New Zealand Legislation: Regulations

Statement of reasons

Note: The following statement of reasons should be read in conjunction with the statement(s) of reasons appended to the:

• Financial Reporting Act (Overseas Companies) Exemption Amendment Notice 2008.

This notice, which comes into force on the day after the date of its notification in the Gazette and expires on 30 June 2012, exempts the directors of certain issuers incorporated in the United States of America and the United Kingdom from various provisions of the Financial Reporting Act 1993 (the Act).

The effect of the exemptions is to provide relief to the directors of issuers incorporated in those jurisdictions that have offered or offer securities in New Zealand under the Securities Act (Overseas Companies) Exemption Notice 2002 or other overseas companies notices that correspond to that notice (the overseas companies securities notices) from the preparation, content, auditing, and filing requirements of the Act. These exemptions are granted on the conditions that the issuer prepares and publicly files financial statements that they are required to prepare under the financial reporting requirements of their respective jurisdictions.

The Securities Commission considers that it is appropriate to grant the exemptions because—

• there will not be any significant detriment to subscribers in New Zealand as the exemptions only apply to issuers that already have New Zealand shareholders, and where those persons did not become shareholders as a result of a public offer in New Zealand. Investors in these issuers will already be familiar with the format of financial reports prepared by these issuers:

• the exemption from the filing requirement recognises that overseas companies that are issuers only under the overseas companies securities notices have a comparatively minor association with New Zealand securities law, which does not justify the imposition of an ongoing obligation to file accounts in New Zealand:

• the Securities Commission has had regard to the financial reporting and audit requirements that must be complied with by United Kingdom and United States issuers that relied or rely on the overseas companies securities notices. The exemptions are limited to issuers that must comply with the financial reporting and audit requirements set out in the Companies Act 1985 (UK) and the Companies Act 2006 (UK) or the Securities Exchange Act of 1934 (US) and the Code of Federal Regulations (US), as the case may be:

• the exemptions address the particular circumstances of offers made under the overseas companies securities notices, which involves only transitory contact by overseas companies as issuers with New Zealand and provides relief from the ongoing financial reporting requirements triggered by the allotment of securities under those notices. The application of the exemptions is limited to overseas companies that are issuers by reason only of reliance on the overseas companies securities notices, and so it is not broader than is reasonably necessary to address the difficulties identified:

• the Securities Commission has named the United States of America and the United Kingdom as specified jurisdictions in the Schedule of this notice, taking into account the financial reporting obligations on listed companies (under law and any applicable stock exchange rules), the legal standing and enforcement of these obligations, and whether these financial reporting obligations provide New Zealand securities holders with adequate financial information about companies in which they invest, including public availability of financial reports prepared under the rules and laws of the relevant jurisdiction.

Note: The preceding statement of reasons should be read in conjunction with the statement(s) of reasons appended to the:

• Financial Reporting Act (Overseas Companies) Exemption Amendment Notice 2008.