January, 2023 - Parry Field Lawyers

Most people have heard of resolutions for companies, but at certain times the Companies Act 1993 (the Act) requires companies to issue certificates. We were recently asked what certificates are, when they need to be issued, and how certificates differ from resolutions. These are great questions and we answer them here so more people can have the information.

Both resolutions and certificates are important for appropriate decision-making, due process, and to ensure good governance.

What is a resolution?

In meetings (or via email if a decision is needed outside of a meeting), decision-makers will typically discuss something and make a decision. A resolution is the record of that decision. Resolutions must be recorded in the minutes. Schedule 3 of the Act provides a good overview of what is required for board meetings. It is common for company constitutions to include more detail and process around company meeting obligations.

When are resolutions needed?

It is advisable to record all important director decisions as resolutions. One important situation requiring a resolution or contingent on approval by special resolution is when a company wishes to enter into a major transaction. This might relate to the acquisition or disposition of assets the value of which is more than half the value of the company’s assets before the acquisition or disposition.

Resolutions are also needed in many other situations, including when adopting a constitution, deciding on the consideration for which shares will be issued, or deciding to exercise an option to redeem a share.

What is a certificate?

A certificate is more formal in nature than a resolution and sets out information which directors certify as being true. Certificates are only required in certain situations. Companies will make many more resolutions than they will issue certificates.

Certificates are typically required to be provided to the Companies Register where they will be publicly accessible. Anyone can do a search on an incorporated company. For example, a search of ‘documents’ for a large company will show many examples of certificates the company has provided to the registrar. The register promotes transparency and accountability, which is intended to help encourage good governance and discourage behaviour by directors that may harm shareholders.

When are certificates needed?

When certificates are required by the Act it is common that a resolution is needed first. For example, when directors are determining the consideration for the issue of shares they will vote and there will be a resolution. Only then are they able to sign a certificate and provide that to the Registrar.

Some other examples of when certificates are typically needed include:

When the board passes a resolution for the issue of options or convertible financial products, an offer to acquire shares, or for distributions to shareholders
When the company is amalgamating with another company
If the company has a listing agreement with a stock exchange, after the registration or a transfer of company shares
When a director is appointed or removed
If authorising a payment, benefit, loan, guarantee or contract to a director
If authorising liability insurance for directors or employees.

Consequences of not issuing certificates:

Fines of up to $5,000 apply for failure to comply with the obligations to provide certificates for shares or failure to sign a certificate of solvency when necessary
The company must keep a copy of all certificates for the last 7 years at its registered office
Shareholders and any authorised person are able to give notice in writing to view certificates.

This article is not a substitute for legal advice and you should consult your lawyer about your specific situation. Please feel free to contact us at Parry Field Lawyers:

Steven Moe, Partner – stevenmoe@parryfield.com
Michael Belay, Solicitor – michaelbelay@parryfield.com
Sophie Tremewan, Solicitor – sophietremewan@parryfield.com
Yang Su,Law Clerk – yangsu@parryfield.com

Many people mistakenly believe it is best to register a company to operate as a self-employed contractor. In reality, what is ‘best’, depends on your circumstances. We get asked a lot about these options so let’s look at a common misconception.

Isn’t registering a company best for limiting liability?

We tend to encourage entrepreneurs to set up companies. Registering a company creates a separate legal entity which means the company rather than the owner becomes liable if things go wrong. If you deal with multiple creditors this legal separation might be useful. However, company structures do not protect in all situations. If the owners are also managing the company as directors, they are still exposed to certain duties and liabilities as managers. Having a company structure could allow you to get investors in more easily as well – we discuss that in this article.

If you have few creditors and low risk generally, the idea of limiting liability may not be potential reason enough to register a company. Instead, if you are a sole trader it may be prudent to insure yourself against other industry-specific risks that might attach to you, for example, by taking out Professional Indemnity and Public Liability Insurance.

What are the other options?

Company or sole trader structures will work best for many people. However, we recommend thinking about the future, and how your circumstances might change. If you are likely to end up employing people, dealing with multiple creditors and managing complex inventory, it might be best to register as a company from the outset.

There are numerous options other than companies and sole trading, which is why we developed this useful comparison and our Startups Legal Handbook. We look beyond the obvious when we provide advice. We would be pleased to help you tease out your circumstances in more detail to help determine the best legal structure for you.

Should you require assistance, please feel free to contact Steven Moe stevenmoe@parryfield.com, Michael Belay michaelbelay@parryfield.com, Sophie Tremewan sophietremewan@parryfield.com, Yang Su yangsu@parryfield.com at Parry Field Lawyers.

There are around 28,000 officially registered charities in New Zealand doing important work to make Aotearoa a better place. People donate around $1.5 billion annually to New Zealand charities to enable them to do their work.

When it comes to an organisation, the term ‘charity’ has special meaning. To call itself a registered charity, an organisation needs to go through a proper process, which is governed by the Charities Act 2005 (the Act).

This law exists to promote public trust and confidence in the charitable sector and to encourage and promote the effective use of charitable resources. In a nutshell, it is about ensuring good practice by charities, which is a great thing for everyone.

To obtain charitable status an entity must have legitimate charitable purposes, and these are set out in the Act as: relieving poverty; advancing education; advancing religion; or other purposes beneficial to the community. In other words a cause may be good but it may not be capable of registering as a charitable entity.

This doesn’t mean that a cause that falls outside of these categories is not worthy; it simply means that by law that cause is unlikely to be able to become a registered charity – it may still be a charity which is incorporated with Companies Office though.

We realise this area of law can be confusing so have written a free guide about this for those who want to set up charities which is available here

Does charitable status matter?

There are some advantages for organisations to be registered charities. Funders and donors often feel more comfortable giving to a registered charity because they know that registered charities are required to adhere to good practice. There may also be tax advantages for the organisation, and for donors, who may qualify for tax rebates and be able to claim back 1/3 of what they give to the charity.

To help ensure charities are operating well, registered charities must submit annual reports to Charities Services. The reports are all publicly accessible on the Charities Register, so anyone can see how the charity is performing.

It is an offence to even imply that you are a registered charitable entity if you are not registered, because it is misleading. Being a ‘charitable trust’ does not mean an entity is a registered charity. The term ‘charitable trust’ is simply the legal structure. A charitable trust still needs to be registered to have genuine legal charitable status which is done by applying to Charities Services.

Registered charity or not?

It’s easy to check if an organisation is a registered charity by doing a quick search using the Charities Register.

Dealing with bogus ‘charities’

If you discover that an entity is wrongfully describing themselves as a charity to seek an advantage, you can email compliance@dia.govt.nz. Find out more about making a complaint on the Charities Services website.

We deal with charities and those who want to set them up a lot and have many free resources on our website here. Should you require assistance, please feel free to contact Steven Moe stevenmoe@parryfield.com, or Yang Su yangsu@parryfield.com or any of the team at Parry Field Lawyers.

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