New Zealand welcomes foreign investment as a way to develop the economy and boost the capability of New Zealand companies. However, if the investment involves sensitive New Zealand assets, the Overseas Investment Office (OIO), requires overseas investors to go through a mandatory application process. So, before an overseas investor makes a purchase in New Zealand it is important to be aware of what’s involved in order to stay safe and avoid fines or adverse publicity. Our summary is set out below and we are happy to discuss your situation with you. Also checkout our Doing Business in New Zealand guide.

 

Who is an overseas person?

An “overseas person” is defined as a someone who is not a New Zealand citizen or a person ordinarily resident in New Zealand, or an entity (partnership, trust, company) incorporated overseas or where an overseas person has more than 25% ownership or control.

Even if the person making the purchase is not an “overseas person” they may be an “associate” of an overseas person, meaning that someone overseas is controlling their actions. The term “control” is given a very wide meaning and can be specific or general, indirect or direct. It recognises that where control exists, the purchaser is really the overseas person, and therefore approval is still needed.

 

Buying sensitive land

Consent is needed for five hectares or more of non-urban land (this covers most farms), or land which is defined to be sensitive:

  • foreshore, seabed or one of certain named islands;
  • greater than 4,000 square metres and contains (or adjoins) a reserve, lake or foreshore;
  • land of historical or conservation significance.

Farm land is a particularly sensitive potential acquisition. Farm land being sold must first be offered on the open market in New Zealand so that New Zealanders have the chance to buy it before an overseas person. Find out more about how it must be advertised.

 

Significant Business Assets

Consent is also required if an overseas person plans to:

  • establish a new business at a cost of more than $100 million;
  • acquire a business if the value of the business exceeds $100 million; or
  • acquire 25% or more of a company where the value of the consideration or the assets of the target company and its subsidiaries exceeds $100 million.

These monetary thresholds may be impacted by agreements with other countries. For example, the figure in 2023 is $618 million for Australian non-government investors. For those countries which have signed up to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership the figure will be $200 million.

If one of the above actions is proposed, then an investment proposal application may be needed.

 

What do investment proposals include?

An overseas person wishing to invest will need to provide comprehensive information about themselves and the proposed investment. To succeed they will need to satisfy both the ‘Investor Test’ and the ‘Benefit to New Zealand Test’.

  • The Investor Test requires applicants to show they are of good character, that they have business experience, and are financially committed to that investment.
  • The Benefit to New Zealand Test has 21 criteria. These include the chance to highlight benefits, such as whether the investment will create new jobs, what access the public will have to the land, new technology that may be brought in, and how historic heritage or conservation areas will be protected.

When making its decision on the proposal the OIO will also consider what would happen if the applicant did not make the investment. For example, they will be interested in likelihood of someone else buying the property or business and whether that person would invest (or not invest) further money in it.

It is important to note that if a consent is granted it will typically contain conditions that must be followed and also contain some requirements to report back to the OIO. If a consent is not granted and the investment goes ahead, penalties such as divestment of the acquisition as well as fines and even imprisonment may apply. This article describes what can happen if investors fail to get consent and go ahead anyway.

 

How long does the process take?

The OIO will provide an estimate of how long it will take to make its decision. It aims to respond within 40 working days for Significant Business Assets applications and within 65 working days for Sensitive Land applications. However, it may take more or less time, depending on the situation and the number of applications it is dealing with.

Approximately 25% of applications are immediately rejected as they lack information or are of poor quality, likely because the applicant did not get advice first. The OIO may also ask for more information from the applicant, which can delay the process.

We recommend seeking expert advice to help ensure the application is as correct as possible to avoid issues arising. We have experience with assisting applicants through this process and would be pleased to assist you.

Be sure to check out our free guides such as ‘Doing Business in New Zealand’ and the ‘Start Ups Legal Toolkit’.

 

If you have any further queries please do not hesitate to contact one of our experts at Parry Field Lawyers- stevenmoe@parryfield.com, yangsu@parryfield.commichaelbelay@parryfield.com or annemariemora@parryfield.com

This article is general in nature and is not a substitute for legal advice. You should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source. 

ChatGPT is a chatbot that was released in November 2022 and it has certainly got people talking. Some say it heralds the demise of lawyers, among other professionals, because of its ability to answer questions and draft documents. We tested it for ourselves and while we believe it does have implications for lawyers, we do not recommend doing away with your legal advice just yet.

A chatbot uses artificial intelligence to simulate human conversation using a large language model, in this case text. Our instruction to ChatGPT was: “Draft a Trust Deed for a New Zealand charitable trust.”

The chatbot’s response was partly correct but overlooked critical details needed to make the document legally valid. It ignored the need for a ‘donor’, the person who creates the trust. It failed to stipulate that Trustee signatures need to be witnessed, which is fundamental to the deed being in the proper form. It included only some of the mandatory duties of Trustees. Overall, it performed at a 5/10, but as the document generated would not be legally binding, it was a ‘fail’. In reality, people can already find better templates for charitable trust deeds using a standard internet search.

We also asked ChatGPT: “Is it better for my organisation to be an incorporated society or charitable trust?”

The chatbot set out some of the differences and similarities but wasn’t overly useful. A much more useful comparison is already available, for example, on our website: https://www.parryfield.com/incorporated-societies-vs-charitable-trusts/

Of course the question was a trick one because we did not provide any details of the organisation and each organisation is different. ChatGPT cleverly noted this at the end of its answer: “Ultimately, the choice …… will depend on the specific needs and goals of your organisation. It is advisable to seek legal advice and consider all relevant factors before making a decision.”

We couldn’t agree more. Our team has helped countless clients with exactly this question because it can be confusing. Our legal advice is based on decades of experience across hundreds of organisations and all entity types. At this stage it is only real-life lawyers who can elicit from clients the critical information to advise on the best entity type.

 

Our verdict

ChatGPT does not purport to provide legal advice.  It acknowledges its limitations including that it may occasionally generate incorrect information or produce harmful instructions or biased content.

However, ChatGPT is just one AI tool. The legal profession has already embraced AI for things like contract reviews, research and document discovery. In a legal first in 2022, an AI start-up in the United Kingdom was used to sift through hundreds of documents in a murder trial saving the legal team four weeks.

AI offers enhanced efficiency and might just free lawyers up from many of the repetitive and mundane tasks they currently undertake, which could be good for lawyers and clients. However, it is a little while before it is advisable to hand over real legal challenges to an AI ‘lawyer’.

We recently helped to edit a collection of essays on the topic of AI and the law for The Law Association which you can download here.

 

This article is general in nature and is not a substitute for legal advice. You should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source.

We help with charity set ups and answering questions all the time. If you would like to discuss further, please contact one of our team on stevenmoe@parryfield.com,  michaelbelay@parryfield.com,  sophietremewan@parryfield.com, or yangsu@parryfield.com at Parry Field Lawyers

Why minutes matter

Accurate and thorough board minutes are as critical for charitable entities as they are for companies. Well-written minutes help to ensure charitable entities are legally compliant and assist effective and efficient governance. They are an important record for current, absent and future board members about meeting discussions and decisions as they provide concise summaries of key points discussed.

Furthermore, accurately noting conflicts of interest, identifying documents tabled during meetings, and maintaining a list of action items all help the board to manage its workload and responsibilities effectively, ensuring progress is tracked and necessary actions are completed for future meetings.

 

Legal Requirements

In New Zealand, different types of charitable entities have specific legal requirements for meeting minutes.

Charitable Trusts: The Trusts Act 2019 requires trustees to keep core documents, including any records of trustee decisions made and any written contracts entered into, which will typically be records in minutes.[1]

Incorporated Societies: The Incorporated Societies Act 2022 stipulates that minutes of annual general meetings must be maintained.[2] Sections 89 allows resolutions to be passed without a meeting, for example, via email, if a society’s constitution allows.  Failure to adequately hold and maintain minutes for annual general meetings constitutes an infringement offense, carrying a $500 fee per violation.

Charitable Companies: The Companies Act 1993 requires charitable company directors to  maintain detailed minutes of all directors’ and shareholders’ meetings, documenting decisions and resolutions. The Companies Act also requires that minutes be accessible for inspection by directors, shareholders, and regulatory authorities.

 

What minutes should include

There are numerous templates available for minutes. Our advice is to tailor any template to the needs and preferences of your entity.

  1. The administrative basics.
  • Start and finish times.
  • Name of chair.
  • Name of minute taker.
  • Attendance: those present and absent, and whether a quorum was established and maintained.
  • Date, Time, and Location: Schedule and details for the next meeting.
  1. Each agenda item.
  • Note the item number and topic and keep this consistent with the agenda for ease of reference.
  • Note key points discussed. Record sufficient detail for people to understand the topic and discussion. Avoid unnecessary detail. Avoid attributing any comment to a particular Board member.
  • Resolutions: Detail the specific resolutions. We recommend that the chair sit beside the minute-taker and verbalise the proposed resolution for the meeting to hear. This allows meeting attendees to hear what is being minuted, to ensure it is accurate and makes sense.
  • Good minutes should signal whether something was simply ‘noted’ or ‘resolved’. If something is being tabled for the awareness of the board but does not require a decision, it is enough to note what was tabled and that it was noted.  If the board paper has asked the Board to make a decision, the minutes should state that the matter was resolved.
  • If relevant, note whether voting was unanimous, tied, or whether a casting vote was necessary. (Tip – refer to your entity’s rules to see what is required for decision making.)
  • Note whether any attendees absented themselves due to a conflict of interest.
  • Actions: List any actions, who the actions are assigned to, and the date required. It can be useful to list the actions in a separate part of the minutes for easy reference.
  1. Distribution
  • It is best practice to send the draft minutes to Board members within a week of the meeting, or soon after. Board members should review these while the content is still fresh, and send any proposed amendments to the Chair.
  1. Approval
  • The approval of minutes should be a standard agenda item for each meeting. At this time, the Chair will ask if any board members have changes to the minutes. The meeting minutes can then be ‘approved’ or ‘approved subject to the changes noted’.
  1. Storage and Accessibility
  • Minutes must be securely stored while also being readily accessible if required.

 

 

This article is general in nature and is not a substitute for legal advice. You should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source. 

[1] Section 45, Trusts Act 2019.

[2] Section 84, Incorporated Societies Act 2022.

Why good papers matter

Board papers help to ensure effective and efficient board meetings and well-informed decision-making. They should be clear, concise, and structured to assist decision-making while avoiding unnecessary detail.

Board members, including those in charitable entities, have a number of duties. Well-informed, well-constructed board papers will assist board members to consider what matters and make appropriate decisions.

These should be provided well before the meeting itself so they are ‘taken as read’.

 

What sections should be included?

Use your judgement and adjust the length and detail of the paper to suit the matter being considered.

Here are some suggestions on what to include, depending on the topic. It may be helpful to develop a board paper template to help writers.

  1. Consultation

Detail who wrote the paper, who else was involved, and whether any other consultation or engagement is needed, for example, with employees, iwi, funders.

  1. Choose the right speakers

Organise the right people to speak to the paper and ensure they understand the content and can answer questions.

  1. A short Introduction and purpose

Include a summary of the main points at the start and highlight key information or questions to address.

Be clear about whether the paper is for ‘information’, ‘noting’, ‘decision-making’, or ‘advice’. Set out what decision or recommendation is being proposed.

  1. Background

Provide essential context. Outline what is proposed and why and related issues. Using the 4Ps framework (‘Position, Problem, Possibilities, Proposal’) can be helpful. If similar topics have been discussed previously, refer to them for deeper insight. This section should summarise key points from detailed materials and allow the board to understand the current outlook, critical events and significant issues.

  1. Proposed activity

What action is required and what are the timelines?

  1. Financial summary

If a decision has a significant financial impact, provide information that allows decision-makers to understand how that would impact your organisation. Outline what alternatives were considered.

For significant investments, evaluate cash flow impacts and payback periods using methods like cost-benefit analysis, net present value, and internal rate of return. Other tools include ratio analysis, period comparisons, and trend forecasting. State whether the proposed expenditure is within budget.

  1. Risks and benefits

Outline any risks , for example, quality, safety, finance, employment, reputation, and environment. Consider these in the context of your organisation’s risk tolerance.  Explore the consequences of not taking the recommended action, providing a balanced view that weighs risks and benefits. Outline mitigation strategies.

  1. Impact

Explain what impact this has had already, if relevant.

  1. Recommendation and Resolutions

Each recommendation should state the proposed resolution, explain why it is the optimal choice, and include a summary of alternatives when applicable. The draft resolution should be ready for the Board’s direct approval.

 

More tips 

  1. Tailor papers to your board. Boards need a strategic view, so avoid operational details.
  2. Have detailed information available on request or place it in an appendix.
  3. Keep language clear and avoid unnecessary words. Avoid jargon and acronyms.
  4. Follow up. After meetings, follow up on action items and decisions, assigning clear responsibilities and deadlines for each task.
  5. Review and edit papers to avoid errors.
  6. If the papers is an important one, seek feedback on the draft.
  7. Provide board members with enough time before the meeting to properly consider the papers.
  8. Get good advice. It is common for the chair and the CEO to work closely on board papers. Papers may also need accounting or legal input. It is worth getting good advice to ensure the ramifications of all potential decisions are considered and understood.

 

We have an extensive suite of free resources for charities, including our Charities Legal Handbook and Incorporated Societies: Information Hub (which features a free Guide for Navigating Re-Registration, webinar recordings and an FAQ with nearly 150 questions). We also often write articles about specific aspects of charities law. Here are some recent ones:

Recent changes to the Charities Act – Part 1

Recent changes to the Charities Act – Part 2

Transitioning from an incorporated society to a charitable trust

Let us know if you would like to have input on any legal issues you may be facing.

This article is general in nature and is not a substitute for legal advice. You should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source. 

Some employees are eligible to receive shares in the company they work for under an Employee Share Scheme (ESS). It is helpful to understand what is likely to be taxed and when.

Some companies adopt ESS to incentivise their employees to work towards the success of the company as both an employee and as a potential shareholder. Because owning shares may benefit the employee financially, income tax may be payable.

What is taxed?

There are many forms of ESS. Some employees are given shares for free or at below market rate if they meet certain conditions. Others are given the opportunity to buy shares and pay them off through salary sacrifices.

In a nutshell, if as an employee receives a financial benefit from ESS, irrespective of how the shares were acquired, the taxable amount is the difference between the market value of the shares and what was paid for the rights. Note that some ESS are exempt from taxation.

Employers may tax ESS employee benefits, however, if they don’t, the employee will need to account for it themselves by filling out an IR3 form. Note that employees can retrospectively advise Inland Revenue of benefits from previous years by making a voluntary disclosure.

When does tax get calculated?

When it comes to ESS the point the employer holds the shares for the beneficial ownership of the employee is the vesting date. In straight forward ESS, the share scheme taxing date is when the employee exercises their option for the shares (takes up their right to the shares).  This makes sense in situations where there is a risk that after the shares have vested, the employee might leave or otherwise forfeit their right to the shares. In those situations, it would not be fair to tax the employee at vesting date, because they might not ever exercise their option.

Recently however Inland Revenue released a Technical Decision Summary about a situation that was not a straight forward ESS. The employer had taxed the employee at the date the shares were exercised but the employee disputed this interpretation, arguing that the tax date should be when the shares vested.

The Tax Council Office in its adjudication found in this particular situation the share scheme taxing date was the date of vesting because that is the first date that the shares were held for the benefit of the employee and after which there was no material risk that their beneficial ownership of the shares would change, for example by the employee leaving. In this case there was no material risk that the employer would fail to exercise their option after the vesting date.

Key takeaway

If you make a financial return from an ESS you will likely need to pay tax. The date from which the tax applies will depend on the particular ESS and the employee’s circumstances. It might be at the date the employee exercises their rights or it might be at the date of vesting if there is no material risk that the employee will fail to realise their option.

Contact us if you would like to know more about ESS and whether this might be a good option for your company and employees.

This article is general in nature and is not a substitute for legal advice. You should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source. 

Kia ora All,

An update on events coming up and free resources that may help you or your group…

On Wednesday 5th June (yes, tomorrow!) am excited to join another Community Governance Aotearoa session this time on chairing meetings but with a particular focus on chairing of AGMs.  Here is how they describe the event and sign ups are here:

“AGMs are coming up, how do we run a great one?
Sonya Rimene (Te Tumu Paeroa) will lead the first hour 12pm to 1pm for those who chair Māori entities and trusts. Sonya will explore what makes a good AGM and some practical guidance. Q&A will follow.
Steven Moe (Parry Field Lawyers) will lead the second hour 1pm to 2pm, continuing the exploration on chairing not-for-profit AGMs, some practical tips, and what makes a good AGM. Q&A to follow.”

Great to connect with almost 40 recently over lunch.  Here is the video of Rahul the new CEO at Philanthropy NZ sharing for those who missed it, or who would like to share with anyone else you can forward this on.  Thanks to Safe for the video support!  Have posted on LinkedIn too here so feel free to tag others in over there who might appreciate the content.

  • I will be joining an online event on 25th June on Impact Investing and Wealth management – info: “Our next CA ANZ For Purpose SIG meeting on Tuesday, 25 June.   The topic is ‘Wealth Management and Impact Investing’ and Craig Fisher will host expert panellists Katie Beith, Head of ESG, Forsyth Barr; John Morrow, Head of Philanthropic, JBWere NZ & Steven Moe, Partner, Parry Field Lawyers.”  Sign ups are here.
  • On 12 June I will be in Auckland at the Mindful Money conference and awards as have surprisingly been nominated for  Best Media reporting on Ethical investment for the work on Seeds.  You can join too – info here https://mindfulmoney.nz/learn/press-release-2024-awards-finalists/
  • I will hold next Seeds Impact lunch on Friday 19 July – sign ups are here
  • If you would like to get the regular Impact Email newsletter that goes to 920 then hit reply and can add you.
  • Seeds podcast is in all apps or here www.theseeds.nz and The Apple Tree book info is here
  • The latest conversation is with Neil Ieremia all about founding Black Grace dance company – it is really really good on the role of art in society.

 

A friend named Seán Barnes’ has just released a book called “The Impact Professional” and to order a copy, jump on impactprofessional.nz – there are options to buy on Kindle and in NZ, its best and cheapest to order from Seán. Find the “order in NZ” link and fill in the form with instructions for payment.  And connect with Seán here:  https://nz.linkedin.com/in/sean-barnes-nz

Other recent resources have been sharing are:

  • We have written a charities legal handbook which you can download.
  • We also put up resources such as the Charities Healthchecks on our Charities Hub (the covers are below).
  • This is Board Matters a show about leadership and governance with the Institute of Directors

We are very happy to have a free catch-up to discuss your situation. Please reach out if there’s anything we can do to assist.