This note is not part of the regulations, but is intended to indicate their general effect.
These regulations, which come into force 28 days after notification in the Gazette, have 3 effects.
First, they provide a temporary exemption from what is known as the non-diversification rule. This rule, which has applied to Zespri Group Limited (ZGL) since 1 April 2000, limits its ability to carry out activities not necessary for its core business, without seeking the agreement of the providers of the capital used.
The exemption allows ZGL to procure the supply and marketing of non-New Zealand-grown produce under an agreement underwritten by Kiwifruit International Limited (KIL). KIL was set up as a separately owned company so that only those producers who voluntarily chose to participate in the business of all-year-round marketing of kiwifruit and produce from other countries would bear the risks of doing so. The exemption gives ZGL until 1 April 2001 to comply fully with the non-diversification rule in respect of any residual risk that may fall on ZGL despite the underwriting agreement.
Secondly, they alter the class of people amongst whom the shares of ZGL must be traceable. Currently the principal regulations require ZGL shares to be fully tradeable at least among producers, where producers includes, for all time, people who have received shares under the ZGL share allocation plan on the restructuring. This amendment has the effect that people who were allocated shares under the share allocation plan in the Act and who cease to own their orchards will no longer be part of the class of people amongst whom shares must be tradeable. As a result, it will be open to ZGL shareholders to change the constitution to set new rules to apply when people sell their orchards.
Thirdly, they allow ZGL shareholders to change the constitution to suspend the voting rights attaching to shares issued under the share allocation plan provided for in the Act if the holder of the shares has ceased to be a producer of kiwifruit. Currently the principal regulations prevent the negation or variation of all of the rights attaching to those shares. The regulations as now amended continue to prevent the negation or variation of dividend and distribution rights attaching to the shares.