Business - Parry Field Lawyers

In August, 2024, the New Zealand Government announced plans to modernise and simplify the Companies Act 1993, which governs how New Zealand’s 730,000 companies are established, operated, and dissolved. While the Act has been in place for over 30 years and remains largely effective, targeted improvements are set to make it more suitable for today’s business environment. The Government has decided to progress a package of reforms that will take place in two phases.

Phase 1: Corporate Governance Reforms

Phase one of the reform will include the following key aspects:

Modernising and Digitising the Companies Act: the Act and other related legislation will be updated to remove outdated, ambiguous and overly complex provisions. This will aim to reduce compliance costs and better utilise modern technology for both businesses and regulations.

Director and Partner Identification Numbers: Unique identifiers will be introduced for company directors and general partners. This will help track their involvement across multiple businesses and combat illegal practices, such as phoenixing (where a business re-emerges under a different name after insolvency).
Enhanced Privacy for Directors and Shareholders: Directors and shareholders will be allowed to list an address for service on the Companies Register instead of their residential addresses, addressing privacy and safety concerns.
Insolvency Law Reforms: To improve outcomes for creditors, the period during which transactions with related parties can be voided when a business is insolvent will be extended to four years, following recommendations from the Insolvency Working Group.
Improved Use of the New Zealand Business Number (NZBN): The reforms will encourage greater uptake of the NZBN, simplifying transactions between businesses and government agencies, and allowing for automatic updates to company records using NZBN data.

Phase 2: Governance and Accountability

The second phase, led by the Law Commission in 2025, will focus on enhancing corporate governance by reviewing directors’ duties, liability, offences, penalties, and improving enforcement mechanisms.

These reforms are expected to streamline corporate processes, reduce costs, and enhance transparency, benefiting both businesses and the broader New Zealand economy.

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This article is intended for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please contact a qualified legal professional. Reproduction is permitted with prior approval and credit to the source.

Succession planning is a critical component of effective governance for any board, whether it’s for a corporate entity, charity, or for-purpose organisation. In New Zealand, where governance practices are guided by both legal frameworks and best practice principles, succession planning ensures that a board remains dynamic, diverse, and capable of steering the organisation into the future. This article outlines some practical considerations to keep in mind when developing a succession plan for your board.

1. Primary Responsibility of the Current Board

Succession planning is one of the board’s most important responsibilities, ensuring continuity and stability during leadership transitions.

(a) Evaluating Leadership Roles

Start by assessing the current leadership. Who is your Chair and how long have they been in the role? It may be time to consider appointing a deputy Chair who can learn the ropes now and ensure a smooth transition when the time comes for the current Chair to step down. Planning ahead mitigates risks associated with abrupt leadership changes and maintains strategic continuity.

(b) Emphasising Diversity of Thought

When considering successors, resist the temptation to simply replicate the existing board members. Instead, focus on bringing in new perspectives. Diversity of thought fosters innovative solutions and more resilience. Actively seek out individuals who bring different experiences, skills, and viewpoints to the table. We have also created a Board Skills Matrix which you can access over here.

(c) Mapping Out a Succession Plan

A clear, structured succession plan is essential. Consider implementing a rotation schedule for trustees, this could be legally enshrined in your Trust Deed. For instance, a trustee might serve for a term of three years, renewable for another three years, with a maximum of three terms (3+3+3), after which they must stand down for at least a year. This ensures regular infusion of fresh ideas while maintaining experienced leadership.

(d) Encouraging Healthy Board Renewal

Term limits and rotation schedules naturally create opportunities for board renewal. These mechanisms facilitate necessary discussions about new leadership without making it personal. Focus these conversations on the organisation’s needs rather than individual preferences to prioritise the entity’s long-term success.

2. Utilising a Skills Matrix

A skills matrix is a valuable tool for evaluating the board’s current composition and identifying gaps in expertise or experience. This can be used to decide where there may be areas to bring people in on. By regularly updating the skills matrix, you can keep your board aligned with the evolving needs of the organisation. Here is ‘needs matrix’ example from SportNZ.

3. Long-Term Vision: “Where Will We Be in 50 Years?”

While succession planning often focuses on the near to medium term, it’s crucial to consider the long-term legacy of the current leadership. The question, “where will we be in 50 years?” encourages the board to think beyond immediate challenges, nurture potential leaders, anticipate future trend and position the board to respond to long-term challenges and opportunities.

4. Conclusion

Board succession planning is not just about filling seats—it’s about ensuring that the board remains effective, diverse, and forward-thinking. By taking a proactive approach, utilising tools like a skills matrix, and thinking long-term, your board can continue to provide strong governance that drives the organisation’s success for decades to come.

If you would like to listen to a short podcast on this topic, the Institute of Director’s have released an episode featuring a Chartered Fellow of the Institute of Directors here where Steven Moe (the host of the show) talks through governance and board considerations.

If you need assistance in developing a succession plan tailored to your board’s needs or have legal questions regarding governance, contact one of our experts at Parry Field Lawyers.

This article is intended for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please contact a qualified legal professional. Reproduction is permitted with prior approval and credit to the source.

In the context of contract law, understanding the differences between assignment and novation is important for effectively managing contractual relationships and obligations. They have significant differences in terms of their legal implications and requirements.

Assignment

Assignment involves the transfer of rights from one party (the assignor) to another (the assignee) without altering the underlying contract or requiring the debtor’s consent. Key points include:

Transfer of Rights: Only the benefits or rights under the contract are transferred. The assignor retains their obligations.
Consent: The debtor’s consent is not required for the assignment to be effective. However, the assignee cannot be imposed with obligations without their consent.
Notification: It is generally good practice, although not always legally required, to notify the debtor of the assignment.

For example, if Party B is owed money by Party A, Party A can assign the right to receive payment to Party C without needing Party A’s consent.

Novation

Novation, on the other hand, involves the replacement of an existing contract with a new one, requiring the consent of all parties involved. This creates a completely new contractual relationship and extinguishes the original contract. Key aspects include:

Substitution of Parties: A new contract is formed where a new party (the novatee) replaces one of the original parties (the novator), with the consent of the remaining original party.
Discharge of Obligations: The original contract’s obligations are discharged, and a new set of obligations is created under the new contract.
Consent Requirement: All parties involved must consent to the novation for it to be valid.

For example, if Party A owes Party B $100, and Party B agrees to transfer this obligation to Party C, with Party A’s consent, a new contract is formed where Party A now owes $100 to Party C, and Party B is released from the original obligation.

Legal Distinctions

The main differences between assignment and novation lie in the nature of the transfer and the necessity for consent:

Assignment: Transfers rights only and does not require the debtor’s consent.
Novation: Transfers both rights and obligations, discharging the original contract, and requires the consent of all parties involved.

In summary, assignment allows for flexibility in transferring rights without complicating the original contract, while novation provides a clean slate by forming a new contractual relationship. Each mechanism serves different strategic needs, depending on whether one wishes to transfer benefits alone or completely restructure obligations and parties involved.

We assist a wide range of clients with all aspects of commercial law. Please do get in touch if you would like assistance. Contact Steven Moe at stevenmoe@parryfield.com or Aislinn Molloy at aislinnmolloy@parryfield.com.

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.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.

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.

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.

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.

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.

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’.

Storage and Accessibility

Minutes must be securely stored while also being readily accessible if required.

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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.

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.

Choose the right speakers

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

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.

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.

Proposed activity

What action is required and what are the timelines?

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.

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.

Impact

Explain what impact this has had already, if relevant.

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

Tailor papers to your board. Boards need a strategic view, so avoid operational details.
Have detailed information available on request or place it in an appendix.
Keep language clear and avoid unnecessary words. Avoid jargon and acronyms.
Follow up. After meetings, follow up on action items and decisions, assigning clear responsibilities and deadlines for each task.
Review and edit papers to avoid errors.
If the papers is an important one, seek feedback on the draft.
Provide board members with enough time before the meeting to properly consider the papers.
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.

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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.

In our article on Privacy for Organisations we talk about how to stay safe as an organisation. But what about if you have shared your personal information with an agency? How do you stay safe as an individual? Let’s look at some frequently asked questions.

FAQs

1. Do agencies need to tell you if your information is involved in a privacy breach?

Agencies must report serious breaches to the Privacy Commissioner and the affected individuals. A serious breach is one that has or is likely to cause serious harm to those affected. Failure to notify the Privacy Commissioner of a notifiable privacy breach may result in a fine of up to $10,000 or the issue of a public compliance notice.

2. How can you check if your information has been leaked?

Check at haveibeenpwned.com

3. What happens if your privacy is breached?

Contact New Zealand’s national identity and cyber support community service IDCARE on 0800 121 068.

4. How do you ask an agency for your information?

Use this form, or request the information by phone, email or letter. Agencies must reply within 20 working days, or 10 days for urgent requests, but can refuse for valid reasons.

5. How do you correct your information?

Contact the agency, explain the error, and ask for it to be corrected. If the correction is refused, you may complain to the Privacy Commissioner.

6. How do you make a complaint?

Try to resolve it with the agency first. If that doesn’t work, complain to the Privacy Commissioner. They will not investigate situations from long ago or that didn’t cause you harm, or things like family disputes, someone else’s personal information, or vexatious matters.

7. Are there any special rules for sensitive personal information?

Codes of practice exist for some sensitive types of personal information, such as for health, credit and superannuation.

8. How do you keep your own information safe?

Your personal information is important to you and may be valuable to others who can benefit from it. Be thoughtful about giving out your personal information. Many agencies provide a discount when your join their ‘club’. Ask yourself if it is really worth it.

When asked for your details by email or phone, question why it is needed and confirm the collection is valid.
Monitor your email and bank accounts and be alert for any suspicious behaviour.
Use complex passwords and change them monthly—it’s worth the effort.
Report breaches.

9. What if you need to breach a privacy obligation?

Look at the guidance and contact the Privacy Commissioner’s Office for clarification.

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This article is merely on overview of the Privacy Act. We recommend visiting the Privacy Commissioner’s website.

It is not a substitute for legal advice and you should contact a lawyer about your specific situation. If you think your privacy policy is insufficient (or non-existent!), we strongly encourage you to get in touch with us. We’d love to help. Contact Steven Moe at stevenMoe@parryfield.com or Aislinn Molloy at aislinnMolloy@parryfield.com.

Privacy for organisations is important and should be taken seriously. In this article we show you how.

We all value our personal information. No one wants their personal details accessed or used inappropriately. It can lead to spam or more worryingly, identity theft or fraud. It can also exact an emotional toll.

The Privacy Act 2000 (Act) is all about helping to protect individuals and keeping the organisations who collect personal information accountable. The amended Act came into force on 1 December 2020, so you need to be following it now.

Top tips

Treat other people’s information as if it were your own—with care and respect.
Follow the rules. If unsure what to do, seek help.
Adopt or update your Privacy Policy and appoint a Privacy Officer.
Consider doing a Privacy Impact Assessment to inform projects or proposals. This may save time and money. Use the toolkit.
Make use of the resources available. Seek legal advice for more serious matters.

Who has responsibilities?

The Act refers to ‘agencies’. This is any organisation or person that collects and holds personal information about people, whether private or public sector. Some examples are companies, businesses (including small businesses), clubs, charities and community groups.

The Privacy Commissioner’s Compliance and Regulatory Action Framework says that its goal is to achieve high levels of voluntary compliance by seeking to make the regulatory approach as clear as possible.

If your organisation breaches privacy rules there can be consequences, such as a failure to report a notifiable breach will be punishable on prosecution with a fine of up to $10,000.

A word of caution – privacy covers all you do so includes emails and texts. Be careful what you say as those might need to be disclosed in a person asks for these records. Also, if a reporter is writing about your organisation, avoid using their real name in internal communications – use a pseudonym instead. Their name is an example of personal information and the journalist is therefore entitled to see the number of times they have been referred to in communication. Furthermore, they may be entitled to see what has been written about them, so our advice is to be scrupulously professional in all communication.

What do agencies need to do?

At the heart, this is about being respectful and careful. Imagine it is your personal information and treat it accordingly. Follow the links below to the Privacy Principles for more detail. What you need to consider falls into these categories.

1. Collecting personal information

Only collect information that you really need. The more you collect, the more care is needed. (Privacy Principle 1). We do see clients collecting more than is necessary so ask yourself if it is needed.
Collect information from the person directly (or their authorised representative). (Privacy Principle 2)
Tell people why you are collecting the information. Having a Privacy Statement is a good idea. You can develop one using the Privacy Commissioner’s generator or we can draft a complete and bespoke version specifically for your circumstances. (Privacy Principle 3)
Collect information lawfully and fairly, or there may be consequences. (Privacy Principle 4)

2. Storing personal information

Keep information genuinely Lock it up or password protect it, and limit access. Ensure staff know what they can and cannot access. (Privacy Principle 5)
Ensure you can provide it promptly to a person on their request. Charges should generally not apply, and if they do they must be reasonable. (Privacy Principle 6)
Correct personal information if it is not correct. (Privacy Principle 7)
Keep personal information accurate. (Privacy Principle 8)
Keep information only as long as you need to and dispose of it carefully. (Privacy Principle 9)
Use the information only for the purpose it was collected. (Privacy Principle 10)
Disclose personal information only for a valid reason, for example, when required by law. (Privacy Principle 11)
Follow the rules for sending personal information out of New Zealand, including digitally. (Privacy Principle 12)
Only use a ‘unique identifier’ (something that is unique to a person such as a drivers licence), when necessary. (Privacy Principle 13)

FAQs

How do you ask an agency for your information?

Use this form, or request the information by phone, email or letter. Agencies must reply within 20 working days, or 10 days for urgent requests, but can refuse for valid reasons.

1. How do you correct your information?

Contact the agency, explain the error, and ask for it to be corrected. If the correction is refused, you may complain to the Privacy Commissioner.

2. How do you make a complaint?

Try to resolve it with the agency first. If that doesn’t work, complain to the Privacy Commissioner. They will not investigate situations from long ago or that didn’t cause you harm, or things like family disputes, someone else’s personal information, or vexatious matters.

3. Are there any special rules for sensitive personal information?

Codes of practice exist for some sensitive types of personal information, such as for health, credit and superannuation.

4. How can you check if your information has been leaked?

Check at haveibeenpwned.com

5. What happens if your privacy is breached?

Contact New Zealand’s national identity and cyber support community service IDCARE on 0800 121 068.

6. How do you keep your own information safe?

Your personal information is important to you and may be valuable to others who can benefit from it. Be thoughtful about giving out your personal information. Many agencies provide a discount when your join their ‘club’. Ask yourself if it is really worth it.

When asked for your details by email or phone, question why it is needed and confirm the collection is valid.
Monitor your email and bank accounts and be alert for any suspicious behaviour.
Use complex passwords and change them monthly—it’s worth the effort.
Report breaches.

7. What if you need to breach a privacy obligation?

Look at the guidance and contact the Privacy Commissioner’s Office for clarification.

A key change – Reporting privacy breaches

Agencies must report serious breaches to the Privacy Commissioner and the affected individuals. A serious breach is one that has or is likely to cause serious harm to those affected. Failure to notify the Privacy Commissioner of a notifiable privacy breach may result in a fine of up to $10,000 or the issue of a public compliance notice.

Read more on your personal information rights here.

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This article is merely on overview of the Privacy Act. We recommend visiting the Privacy Commissioner’s website.

It is not a substitute for legal advice and you should contact a lawyer about your specific situation. If you think your privacy policy is insufficient (or non-existent!), we strongly encourage you to get in touch with us. We’d love to help. Contact Steven Moe at stevenMoe@parryfield.com or Aislinn Molloy at aislinnMolloy@parryfield.com.

It can be confusing to know when to engage a lawyer and what the terms of engagement and prices will be. We have answered five questions below to help you and your startup ‘get the ball rolling’.

When should you engage a lawyer and how do you find one that suits you best?

It is a relatively straight forward process to set up a company and our view is it can be done without a lawyer. However, legal documents such as a company constitution, shareholder’s agreement, term sheets, though you may have questions such as how many shares to issue or who should be a director, subscription agreements, employment contracts, employee stock option plans (ESOPs) and vesting agreements will likely be needed along the way. While these are not compulsory, they are helpful to determine how the company will be governed, the rights and obligations of directors and shareholders and terms of agreement with investors. Without them the Companies Act 1993 applies which may not be suited to your specific circumstances.

Other legal considerations include how to protect your intellectual property (IP), employment matters or which governance structure will suit your start-up best. It is highly advisable to engage a lawyer when seeking to draft these documents as they can explain which parts of the law such as the Companies Act 1993, Privacy Act 2020, or the Employment Relations Act 2000 will be applicable or can be avoided. To read more about these issues see our Free Start Ups Legal Toolkit and Capital Raising Guides here.

There are multiple ways to find the right lawyer for you:

Attend industry events or conferences;
Get a referral from other founders in your industry;
Law firms websites indicate whether they have experience with startups that are similar to you;
Ask questions such as whether they have experience in your industry or with other founders in your industry;
Ask for clarity on fees. While we do not charge for a first meeting we have heard of other law firms sending a large bill after a first meeting. Have clear communication to avoid surprises.

What are normal terms of engagement?

The terms of engagement set out lawyer-client responsibilities. The client is to provide accurate information and giving clear instructions. The lawyer must abide by confidentiality, conflict of interest and disclosure requirements. The terms outline the scope of the lawyer’s work and their role including their duties. They will state that you authorise credit checks and due diligence services to verify your identify if required. Engagement terms also set out how fees are calculated, including disbursements such as document service fees, when fees are to be paid and how the firm will hold the funds collected by you. It will also outline how to terminate the engagement, make complaints and indemnity clauses.

What are normal prices and bill services for lawyers?

Lawyers are under an obligation not to charge more than what is fair and reasonable for services. Fair and reasonable fee factors include the time and labour spent, the skill and specialised knowledge required, the importance, complexity and urgency of the matter, the degree of risk, the possibility it will preclude engagement of the lawyer by other clients, whether the fee is fixed or conditional, quote or estimate of fees, fee agreement, the reasonable cost of running a practice and the fee customarily charged in the market. Generally law firms have a hourly charge out rate for their lawyers. The more senior the lawyer, the higher the hourly charge-out rate. A partner might be between $400-$600, a senior lawyer $250-$400 and a junior lawyer $180-$280 per hour plus GST.

What types of legal fees should you expect?

The first consultation may be free and the legal fees will vary depending on the complexity of the documents or services you require. The more documents that require drafting, and the more back and forth communications with the lawyer, the higher the costs will be. A complex governance structure will also require more documents drafted. Firms like ours with more experience with startups will have templates to use. If they have worked with startups similar to yours it can reduce the complexity of drafting. Other costs include complying with anti-money-laundering requirements and disbursements.

How can you control costs when raising capital?

The best way to control costs is to plan ahead. Determine early on which documents your startup will need and which governance structure you want. When you engage a lawyer you can then outline exactly what you need and when you need it by. Identify issues regarding your IP, privacy, employment, insurance, health and safety, due diligence and fundraising. This means you will have considered the right things and can go in with questions. This will reduce the amount of communication needed with your lawyer and reduce costs. You should also ascertain the areas in which you do not need a lawyer, for example incorporating a company or reserving its name.

We have supported many startups to get going and have produced a helpful suite of free information to help startups succeed. Our Startups Legal Toolkit is a practical guide for entrepreneurs in Aotearoa New Zealand. It explains how to set up a company, discusses social enterprises and not-for-profits, fundraising, liability and ongoing duties, employment issues and other useful information.

If you would like to discuss further, please contact one of our team on stevenmoe@parryfield.com, or annemariemora@parryfield.com at Parry Field Lawyers

What is a fund?

In essence, a fund is a pool of money set aside for a particular purpose. Typically, multiple investors will introduce money into a fund for a common purpose.

People create or participate in funds for diverse reasons. Our focus in this article is on those who are creating funds for the purpose of kick starting an entrepreneurial idea and giving it life. There are other contexts where a fund may be relevant that we will save for another day – for example, a family might set up an education fund for their children’s education. A couple might establish or participate in an established retirement fund so that they receive income on their retirement. We have written another article on those contexts, over here.

So how can funds be set up to be used to back a new idea / business?

Investment funds are pools of money set aside by people seeking a return on their investment. The investors’ funds provide equity that can be used by others and then redeemed according to the terms of the fund. The targeted return might be purely financial, or financial + societal or environmental or cultural. Increasingly such a broader conception of investment funds result in the term “Impact Investing” which we have written about separately here.

What structure might be used?

You might be able to get investors involved via debt – that is, they provide secured lending to you to undertake the project. Another option is via equity which is where investors have an ongoing ownership stake.

Typically a project that needs funding will be structured so that there is financial return for investors and this is often done with one of the following methods:

Limited Partnerships – in this model for a fund there are those with money who invest but have little say in the project (limited partners) and there is an entity which guides the project (the general partner). This type of legal vehicle is useful when there is a distinct one off project, such as a housing development. There are often tax reasons why investors prefer this option as well. We go into more detail on this option here. An LP might also make loans to another entity which undertakes the project (so a combination of debt/equity structures).
Companies – this is a traditional vehicle used to have investment and sees the money flow into the entity from shareholders who will then get return from the dividends that get issued when it is profitable. There will be directors of the company who make the key decisions for the project / business.
Unincorporated Joint Ventures – another legal vehicle we see used from time to time is to have different parties involved in a joint venture which is set up for a specific project or purpose. While this is an option in terms of setting up a fund we would typically see that being overseen by an LP or company, mentioned earlier.

Other options may be worth considering, and we talk about different structures in this article here.

Ensuring you comply with fundraising rules

Whichever structure is chosen compliance with the rules set by the Financial Markets Conduct Act is critical – it sets out who you can solicit investment from. For example, if you only ask for investment from wealthy people (who are ‘wholesale investors’ as defined in the legislation) then you do not have as many compliance requirements in terms of the information provided to them. Depending on what the fund will do there may be other compliance which is needed, for example if financial services will be provided.

If you want to know more about this area, we suggest looking over our Capital Raising Guide here.

Please note that this is not a substitute for legal advice. We’d be delighted to discuss your situation with you, so feel free to contact us on 03 348 8480 or by email to Steven Moe – stevenmoe@parryfield.com or Kris Morrison – krismorrison@parryfield.com

Phase 1: Corporate Governance Reforms

Phase 2: Governance and Accountability

1. Primary Responsibility of the Current Board

(a) Evaluating Leadership Roles

(b) Emphasising Diversity of Thought

(c) Mapping Out a Succession Plan

(d) Encouraging Healthy Board Renewal

2. Utilising a Skills Matrix

3. Long-Term Vision: “Where Will We Be in 50 Years?”

4. Conclusion

FAQs

This article is merely on overview of the Privacy Act. We recommend visiting the Privacy Commissioner’s website.

Top tips

FAQs

This article is merely on overview of the Privacy Act. We recommend visiting the Privacy Commissioner’s website.

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