This Supplementary Order Paper amends the Companies and Limited Partnerships Amendment Bill (the Bill), a Bill that amends the Companies Act 1993 and the Limited Partnerships Act 2008. This Supplementary Order Paper supersedes and incorporates, with modifications, Supplementary Order Papers Nos 249 and 403.
Amendments to Companies Act 1993
Criminalisation of breaches of certain directors' duties
As introduced, the Bill amended the Companies Act 1993 (the Companies Act) to criminalise serious breaches of 2 duties of directors. Clause 4 of the Bill inserted new section 138A into the Companies Act. New section 138A provided for offences in relation to serious breaches of—
the duty provided for in section 131 of the Companies Act (the duty of directors to act in good faith and in the best interests of the company); and
the duty provided for in section 135 of the Companies Act (the duty of directors not to agree to, or cause or allow, company business to be carried on in a manner likely to create a substantial risk of serious loss to the company's creditors).
The Supplementary Order Paper removes the second offence (new section 138A(2)). Instead, the Supplementary Order Paper amends the existing offence provision in section 380 of the Companies Act (see the description of new section 380(4) below). The Supplementary Order Paper also changes the offence created by the Bill relating to the section 131 duty. Now, the offence is to become one of exercising powers or performing duties as a director of a company in bad faith towards the company and believing that the conduct is not in the best interests of the company. There must also be knowledge that the conduct will cause the company serious loss.
In a departure from Supplementary Order Paper No 403, this Supplementary Order Paper inserts a new clause (new clause 4AAB) amending section 378(a) of the Companies Act. Section 378 provides for the offence of the fraudulent use or destruction of company property by a director, employee, or shareholder. The amendment expands the scope of the offence to include fraudulently taking or applying company property for the use or benefit of a person other than the company.
New section 380(4) (inserted by new clause 4AAC) creates a new offence where a company incurs a debt at a time when the company is insolvent (insolvency in this context means unable to pay its debts: new section 380(5)) or incurs a debt that, on its own or taken with other debts, has the effect of tipping the company into insolvency. In those circumstances, a director of the company commits an offence if he or she knew of the existing insolvency or knew that the company would become insolvent, and if the director’s failure to prevent the company incurring the debt was dishonest.
A director convicted of the offence is liable under section 373(4) of the Companies Act to imprisonment for a term not exceeding 5 years or to a fine not exceeding $200,000. New clause 4AAA consequentially amends section 373(4)(f).
Rectification of register
The Supplementary Order Paper amends clause 35(2) to correct a drafting error. The amendment to section 360A(2) of the Companies Act 1993 made by the Commerce Committee inadvertently expands the requirement to give notice, which should be confined to the exercise of the Registrar's power of rectification under section 360A(1)(a) only.
Registrar's powers to identify controllers of company
The Supplementary Order Paper gives the Registrar new powers to identify the controllers of a company for defined law enforcement purposes. In order to achieve this, new sections 365A to 365H (inserted by new clause 37A) give the Registrar the powers to ascertain—
who has (and who has the power to acquire) a control interest in shares of a company and full details of that interest (new section 365F)—control interest is defined in new sections 365B to 365E, in a similar way to the definition of relevant interest in sections 5 to 6 of the Securities Markets Act 1988; and
control information relating to a company—this is defined in new section 365G as directions or instructions relating to the management and administration of a company or any delegation of powers relating to the management and administration of a company.
Arrangements, amalgamations, and compromises of code companies
The Supplementary Order Paper creates a transitional arrangement (in new clause 24A) for a code company that has already begun a process to amalgamate under Part 13 of the Companies Act before the Bill comes into force. If the boards of the amalgamating companies have agreed to an amalgamation, the law as it was before the Bill comes into force will apply to that amalgamation—as long as the amalgamation takes effect within a period of 180 days.
The Supplementary Order Paper amends new section 236A of the Companies Act (inserted by clause 25 of the Bill) to clarify that the new Part 15 provisions about the reconstruction of code companies do not apply where there is no change in the relative holding or control of voting rights.
The Supplementary Order Paper also amends the Takeovers (Fees) Regulations 2001 (in new clause 26B) to include the ability for the Takeovers Panel to charge applicants for considering whether or not to provide a no-objection statement to applications under section 236(1) of the Companies Act.
Information about director's date and place of birth
The Supplementary Order Paper amends an amendment made to the Companies Act at select committee that required a director's date and place of birth to be sent to all shareholders of amalgamating companies. Instead, the Supplementary Order Paper requires these details to go only to the Registrar (see the change to new section 220(1)(c) in clause 7F(1), the amendment to section 223 made by new clause 7FA, and the change to clause 22A).
Amendments to Limited Partnerships Act 2008
Registrar's powers to identify controllers of limited partnership
The provisions enabling the Registrar to identify the controllers of companies are also inserted in the Limited Partnerships Act 2008 (the Limited Partnerships Act).
In order to achieve this, new sections 78A to 78H of the Limited Partnerships Act are inserted by new clause 56A. These new provisions are very similar to those inserted by new clause 37A into the Companies Act; the only changes relate to the differences between a limited partnership and a company (and between shares and partnership interests).
Requirements for general partner of limited partnership
The Supplementary Order Paper clarifies—
the requirement in the Bill for limited partnerships to have at least 1 general partner with a substantive connection to New Zealand; and
that the qualification requirements for general partners do not prevent overseas companies from being general partners.
This clarification is achieved by changes to clauses 46 to 49A of the Bill, which amend the Limited Partnerships Act.
The revisions in the Supplementary Order Paper reflect the policy that all natural persons who are general partners, or who are directors, partners, or general partners of a general partner, must be qualified under new section 19A of the Limited Partnerships Act. (New section 19A essentially requires that the person not be a minor and not have various criminal convictions.) This policy is articulated in new section 8(5) of the Limited Partnerships Act, which is inserted by a change in the Supplementary Order Paper to clause 46 of the Bill.
Name, address, and date and place of birth information: general partners
Various amendments in the Supplementary Order Paper to clauses 49A, 49B, and 49C of the Bill ensure that the following information must be provided in applications to become a limited partnership (and in annual returns) and must also appear on the register of limited partnerships:
the full name and residential address of—
every general partner who is a natural person; and
every general partner's director, partner, or general partner who is a natural person:
the name and address of every general partner who is not a natural person:
the date and place of birth of—
every general partner who is a natural person; and
every general partner's director, partner, or general partner who is a natural person.
However, only the Registrar would be able to search the register for date and place of birth information.
Section 74 of the Limited Partnerships Act, which is about the records that a limited partnership must keep, is amended to require limited partnerships to keep records of the new types of name and address information, including the last known such information in respect of each person who has ceased to be a partner within the last 7 years.
Annual return information changes
The Supplementary Order Paper amends the requirements in the Limited Partnerships Act relating to the information to be contained in the annual returns of a limited partnership. The information required currently by section 76 is largely unchanged, but the requirements are placed instead into a new Schedule 2 (mirroring Schedule 4 of the Companies Act). There are a few minor additions, which reflect the changes made elsewhere in the Supplementary Order Paper. One such addition is a new paragraph (h) in the new Schedule 2, which mirrors the requirements in relation to a company annual return (see the amendments to clause 22A of the Bill). That amendment requires a company annual return to include prescribed information in respect of the company or companies in an enforcement country of which the director is a director. In respect of a limited partnership, the requirement is that a limited partnership's annual return must supply prescribed information about the company or companies in the enforcement country of which the natural person meeting the residency requirement is a director.
Transitional provision relating to requirement for existing limited partnerships to provide place of birth information about partners
Clause 52B of the Bill requires existing limited partnerships to inform the Registrar of the place of birth of natural persons who are general partners. The Supplementary Order Paper extends that requirement to limited partners.
The Supplementary Order Paper also makes consequential amendments associated with the changes described above. For example, it inserts into the Companies Act and the Limited Partnerships Act various cross-references to the Supplementary Order Paper's new provisions.
Updates resulting from enactment of Criminal Procedure Act 2011
A reference to the term indictment in new sections 103A and 103B of the Limited Partnerships Act 2008 (inserted by clause 58 of the Bill) is no longer appropriate given the move away from that concept in the Criminal Procedure Act 2011. The Supplementary Order Paper replaces this reference with a reference to offences that are punishable by a term of imprisonment of not less than 3 months. Sections 382 and 383 of the Companies Act , on which new sections 103A and 103B of the Limited Partnerships Act are based, had already been changed in Schedule 3 of the Criminal Procedure Act 2011. However, these changed provisions are now adjusted in the Supplementary Order Paper to match the amended new sections 103A and 103B of the Limited Partnerships Act (see new clauses 39AAA and 39AAB).
The Bill amends Schedule 1 of the Summary Proceedings Act 1957 in clauses 4A, 42, and 59. However, that schedule was repealed on 1 July 2013 as part of the package of reforms relating to the Criminal Procedure Act 2011. The Supplementary Order Paper therefore deletes the redundant references to the repealed schedule.
Updates resulting from enactment of Financial Markets (Repeals and Amendments) Act 2013
Changes are made in the Supplementary Order Paper to reflect the amendments to be made to the Companies Act by the Financial Markets (Repeals and Amendments) Act 2013. That Act extends the allowable period for banning certain directors from company management from 5 years to 10 years, with a new ability for the court to make a permanent ban or a ban for a specified period over 10 years. New section 385AA of the Companies Act, which is inserted by clause 39 of the Bill, is amended to the same effect by the Supplementary Order Paper. The changes made by the Financial Markets (Repeals and Amendments) Act 2013 to the Companies Act are then copied into the Bill's amendments to the Limited Partnerships Act by the Supplementary Order Paper.
The Financial Markets (Repeals and Amendments) Act 2013 also amends the Companies Act to set out requirements for a company's annual return if the company has been the offeror of financial products. These requirements are also put into the Limited Partnerships Act by the Supplementary Order Paper.
The relevant amendments in the Financial Markets (Repeals and Amendments) Act 2013 are not yet in force, and so the amendments made to the Companies Act and the Limited Partnerships Act by the Supplementary Order Paper are to commence when the relevant amendments in the Financial Markets (Repeals and Amendments) Act 2013 come into force (see the amendment to clause 2 of the Bill in the Supplementary Order Paper).
Updates resulting from enactment of State Sector Amendment Act 2013
The State Sector Amendment Act 2013 replaced the previous immunity in the State Sector Act 1988 that applied to the Registrar. The new immunity is in more comprehensive and certain terms. This means that the immunities in the Bill (see new section 366C of the Companies Act and new section 63B of the Limited Partnerships Act) are no longer required.
Departmental disclosure statement
The Ministry of Business, Innovation, and Employment considers that a departmental disclosure statement is not required to be prepared for this SOP.