Company admin reforms

New Zealand is lucky to have one of the best (if not the best) Companies Office websites in the world. We also have a very liberal company law regime – which is generally a good thing. It is little surprise therefore that New Zealand ranks #1 in the world for ease of setting up a business – the process is almost ridiculously easy and often only takes a few minutes. The proportionally large number of registered companies confirms that setting up and maintaining a company is an easy thing to do.

Two changes will affect this slightly.

First, from 1 August a $45 charge has been introduced for filing of annual returns (previously this was free). As the process is fully automated and does not involve filing accounts, it is difficult to see what this charge is actually for. But it should be a nice little earner: the Companies Office says there were 563,856 active companies at June 2011, and assuming each one files annual returns this will bring in over $25 million.

This will also sting those people who, for whatever reason, sit on numerous shelf companies. Someone with say ten shelf companies will now have an annual holding cost of at least $450 per year, or face having them struck off.

The second, more substantive change (which has not yet occured) are reforms requiring, among other things, companies to have at least one director or agent resident in New Zealand (or an “enforcement country” with whom we have reciprocal arrangements). As Stuff reports:

The Government is fast-tracking reforms to prevent New Zealand companies being used as tools by international criminals.

The move comes after criticism from opposition parties that the Government was dragging its feet on the issue and as the Sunday Star-Times uncovers New Zealand links to a rort of the Ukraine health system, where publicly purchased vaccines were subjected to 300 per cent mark-ups.

As in previous cases of shell company abuse, the vaccine scam relied on New Zealand-registered companies using foreign directors – in this case a Panamanian mother – to obscure transactions.

This is a sensible and probably overdue change. It will not affect the vast majority of New Zealand companies. But there have been numerous instances of New Zealand companies having no local directors, being involved in international money laundering. The requirement for a local director / agent will address this by:

  1. Making it harder to register a company without a New Zealand resident being involved; and
  2. Ensuring (or at least making more likely) that there is at least one person in the jurisdiction (or one with enforcement arrangements in place) who can be investigated or potentially prosecuted if the company becomes involved in suspicious activities.

NZ Companies Office kudos

As my last post was on the subject of company records, I should mention that the NZ Companies Office is far and away the best company registry website around. The main search pages may be getting slightly dated now, but are still great and gradually being updated, with a major overhaul apparently planned (IIRC from the “roadshow” they did last year).

One very simple thing at the top of my wishlist: ditch the pop-up results frames! Allow us to open results in new tabs (without post-backs)! As you can see I don’t ask much. Also the “watchlist” notification function which I understand is planned will be VERY useful. And while I’m making a list, a historical shareholders function would be useful, albeit of limited use because (unlike changing directors) not every shareholding change is required to be filed.

Best of all (from a tech-perspective) it allows XML web service integration for free, which is brilliant (I have used it, and still do, on several projects, even gratis developer tech support is provided [if you ask nicely]) albeit with the requirement that a confidentiality agreement is signed regarding the XML schema. I don’t quite see why that is necessary (not that I’m at liberty to discuss it…) but perhaps the Open New Zealand initiative will take up the matter. They have also been very active with new media (e.g. on Facebook and Twitter) which is great to see and a model for other agencies.

By contrast, the UK, Australian, and Hong Kong equivalents are terrible (in ascending order of awfulness). The information is there, you just need to pay for it and/or go via a third party. In 2007 I tried talking to a Hong Kong official about automated web-service access to the Hong Kong register… well, the fact their homepage still refers to IE5.0 and Netscape 6.0 gives an idea of the responses I got.

Kudos to the NZ Companies Office, which should be a model for other public sector registers.

Privacy for company director addresses

From October, the UK will be restricting access to the residential addresses of company directors on new registrations (and optionally for existing registrations).

At present – as in NZ – directors must disclose their residential addresses, although – unlike in NZ – a director may apply to have that information restricted on the grounds of possible attack. Soon, residential addresses will become “protected information” by default – only disclosable to credit reference agencies and certified authorities. There will also be an option to hide the residential address from even those authorities.

The change is apparently in response to increased privacy concerns and threats of violence against directors.

In New Zealand, the law requires that company directors disclose their residential address (e.g. section 215 of the Companies Act 1993 among other sections). There is no provision for withholding an address. Interestingly, our Companies Act also requires that founding shareholders provide a residential address (section 12(2)(c)), but not subsequent shareholders (section 87 only refers to “the latest known address” which, in the case of a person, could be a non-residential postal or even electronic address. Many companies I have dealt with and managed use a non-residential person-shareholder address).

It is probable that New Zealand will eventually go the way of the UK, although there has not been any call for it yet. Australia has a provision for suppressing directors’ residential addresses which would also be a possible model to adopt.

Is this a good idea? It depends on the purpose of showing a director’s residential address. Why do we really need to know that information? If the answer is to serve documents on a director, that can be easily achieved by allowing directors to be served:

  1. At an alternative “address for service” specified by the director (the new UK model); or
  2. At the company’s “address for service” which all companies must have anyway.

Provided we have one of the above options, the residential address isn’t really needed and should be able to be suppressed. This would be consistent with the UK and Australia, and also the approach under the Electoral Act 1993. The electoral roll is open for public inspection (though not electronically) and can be used to find a residential address, but with the ability for individuals to request suppression under section 115.

The Privacy Commissioner has guidelines suggesting a model similar to Australia’s, allowing suppression on request, although for some reason its report does not mention the Companies Act at all.

In the meantime, all company records including director addresses are open to full public inspection. Is there some other reason why it should stay? Openness and transparency are always good things, but if it is not necessary to disclose this personal information, should we?