July, 2020 - Parry Field Lawyers

We recently attended a webinar by the Overseas Investment Office (OIO) on 20 July 2020. The purpose was to discuss some reforms to the rules and in particular the new “Urgent Measures Act”.

The purpose of the new changes are to support the Government as part of its business response to COVID by encouraging growth through investment. So there are some simplifications made to the normal OIO process– while also ensuring there are rules in place in relation to sensitive land and other categories of assets.

Before we get into detail it is worth noting that the guides on investing in New Zealand at the OIO website are quite helpful, for example, this one on which transactions need consent.

Overview

There are four key changes:

1. Temporary Emergency Notification Requirements;
2. New national interest assessment;
3. Simplified screening; and
4. Stronger enforcement powers.

In this article we will set out the key points for each of them.

1. Temporary Emergency Notification Requirements

Notification is required in relation to ownership/control there are (no monetary thresholds) and will be needed for increases above 25%, ownership beyond 50%, 75% or to 100%. They said that this is a deliberately broad approach they said. This is a temporary regime which will only apply for a limited time.

Who needs to notify? This should be done by any person who has more than 25% overseas ownership, are non-citizens and non-residents, and have more than 25% control of a board, as well as those who are associates.

What needs to be notified? Purchase of more than 25% of a business, increases in key thresholds (above) and purchase of more than 25% of the property of an NZ business (including land interests that would not be sensitive).

When to notify? 16 June is when legislation came into force, so only for those deals after that.

What do you not need to notify? If you already have consent, or if you need consent under another criteria.

Examples of when notice is needed:

• Direct: An overseas entity buying all shares of an NZ company – needs to be notified, even if a shell company.

• Indirect: Overseas person buying an Australian company that has an NZ entity – need to notify (ie even though already overseas owned).

• Notification of property: If a company is being bought that has property, then you need to notify. If a lease to an overseas person, then it depends if that is more than 25% of the value of the NZ companies property at the NZ Company.

There is no cost to notify and there is a form online. There is a much higher level of information needed than normal. It will take around 35-40 minutes to fill in the form. The type of information required includes type of transaction, if there is a target entity, the investor themselves etc.

Once submitted, they will assess if more details are needed or if the transaction can be approved. Generally this takes around 10 days (if the transaction can proceed). A few applications may be allowed to proceed subject to conditions. A few applications may be denied or need more information.

If more information is required, then you will need to allow a total of 40 working days and the aim is to resolve all within 70 working days.

If a transaction is not notified, there can be serious implications. The highest penalty would be civil penalties of up to $10million.

2. National interest assessment

The OIO emphasised that they want investments to proceed. So the question they ask is going to be: “Is the transaction is contrary to the national interest?” This test will be applied:

• If further assessment is needed;
• If it is a strategically important business; and
• If the Minister of Finance wants to ask more questions about an application.

The OIO will look broadly at factors such as competition, social impacts, character of the investor, national security, public order, international relations, alignment with NZ values and interests as well as broader policy settings. The factors are very broad. As an example, they would look more closely at military technology investments than other investments.

An application could have conditions added to manage risks, or it could be prohibited or it could just proceed without conditions.

3. Simplified Screening

This simplified screening includes that low risk transactions that do not need consent eg small increases in shareholding. There are also automatic standing consents for eg listed entities that are not more than 50% owned overseas, land adjoining sensitive land, managed investment schemes and some debt transactions.

As an example, if an overseas person is buying land next to sensitive land, that may qualify for the automatic standing consent. Also, some loans and debt can qualify for automatic consent.

4. Enforcement powers

These are increased, such as adding enforceable undertakings as a possibility as well as maximum penalties including (changing from $300,000 to $500,000). For a company, it could range from $300k to $10 million. The reason for this is that breaches are serious and so the penalty reflects that.

Conclusion

Overall it appears that the intention is to allow easier investment in New Zealand. However, as you can see from the detail in this short update it is worth speaking with advisors about the particular context as there are likely to be additional points to consider to ensure you qualify for the simpler regime.

For more information the OIO website has a lot of detail. For example, the above is discussed here https://www.linz.govt.nz/overseas-investment/changes-overseas-investment-act.

Please note that this is not a substitute for legal advice and you should contact your lawyer about your specific situation. Please feel free to contact us on 03 348 8480 or by email to Steven Moe – stevenmoe@parryfield.com or Kris Morrison – krismorrison@parryfield.com

In part one, we looked at the reporting obligations of charities. In this article we will look at the obligations a registered charity has when certain changes are being made.

Notifying Charities Services

A charity must notify Charities Services of the following changes:

– Charity name
– Address for service
– Change in the officers (including when an officer is disqualified)
– Balance date
– Rules (ie under the trust deed, constitution or charter)
– Purpose of the charity
– The legal entity type of the charity

To notify Charities Services of such changes, you can complete this form, or log into your account and notify them online.

A charity must notify Charities Services of such changes no later than three months after:
– the changes take place; or
– the charity becomes aware of the change (whichever is later).

Notifying the Companies Office

Your charity also has an obligation to notify the Companies Office of certain changes. Changes that incur this obligation can be categorised as either ‘administrative’ or ‘substantial’.

Administrative changes include changes concerning officers, changes in procedures relating to appointments, resignations, meetings, and changes to the powers of a board. You can make such changes by completing this form, or logging into your account and notifying them online. You will be required to attach a copy of the requisite alteration(s) or resolution.

Substantial changes are more significant changes that involve trust property, also known as a ‘variation’ of the trust. Such changes have the same notification requirements as an administrative change (above) but must also be accompanied by a statutory declaration. Additionally, the variation must be certified as a correct copy by one of the trustees, or a member of the committee or governing body of the society.

A charity must notify the Companies Office of any administrative or substantial changes within one month of adoption of the alteration. Of note is that a charity does not have an obligation to notify the Companies Office of the addition or resignation of trustees.

These key obligations are just a few of the ongoing obligations charities should comply with. Charities should also ensure they operate in accordance with their own rules, the Charities Act 2005, and other relevant legislation.

We have helped many charities over the years and would be more than happy to discuss your situation with you. For more information, feel free to contact Steven Moe at stevenmoe@parryfield.com

We have published guidance about the requirements of registered charitable trusts and how to set up a charitable trust in New Zealand (here), as well as provided a practical checklist of next steps (here). However, charities also incur ongoing obligations. This article outlines the key ongoing obligations you should be aware of.

1. Reporting to Charities Services

All registered charities must submit an annual return to Charities Services within 6 months of their financial year end. The annual return requires you to check and update the following information:

– General Information: Your charity’s name, place(s), and contact details.
– Officer Details: Each officer’s name, date of birth, position and address.
– Purpose and Structure: What your mission is, your main activity or beneficiary, and how your charity is structured.
– Charity Relationships: The names of any entities that control or are controlled by your charity.
– Your People: The number of employees and volunteers you have, as well as how many hours they work.

As well as the above details, charities must also report a level of financial information. These reporting requirements differ depending on the tier of charity:

– Tier 1: Over $30 million annual expenditure;
– Tier 2: Under $30 million annual expenditure;
– Tier 3: Under $2 million annual expenditure; or
– Tier 4: Under $125,000 annual operating expenditure.

Of note is that these thresholds must be viewed in the context of the previous two financial years. This means that if you have a one-off fluctuation in the current financial year that would otherwise put you into a different tier, you would still have to report under the tier of the previous two financial years. This is to ensure that any one-off yearly fluctuations don’t change the tier the charity must report under.

Once you have worked out what tier your charity falls in, the reporting requirements are as follows:

– Tier 1: Full Reporting Standards
– Tier 2: Reduced Disclosure Regime
– Tier 3: Simple Format Report – Accrual based accounting
– Tier 4: Simple Format Report – Cash based accounting

Around 95% of charities fall under tiers 3 and 4. Charities under these tiers can report under simplified reporting standards, using either cash-based accounting (tier 3) or accrual-based accounting (tier 4).

What is the difference between cash-based accounting and accrual-based accounting?

Cash-based accounting requires transactions to be recorded at the time cash is received or paid. Cash-based accounting is typical in organisations where transactions are small in number and size.

Accrual-based accounting requires revenue and expenses to be recorded when they are earned or incurred, rather than when cash is received or paid. Accrual-based accounting is typical in organisations with more frequent and larger transactions.

Do I need to have my accounts audited?

If your charity’s total operating expenditure for each of the two previous financial years was:

– Over $500,000: financial statements must be either audited or reviewed by a qualified auditor.
– Over $1 million: financial statements must be audited by a qualified auditor.

You can find more about financial reporting standards here.

Charities Services have also provided this helpful guidance here as well.

Summary

These key obligations are just a few of the ongoing obligations charities should comply with. Charities should also ensure they operate in accordance with their own rules, the Charities Act 2005, and other relevant legislation.

This article is not a substitute for legal advice and you should contact your lawyer about your specific situation. We have helped many charities over the years and would be more than happy to discuss with you. For more information, feel free to contact Steven Moe at stevenmoe@parryfield.com

On 30 June 2020, the long-awaited Privacy Bill received Royal Assent, with the changes coming into effect on 1 December 2020.

Privacy Commissioner John Edwards has said “The new Privacy Act provides a modernised framework to better protect New Zealanders’ privacy rights in today’s environment.”

Some of the key changes include:

• All agencies will be required to report serious privacy breaches to the Office of the Privacy Commissioner. If the breach is likely to cause serious harm, the people affected must also be informed. This is consistent with international best practice.

• If an agency uses service providers based outside New Zealand, they will need to make sure the providers meet New Zealand privacy laws.

• Criminal offences will be introduced. An agency could be fined up to $10,000 for misleading an agency about someone’s personal information and/or intentionally destroying requested personal information.

• The Privacy Commissioner will have the power to make binding decisions when someone requests access to their personal information. These decisions may be appealed to the Human Rights Tribunal.

• International digital platforms that obtain New Zealanders’ personal information through business in New Zealand must comply with New Zealand privacy law, regardless of where the servers are based.

• The Privacy Commissioner will have the power to issue compliance notices. Non-compliance with the notice could result in a fine of up to $10,000.

This article is not a substitute for legal advice and you should contact your lawyer about your specific situation. If you think your privacy policy is insufficient (or non-existent!), we would strongly encourage you to get in touch with us. Contact Steven Moe at StevenMoe@parryfield.com

Christchurch CBD

Christchurch

Rolleston

Hokitika