New Zealand Legislation: Acts

10 Meaning of equity return rights

• (1) For the purposes of this Act, a person has an equity return right in relation to a business if the person has a right or entitlement or expectancy to receive equity returns, directly or indirectly, of the business.

  (2) Equity returns means—

  • (a) profits of the business; or

  • (b) distributions from the business; or

  • (c) other equity returns from the business.

  (3) Other equity returns—

  • (a) means a benefit derived, directly or indirectly, from a business which represents, or is calculated by reference to, or is determined by,—

    • (i) a share in or proportion of its capital; or

    • (ii) its surplus or residual economic value (after satisfying prior contractual claims); or

    • (iii) its profitability or other indicator of its success; but

  • (b) does not include (for the avoidance of doubt) a right or entitlement to interest on debt calculated at general market rates prevailing at the time of the loan agreement, or fluctuating in accordance with a formula which applies general market rates prevailing from time to time.

  (4) In respect of equity return rights for which percentage entitlements are not readily calculable for any reason, the persons that hold or may hold them and the amounts are to be determined in accordance with any method set out in regulations.

  (5) A person is deemed to have a percentage of the equity return rights held by another person in a business if the first person has, or is one of 2 or more associates who together have, more than 10% of the equity return rights in the second person.

  (6) The percentage of rights held by a person in another person is calculated as follows:

  a = b × c

  where—

  a

  is the percentage to be determined

  b

  is the percentage of the equity return rights held by the first person in the second person

  c

  is the percentage of the equity return rights held by the second person in the business.