Resident Directors – an update

20 August 2014

Resident Directors – an update

Start date for changes

In my 2 July bulletin on the passing of the Companies and Limited Partnerships Amendment Bill (at last) I concluded with comments that:

• a number of the key changes (particularly those relating to the ‘resident director’ requirements and the enhanced powers of the Registrar) would not come into force until 12 months after the date of the Royal assent; and
• existing companies would then have a further 6 months within which to comply with the resident director requirements.

In the case of the amendments to both the Companies Act 1993 and the Limited Partnerships Act 2008, the relevant wording of the commencement mechanism contained a carve-out, namely:

unless it is earlier brought into force on a date appointed by the Governor-General by Order in Council.

In a similar vein to the Order in Council implementing the changes to the Limited Partnerships Act – an Order in Council has been made pinpointing an earlier start date for the ‘resident director’ requirements added to the Companies Act 1993.

As a result of Companies Amendment Act 2014 Commencement Order 2014, the changes to the Companies Act 1993 relating to the resident director’ provisions will come into force on 1 May 2015.

Consequently, companies registered after 1 May 2015 will be subject to the changes.

Existing companies will be able to rely on the 180 day lead time in the transitional provisions and will therefore have until 28 October 2015 to comply with the ‘resident director’ requirements.

As previously noted, the principal changes include:

• New ‘resident director’ requirements applying to a director who lives in New Zealand or a person who is also a director of a company incorporated in, and who also lives in, an ‘enforcement country’ (which will initially be limited to Australia).
• New qualification requirements for individuals who are directors.
• Collection of details of date and place of birth details for all directors.

Because of the very wide wording of the term ‘director’ in section 126 of the Companies Act, creating two categories of director:

• a de jure director – who is properly and formally appointed as a director in accordance with the Companies Act; and
• a de factor director – who, although not formally appointed, occupies the position and/or assumes the role and powers of a director,

it is apparent that a person who is formally appointed as a ‘director’ albeit with limited powers (which are stated in the company’s constitution) or in limited circumstances (such as an alternate director) who is resident in New Zealand will be enough to satisfy the new ‘resident director’ requirement.

MBIE says the amendments will:

• Enhance and clarify the powers of the Registrar of Companies to require verification of information upon request.
• Require companies to disclose the details of their ultimate holding company if they have one.
• Provide the Registrar of Companies with more power to identify the true owner of a company by enquiring about:

o Individuals controlling companies and limited partnerships.
o Individuals controlling directors and general partners.
o Individuals that directors and general partners may have delegated their powers to.

These measures are designed to shore up New Zealand’s company registration process against criminal activity.

Further information

If you would like more information about any of the matters discussed in this note, please contact me.