Regulation of Companies – Proposed changes and consultation
A number of changes to the law regulating companies are being considered by the government driven by changes in people’s behaviour in their use of technology and people’s increasing concerns about individual privacy.
One such initiative is the introduction of an omnibus bill Regulatory Systems (Economic Development) Amendment Bill (“Bill”), which contains, amongst others, proposed amendments to the Companies Act 1993 (“Act”).
One of the changes to the Act the Bill is seeking to make is to enable notices, statements and reports to be sent to a creditor that is a body corporate not just by facsimile but also by email to the body corporate. While it appears to be a small technical change, it would certainly be well received by those involved in the actual administration.
In relation to a meeting of shareholders, the Bill seeks to enable a notice of the meeting to specify a time, which is less than 48 hours before the start of the meeting, by which postal votes must be cast electronically, despite any earlier time set out in the constitution. Similarly, the Bill seeks to enable a notice of the meeting to specify a time, which is less than 48 hours before the start of the meeting, by which a proxy must be produced, despite any earlier time set out in the constitution.
Amending a constitution is not an easy task even if the proposed change is uncontroversial and technical in nature as it requires at least 75% shareholders’’ approval. We consider the proposed change would provide companies with flexibility, and better reflect the reality of the fast pace of electronic communication and business dealings, without undermining any processes set out in a company’s constitution in a significant way.
Another recent initiative by the government is the Ministry of Business, Innovation and Employment’s paper and public consultation related to the publication of directors’ residential addresses on the Companies Office register.
Currently, directors must provide the Registrar of Companies (“Registrar”) with a residential address, which is publicly available and searchable, and keep this up to date. However, this raises issues of privacy; in particular, for directors with security or safety concerns due to their business, or for those who are concerned their personal information may be used for fraudulent purposes. On the other hand, given the legal obligations of directors, it is important directors are able to be contacted to serve legal papers, and it is important there is a degree of transparency about who controls companies conducting business in New Zealand.
The government is, therefore, considering whether to assign a unique identifying number to directors called a DIN (Director Identification Number) instead of publishing residential addresses. The Registrar would still collect information from the directors, such as their residential addresses, but access to that information will be granted to interested parties only upon application to the Companies Office.
Other than addressing privacy concerns, there appears to be additional advantages to this proposal; that is, directors would be required to provide accurate information, including their full legal names and address, which will be verified by RealMe. The DIN will be able to be used to connect companies through shared directors.
However, it is not clear what implications this would have on transparency especially in light of increasing focus and regulation of those conducting businesses as part of global efforts to uncover money laundering proceeds of crime.
More thought and analysis would also be required about who can request the information from the Registrar, and the circumstances under which they can request the information will need to be clearly defined.