Government Unveils Reforms to Modernise Business Laws in New Zealand
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- New reforms to company law will simplify processes and reduce compliance burdens for businesses.
- New rules will improve insolvency laws, combat phoenixing, and enhance transparency in business practices.
- Company directors will receive unique IDs, improving accountability and addressing privacy concerns.
A series of reforms aimed at modernising and simplifying New Zealand’s company law will make it easier and safer to do business, according to Commerce and Consumer Affairs Minister Andrew Bayly.
“To rebuild the economy and increase the value of our exports, we need to ensure our companies are not hamstrung by out-of-date laws and onerous red tape, while also making sure there are safeguards in place to deter bad actors and dodgy business practices,” said Bayly.
The announced changes are designed to deter illegal business practices and ease the compliance burden for businesses. Bayly highlighted the issue of ‘phoenixing,’ where a company goes bankrupt, leaving debts unpaid, only to reappear under a different name. “This is clearly not fair or right,” he remarked.
The Government’s reform package includes measures to improve insolvency law, combat phoenixing, and make it more challenging for directors to evade debts while continuing their business activities. One key reform is the introduction of a unique identification number for company directors. This will enhance transparency and make it easier for creditors and law enforcement to track individuals. Additionally, directors will have the option to remove their home address from the Companies Register, addressing safety and privacy concerns while maintaining accountability.
Bayly also noted that the Companies Act, which governs the lifecycle of over 730,000 companies in New Zealand, has not seen substantial updates in three decades. As a result, certain aspects of the law no longer align with the modern business environment and may hinder growth and innovation.
“For example, there are still requirements for certain types of information to be physically published in the newspaper or mailed out to shareholders,” Bayly explained. “Practices like share buybacks, which used to be rare but are now commonplace, must be permitted in the company’s constitution, which only two out of seven companies have. Similarly, if a company wants to reduce its share capital, it has to seek approval by going to court, which is time-consuming and expensive.”
Bayly concluded that these reforms will bring New Zealand’s company law into the 21st century, enabling businesses to focus on growth rather than outdated legal requirements.
The second phase of the reforms will involve a review of directors’ duties, liability, and enforcement, including issues raised in the Mainzeal case. This review will begin in 2025, as recommended by Justice Minister Paul Goldsmith.