proceedings brought by a shareholder or a director or in which a shareholder or director intervenes, as the case may be, with leave of the court under section 165, and without limiting the generality of this section may—

(a)

make an order authorising the shareholder or any other person to control the conduct of the proceedings:

(b)

give directions for the conduct of the proceedings:

(c)

make an order requiring the company or the directors to provide information or assistance in relation to the proceedings:

(d)

make an order directing that any amount ordered to be paid by a defendant in the proceedings must be paid, in whole or part, to former and present shareholders of the company or related company instead of to the company or the related company.

168 Compromise, settlement, or withdrawal of derivative action

No proceedings brought by a shareholder or a director or in which a shareholder or a director intervenes, as the case may be, with leave of the court under section 165, may be settled or compromised or discontinued without the approval of the court.

Personal actions by shareholders

169 Personal actions by shareholders against directors

(1)

A shareholder or former shareholder may bring an action against a director for breach of a duty owed to him or her as a shareholder.

(2)

An action may not be brought under subsection (1) to recover any loss in the form of a reduction in the value of shares in the company or a failure of the shares to increase in value by reason only of a loss suffered, or a gain forgone, by the company.

(3)

Without limiting subsection (1), the duties of directors set out in—

(a)

section 90 (which relates to the duty to supervise the share register); and

(b)

section 140 (which relates to the duty to disclose interests); and

(c)

section 148 (which relates to the duty to disclose share dealings)—

are duties owed to shareholders, while the duties of directors set out in—

(d)

section 131 (which relates to the duty of directors to act in good faith and in the best interests of the company); and

(e)

section 133 (which relates to the duty to exercise powers for a proper purpose); and

(f)

section 135 (which relates to reckless trading); and

(g)

section 136 (which relates to the duty not to agree to a company incurring certain obligations); and

(h)

section 137 (which relates to a director’s duty of care); and

(i)

section 145 (which relates to the use of company information)—

are duties owed to the company and not to shareholders.

170 Actions by shareholders to require directors to act

Notwithstanding section 169, the court may, on the application of a shareholder of a company, if it is satisfied it is just and equitable to do so, make an order requiring a director of the company to take any action that is required to be taken by the directors under the constitution of the company or this Act and, on making the order, the court may grant such other consequential relief as it thinks fit.

Section 170: amended, on 1 April 2014, by section 126 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

171 Personal actions by shareholders against company

A shareholder of a company may bring an action against the company for breach of a duty owed by the company to him or her as a shareholder.

172 Actions by shareholders to require company to act

Notwithstanding section 171, the court may, on the application of a shareholder of a company, if it is satisfied that it is just and equitable to do so, make an order requiring the board of the company to take any action that is required to be taken by the constitution of the company or this Act and, on making the order, the court may grant such other consequential relief as it thinks fit.

Section 172: amended, on 1 April 2014, by section 126 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

173 Representative actions

Where a shareholder of a company brings proceedings against the company or a director, and other shareholders have the same or substantially the same interest in relation to the subject matter of the proceedings, the court may appoint that shareholder to represent all or some of the shareholders having the same or substantially the same interest, and may, for that purpose, make such order as it thinks fit including, without limiting the generality of this section, an order—

(a)

as to the control and conduct of the proceedings:

(b)

as to the costs of the proceedings:

(c)

directing the distribution of any amount ordered to be paid by a defendant in the proceedings among the shareholders represented.

174 Prejudiced shareholders

(1)

A shareholder or former shareholder of a company, or any other entitled person, who considers that the affairs of a company have been, or are being, or are likely to be, conducted in a manner that is, or any act or acts of the company have been, or are, or are likely to be, oppressive, unfairly discriminatory, or unfairly prejudicial to him or her in that capacity or in any other capacity, may apply to the court for an order under this section.

(2)

If, on an application under this section, the court considers that it is just and equitable to do so, it may make such order as it thinks fit including, without limiting the generality of this subsection, an order—

(a)

requiring the company or any other person to acquire the shareholder’s shares; or

(b)

requiring the company or any other person to pay compensation to a person; or

(c)

regulating the future conduct of the company’s affairs; or

(d)

altering or adding to the company’s constitution; or

(e)

appointing a receiver of the company; or

(f)

directing the rectification of the records of the company; or

(g)

putting the company into liquidation; or

(h)

setting aside action taken by the company or the board in breach of this Act or the constitution of the company.

(3)

No order may be made against the company or any other person under subsection (2) unless the company or that person is a party to the proceedings in which the application is made.

175 Certain conduct deemed prejudicial

(1)

Failure to comply with any of the following sections of this Act is conduct which is unfairly prejudicial for the purposes of section 174:

(a)

section 45 (which relates to pre-emptive rights to the issue of shares):

(b)

section 47 (which relates to the consideration for which shares are issued):

(c)

section 53 (which relates to dividends):

(d)

section 60 (which relates to offers by a company to acquire its own shares):

(e)

section 61 (which relates to special offers to acquire shares):

(f)

section 63 (which relates to stock exchange acquisitions subject to prior notice to shareholders):

(g)

section 65 (which relates to stock exchange acquisitions not subject to prior notice to shareholders):

(h)

section 76 (which relates to the provision of financial assistance by a company to acquire its own shares):

(i)

section 78 (which relates to special financial assistance):

(j)

section 80 (which relates to financial assistance not exceeding 5% of shareholders’ funds):

(k)

section 117 (which relates to the alteration of shareholder rights):

(l)

section 129 (which relates to major transactions).

(2)

The signing by the directors of a company of a certificate required by this Act without reasonable grounds existing for an opinion set out in it is conduct that is unfairly prejudicial for the purposes of section 174.

176 Alteration to constitution

(1)

Notwithstanding anything in this Act, but subject to the order, where the court makes an order under section 174 altering or adding to the constitution of a company, the constitution must not, to the extent that it has been altered or added to by the court, again be altered or added to without the leave of the court.

(2)

Any alteration or addition to the constitution of a company made by an order under section 174 has the same effect as if it had been made by the shareholders of the company pursuant to section 32 and the provisions of this Act shall apply to the constitution as altered or added to.

(3)

Within 10 working days of the making of an order under section 174 altering or adding to the constitution of a company, the board of the company must ensure that a copy of the order and the constitution as altered or added to is delivered to the Registrar for registration.

(4)

If the board of a company fails to comply with subsection (3), every director of the company commits an offence and is liable, on conviction, to the penalty set out in section 374(2).

Ratification

177 Ratification of certain actions of directors

(1)

The purported exercise by a director or the board of a company of a power vested in the shareholders or any other person may be ratified or approved by those shareholders or that person in the same manner in which the power may be exercised.

(2)

The purported exercise of a power that is ratified under subsection (1) is deemed to be, and always to have been, a proper and valid exercise of that power.

(3)

The ratification or approval under this section of the purported exercise of a power by a director or the board does not prevent the court from exercising a power which might, apart from the ratification or approval, be exercised in relation to the action of the director or the board.

(4)

Nothing in this section limits or affects any rule of law relating to the ratification or approval by the shareholders or any other person of any act or omission of a director or the board of a company.

Inspection of records

178 Information for shareholders

(1)

A shareholder may at any time make a written request to a company for information held by the company.

(2)

The request must specify the information sought in sufficient detail to enable it to be identified.

(3)

Within 10 working days of receiving a request under subsection (1), the company must either—

(a)

provide the information; or

(b)

agree to provide the information within a specified period; or

(c)

agree to provide the information within a specified period if the shareholder pays a reasonable charge to the company (which must be specified and explained) to meet the cost of providing the information; or

(d)

refuse to provide the information specifying the reasons for the refusal.

(4)

Without limiting the reasons for which a company may refuse to provide information under this section, a company may refuse to provide information if—

(a)

the disclosure of the information would or would be likely to prejudice the commercial position of the company; or

(b)

the disclosure of the information would or would be likely to prejudice the commercial position of any other person, whether or not that person supplied the information to the company; or

(c)

the request for the information is frivolous or vexatious.

(5)

If the company requires the shareholder to pay a charge for the information, the shareholder may withdraw the request, and is deemed to have done so unless, within 10 working days of receiving notification of the charge, the shareholder informs the company—

(a)

that the shareholder will pay the charge; or

(b)

that the shareholder considers the charge to be unreasonable.

(6)

The court may, on the application of a person who has made a request for information, if it is satisfied that—

(a)

the period specified for providing the information is unreasonable; or

(b)

the charge set by the company is unreasonable,—

as the case may be, make an order requiring the company to supply the information within such time or on payment of such charge as the court thinks fit.

(7)

The court may, on the application of a person who has made a request for information, if it is satisfied that—

(a)

the company does not have sufficient reason to refuse to supply the information; or

(b)

the company has sufficient reason to refuse to supply the information but that other reasons exist that outweigh the refusal,—

make an order requiring the company to supply the information.

(8)

Where the court makes an order under subsection (7), it may specify the use that may be made of the information and the persons to whom it may be disclosed.

(9)

On an application for an order under this section, the court may make such order for the payment of costs as it thinks fit.

179 Investigation of records

(1)

The court may, on the application of a shareholder or creditor of a company, make an order authorising a person named in the order at a time specified in the order, to inspect and to make copies of, or take extracts from, the records or other documents of the company, or such of the records or documents of the company as are specified in the order, and may make such ancillary order as it thinks fit, including an order that the accounts of the company be audited by that person.

(2)

The court may make an order under subsection (1) only if it is satisfied that—

(a)

in making the application, the shareholder or creditor is acting in good faith and that the inspection is proposed to be made for a proper purpose; and

(b)

the person to be appointed is a proper person for the task.

(3)

A person appointed by the court under subsection (1) must diligently carry out the inspection and, having done so, must make a full report to the court.

(4)

On receiving the report of an inspector, the court may make such order in relation to the disclosure and use that may be made of records and information obtained as it thinks fit.

(5)

An order made under subsection (4) may be varied from time to time.

(6)

The reasonable costs of the inspection must be met by the company unless the court orders otherwise.

(7)

A person may only disclose or make use of information or records obtained under this section in accordance with an order made under subsection (4) or subsection (5).

(8)

A person who discloses or makes use of information or records obtained under this section other than in accordance with an order made under subsection (4) or subsection (5) commits an offence, and is liable on conviction to the penalty set out in section 373(2).

Part 10 Administration of companies

Authority to bind company

180 Method of contracting

(1)

A contract or other enforceable obligation may be entered into by a company as follows:

(a)

an obligation which, if entered into by a natural person, would, by law, be required to be by deed, may be entered into on behalf of the company in writing signed under the name of the company by—

(i)

2 or more directors of the company; or

(ii)

if there is only 1 director, by that director whose signature must be witnessed; or

(iii)

if the constitution of the company so provides, a director, or other person or class of persons whose signature or signatures must be witnessed; or

(iv)

1 or more attorneys appointed by the company in accordance with section 181:

(b)

an obligation which, if entered into by a natural person, is, by law, required to be in writing, may be entered into on behalf of the company in writing by a person acting under the company’s express or implied authority:

(c)

an obligation which, if entered into by a natural person, is not, by law, required to be in writing, may be entered into on behalf of the company in writing or orally by a person acting under the company’s express or implied authority.

(1A)

A company may, in addition to complying with subsection (1), affix its common seal, if it has one, to the contract or document containing the enforceable obligation.

(2)

Subsection (1) applies to a contract or other obligation—

(a)

whether or not that contract or obligation was entered into in New Zealand; and

(b)

whether or not the law governing the contract or obligation is the law of New Zealand.

Section 180(1A): replaced, on 30 June 1997, by section 14 of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

181 Attorneys

(1)

Subject to its constitution, a company may, by an instrument in writing executed in accordance with section 180(1)(a), appoint a person as its attorney either generally or in relation to a specified matter.

(2)

An act of the attorney in accordance with the instrument binds the company.

(3)

Sections 19 to 21 of the Property Law Act 2007 apply, with all necessary modifications, in relation to a power of attorney executed by a company, to the same extent as if the company was a natural person and as if the commencement of the liquidation or, if there is no liquidation, the removal from the register kept for the purposes of this Act of the company was an event revoking the power of attorney within the meaning of those sections.

Section 181(3): replaced, on 1 January 2008, by section 364(1) of the Property Law Act 2007 (2007 No 91).

Pre-incorporation contracts

182 Pre-incorporation contracts may be ratified

(1)

In this section and in sections 183 to 185, the term pre-incorporation contract means—

(a)

a contract purporting to be made by a company before its incorporation; or

(b)

a contract made by a person on behalf of a company before and in contemplation of its incorporation.

(2)

Notwithstanding any enactment or rule of law, a pre-incorporation contract may be ratified within such period as may be specified in the contract, or if no period is specified, then within a reasonable time after the incorporation of the company in the name of which, or on behalf of which, it has been made.

(3)

A contract that is ratified is as valid and enforceable as if the company had been a party to the contract when it was made.

(4)

A pre-incorporation contract may be ratified by a company in the same manner as a contract may be entered into on behalf of a company under section 180.

(5)

Notwithstanding the Contracts (Privity) Act 1982, if a pre-incorporation contract has not been ratified by a company, or validated by the court under section 184, the company may not enforce it or take the benefit of it.

Compare: 1955 No 63 s 42A(1)–(3); 1983 No 53 s 15

183 Warranties implied in pre-incorporation contracts

(1)

Notwithstanding any enactment or rule of law, in a pre-incorporation contract, unless a contrary intention is expressed in the contract, there is an implied warranty by the person who purports to make the contract in the name of, or on behalf of, the company—

(a)

that the company will be incorporated within such period as may be specified in the contract, or if no period is specified, then within a reasonable time after the making of the contract; and

(b)

that the company will ratify the contract within such period as may be specified in the contract, or if no period is specified, then within a reasonable time after the incorporation of the company.

(2)

The amount of damages recoverable in an action for breach of a warranty implied by subsection (1) is the same as the amount of damages that would be recoverable in an action against the company for damages for breach by the company of the unperformed obligations under the contract if the contract had been ratified and cancelled.

(3)

If, after its incorporation, a company enters into a contract in the same terms as, or in substitution for, a pre-incorporation contract (not being a contract ratified by the company under section 182 ), the liability of a person under subsection (1) (including any liability under an order made by the court for the payment of damages) is discharged.

Compare: 1955 No 63 s 42A(4), (5), (8); 1983 No 53 s 15

184 Failure to ratify

(1)

A party to a pre-incorporation contract that has not been ratified by the company after its incorporation may apply to the court for an order—

(a)

directing the company to return property, whether real or personal, acquired under the contract to that party; or

(b)

for any other relief in favour of that party relating to that property; or

(c)

validating the contract whether in whole or in part.

(2)

The court may, if it considers it just and equitable to do so, make any order or grant any relief it thinks fit and may do so whether or not an order has been made under section 183(2).

Compare: 1955 No 63 s 42A(6); 1983 No 53 s 15

185 Breach of pre-incorporation contract

In proceedings against a company for breach of a pre-incorporation contract which has been ratified by the company, the court may, on the application of the company, any other party to the proceedings, or of its own motion, make such order for the payment of damages or other relief as the court considers just and equitable, in addition to or in substitution for any order which may be made against the company, against a person by whom the contract was made.

Compare: 1955 No 63 s 42A(7); 1983 No 53 s 15

185A Jurisdiction of District Courts

(1)

A District Court shall have jurisdiction to exercise any power conferred by sections 182 to 185 in any case where—

(a)

the occasion for the exercise of the power arises in the course of civil proceedings properly before the court; or

(b)

the amount of the claim or the value of the property or relief claimed or in issue is not more than $200,000; or

(c)

the parties agree, in accordance with section 37 of the District Courts Act 1947, that a District Court shall have jurisdiction to determine the proceedings.

(2)

For the purposes of section 43 of the District Courts Act 1947, an application made to a District Court under any of sections 182 to 185 shall be deemed to be a proceeding.

Section 185A: inserted, on 1 July 1994, by section 21 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

Registered office

186 Registered office

(1)

A company must always have a registered office in New Zealand.

(2)

Subject to section 187, the registered office of a company at a particular time is the place that is described as its registered office in the New Zealand register at that time.

(3)

The description of the registered office must—

(a)

state the address of the registered office; and

(b)

if the registered office is at the offices of any firm of accountants, barristers and solicitors, or any other person, state—

(i)

that the registered office of the company is at the offices of that firm or person; and

(ii)

particulars of the location in any building of those offices; or

(c)

if the registered office is not at the offices of any such firm or person but is located in a building occupied by persons other than the company, state particulars of its location in the building.

Compare: 1955 No 63 s 115(1)

Section 186(3)(b): amended, on 1 July 2015, by section 17 of the Financial Reporting Amendment Act 2014 (2014 No 64).

187 Change of registered office

(1)

Subject to the company’s constitution and to subsection (3), the board of a company may change the registered office of the company at any time.

(2)

Notice in the prescribed form of the change must be given to the Registrar for registration.

(3)

The change in the registered office takes effect on a date stated in the notice not being a date that is earlier than 5 working days after the notice is registered.

Compare: 1955 No 63 s 115(3)

188 Requirement to change registered office

(1)

Subject to this section, a company must change its registered office if it is required to do so by the Registrar.

(2)

The Registrar may require a company to change its registered office by notice in writing delivered or sent to the company at its registered office.

(3)

The notice must—

(a)

state that the company is required to change its registered office by a date stated in the notice, not being a date that is earlier than 20 working days after the date of the notice:

(b)

state the reasons for requiring the change:

(c)

state that the company has the right to appeal to the court under section 370:

(d)

be dated and signed by the Registrar.

(4)

A copy of the notice must also be sent to each director of the company.

(5)

The company must change its registered office—

(a)

by the date stated in the notice; or

(b)

if it appeals to the court and the appeal is dismissed, within 5 working days after the decision of the court.

(6)

If a company fails to comply with this section, every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

Compare: 1955 No 63 s 115A; 1975 No 137 s 12

Company records

189 Company records

(1)

Subject to subsection (3) and to section 88 and section 195, a company must keep the following documents at its registered office:

(a)

the constitution of the company:

(b)

minutes of all meetings and resolutions of shareholders within the last 7 years:

(c)

an interests register:

(d)

minutes of all meetings and resolutions of directors and directors’ committees within the last 7 years:

(e)

certificates given by directors under this Act within the last 7 years:

(f)

the full names and addresses of the current directors:

(g)

copies of all written communications to all shareholders or all holders of the same class of shares during the last 7 years, including annual reports made under section 208:

(h)

copies of all financial statements and group financial statements required to be completed by this Act or any other enactment for the last 7 completed accounting periods of the company:

(i)

the accounting records required by section 194 for the current accounting period and for the last 7 completed accounting periods of the company:

(j)

the share register.

(2)

The references in paragraphs (b), (d), (e), and (g) of subsection (1) to 7 years and the references in paragraphs (h) and (i) of that subsection to 7 completed accounting periods include such lesser periods as the Registrar may approve by notice in writing to the company.

(3)

The records referred to in paragraphs (a) to (i) of subsection (1) may be kept at a place in New Zealand, notice of which is given to the Registrar in accordance with subsection (4).

(4)

If any records are not kept at the registered office of the company, or the place at which they are kept is changed, the company must ensure that within 10 working days of their first being kept elsewhere or moved, as the case may be, notice is given to the Registrar for registration of the places where the records are kept.

(5)

If a company fails to comply with subsection (1) or subsection (4),—

(a)

the company commits an offence and is liable on conviction to the penalty set out in section 373(2):

(b)

every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

Section 189(1)(b): amended, on 1 July 1994, by section 22(1) of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

Section 189(1)(d): amended, on 1 July 1994, by section 22(1) of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

Section 189(1)(e): amended, on 1 July 1994, by section 22(1) of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

Section 189(1)(g): amended, on 1 July 1994, by section 22(1) of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

Section 189(1)(h): replaced, on 1 April 2014, by section 29 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 189(1)(i): amended, on 1 July 1994, by section 22(1) of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

Section 189(2): amended, on 1 July 1994, by section 22(2) of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

Section 189(3): amended, on 1 July 1994, by section 22(3) of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

190 Form of records

(1)

The records of a company must be kept—

(a)

in written form; or

(b)

in a form or in a manner that allows the documents and information that comprise the records to be easily accessible and convertible into written form.

(2)

The board must ensure that adequate measures exist to—

(a)

prevent the records being falsified; and

(b)

detect any falsification of them.

(3)

If the board fails to comply with subsection (2), every director commits an offence and is liable on conviction to the penalty set out in section 374(2).

Compare: 1955 No 63 s 459(2); 1980 No 43 s 7(4)

191 Inspection of records by directors

(1)

Subject to subsection (2), every director of a company is entitled, on giving reasonable notice, to inspect the records of the company—

(a)

in written form; and

(b)

without charge; and

(c)

at a reasonable time specified by the director.

(2)

The court may, on application by the company, if it is satisfied that—

(a)

it would not be in the company’s interests for a director to inspect the records; or

(b)

the proposed inspection is for a purpose that is not properly connected with the director’s duties,—

direct that the records need not be made available for inspection or limit the inspection of them in any manner it thinks fit.

Address for service

192 Address for service

(1)

A company must have an address for service in New Zealand.

(2)

The address for service may be the company’s registered office or another place, but it must not be at a postal centre or document exchange.

(3)

A company’s address for service at any particular time is the address that is described as its address for service in the New Zealand register at that time.

(4)

The description of the address for service must state that it is at the registered office of the company, or if it is at another place, must—

(a)

state the address of that place; and

(b)

if the address for service is at the offices of any firm of accountants, barristers and solicitors, or any other person, state—

(i)

that the address for service of the company is at the offices of that firm or person; and

(ii)

particulars of the location in any building of those offices; or

(c)

if the address for service is not at the offices of any such firm or person but is located in a building occupied by persons other than the company, state particulars of its location in the building.

Section 192(4)(b): amended, on 1 July 2015, by section 17 of the Financial Reporting Amendment Act 2014 (2014 No 64).

193 Change of address for service

(1)

Subject to the company’s constitution and to subsection (3), the board of a company may change the address for service of the company at any time.

(2)

Notice in the prescribed form of the change must be given to the Registrar for registration.

(3)

A change of address for service takes effect on a date stated in the notice, not being a date that is earlier than 5 working days after the notice is registered.

193A Rectification or correction of address for service

(1)

This section applies if the address for service of a company is rectified or corrected under section 360A or section 360B.

(2)

The rectification or correction takes effect at the time that the rectification or correction is made to the New Zealand register.

Section 193A: inserted, on 15 April 2004, by section 9 of the Companies Amendment Act (No 2) 2004 (2004 No 24).

Part 11 Accounting records and financial reporting

Part 11: replaced, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Subpart 1—Accounting records

Subpart 1 heading: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

194 Accounting records must be kept

(1)

The board of a company must ensure that there are kept at all times accounting records that—

(a)

correctly record the transactions of the company; and

(b)

will enable the company to ensure that the financial statements or group financial statements of the company comply with generally accepted accounting practice (if the company is required to prepare such statements under this Act or any other enactment); and

(c)

will enable the financial statements or group financial statements of the company to be readily and properly audited (if those statements are required to be audited).

(1A)

For the purpose of subsection (1), the transactions of the company include any transaction that constitutes an act of the type described in section 105C(3) of the Crimes Act 1961.

(2)

The board of a company must establish and maintain a satisfactory system of control of its accounting records.

(3)

The accounting records must be kept—

(a)

in written form in English; or

(b)

in a form or manner in which they are easily accessible and convertible into written form in English.

(4)

If the board of a company fails to comply with the requirements of this section, every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(3).

Section 194: replaced, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 194(1A): inserted, on 7 November 2015, by section 4 of the Companies Amendment Act 2015 (2015 No 97).

195 Place accounting records to be kept

(1)

A company need not keep its accounting records in New Zealand.

(2)

If the records are not kept in New Zealand,—

(a)

the company must ensure that accounts and returns for the operations of the company that satisfy the following requirements are sent to, and kept at, a place in New Zealand:

(i)

the accounts and returns must enable the preparation of the company’s financial statements or group financial statements required by this Act or any other enactment; and

(ii)

the accounts and returns must enable the preparation of any other document required by this Act; and

(b)

notice of the place where the accounting records and the accounts and returns required under paragraph (a) are kept must be given to the Registrar.

(3)

If a company fails to comply with subsection (2),—

(a)

the company commits an offence and is liable on conviction to the penalty set out in section 373(2):

(b)

every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

Section 195: replaced, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Subpart 2—Financial reporting

Subpart 2 heading: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

196 Overview

(1)

This subpart imposes financial reporting requirements on—

(a)

every large company; and

(b)

every large overseas company that carries on business in New Zealand; and

(c)

every other company with 10 or more shareholders (unless the shareholders of the company opt out of compliance); and

(d)

every other company with fewer than 10 shareholders if shareholders of the company holding at least 5% of the voting shares require the company to comply.

(2)

This section is only a guide to the general scheme and effect of this subpart.

Section 196: replaced, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

197 Non-application of subpart if alternative financial reporting duties under financial markets legislation

This subpart does not apply to a company or an overseas company in relation to an accounting period if financial statements of the company or overseas company, or group financial statements of the group that comprises the company or overseas company and its subsidiaries, are required to be prepared for that period under subpart 3 of Part 7 of the Financial Markets Conduct Act 2013 or section 55 of the Financial Reporting Act 2013.

Section 197: replaced, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

198 Interpretation

In this subpart,—

group means a group comprising a company or an overseas company and its subsidiaries

large company means a company that is large under section 45 of the Financial Reporting Act 2013

large overseas company means a body corporate incorporated outside New Zealand that—

(a)

carries on business in New Zealand within the meaning of section 332; and

(b)

is large under section 45 of the Financial Reporting Act 2013

public entity has the same meaning as in section 5 of the Public Audit Act 2001

qualified auditor has the same meaning as in section 35 of the Financial Reporting Act 2013

subsidiary

(a)

means a subsidiary within the meaning of sections 5 to 8; and

(b)

includes, except in section 207D, any entity that is classified as a subsidiary in any applicable financial reporting standard

voting share, in relation to a company, means a share in the company that confers a currently exercisable right to cast a vote at meetings of shareholders of the company, not being a right to vote that is exercisable only in 1 or more of the following circumstances:

(a)

during a period in which a payment or distribution (or part of a payment or distribution) in respect of the share is in arrears or some other default exists:

(b)

on a proposal that affects rights attached to the share:

(c)

during the liquidation of the company:

(d)

in respect of a special, immaterial, or remote matter that is inconsequential to control of the company.

Section 198: replaced, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

199 Determining number of shareholders

(1)

For the purposes of this subpart and section 208, the number of shareholders that a company has, in relation to an accounting period, is the number of shareholders that hold voting shares as at the close of the first day of the period.

(2)

Joint holders of a parcel of shares must be counted as a single shareholder.

Example

ABC Limited has an accounting period of 1 April 2014 to 31 March 2015. ABC Limited is not large (see section 45 of the Financial Reporting Act 2013).

At the close of 1 April 2014, 16 shareholders hold ordinary voting shares. (The company also has 12 shareholders who hold non-voting preference shares, but non-voting shares are not relevant to the calculation under this section).

Two of those shareholders hold their parcel of ordinary voting shares jointly. These shareholders are counted as a single shareholder.

For the purposes of this subpart and section 208, ABC Limited has 15 shareholders in relation to the 1 April 2014 to 31 March 2015 period. This means that it must prepare financial statements, have those statements audited, and prepare an annual report unless it opts out of compliance under section 207I.

Section 199: replaced, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Preparation of financial statements

Heading: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

200 Application of preparation provisions

(1)

Sections 201 and 202 apply to—

(a)

every large company; and

(b)

every company that is a public entity; and

(c)

every large overseas company; and

(d)

every other company with 10 or more shareholders unless the company has opted out of compliance with the provision in accordance with section 207I; and

(e)

every other company with fewer than 10 shareholders if the company has opted into compliance with the provision in accordance with section 207K.

(2)

However, section 201 does not apply to a company or an overseas company in relation to a balance date if the company or overseas company has, on that date, 1 or more subsidiaries (see section 202).

Section 200: replaced, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

201 Financial statements must be prepared

Every company or overseas company to which this section applies (A) must ensure that, within 5 months after the balance date of A, financial statements that comply with generally accepted accounting practice are—

(a)

completed in relation to A and that balance date; and

(b)

dated and signed on behalf of A by 2 directors of A, or, if A has only 1 director, by that director.

Compare: 1993 No 106 ss 10(1), 11(1)

Section 201: replaced, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

202 Group financial statements must be prepared

(1)

Every company or overseas company to which this section applies (A) that has, on the balance date of A, 1 or more subsidiaries must ensure that, within 5 months after that balance date, group financial statements that comply with generally accepted accounting practice are—

(a)

completed in relation to that group and that balance date; and

(b)

dated and signed on behalf of A by 2 directors of A, or, if A has only 1 director, by that director.

(2)

Group financial statements are not required under subsection (1) in relation to a balance date if,—

(a)

on the balance date, A is a subsidiary of a body corporate that is incorporated in New Zealand (B); and

(b)

group financial statements in relation to a group comprising B, A, and all other subsidiaries of B that comply with generally accepted accounting practice are completed in relation to that balance date under this Act or any other enactment.

Compare: 1993 No 106 ss 13(1), 14(1)

Section 202: replaced, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

203 Recognition of financial reporting requirements of overseas countries

(1)

Subsection (2) applies if the Registrar notifies a large overseas company (A) that the Registrar is satisfied that—

(a)

the financial statements of A comply with the requirements of the law in force in the country where A is incorporated or constituted; and

(b)

those requirements are—

(i)

substantially the same as those of this Act; or

(ii)

sufficiently equivalent, in relation to the quality of financial reporting they achieve, to the requirements of this Act.

(2)

The financial statements must be treated as complying with generally accepted accounting practice.

(3)

Subsection (4) applies if the Registrar notifies a large overseas company (A) that the Registrar is satisfied that—

(a)

the group financial statements of the group that comprises A and its subsidiaries comply with the law in force in the country where A is incorporated or constituted; and

(b)

those requirements are—

(i)

substantially the same as those of this Act; or

(ii)

sufficiently equivalent, in relation to the quality of financial reporting they achieve, to the requirements of this Act.

(4)

The group financial statements must be treated as complying with generally accepted accounting practice.

Compare: 1993 No 106 ss 11(3), 14(5)

Section 203: replaced, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

204 Financial statements for overseas company must include financial statements for large New Zealand business

(1)

If an overseas company is required to prepare financial statements under section 201 and its New Zealand business is large, the financial statements that are prepared must include, in addition to the financial statements of the overseas company, financial statements for its New Zealand business prepared as if that business were conducted by a company formed and registered in New Zealand.

(2)

If an overseas company is required to prepare group financial statements under section 202 and the group’s New Zealand business is large, the group financial statements that are prepared must include, in addition to the financial statements of the group, financial statements for the group’s New Zealand business prepared as if the members of the group were companies formed and registered in New Zealand.

(3)

In this section, the New Zealand business or the group’s New Zealand business is large in respect of an accounting period if at least 1 of the following paragraphs applies (calculated as if that business were an entity):

(a)

as at the balance date of each of the 2 preceding accounting periods, the total assets of the business exceed $20 million:

(b)

in each of the 2 preceding accounting periods, the total revenue of the business exceeds $10 million.

(4)

A financial reporting standard (or a part of a standard) issued by the External Reporting Board that is expressed as applying for the purposes of subsection (3) must be applied in determining whether that provision applies.

(5)

If an overseas company has been granted an exemption under section 207L from a requirement to prepare financial statements under section 201 or group financial statements under section 202, subsection (1) or (2) (as the case may be) still applies (except that the financial statements for the New Zealand business are not in addition to the financial statements of the overseas company or its group).

Compare: 1993 No 106 ss 8(2), 9(2)

Section 204: replaced, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

205 Balance date of subsidiaries

(1)

The board of a company or an overseas company that is required to comply with section 202 must ensure that, unless in the board’s opinion there are good reasons against it, the balance date of each subsidiary of the company is the same as the balance date of the company.

(2)

If the balance date of a subsidiary of a company or an overseas company referred to in subsection (1) is not the same as that of the company, the balance date of the subsidiary for the purposes of any particular group financial statements must be a date that precedes the balance date of the company.

Compare: 1993 No 106 s 7(7), (11)

Section 205: replaced, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Audit of financial statements

Heading: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

206 Application of audit requirement

(1)

Section 207 applies to—

(a)

every large company unless subsection (2) applies; and

(b)

every company that is a public entity; and

(c)

every large overseas company; and

(d)

every company with 10 or more shareholders unless the company has opted out of compliance with that section in accordance with section 207I; and

(e)

every company with fewer than 10 shareholders if the company has opted into compliance with the section in accordance with section 207K.

(2)

Subsection (1)(a) does not apply to a large company (A) if—

(a)

A has opted out of compliance with section 207 in accordance with section 207J; or

(b)

the following requirements are satisfied:

(i)

A is a wholly-owned subsidiary of another company (B) or of a large overseas company (B); and

(ii)

group financial statements in relation to a group comprising B, A, and all other subsidiaries of B that comply with generally accepted accounting practice are completed and signed within the time specified in section 202; and

(iii)

a copy of the group financial statements referred to in subparagraph (ii) and a copy of the auditor’s report on those statements are delivered for registration under this Act or for lodgement under another Act.

Section 206: replaced, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207 Financial statements must be audited

(1)

Every company or overseas company to which this section applies (A) must ensure that the financial statements or group financial statements prepared in respect of A under section 201, 202, or 204 (if any) are audited by a qualified auditor.

(2)

See sections 37 to 39 of the Financial Reporting Act 2013 (which provide for the appointment of a partnership and access to information in relation to a company or an overseas company).

Section 207: replaced, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207A Audit must be carried out in accordance with auditing and assurance standards

(1)

An auditor must, in carrying out an audit for the purposes of section 207, comply with all applicable auditing and assurance standards.

(2)

Subsection (3) applies if the Registrar notifies a large overseas company (A) that the Registrar is satisfied that standards relating to auditing or assurance that are in force in the country where A is incorporated or constituted (the overseas standards) are—

(a)

substantially the same as the applicable auditing and assurance standards referred to in subsection (1); or

(b)

sufficiently equivalent, in relation to the quality of auditing they achieve, to the applicable auditing and assurance standards referred to in subsection (1).

(3)

The auditor of A’s financial statements or group financial statements may, in carrying out the audit of those statements and in preparing the auditor’s report, comply with the overseas standards instead of the applicable auditing and assurance standards.

(4)

This section does not apply to a company that is a public entity.

Section 207A: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207B Auditor must report to shareholders

(1)

The auditor of a company must make a report to the shareholders on the financial statements or group financial statements audited by the auditor.

(2)

The auditor’s report must comply with the requirements of all applicable auditing and assurance standards.

(3)

Subsection (2) is subject to section 207A(3).

Section 207B: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207C Auditor’s report must be sent to Registrar and External Reporting Board if requirements have not been complied with

If the auditor’s report indicates that the requirements of this Act have not been complied with, the auditor must, within 7 working days after signing the report, send a copy of the report and a copy of the financial statements or group financial statements to which it relates to the Registrar and the External Reporting Board.

Compare: 1993 No 106 s 16(2)

Section 207C: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Registration of financial statements of overseas companies and other companies with significant overseas ownership

Heading: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207D Application of registration provisions

(1)

Section 207E applies to each of the following:

(a)

every large overseas company:

(b)

every large company in which shares that in aggregate carry the right to exercise or control the exercise of 25% or more of the voting power at a meeting of the company are held by—

(i)

a subsidiary of a body corporate incorporated outside New Zealand; or

(ii)

a body corporate incorporated outside New Zealand; or

(iii)

a person not ordinarily resident in New Zealand.

(2)

However, section 207E does not apply to a company or an overseas company (A) if the following requirements are satisfied:

(a)

A is a subsidiary of a company that is incorporated in New Zealand (B); and

(b)

group financial statements in relation to a group comprising B, A, and all other subsidiaries of B that comply with generally accepted accounting practice are completed and signed within the time specified in section 202; and

(c)

a copy of the group financial statements referred to in paragraph (b) and a copy of the auditor’s report on those statements are delivered for registration under this Act or for lodgement under another Act.

(3)

For the purposes of subsection (1), a person is ordinarily resident in New Zealand if that person—

(a)

is domiciled in New Zealand; or

(b)

is living in New Zealand and the place where that person usually lives, and has been living for the immediately preceding 12 months, is in New Zealand, whether or not that person has on occasions been away from New Zealand during that 12-month period.

Compare: 1993 No 106 s 19(1), (2)

Section 207D: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207E Financial statements must be registered

(1)

A company or an overseas company to which this section applies must ensure that, within 5 months after the balance date of the company or overseas company, copies of its financial statements or group financial statements completed in relation to that balance date under section 201, 202, or 204 together with a copy of the auditor’s report on those statements (if any) are delivered to the Registrar for registration.

(2)

The company or overseas company must, when the financial statements or group financial statements are registered, pay to the Registrar the prescribed registration fee (if any).

(3)

Any person may, on payment of the prescribed fee (if any), inspect the copies of the financial statements, group financial statements, and auditor’s report on those statements delivered to the Registrar under this section.

Compare: 1993 No 106 s 19(3)

Section 207E: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Shareholders may request copy of financial statements prepared for tax purposes

Heading: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207F Shareholders may request copy of financial statements prepared for tax purposes

(1)

This section applies if—

(a)

neither financial statements in relation to a company nor group financial statements in relation to a company’s group are prepared under this Act or Part 7 of the Financial Markets Conduct Act 2013; but

(b)

financial statements in relation to the company, or group financial statements in relation to its group, are prepared under, or for the purposes of, any of the Inland Revenue Acts (as defined in section 3(1) of the Tax Administration Act 1994).

(2)

A shareholder of the company may at any time make a written request to the company for a copy of the financial statements or group financial statements (or both) referred to in subsection (1)(b).

(3)

The company must, within 10 working days of receiving a request under subsection (2), provide, free of charge, a copy of the financial statements or group financial statements (or both) to the shareholder together with a copy of the auditor’s report on those statements (if any).

Section 207F: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Financial reporting offences

Heading: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207G Financial reporting offences

(1)

This section applies if—

(a)

a company or an overseas company is required to comply with section 201 and financial statements of the company or overseas company—

(i)

are not completed and signed within the time specified in that section; or

(ii)

fail to comply with an applicable financial reporting standard; or

(b)

a company or an overseas company is required to comply with section 202 and group financial statements of a group comprising the company or overseas company and its subsidiaries—

(i)

are not completed and signed within the time specified in that section; or

(ii)

fail to comply with an applicable financial reporting standard; or

(c)

an overseas company is required to comply with section 204 and the financial statements or group financial statements referred to in that section—

(i)

are not completed and signed within 5 months after the balance date of the overseas company; or

(ii)

fail to comply with an applicable financial reporting standard; or

(d)

a company or an overseas company fails to comply with section 207 (which relates to auditing); or

(e)

a company or an overseas company fails to comply with section 207E (which relates to registration of financial statements); or

(f)

a company fails to comply with section 207F (which relates to the supply of copies of financial statements prepared for tax purposes).

(2)

The company or overseas company commits an offence and is liable on conviction to a fine not exceeding $50,000.

(3)

Every director of the company or overseas company commits an offence and is liable on conviction to the penalty set out in section 374(3).

(4)

See section 376(2) (which provides defences to directors in respect of an offence under this section).

Compare: 1993 No 106 ss 36, 38, 39

Section 207G: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Provisions relating to opting out and opting in

Heading: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207H Period during which company may opt in or opt out

In sections 207I to 207K, the opting period, in relation to the accounting period referred to in section 207I(3), 207J(3), or 207K(2), is the period from the start of the accounting period until the close of the earliest of the following dates:

(a)

the date that is 6 months after the start of the accounting period:

(b)

the date of the annual meeting to be held in the accounting period:

(c)

in the case of an accounting period that is shorter than 6 months (as a result of the date of the registration of the company or a change of the balance date of the company), the balance date of the period.

Section 207H: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207I Companies with 10 or more shareholders may opt out

(1)

This section applies to a company with 10 or more shareholders.

(2)

However, this section does not apply—

(a)

if the constitution of the company expressly provides that this section does not apply; or

(b)

if the company is a large company or a public entity.

(3)

The shareholders of the company may, at a meeting of shareholders held within the opting period, opt out of compliance with 1 or more of the following provisions in relation to the accounting period by way of a resolution approved by not less than 95% of the votes of those shareholders entitled to vote and voting on the question:

(a)

sections 201 and 202 (preparation of financial statements and group financial statements):

(b)

section 207 (audit requirement):

(c)

section 208 (obligation to prepare annual report).

(4)

If the shareholders opt out of compliance with a provision in relation to an accounting period under this section, the provision does not apply to the company in relation to that period.

Example

ABC Limited has an accounting period of 1 April 2014 to 31 March 2015.

ABC Limited is not a large company in relation to that period (see section 45 of the Financial Reporting Act 2013).

Under section 199, it has 15 shareholders.

The opting period ends no later than the close of the date of the annual meeting to be held in that period. At the annual meeting, a resolution to opt out of the preparation provisions (sections 201 and 202) is passed by a 95% majority. Accordingly, ABC Limited does not have to prepare financial statements for that period (section 207, which relates to auditing, also does not apply because financial statements are not required to be prepared).

Section 207I: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207J Large companies may opt out of audit requirement

(1)

This section applies to a large company.

(2)

However, this section does not apply if—

(a)

the constitution of the company expressly provides that this section does not apply; or

(b)

the company is a public entity; or

(c)

the company is required to register financial statements under section 207E.

(3)

The shareholders of the company may, at a meeting of shareholders held within the opting period, opt out of compliance with section 207 in relation to the accounting period by way of a resolution approved by not less than 95% of the votes of those shareholders entitled to vote and voting on the question.

(4)

If the shareholders opt out of compliance with section 207 in relation to an accounting period under this section, that section does not apply to the company in relation to that period.

Section 207J: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207K Companies with fewer than 10 shareholders may opt in

(1)

This section applies to a company (other than a large company) with fewer than 10 shareholders.

(2)

A shareholder of the company who holds, or shareholders of the company who together hold, not less than 5% of the voting shares may, by written notice given to the company within the opting period but not later than 5 working days before the end of that period, require the company to comply with 1 or more of the following provisions in relation to the accounting period:

(a)

section 201 or 202 (preparation of financial statements or group financial statements):

(b)

section 207 (audit requirement):

(c)

section 208 (obligation to prepare annual report).

(3)

If a notice is given under subsection (2) in relation to a provision and an accounting period, the provision applies to the company in relation to that period.

Section 207K: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Registrar may grant exemptions to overseas companies

Heading: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207L Registrar may grant exemptions to overseas companies

(1)

The Registrar may, by notice in the Gazette, exempt any large overseas company, or any class of large overseas companies, from compliance with any provision of sections 201, 202, 207, and 207E.

(2)

The Registrar must not grant an exemption under this section unless he or she is satisfied that—

(a)

compliance with the relevant provision would require the overseas company to comply with requirements that are unduly onerous or burdensome; and

(b)

financial reporting requirements must be complied with in relation to the overseas company under the law in force in the country where the overseas company is incorporated or constituted and that those requirements are satisfactory; and

(c)

the extent of the exemption is not broader than what is reasonably necessary to address the matters that gave rise to the exemption.

(3)

The exemption may be granted on any terms and conditions that the Registrar thinks fit.

(4)

The Registrar may vary or revoke an exemption in the same way as an exemption may be granted under this section.

Compare: 1993 No 106 s 35B(1)–(3), (5)

Section 207L: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207M Publication and status of exemptions

(1)

The Registrar may give notice of the exemption in any publications he or she thinks fit (in addition to notifying the exemption in the Gazette).

(2)

Each notice published in the Gazette under section 207L is a disallowable instrument, but not a legislative instrument, for the purposes of the Legislation Act 2012 and must be presented to the House of Representatives under section 41 of that Act.

(3)

The Registrar’s reasons for granting an exemption (including why the exemption is appropriate) must be notified in the Gazette together with the exemption.

Compare: 1993 No 106 s 35B(4), (6), (7)

Section 207M: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207N Consultation

In deciding whether or not to grant, amend, or revoke an exemption under section 207L, the Registrar—

(a)

may consult with any persons or organisations that the Registrar thinks fit; but

(b)

must consult with the Commissioner of Inland Revenue if the exemption involves any provision of section 201 or 202.

Compare: 1993 No 106 s 35C

Section 207N: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207O Exemption may apply to accounting period before exemption is granted

An exemption under section 207L may, if the Registrar thinks fit, apply to an accounting period that commenced before the exemption is granted (including an accounting period that ended before the exemption is granted) if the exemption is granted before financial statements or group financial statements for that period are required to be delivered for registration under section 207E.

Compare: 1993 No 106 s 35D

Section 207O: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Subpart 3—Miscellaneous auditing provisions

Subpart 3: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207P Auditor must be appointed if financial statements must be audited

(1)

This section applies to a company in relation to an accounting period if financial statements or group financial statements of the company for that period are required to be audited under this Act, the Financial Markets Conduct Act 2013, or any other enactment.

(2)

A company must, at the annual meeting held in the accounting period referred to in subsection (1), appoint a qualified auditor to—

(a)

hold office from the conclusion of the meeting until the conclusion of the next annual meeting; and

(b)

audit the financial statements or group financial statements referred to in subsection (1).

(3)

However, if a company is a public entity, the Auditor-General is its auditor in accordance with that Act and subsection (2) does not apply.

(4)

The first auditor of a company may be appointed by the directors of the company before the first annual meeting, and, if so appointed, holds office until the conclusion of that meeting.

Section 207P: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207Q Registrar may appoint auditor

(1)

The Registrar may appoint an auditor if,—

(a)

at an annual meeting of a company, no auditor is appointed or reappointed as required by section 207P; or

(b)

a casual vacancy in the office of auditor is not filled within 1 month of the vacancy occurring and the company is required to comply with section 207P.

(2)

A company must, within 5 working days of the power becoming exercisable, give written notice to the Registrar of the fact that the Registrar is entitled to appoint an auditor under this section.

(3)

If a company fails to comply with subsection (2),—

(a)

the company commits an offence and is liable on conviction to the penalty set out in section 373(2); and

(b)

every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

Section 207Q: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207R Resignation and casual vacancy

(1)

An auditor may resign at any time by giving written notice to the board of the company, and the company must, as soon as practicable, notify its shareholders of the auditor’s resignation.

(2)

If a company fails to comply with subsection (1),—

(a)

the company commits an offence and is liable on conviction to the penalty set out in section 373(2); and

(b)

every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

(3)

The board of a company may fill any casual vacancy in the office of auditor, but while the vacancy remains the surviving or continuing auditor, if any, may continue to act as auditor.

Section 207R: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Section 207R(2): replaced, on 11 September 2014, by section 59 of the Companies Amendment Act 2014 (2014 No 46).

207S Auditor’s fees and expenses

The fees and expenses of an auditor of a company must be fixed,—

(a)

if the auditor is appointed at a meeting of the company, by the company at the meeting or in the manner that the company determines at the meeting:

(b)

if the auditor is appointed by the directors, by the directors:

(c)

if the auditor is appointed by the Registrar, by the Registrar:

(d)

if the auditor is the Auditor-General, in accordance with the Public Audit Act 2001.

Section 207S: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207T Automatic reappointment

(1)

An auditor of a company, other than an auditor appointed under section 207P(4), is automatically reappointed at an annual meeting of the company unless—

(a)

the auditor is not a qualified auditor; or

(b)

the company passes a resolution at the meeting appointing another person to replace him or her as auditor; or

(c)

the company is not required to appoint an auditor at the meeting (see section 207P); or

(d)

the auditor has given notice to the company that the auditor does not wish to be reappointed.

(2)

An auditor is not automatically reappointed if the person who it is proposed will replace the auditor dies, or is or becomes incapable of, or disqualified from, appointment.

Section 207T: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207U Replacement of auditor

(1)

A company must not appoint a new auditor in the place of an auditor who is a qualified auditor, unless—

(a)

at least 20 working days’ written notice of a proposal to do so has been given to the auditor; and

(b)

the auditor has been given a reasonable opportunity to make representations to the shareholders on the appointment of another person either in writing or by the auditor or the auditor’s representative speaking at a shareholders’ meeting (whichever the auditor may choose).

(2)

The auditor is entitled to be paid by the company reasonable fees and expenses for making the representations to shareholders.

Section 207U: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207V Auditor not seeking reappointment or resigning

(1)

If an auditor gives the board of a company written notice that the auditor does not wish to be reappointed or of the auditor’s resignation, the board must, if requested to do so by that auditor,—

(a)

distribute, as soon as practicable, to all shareholders, at the expense of the company, a written statement of the auditor’s reasons for the auditor’s wish not to be reappointed or for the auditor’s resignation; or

(b)

permit the auditor or the auditor’s representative to explain at a shareholders’ meeting the reasons for wishing not to be reappointed or for resigning.

(2)

An auditor is entitled to be paid by the company reasonable fees and expenses for making the representations to shareholders.

Section 207V: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207W Auditor’s attendance at shareholders’ meeting

(1)

The board of a company must ensure that an auditor of the company—

(a)

is permitted to attend a meeting of shareholders of the company; and

(b)

receives the notices and communications that a shareholder is entitled to receive that relate to a meeting of shareholders; and

(c)

may be heard at a meeting of shareholders that the auditor attends on any part of the business of the meeting that concerns the auditor as auditor.

(2)

If the board of a company fails to comply with subsection (1), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

Section 207W: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Subpart 4—Infringement offence for failing to register financial statements

Subpart 4: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207X Interpretation in this subpart

In this subpart,—

infringement fee, in relation to an infringement offence, means $7,000

infringement notice means a notice issued under section 207Z

infringement offence means an offence under section 207G(2) or (3) in respect of a failure referred to in section 207G(1)(e) (which relates to failing to register financial statements).

Section 207X: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207Y Infringement offences

(1)

If a person is alleged to have committed an infringement offence, that person may—

(a)

be proceeded against by filing a charging document under section 14 of the Criminal Procedure Act 2011; or

(b)

be served with an infringement notice as provided in section 207Z.

(2)

Proceedings commenced in the way described in subsection (1)(a) do not require leave of a District Court Judge or Registrar under section 21(1)(a) of the Summary Proceedings Act 1957.

Section 207Y: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207Z Infringement notices

(1)

The Registrar may issue an infringement notice to a person if the Registrar believes on reasonable grounds that the person is committing, or has committed, an infringement offence.

(2)

The Registrar may revoke an infringement notice before the infringement fee is paid, or before an order for payment of a fine is made or deemed to be made by a court under section 21 of the Summary Proceedings Act 1957.

(3)

An infringement notice is revoked by giving written notice to the person to whom it was issued that the notice is revoked.

Section 207Z: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207ZA Procedural requirements for infringement notices

(1)

An infringement notice may be served on a person—

(a)

by delivering it, or a copy of it, personally to the person who appears to have committed the infringement offence; or

(b)

by sending it, or a copy of it, by post, addressed to the person at the person’s last known place of residence or business.

(2)

An infringement notice sent under subsection (1)(b) must be treated as having been served on the person on the date it was posted.

(3)

An infringement notice must be in the prescribed form and must contain—

(a)

details of the alleged infringement offence that are sufficient to fairly inform a person of the time, place, and nature of the alleged infringement offence; and

(b)

the amount of the infringement fee; and

(c)

an address at which the infringement fee may be paid; and

(d)

the time within which the infringement fee must be paid; and

(e)

a summary of the provisions of section 21(10) of the Summary Proceedings Act 1957; and

(f)

a statement that the person served with the notice has a right to request a hearing; and

(g)

a statement of what will happen if the person served with the notice does not pay the fee and does not request a hearing; and

(h)

any other prescribed matters.

(4)

If an infringement notice has been issued, proceedings in respect of the infringement offence to which the notice relates may be commenced in accordance with section 21 of the Summary Proceedings Act 1957 and, in that case,—

(a)

reminder notices may be prescribed under regulations made under this Act; and

(b)

in all other respects, section 21 of the Summary Proceedings Act 1957 applies with all necessary modifications.

(5)

Reminder notices must contain the prescribed information.

Section 207ZA: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207ZB Payment of infringement fee

The Registrar must pay all infringement fees received into a Crown Bank Account.

Section 207ZB: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Part 12 Disclosure by companies

Disclosure to shareholders

208 Obligation to prepare annual report

(1)

This section applies to—

(a)

every large company (within the meaning of section 198); and

(b)

every company that is a public entity; and

(c)

every company that is required to prepare financial statements or group financial statements under Part 7 of the Financial Markets Conduct Act 2013 or section 55 of the Financial Reporting Act 2013; and

(d)

every company with 10 or more shareholders unless the company has opted out of compliance with this section in accordance with section 207I (in relation to the accounting period referred to in subsection (2)); and

(e)

every company with fewer than 10 shareholders if the company has opted into compliance with this section in accordance with section 207K (in relation to the accounting period referred to in subsection (2)).

(2)

The board of every company to which this section applies must, within 5 months after the balance date of the company, prepare an annual report on the affairs of the company during the accounting period ending on that date.

(3)

If the board of a company fails to comply with subsection (2), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

Section 208: replaced, on 1 April 2014, by section 31 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

209 Obligation to make annual report available to shareholders

(1)

The board of a company must send to every shareholder of the company, not less than 20 working days before the date fixed for holding the annual meeting of shareholders,—

(a)

a copy of the annual report; or

(b)

a notice containing the statements specified in subsection (3).

(1A)

Subsection (1) does not apply if the annual report is not required to be prepared under section 208.

(2)

Subsection (1) is subject to section 212.

(3)

The notice referred to in subsection (1)(b) must contain—

(a)

a statement to the effect that the shareholder has a right to receive from the company, free of charge, a copy of the annual report if the shareholder, within 15 working days of receiving the notice, makes a request to the company to receive a copy of the annual report; and

(b)

a statement to the effect that the shareholder may obtain a copy of the annual report by electronic means; and