Business - Parry Field Lawyers

So, what makes a mission driven company?

Came across an interesting report from November 2016 published in the UK called: “In pursuit of impact: Mission-led businesses”. A copy can be accessed here.

One of the most interesting parts was how they actually decided what a mission led business was and their criteria for determining that. In the introduction they note: “This report sets out an approach for defining and identifying businesses that have no legal restrictions on their profit distribution but which have a genuine commitment to wider social and environmental impact. As an emerging business trend, it is too early to describe this as a clear ‘sector’ or ‘market’. It is better described as a movement or an approach to business where social impact is seen as a critical driver of value creation.”

Essentially they had a weighting system for different components of a business and it had the following parts. I think this is helpful to analyse in order to see how businesses we may be starting, or involved in, might weigh up.

Intent: 40%
Strength of strategic commitment to a social or environmental mission

Business Model: 25%
Centrality of mission in core business activity and profit distribution

Governance and operations: 20%
Integration of mission across governance, business operations and ways of working

External perception: 15%
Public recognition for business commitment to mission

A company can get a unique rating based on an assessment of objective criteria relating to each of these component parts. They actually provide an even more detailed background on each one of those four elements as well which shows the weighting for each:

Intent: Central Ambition is given 80% and long term commitment is given 20%.
Business Model: Core commercial activity is given 60% while Profit distribution is given 40%.
Governance and operations: Governance structure (20%), Mission integrated in operations and ways of working (40%), Impact related activities integrated with mission (30%) and Impact reporting (10%).
External perception: Press reports and awards is given 100%.

I found it interesting that in undertaking their research they specifically excluded charities and community interest companies and focussed solely on profit making company structures.

One of the interesting quotes I came across in the conclusion which I agree with was: “Businesses that did not have access to quality advice often chose their legal structure randomly.” In all the report concludes that 4.3% of turnover in the UK private sector related to mission driven businesses (that’s 165 billion pounds).

Not unlike B Corp status, this way of thinking is new and challenging when it comes to how we actually define what a company is. It is one thing to claim to be about a purpose or to be advancing social good but what are the metrics that are satisfied to objectively show that? What might the impact be of thinking in this way for social enterprises and people who want to do good with their new companies (or, for that matter, with existing ones). It is certainly worth thinking through when it comes to setting up a business and working out how it will operate.

Why is due diligence important?

Due diligence is an important aspect of buying or selling a property, both for the purchaser and the vendor. Decisions are made based on disclosures made in due diligence, therefore it’s important for both parties that the documents or information relied on are accurate and correct. Failing to undertake due diligence can have a potentially disastrous consequences, as a 2012 case shows.

In this particular case water rights were the issue. Altimarloch Joint Venture Limited contracted to buy 145.5 hectares of rural land, part of which they intended to plant in grapevines. Under the contract the water rights held by the vendors would be transferred to the purchaser. Those water rights were represented to allow 1,500m3 of water per day to be taken from a stream for irrigation purposes. The reality was that the property held resource consents to take only 750m3 a day from the stream.

The error came from a LIM Report issued by Marlborough District Council that was relied on by the vendor’s real estate agents when they were marketing the property for sale and also by vendor’s lawyers when preparing the agreement for sale and purchase. The vendors themselves were aware of the correct water-take figure but didn’t spot the error when signing the contract, relying as they were on their professional advisors.

If the vendor’s agent or lawyer had checked with the vendor themselves as to what consents they had or had obtained a copy of the resource consent from the District Council, which is easy enough to do, the error would have almost certainly been picked up.

Always check primary sources

The lesson learnt is not to rely on secondary sources, particularly when making specific contractual warranties about matters. Instead, do check the actual source documents that give the rights or govern the obligations.

In this instance the purchaser successfully claimed damages of $1,055,907.16 as a result of this misrepresentation, even though the difference in value of the land with the represented amount of water rights as opposed to the water rights it actually had was only $125,000.

The reason for this is that the court assessed the damages as the amount it would take the purchaser to put themselves in the position as if they did get what they contracted to purchase. The reason the damages were so high was because no further water rights were available from the stream; in order for the purchaser to obtain the increased water-take they had to construct a dam to store the sufficient water to take up the shortfall.

By using primary source documents mistakes like this can be avoided. Where agreements, easements or resource consents are referred to in other documents such as valuations, LIM Reports (as in this case) or property information packs compiled by real estate agents, it’s encumbent on both the purchaser and the vendor to check the source documents of the information.

In this case, because there was a specific contractual provision about the volume of water rights being transferred, the vendor (or in reality their professional advisors) were found liable to pay very significant damages when the correct information was readily available and could have been checked very easily.

Always thoroughly check documentation

The same applies to easements, leases, crops supply agreements or other sorts of resource consents. None of these documents should be viewed as ‘standard’ and the original documents should be read by a vendor to ensure that what they are representing is what is actually in the document. A purchaser must also check documentation to ensure that what they are contracting to buy is what can actually be acquired.

Used by permission, copyright of NZ Law Limited, 2017

Every situation is unique so please discuss your situation with a professional advisor who can provide tailored solutions to you. Please contact Paul Owens at Parry Field Lawyers paulowens@parryfield.com 03 348 8480

Recent trends relating to mission driven companies

Came across an interesting report about mission driven companies from November 2016 published in the UK called: “In pursuit of impact: Mission-led businesses”. A copy can be accessed here.

Some of the trends regarding mission driven companies that they identify include the following (from page 1):

“Increasing expectations for business to adopt a responsible role in wider society. For example, nine out of ten millennials believe that he success of a business should be measured by more than just its financial performance.
Employees becoming more optimistic about businesses that make a commitment external to themselves. One survey indicates that workers are twice as likely to be optimistic about businesses with a strong sense of purpose. These businesses are considered more likely to be resilient to future shocks and “able to stay ahead of industry disruptions; and
The digital economy creating greater transparency, ensuring trust in business becomes ever more important at a time when public trust in business is at an all-time low.”

There are some good points to keep in mind here when thinking about our current environment and what the future might hold for the social enterprise sector as it seems likely that these trends will grow.

I have been reading “The Mission Driven Venture” by Marc J. Lane. The sub title is: “Business solutions to the world’s most vexing social problems”. It provides an overview of many different topics relevant in the social enterprise sector including examples where new ways of doing things have been tried and been successful. From my perspective as a lawyer it is interesting because the author is an attorney in the United States so there is often mention of legal structures.

The preface contains an overview of what comes as the author argues that new business strategies are solving social problems in education, health care, poverty and the environment. He writes: “For-profit, social purpose businesses are defining success in terms of both financial and social returns. Nonprofits are becoming entrepreneurial, supplementing charitable donations and government grants with revenue earned by the businesses they own and run, instrumentalities of mission in their own right. Progressive nonprofits are partnering with each other, and even with for-profits, breaking down cultural barriers, leveraging their competencies, and gaining economies of scale. A growing number of passionate social entrepreneurs are deploying invested capital to test and develop business opportunities intended to drive positive social change.”

He goes on to give the following specific examples: “Newly validated business models and entity forms that invite collaboration are emerging, including the low-profit limited liability company (L3C), which, by law, laces mission above profits and faciliteates foundation funding of chariatable and educational businesses, and the benefit corporation, which requires its managers to make decisions not only to enrich its shareholders, but also for the good of society as a whole. Social impact bonds – futures contracts on social impact – provide long term funds for promising social interventions, transfer risk to privacy capital markets, and tap into public coffers only when specific social benefits are achieved, Microfinance and microcredit are helping the poorest of the poor become self sufficient business owners. And worker owed co-operatives are converting the disenfranchised into self-reliant entrepreneurs”

Some of the most interesting examples I found in the book that were given were as follows:

the section on where to begin for those who have a good idea was a nice overview of some of the key considerations that a founder needs to think through. It is certainly one thing to have a groundbreaking and unique idea it is a rare combination to have the right experience, drive and team to be able to implement that idea.
the section on the Nobel peace prize winner Mohammed Yunus (who visited Christchurch April 2017 and who I went along to listen to) went into a lot of depth about not just the Microfinance industry and Grameen Bank but also about the social business ideas that he advocates. It was also interesting to read more about his theory that a social business may profit but its investors must not – am not sure I agree with that.
the section about co-operatives in Europe and in particular Spain where many companies have risen which are owned by their workers. This was interesting to read about but not sure if it would be transferable to other places which did not have the history of them going back several decades.
the section on impact investing was interesting to read and gave glimpses of the possibilities – this quote summarizes that: “Impact investing is investing with a mission. It’s an investment strategy that merges profit-seeking with philanthropy. When an impact investor invests, he or she seeks a financial return and a social return – to make money and help clean the air we breathe, or feed the hungry, or build butter schools. An impact investor does not put profit in conflict with social progress.”
three chapters at the end are devoted to how to assess impact investing and work out what it has achieved. As he states: “Unlike the traditional profit-driven business, an enterprise Int he business of producing an intangible bottom line – social good – cannot measure success in terms of dollars alone. In addition to demonstrating profitability – or at least financial sustainability – mission-driven ventures must show that they’re making progress toward achieving their social missions. They must demonstrate their social impact.” But how do they actually do that – what metrics will they report on? How will you compare an organisation focusing on alleviating poverty with one focussed on reintegration of prisoners into society? These are the challenges that these chapters deal with as they wrestle with what “social metrics” might look like.
It would be great if the next edition of the book features some examples and discussion of developments in places like Australia, New Zealand, Asia or South America.

To conclude this overview of the book I think it achieves the purpose the author set out in the preface – “…the Mission Driven Venture recounts the life stories of modern day heroes, people who, for very personal reasons, took on a social challenge as their own and vowed to overcome it through the prudent application of sound business principles. The lessons they learned and the successes they won translate into models worth replicating and adapting. My hope is that their thought leadership will help inform your decisions and inspire your actions.”

I would recommend this book to anyone who wants to get a really good overview of the state of social enterprise around the world today and gain a glimpse into what the future might look like at the same time. If you are in Christchurch and would like to have a look at or borrow my copy send me an email at stevenmoe@parryfield.com

Great vision and ideas take resources to realise. Whether you are starting a company, a non-profit venture, or even a charitable project, one of the first things you need to find is money to fund the research and development of your new idea.

Banks are the traditional source of funding, but sometimes, you can look instead to your family, friends, professional contacts or other people with similar vision for financial contributions. What are some of the key things to think about if you want to go down that route and seek contributions from them?

1. Will This Ruin the Relationship?

The first point is not a legal consideration as such – more of a home grown truth: money has a unique way of affecting relationships (often in a bad way). You may think your relationships are above this and of course there is 100% certainty your new idea will be a tremendous success. But if whatever your friend or family member invested was lost how would this impact that relationship?

If you can foresee that there could be hard feelings and resentment then you need to seriously weigh up if it is worth risking that relationship.

2. What Contribution Will They Make?

Second, think about what form the contribution will take. Will you be seeking loans from people with a fixed end date and payment of interest? Or do you actually want to bring people on board as partners in a partnership or shareholders in a company and involve them in the future success that you will hopefully enjoy?

What will fit best for you, your contributors and the future of your project?

3. How Involved Will they Be?

Third, consider what level of say each person will have in the decision making for the project. How involved will these people be in the decision making or are they simply silent contributors with limited rights – these points should be clearly agreed and documented.

4. Do I need to comply with the Financial Markets Conduct Act?

Fourth, understand the rules relating to fundraising and what exclusions might apply – some of these are outlined below. The Financial Markets Conduct Act 2013 is incredibly long and detailed but the basic policy approach is that you will be caught by it and need to provide disclosure of information to investors unless there is an exemption for what you want to do.

What are the key exclusions that might apply?

Some of the most relevant exemptions in the context being discussed in this article would be:

Close business associates

Offers to people who already know the business are subject to an exclusion because they would be unlikely to need full disclosure before making an informed decision about whether to invest or not. They need to be able to assess the merits of the offer and obtain information from the person making the offer.

Whether a person actually is a close business associate will need to be assessed on the facts but the term is defined to include situations such as the person being a director or senior manager of the company, holding 5% or more of the votes of the company, is a spouse, partner or de facto partner of a person who is a close business associate (these are just some of the examples to show the nature of the relationships caught).

Relatives

Along similar lines to the last exclusion, offers can be made to relatives. They are defined to include the following: A spouse, civil union partner, de facto partner, grandparent, parent, child, grandchild, brother, sister, nephew, niece, uncle, aunt, first cousin. The list also includes spouses, partners and de facto partners of those people listed as well as whether or not they result from a step relationship or not. Also included are trustees of a trust where one of the above is a beneficiary.

We had an interesting one recently where a person said that their Godfather wanted to invest – there was a close relationship but they were not a “relative” under this definition, so you need to objectively think about things each time and not just make assumptions that someone is a relative as they need to fit the definition.

Small Offers

A small offer must be for debt or equity securities and for up to a maximum of 20 investors and raising a maximum of $2 million in any 12 month period.

Such offers need to be a “personal offer” which can only be made to certain individuals, such as those who are likely to be interested in the offer (eg some previous connection and interest known), a person with a high annual gross income (at least $200k in each of last two income years) or someone who is controlled by such a person.

Some other key points:

Small offers also have an advertising prohibition so it is important to check what you will do to get the word out and make sure it is not going to breach that requirement.
Notification is required of certain information about the offer to the FMA within one month of the end of the relevant accounting period that the small offer was made.
A warning needs to go on the front of documents which looks like this:

“Warning

You are being offered [name of financial product type (for example, ordinary shares)] in [name of issuer].

New Zealand law normally requires people who offer financial products to give information to investors before they invest. This requires those offering financial products to have disclosed information that is important for investors to make an informed decision.

The usual rules do not apply to this offer because it is a small offer. As a result, you may not be given all the information usually required. You will also have fewer other legal protections for this investment.

Ask questions, read all documents carefully, and seek independent financial advice before committing yourself.”

Other Exclusions

This article has been focused on investments by family and friends so has not looked at every possible exclusion. In fact the above are the ones that we see most commonly being used in most situations. However, for more detail on other exclusions have a look at this article on Wholesale Investors and Crowdfunding and/or the FMA site here.

We often provide advice to people around the appropriate fundraising strategy for their start-up and from experience every situation is unique. This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. If you would like to discuss the options and work out what might fit best for you then drop us a line (Kris Morrison at krismorrison@parryfield.com or Steven Moe at stevenmoe@parryfield.com) and we would be happy to discuss.

You can access a review of the key points from the Zero to One book by Peter Thiel here. In particular have a look at these four statements of what he has observed:

It is better to risk boldness than triviality
A bad plan is better than no plan
Competitive markets destroy profits
Sales matter just as much as product.

His conclusion here is that we need to be careful about broad brush conclusions reached as a result of mistakes like the dot-com crash. Instead he says that: “to build the next generation of companies, we must abandon the dogmas created after the crash … the most contrarian thing of all is not to oppose the crowd but to think for yourself”.

Zero to One: Key points

It is hard to look past the credentials of Peter Thiel, who co-founded Pay Pal and was one of the original investors in Facebook and LinkedIn. It has endorsements on the back from Mark Zuckerberg and Elon Musk. The book came out in 2014 so has been out for a while and this article will pull out just some of the best and most challenging bits from it. This can form a cheat sheet for those who haven’t read it or a set of good reminders for those who have.

The basic premise is: “It’s easier to copy a model than create something new: doing what we already know how to do takes the world from 1 to n, adding more of something familiar. Every new creation goes from 0 to 1. This book is about how to get there.”

Thiel was directly participating in the dot-com crash around 2000 and early in the book he draws four conclusions that people took from it:

Make incremental advances – small steps are the best way forward.
Stay lean and flexible – operate without definite plan and be able to adapt.
Improve on the competition – build on what others have already done.
Focus on product, not sales – develop an excellent product that will sell itself.

He then contrasts some of those conclusions with these four statements of what he has observed:

It is better to risk boldness than triviality
A bad plan is better than no plan
Competitive markets destroy profits
Sales matter just as much as product.

His conclusion here is that we need to be careful about broad brush conclusions reached as a result of mistakes like the dot-com crash. Instead he says, “to build the next generation of companies, we must abandon the dogmas created after the crash … the most contrarian thing of all is not to oppose the crowd but to think for yourself”.

There is an interesting story that he tells in the book which I relate to since it involves Thiel’s background studying law. As a lawyer myself it is interesting to read about his experience and I do often think about the fact that having a role as an advisor means that I myself am less likely to branch out into something new like a start-up. In actual fact that is not true any more as our law firm has looked at disruption and what it means for law firms and is the co-founder of a start-up that I have been actively involved in setting up. But this story is illustrative of a general point about what we settle for and what we think will make us happy:

“The highest prize in a law student’s world is unambiguous: out of tens of thousands of graduates each year, only a few dozen get a Supreme Court clerkship. After clerking on a federal appeals court for a year, I was invited to interview for clerkships with Justices Kennedy and Scalia. My meetings with the Justices went well. I was so close to winning this last competition. If only I got the clerkship, I thought, I would be set for life. But I didn’t. At the time, I was devastated. In 2004, after I had built and sold PayPal, I ran into an old friend from law school who had helped me prepare my failed clerkship applications. We hadn’t spoken in nearly a decade. His first question wasn’t “How are you doing?” or “Can you believe it’s been so long?”. Instead, he grinned and asked, “So, Peter, aren’t you glad you didn’t get that clerkship?”. With the benefit of hindsight, we both knew that winning that ultimate competition would have changed my life for the worse. Had I actually clerked on the Supreme Court, I probably would have spent my entire career taking depositions or drafting other people’s business deals instead of creating anything new. It’s hard to say how much would be different, but the opportunity costs were enormous. All Rhodes Scholars had a great future in their past.”

Thiel then has a really interesting few chapters about pessimism and optimism and how that has played out in different cultures and eras. In his view this has shaped the way that we think about entrepreneurs as being lucky vs having a plan. He comments that “indefinite optimism” means there is a general feeling that things will improve but no plan or direction for how to get there – so it involves cultivating and maintaining what we have rather than creating something new. He comments that this short term thinking is evident in politics too where we are concerned about predictions of elections for what the future will look like in a few weeks or months but lack the focus on 10 or 20 or 30 years from now. Ultimately his conclusion on this topic is that design trumps chance and there needs to be a lot of thinking and planning when involved in a start-up. He states: “Long term planning is often under valued by our indefinite short term world.”

This theme is emphasised more in the middle chapters of the book: “It does matter what you do. You should focus relentlessly on something you’re good at doing, but before that you must think hard about whether it will be valuable in the future.”

He also spends time towards the end of the book analysing founders and the “big characters” that they tend to be (like Steve Jobs) and asks if they create their own images, if the media helps glorify certain aspects of them or if they are actually just naturally that way inclined. He seems to conclude it is a combination of all of those things and that the social media world we live in now leads to an emphasis on certain attributes compared to the past.

We ourselves have a startup at Parry Field Lawyers where we are working to develop an innovative and new product offering focused on the legal market so a lot of this book really resonated with our experience. The biggest takeaway for me was the basic point that founding a company that does something new is a lot of hard work and you need to be purposeful about choosing what you get involved in and who you choose to work with you. This type of book is useful in that it reminds us of some fundamental points about startups from a person who has had direct involvement in many of them.

And do they comply?

A recent report from Statistics New Zealand suggests that nearly 1 in 10 employees do not have a written employment agreement. Of those who do have written employment agreements, it’s probably fair to say that a proportion of those are not up-to-date. Recent changes to employment law also mean some previously compliant agreements may need revising.

Whether you are an employer or an employee, you should check your employment agreement and make sure it complies with the minimum requirements. If it doesn’t, employees may be missing out on entitlements, and employers could be exposing themselves to increased penalties and claims from employees. Directors and senior business managers can now also be held personally accountable.

Minimum requirements

The Employment Relations Act 2000 (ERA) requires that every employee must have an employment agreement and that agreement must be in writing whether it is for a permanent, fixed term or casual position. The agreement must include the following:

Names of the employee and employer
A description of the work to be performed by the employee
An indication of where the employee will perform the work
Any agreed hours of work or, if no hours are agreed, an indication of the arrangements relating to the times the employee is to work
The wages or salary payable to the employee, and
A plain language explanation of the services available for the resolution of employment relationship problems, including a reference to the period of 90 days within which a personal grievance must be raised.

Employers must retain a copy of the employment agreement.

Within the ERA, there are further specific requirements in relation to certain types of clauses. For example, if the agreement includes a trial period clause, there are specific requirements which must be met if it is to be relied on to end employment within 90 days.

Recent changes

The Employment Standards Bill was enacted earlier this year, with effect from 1 April 2016. It introduced a suite of changes to employment law including some which mean existing employment agreements will need updating. It also toughened the penalties for employers who do not comply with their obligations.

Some of these changes are summarised below. Please see us if you require a more detailed explanation of the changes and what they may mean for you.

Parental leave

Parental leave eligibility was extended to ‘primary carers’ who can include grandparents, aunts and uncles. Those employees on casual and fixed term agreements are also eligible.

Leave entitlements have been extended, and there is now also the option of agreeing to ‘keeping in touch’ arrangements. These are where employees can return to work on a limited basis for up to 40 hours (total) during their leave without losing their leave entitlements. This allows employees to keep up-to-date with any training or changes in the workplace, and to maintain their social and professional bonds.

Zero-hour contracts

‘Zero-hour contracts’ is a colloquial term for employment contracts which require an employee to be available for work, but don’t offer any guaranteed hours or compensate the employee for being on-call. Zero-hour contracts are now prohibited.

Where an employer and employee agree the hours that are to be worked, this must be recorded in the employment agreement. Where particular hours are not agreed, the agreement needs to give an indication of the hours.

Employers who want to be able to require employees to be available for extra work must include an ‘availability’ provision in the employment agreement. This must set out minimum guaranteed hours of work, and any period which the employee is required to be available above the guaranteed hours. Employment agreements cannot contain an availability provision unless the employer has genuine reasons for requiring it and the employee is reasonably compensated for making themselves available.

If the employment agreement doesn’t comply with these requirements, the employee cannot be required to work more than the agreed hours and cannot be treated adversely if they refuse to do this.

Deductions from wages

Currently, employers need the express consent of their employee to deduct any amounts from wages (other than PAYE, etc). Employment agreements commonly contain an agreement to this effect so that the employer does not need to obtain consent every time a deduction needs to be made.

Now, even if the employment agreement contains such a clause, an employer must still consult with their employee before making a deduction. There is also a prohibition on making unreasonable deductions from wages, even if the employee consents to them. An example of an unreasonable deduction might be in relation to theft of the employer’s property by a customer where the employee had no control over it.

Secondary employment

Employment agreements often contain limitations on an employee’s ability to undertake work for other people. These clauses are now subject to a number of limitations.

It’s only permissible to include such a clause if the employer has genuine reasons based on reasonable grounds, and those reasons are stated in the employment agreement. Genuine reasons can include:

Protecting commercially sensitive information or intellectual property rights, or the employer’s reputation, or
Preventing a conflict of interest that cannot be managed without such a restriction.

A secondary employment clause can only prohibit or restrict other work to the extent necessary having regard to the reasons set out in the agreement.

For agreements that were entered into before 1 April 2016, employers have until 1 April 2017 to remove or amend clauses in existing agreements which don’t comply.

It’s important to get it right

The Employment Standards Bill also made other changes which emphasise the importance of employment agreements:

Record keeping requirements have been clarified
Penalties have increased
Employers can be publically named if they fail to meet minimum employment standards, and
People other than the employer (for example, directors and senior managers) can be held liable.

Failing to meet minimum standards can result in penalties and infringement notices being issued. It can also have a significant effect, for example, on an employer’s ability to dismiss an employee.

Check your agreements

This is a good time for all employers and employees to check their employment agreements to ensure they comply with the minimum standards set out above. Employers may also have policies which may need updating.

If your employment agreement doesn’t comply with the new legislation, talk to your employee or employer about amending it to bring it up-to-date. We have experts who can assist.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Should you need any assistance with this, or with any other Employment matters, please contact Hannah Carey – hannahcarey@parryfield.com or any of the team at Parry Field.

The Education (Update) Amendment Act 2017 came into effect on 19 May 2017, introducing significant changes to the Education Act 1989. Some commentators have described the changes as the most significant changes to New Zealand’s education system since the introduction of Tomorrows Schools.

Key changes that came into force on 19 May 2017 include:

Introduction of National Education and Learning Priorities

The Minister of Education now has authority to issue a statement of National Education and Learning Priorities (NELP) for the early childhood and compulsory education sectors. School Boards of Trustees must have particular regard to the NELP in their strategic planning.

The announced intention is for the first NELP to be issued in 2018. It will be interesting to see what range of priorities are included in the NELP.

Clarification of Role of Board of Trustees

The role and responsibilities of the Board of Trustees are now set out in detail in Schedule 6 of the Education Act 1989.

Previously, the objectives of the Board of Trustees were summarised in section 75. Prior to 2013, section 75 stated that, subject to the general law of New Zealand, a school’s board had ‘complete discretion to control the management of the school as it thinks fit’. In 2013, this section was amended to state that a school’s board ‘must perform its functions and exercise its powers in such a way as to ensure that every student at the school is able to attain his or her highest possible standard in educational achievement’.

Section 75 has now been completely replaced. The new section 75 does not relate to Boards of Trustees at all. It is now in a part of the Education Act that relates to communities of learning.

The key objectives of the Board of Trustees are now described in clause 5 of Schedule 6. The primary objective is still stated to be ‘to ensure that every student at the school is able to attain his or her highest possible standard in educational achievement’. The statement that the Board of Trustees ‘has complete discretion to control the management of the school as it thinks fit‘ has been removed.

Clause 5 of schedule 6 also sets out a list of things that the Board of Trustees must do to meet its primary objective. These are:

ensure that the school—
1. is a physically and emotionally safe place for all students and staff; and
2. is inclusive of and caters for students with differing needs; and
have particular regard to any statement of National Education and Learning Priorities issued under section 1A; and
comply with its obligations under sections 60A (in relation to curriculum statements and national performance measures), 61 (in relation to teaching and learning programmes), and 62 (in relation to monitoring of student performance); and
if the school is a member of a community of learning that has a community of learning agreement under section 72, comply with its obligations under that agreement as a member of that community; and
comply with all of its other obligations under this or any other Act.

Increased Range of intervention options

The Minister and Secretary of Education now have an increased range of options for intervening in schools. New intervention options include case conferences, specialist audits, performance notices and statutory appointees (to Board of Trustees).

Clearer Framework for Communities of Learning (COLs)

The Act clarifies the process for approval of a Community of Learning and for entry into an agreement on the activities the COL will undertaking.

The Community of Learning concept was already in place prior to the passing of these amendments, but it is probably an improvement to have the COL framework clearly set out in the legislation.

Management of Enrolment Schemes

The Secretary of Education can now implement an enrolment scheme for a school if the school fails to put one in place within a reasonable time after being asked to do so.

Previously, the Ministry of Education could ask a school to implement an enrolment scheme, but did not have the authority to implement one itself for a school that was slow in responding.

New Purpose Provision for closure and merger of schools

Closure and merger of schools is nearly always a controversial issue, and is an area where the government is frequently criticised for failing to properly consult with the school community and take its concerns into account.

A new section 145AAA introduces objectives to guide decision making on establishment, closure and merger of schools. The objectives are to:

enable the provision of a schooling network that assists parents to meet their obligations to enrol their children at school;
assist the efficient and effective use of the Government’s investment in schooling; and
recognise the role of diversity in the provision of schooling, including the provision of Māori-medium education.

Enabling the Minister to combine school boards of trustees in certain circumstances

Before these amendments were made, the Education Act already permitted multiple schools to have combined BoTs and one principal for multiple schools – section 110.

The Minister can now initiate the process to combine BoTs if the Minister has reasonable cause to believe that there are serious problems with the governance of 1 or more of the schools or institutions concerned; and those problems could be addressed by the combined board.

The Minister must first consult the Board of Trustees and Proprietor of the affected schools.

Updating the legislative framework for state integrated schools

One of the biggest changes in the Amendment Act relates to Integrated Schools.

The Private Schools Conditional Integration Act 1975 has been repealed, with all relevant provisions being incorporated directly into the Education Act 1989 in a new part 33.

The Ministry of Education has said that the intention was not to change the substance of the Private Schools Conditional Integration Act. The language has been modernised in places, but in substance the PSCI provisions are unchanged except that new provisions have been added:

requiring proprietors to provide financial and other information to the Crown to improve decision-making when issues arise.
introducing new criteria to guide decision-making by proprietors.
creating a bespoke merger process for state-integrated schools.

Establishing a Competence Authority for teachers

The competence authority was initially created under the Education Council’s rules in 2016, but without specific recognition and powers under the Education Act. The role of the competence authority is now specifically recognised in the Act.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source. Contact Kris Morrison at krismorrison@parryfield.com to request this or for any other questions. Copyright © Parry Field Lawyers 2017.

This list of UN sustainable development goals is quite interesting – both inspiring and aspirational – have you had a look at them?

http://www.un.org/sustainabledevelopment/sustainable-development-goals/

I wonder how bearing in mind even some of those goals might impact on businesses (and not for profits) when they come to make decisions about strategic direction and the future of their organisation.

What do you think? What is missing or should be emphasised?