May, 2018 - Parry Field Lawyers

New Zealand has passed a law called the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (“the AML/CFT law” for short). The purpose of the law reflects New Zealand’s commitment to the international initiative to counter the impact that criminal activity has on people and economies within the global community.

Recent changes to the AML/CFT Act mean that from 1 July 2018 lawyers must comply with its requirements. Lawyers must do a number of things to help combat money laundering and terrorist financing, and to help Police bring the criminals who do it to justice. The AML/CFT law does this because the services law firms and other professionals offer may be attractive to those involved in criminal activity.

The law says that law firms and other professionals must assess the risk they may face from the actions of money launderers and people who finance terrorism and must identify potentially suspicious activity.

To make that assessment, lawyers must obtain and verify information from prospective and existing clients about a range of things. This is part of what the AML/CFT law calls “customer due diligence”.

Customer Due Diligence Requirements

Customer due diligence requires a law firm to undertake certain background checks before providing services to clients or customers. Lawyers must take reasonable steps to make sure the information they receive from clients is correct, and so they need to ask for documents that show this.
We will need to obtain and verify certain information from you to meet these legal requirements. This information includes:

your full name; and
your date of birth; and
your address.

To confirm these details, documents such as your driver’s licence or your birth certificate, and documents that show your address – such as a current bank statement – will be required.
If you are seeing us about company or trust business, we will need information about the company or trust including the people associated with it (such as directors and shareholders, trustees and beneficiaries).

We may also need to ask you for further information. We will need to ask you about the nature and purpose of the proposed work you are asking us to do for you. Information confirming the source of funds for a transaction may also be necessary to meet the legal requirements.

If you cannot provide the Required Information

If we are not able to obtain the required information from you, it is likely we will not be able to act for you. Because the law applies to everyone, we need to ask for the information even if you have been a client of ours for a long time.

Before we start working for you, we will let you know what information we need, and what documents you need to show us and let us photocopy.

Please contact the lawyer who will be undertaking your work, if you have any queries or concerns.

What are your options when a charity “runs out of steam” but you don’t want to give up on it altogether? What if you want some time to have a break from the charity and its compliance obligations, but intend to come back to it in a few years? We were recently asked the question of whether it is possible for a charity to “pause” for a period of time, and here is what we said:

Can you “pause” a charity?

Generally, a charity is deregistered (removed from the Charities Register) where it ceases all activity. This means that in order for a trust to remain “alive”, it must continue to be active. Pausing a charity essentially means that all activity for the charity will cease for a period of time and it is therefore no longer active. If a charity has been de-registered and wishes to get back on the Charities Register, it will need to go through the application process again.

There is, however, an exception to this – it is possible for a charity to continue to file annual returns for the years that it is “paused” which essentially holds the charity accountable to the fact that it has paused. So long as the charity is not making any returns, it would not need to pay anything on filing those annual returns.

Conclusion

In conclusion, it is possible that you could pause a charity and come back to it in a couple of years, provided that you continue to file an annual return each year for the years where the charity is paused. This option could be advisable where you do not want your charity to be deregistered and to have to go through the application process again at a later date.

Every situation is unique so please discuss your situation with a professional advisor who can provide tailored solutions to you. We offer advice on all aspects of charitable trusts and are happy to answer any questions that you might have. Contact Steven Moe at stevenmoe@parryfield.com or 03-348-8480 for more information.

Muhammed Yunus is a 2006 Nobel Prize winner who founded the Grameen Bank in Bangladesh which lends to entrepreneurs who cannot borrow under regular banks and founded the microcredit movement which focuses on moving families around the world out of poverty. He has recently published a new book titled “A World of Three Zeroes” which focuses on his vision for a kinder, gentler planet without poverty, unemployment or environmental devastation. A large theme of this is the positive impact that social businesses (or social enterprises) have on moving towards a better future.

Muhammed Yunus was interviewed by Wharton School of the University of Pennsylvania at the end of 2017, and we have noted a couple of stand-out points from the extract of that interview below:

Wharton: Do you see the number of social-impact businesses increasing around the world?

Yunus: I see it every day, every moment, because people really have that feeling inside of them. This is my thesis of what I promoted in the book. The capitalist system is based on an interpretation that human beings are driven by self-interest, meaning selfishness. That is absolutely the wrong interpretation of a human being. A real human being is not all about selfishness. A real human being is selfishness and selflessness at the same time.

You double up both sides, whatever strength you want to put in each side. That’s your upbringing, your schooling and so on. But you have two options, and you can do both. You can create business to make money for yourself – that’s a selfishness – and you can create business to solve problems, make other people happy in the world, protect the world. That’s a selflessness, and that’s a business that we create called social business.

Social business is a non-dividend company [meant] to solve human problems. We completely eliminate the idea of making personal profit in social businesses. We totally dedicate ourselves to solving problems. Now that the idea of social business is growing, young people are coming up with big ideas, big businesses are coming up to create social businesses alongside. I’m very happy about that. Hopefully, schools like Wharton will be teaching social business as a separate subject and also give social MBAs to young people who will be preparing to operate social businesses, manage social business, create social business.

Wharton: Why didn’t we see social businesses 50 years ago?

Yunus: We don’t have to blame ourselves for not seeing it 50 years back, but we must blame ourselves why are we not seeing it now… You see everything (and it’s) about dollars, how to make dollars. Why don’t you for a while take the dollar-sign glasses off your eyes and put on the social business eyes? Suddenly, you see lots of opportunity for people to come up with creative ideas, to solve the problems of the people. If we bring all of our creative energy of the whole world, all of these problems that we see every day will disappear.

Wharton: A lot of that will rely on the entrepreneurship and the mind-set that people have. They have to take incremental steps and build on it.

Yunus: And when you become an entrepreneur, you have two options. You can run a business to make money for yourself, or you can run a business to solve people’s problems. And you can do both. You can have a money-making business for yourself, and you have a social business for yourself, and you feel good that you are doing something that touches the lives of so many people around you.

The full extract of the interview is up on the Wharton website.

This encouraging interview reinforces the significance of the impact that social enterprises can have. We hope that these snippets from the interview inspire you, as they did us.

More information on the book, including a link to order it, can be found here.

We have a team at Parry Field who work in the Social Enterprise/Start-up sector who would be more than happy to assist or answer any queries that you might have. We also have a book that might be of interest – more information on this can be found here.

Contacts:

Steven Moe – stevenmoe@parryfield.com

Kris Morrison – krismorrison@parryfield.com

The European Union (EU) will soon have new rules that are likely to affect the privacy policies of businesses around the world. They relate to the collection of data from citizens of EU countries, and so can affect businesses even as far away as New Zealand. The EU General Data Protection Regulation (known as the GDPR – more info here) has now come into force as of 25 May 2018.

There are three key ways that it could affect your business which you should be thinking through now.

1. Assessing to what extent it will affect you

To answer this you need to think through questions like this:

do you market to and target EU residents via website? Just having it accessible to them may not be enough – do you actively target EU residents to help those in the EU order tours or trips via your website such as offering the website in languages of the EU (beyond English)?
what “personal” data do you collect about users/customers e.g. names, gender, dates of birth, phone, credit card information, addresses, emails etc.
do you transfer data to the EU for example to any agents who act on your behalf there or do you have an “EU representative” or any physical presence at all?
does anyone else store your data on servers offshore or is it all in New Zealand?

2. Reviewing your documents

In light of the answers above, the key one to review is your privacy policy and it is important to check what it says and if it needs updating to reflect best practice. In addition, it is good to look at any consent forms (or places clients click) to check that they are widely enough drafted to give consent to use of their information.

When looking at your privacy policy some key questions to ask are:
What exactly is being collected?
Which entity is collecting the data?
What is the basis for receiving and for processing the data?
Whether or not the data will be shared with third parties?
How long will the data be stored for?
How is the information collected going to be used?
What rights does the person who submitted the information have to e.g. access it – and how?
What the process for a complaint is?

3. Documenting how you comply

This is both an internal record but also could be used if you were ever asked to show how you are complying. It would document the above two points clearly to explain how compliance with the new rules is ensured.

You may want to also designate a person or group to lead the effort within the business. A “Data Protection Officer” could help lead the way in this regard. They may want to prepare a “Data Protection Policy” which can also be used to educate the businesses’ senior decision makers about the GDPR’s new risk-based compliance approach, and the potential effects of non-compliance.

We are able to assist companies with a review of their privacy policies in light of the changes in the EU. While it may seem amazing that a jurisdiction so far away could impact us this is likely to be an increasing trend as we move into even more of a global economy where countries and regions look to protect the data of their citizens. This focus is highlighted by reports of the improper use of data by companies harvesting that information to use in elections. If your answers to any of the questions above indicate a link with the EU then now is the time to take action.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Please contact Steven Moe stevenmoe@parryfield.com at Parry Field Lawyers (348-8480)

New Extension of the Bright Line Test

In October 2015 the Government introduced the ‘Bright Line Test.’ The purpose of this test was to tax people on any “capital gains” made from the sale of residential land when that sale occurred within two years of the party acquiring the land and when an exemption to the tax did not apply.

Recently, a rather significant amendment has been made to this test that may affect you if you acquire property after 29 March 2018. Below we discuss this change and note the keys points that you should be aware of.

The Amendment

The timeframe under the Bright Line Test has now been extended from 2 years to 5 years.

Application of the Bright Line Test Moving Forward

Application of the Bright Line Test is now as follows:

If you acquired your property prior to 1 October 2015, the Bright Line Test will not apply (this position has remained unchanged);
If you acquired your property from 1 October 2015 to 28 March 2018 (both days inclusive) the original 2 year timeframe under the Bright Line Test will continue to apply;
Any property acquired from 29 March 2018 will now be subject to the 5 year timeframe under the Bright Line Test.

The date you acquired the property is typically the date that you entered into an Agreement for Sale and Purchase to purchase the property (although this position can vary).

Residential Land Withholding Tax

Residential land withholding tax criteria has now also changed for offshore RLWT persons to align with the change to the Bright Line Test. For property acquired from 29 March 2018 onwards, tax will be withheld by the solicitor/conveyancer for an offshore RLWT person and forwarded to the IRD on the sale of residential property sold within 5 years of its acquisition (if an exemption does not apply).

Does the bright-line test apply to all residential property?

All residential property is subject to the Bright Line Test however, the original exemptions to the Bright Line Test continue to apply. Primarily if the land was used as your main home, was transferred to you as part of an inheritance or was transferred to you as an executor or administrator of an estate. In all other situations, you will need to look to the test to determine whether you are obligated to pay tax.

If you have any concerns or questions regarding the Bright Line Test and RLWT, and how it applies to your situation, we have teams based in Riccarton, Hokitika and Rolleston who would be happy to assist. Please feel free to contact us to discuss further..

Contacts:

Paul Owens – paulowens@parryfield.com

Luke Hayward – lukehayward@parryfield.com

Judith Bullin – judithbullin@parryfield.com

New changes to the Overseas Investment Act (OIA) will be enforced later in the year restricting non-resident foreign buyers from purchasing existing homes in New Zealand in an effort to make housing cheaper for New Zealanders. These changes mean that all land considered “residential” or “lifestyle” will be deemed “sensitive land” and will be more difficult for overseas investors to purchase. The anticipation of these changes has raised some concerns and confusion for those hoping to purchase property in New Zealand.

This article aims to address some of these concerns, and clarify the confusion.

What are these upcoming changes?

The government is “tightening” the overseas investment regime by broadening the scope of “sensitive land” to include residential land, which will primarily be available only to New Zealand and Australian Citizens (and permanent residents who meet the criteria – more on this below). This will make it more difficult for overseas investors to purchase property in New Zealand as they will be subject to consent from the Overseas Investment Office (OIO). The consent/screening will require that the investors are committed to staying in New Zealand. If they obtain consent and subsequently breach the regime, the investors may be required to take certain actions such as selling their property within 12 months of the “trigger event”. The definition of a trigger event will be provided in a regulation in the act.

Along with this major change, stricter rules are likely to apply to the purchase of farm land or forestry by overseas investors.

NB: “Sensitive land” is land that cannot be purchased by overseas investors unless they obtain consent from the Overseas Investment Office.

Criteria for permanent residents:

A permanent resident may be classed with New Zealand and Australian citizens and therefore not need to obtain consent from the OIO where they have been residing in New Zealand for at least 12 months and have been present in New Zealand for at least 183 days. If they don’t meet these requirements, then they will be placed in the same class as residents for the purposes of purchase of sensitive land and will be subject to the same consent/screening criteria (showing that they are committed to residing in New Zealand).

Example:

Frank and Jill are planning to move to New Zealand from overseas and want to get in the property market over here. They are concerned that these upcoming changes to overseas investment in New Zealand will prevent them from doing so, so they want to buy property in New Zealand before it is too late. Frank and Jill are wondering whether it would be best for them to quickly buy an average house to ensure that they are in the property market before these new changes come into force.

Should Frank and Jill quickly buy property in order to get in the market?

At this stage, it is unclear when these changes will actually come into force. This poses a difficulty in determining when will be too late to purchase property before the new requirements are imposed. It is certainly a possibility that Frank and Jill could buy an average house in the meantime to simply get on the property market, and it is advisable that they do purchase property before the changes do come into force if they wish to avoid the screening criteria. If they enter into a sale and purchase agreement now, they will not be subject to the criteria when the changes do kick in.

That being said, purchasing an average property as a way of getting in the market would not give Frank and Jill a free pass to then on-sell and buy a new house later down the track. They would still be subject to the screening tests once they are enforced – that is, until they either meet the permanent resident requirements noted above, or until they become a New Zealand citizen.

Other options available to Frank and Jill:

Another option is that Frank and Jill rent a house until they have satisfied the permanent resident criteria, and then purchase a house at that stage. They will need to ensure that they have met the 12 month/183 days residing in New Zealand requirements in order to qualify by this means.

It is important to note that these changes do not by any means mean that Frank and Jill will not be able to purchase property in New Zealand; it simply means that they must get consent in order to purchase unless they meet the residency requirements.

What about agricultural/farm land and forestry?

As mentioned above, stricter requirements are also likely to apply to the purchase of farm land and forestry. If an overseas person is seeking to invest in farm land, questions in relation to jobs, new technology, increased exports, increased processing of primary and oversight and participation by New Zealanders. An overseas person investing in forestry land may be subject to certain conditions such as entering into agreements with locals.

For a more general article on the changes to OIO rules, see our article here.

If you have any further questions regarding these upcoming changes, please feel free to get in touch with us. We have teams in our Riccarton, Hokitika and Rolleston branches who would be happy to help you.

Kris Morrison – krismorrison@parryfield.com

Paul Owens – paulowens@parryfield.com

Steven Moe – stevenmoe@parryfield.com

Keynote by Hon Peeni Henare.

Hon Peeni Henare – Keynote – Q & A session.

Steven Moe, Kris Morrison and Ken Lord recently attended the Perspectives on Charity Law, Accounting and Regulation in New Zealand inter-disciplinary conference held at the end of April 2018 in Wellington, New Zealand. We were involved in the organising committee for the conference, and Steven Moe moderated Session 2 and Session 9. Below are videos of each of the sessions including Q & A’s with the topics covered at this event. These videos are also accessible on our YouTube page (click here) and under the Videos tab on this website.

Session 1: Who are we as a sector, why are we here and what do we hope to achieve?
Speakers: Stewart Donaldson and Roger Holmes Miller

Click here to watch session 1

Session 2: Are there too many charities in New Zealand?
Speakers: Sue Barker, Jamie Cattell, Kate Russell, Cheryl Spain, Dellwyn Stuart and Steven Moe (moderator)

Click here to watch session 2

Click here to watch session 2 – Q & A

Session 3: Overview of new financial reporting standards implementation
Speakers: Robert Buchanan, Anthony Heffernan, Raewynne Jacobs, Ceri-Ann Ross, Caroline White and Julia Fletcher (moderator)

Click here to watch session 3
Click here to watch session 3 – Q & A

Session 4: Approaches to public benefit – different perspectives on social housing and charity
Speakers: Andrew Butler, Scott Figenshow, Peter Gunn and Matthew Harding (moderator)

Click here to watch session 4

Session 5: Advocacy by charities
Speakers: Sue Barker, Adam Parachin (via webcast), Andrew Phillips and Matthew Harding (moderator)

Click here to watch session 5
Click here to watch session 5 – Q & A

Session 6: The interplay of judge-made and statute law
Speakers: Jennifer Batrouney QC and Matthew Harding

Click here to watch session 6

Session 7: Tax issues and charity
Speakers: Andrew Babbage, Stewart Donaldson, Denham Martin and Jennifer Batrouney QC (moderator)

Click here to watch session 7
Click here to watch session 7 – Q & A

Session 8: How to build public trust and confidence in the charitable sector
Speakers: Murray Baird, Oonagh Breen, Stephen Reilly and Wayne Tukiri (moderator)

Click here to watch session 8
Click here to watch session 8 – Q & A

Session 9: Funding, social enterprise and the intersection with charities who operate businesses
Speakers: Louise Aitken, Levi Armstrong, Matt Dodd, Michael Gousmett, David Woods and Steven Moe (moderator)

Click here to watch session 9
Click here to watch session 9 – Q & A

Session 10: Charity law and accounting in Te Ao Maori
Speakers: Simon Karipa, Damian Stone and Alex Wilson

Click here to watch session 10
Click here to watch session 10 – Q & A

Session 11: What needs to be done next?
Speakers: Anthony Heffernan, David McLay, Mary Synge and Andrew Phillips (moderator)

[To be added]

Session 12: Future opportunities and challenges
Speakers: Craig Fisher and Matthew Harding

Click here to watch the Q & A discussion session

Keynote
Speaker: Hon Peeni Henare

Click here to watch the keynote address
Click here to watch the keynote Q & A

Session 1 – Who we are a sector, why are we here and what do we hope to achieve?

Speakers: Stewart Donaldson and Roger Holmes Miller