Business - Parry Field Lawyers

Under the Financial Services Providers (Registration and Dispute Resolution) Act 2008, everyone who provides, or offers to provide, a financial service in New Zealand or from New Zealand to other countries must register as an FSP. Importantly, before you offer your financial services you must be registered.

There is a simple straightforward application process for registration. This can be found online on the website of the Ministry of Business, Innovation and Employment.

Firstly, the application process depends on what kind of FSP you are. There are three different types depending on your business and the services you will provide – an individual; an entity already registered via the Companies Office; or another entity or body.

Applying as an individual:

There is basic information which you will have to include the application such as your full legal name, date of birth, residential and contact address, your business address and any trading names you use.

Applying as a business already on a Companies Office register:

You will have to provide your company or entity’s name, the Companies Office number or its New Zealand Business Number. If you do not know what this is, you can search for it via the Companies Register. Furthermore, include any trading names you use, your business and contact address and the basic details on your directors and other controlling owners and managers.

Applying as another entity or body:

The basic information you will have to provide is about your business, such as its legal and trading names, the country of origin, the business and communication address and also an email address. You will also have to provide the basic details on your directors and other controlling owners and managers.

For all applications:

Firstly, in completing this process, whatever kind of FSP you are, you will have to provide information about your business and the services it will provide. In the form you fill out online there are a list of services. You would select all the ones that you intend to provide upon registration. This is something that needs to be kept up to date as well. The services that you need to declare can be found under section 5 of the Financial Service Providers (Registration and Dispute Resolution) Act 2008.

Secondly, every individual FSP and those people in charge will have to undergo a criminal history check.

If you are applying to the Financial Markets Authority (FMA), at the same time, to be an Authorised Financial Advisor (AFA), there is additional information to prepare which can be found here.

When registering as a FSP there are transaction fees to pay:

○ Application fee, incl. GST: $345.00
○ Criminal history check fee per person, incl. GST: $13.00
○ FMA levy, incl. GST: $690.00
○ TOTAL: $1048.00

Furthermore, after you register you have to pay fees once you’ve completed your annual confirmation:

○ The Companies Office Fee, incl. GST: $75.00

Alongside this, you will pay levies to the Financial Markets Authority (FMA).

○ The amount of levies you pay depends on your class of service provider and the services you provide.
○ Levies are listed under Schedule 2 of the Financial Markets Authority (Levies) Regulations 2012.

This online process is efficient and easy and should not take up too much of your time.

The information contained in this outline is of a general nature, should only be used as a guide and does not amount to legal advice. It should not be used or relied upon as a substitute for detailed advice or as a basis for formulating decisions. Special considerations apply to individual fact situations. Before acting, clients should consult their Parry Field Lawyer.

Trade Mark Protection: Key things to know when registering and maintaining a trade mark in New Zealand

A trade mark protects distinguishing names and logos, making it one of the most important business assets you can own. As the number of enterprises in New Zealand now exceeds over half a million and counting, it is more important than ever to protect your business’s hard earned reputation. One of the best ways to do this can be by registering a trade mark.

Parry Field has previously published an article on this matter. This article seeks to add to this previous publication, by providing links to several further discussions on some of the more complex and often confusing aspects of trade mark registration. Parry Field Lawyers provide legal advice on a range of commercial matters including protecting your intellectual property.

No offence! Ensuring your Trade Mark is not likely to Offend Māori and other Community Groups

What is a Search and Preliminary Advice Report? Do I Need One?

Could you be more specific? Working out your Trade Mark’s Specification

Broadening your Horizons? How to register your Trade Mark Internationally

The Intellectual Property Office of New Zealand (IPONZ) encourages first time applicants to make an initial application for a ‘search and preliminary advice report’ (S&PA) before making an application to register their trade mark. This article seeks to give some clarification about what an S&PA report is and in which circumstances you may or may not want to make such an application.

An S&PA report consists of two parts and will give you an assessment within five working days as to whether your proposed trade mark complies with the requirements of the Trade Marks Act 2002. More specifically;

1. A search report will find whether anyone else currently holds a trade mark the same as or similar to your proposed trade mark.

2. A preliminary advice report will find whether your proposed trade mark renders your business clearly distinguishable within your industry.

Individually, each service costs $40 excluding GST, or $80 excluding GST for both services. While the services might be useful, applicants should be aware that applying for the reports is not compulsory. In fact, conducting your own search and ensuring your trade mark is distinguishable may not be as difficult as it sounds, and could save you money.

Conducting your own Search

There are four different searches you should complete to check the availability of your trade mark:

1. IPONZ Trade Mark Register

This register is the best place to begin your examination, offering a thorough search of already registered trade marks in New Zealand. You can access this database here.

2. ONE Check

As well as showing you already registered trademarks, ONE Check will also show you the availability of company names and domains. You can access this database here.

3. International Trade Mark Register

Searching this database will allow you to see if anyone has already applied for your trade mark in New Zealand, but it hasn’t yet been added to the New Zealand register. You can access this database here.

4. General Web Search

Lastly, we suggest you use a search engine, such as Google, to search for your proposed trade mark. This will show you any businesses that may already operate under your name. This search is not absolutely necessary, in that businesses with a name or logo that is not trademarked will not prohibit your application, but it may be worthwhile to assess who else could be considering registering a similar trade mark in the future.

If after conducting the above searches you are not able to find an existing trade mark at all similar to yours, it is unlikely you need to procced with the $40 search report. However, if any of the database searches return a similar existing trade mark, we suggest applying for a search report before proceeding. The $40 cost could save you the larger cost of a failed application.

As a general pointer, trade marks that attempt to register a compound word that includes an already trademarked word (registered in the same or similar specification category) are less likely to succeed. For example in a recent High Court case, the court held that the trade mark ‘Shacman’ was likely to deceive or be confused with the existing trade mark ‘Man’. Both trade marks were registered in class 12 (commercial vehicles).

Self-Assessing the Distinguishability of your Trade Mark

The Trade Marks Act requires each trade mark to have a distinctive character. For example, attempting to register the name ‘Budget Supermarket’ for a food and household goods retailer is unlikely to be seen as distinguishable as it could describe many traders in their nature of business. Similarly, the name ‘Blueberry’ as a trademark for fruit would not be seen as distinguishable, because marks that simply describe the good or service often cannot distinguish that good or service of one trader from another. Using the name ‘Blueberry’ as a trade mark for an architecture firm, however, would be distinctive.

If you are certain your trade mark is distinguishable, it is unlikely you need to proceed with the $40 preliminary advice report. However as with the search report, if you have any doubts regarding your trade mark’s distinctive character, it may be worth the $40 cost to save you the larger cost of a failed application.

Before registering, it also pays to ensure your trade mark is not on the list of protected words and is not likely to offend Māori or another significant section of the community. You can read our article on ensuring your trade mark does not breach this ‘offensiveness’ standard here.

Should you need any assistance with these, or with any other Commercial matters, please contact Kris Morrison or Steven Moe at Parry Field Lawyers (+64 3 348 8480).

For a more general overview of registering a trade mark, please see our original article here.

The Trade Marks Act 2002 outlines that trade marks must be rejected if they are likely to offend a significant section of the community. The first part of this article discusses trade marks that are likely to offend a significant section of the community more broadly, while the second part focuses specifically on trade marks that are likely to offend Māori.

Likely to offend a significant section of the community

Adopting the Macquarie Dictionary’s definition, the Intellectual Property Office of New Zealand (IPONZ) acknowledges the word ‘offend’ means to ‘irritate in mind or feeling’ and ‘to cause resentful displeasure in’. Under this definition, when assessing whether a trade mark is likely to offend a significant section of the community, IPONZ outlines that its examiners will take into account the following considerations:

– Each case must be decided on its own merits.

– The question must be considered as at the date of application.

– The question must be considered objectively, from the point of view of “right-thinking members of the public”.

– A mark should be considered likely to offend a significant section of the community where:

– The mark is likely to cause a significant section of the community to be outraged; and/or

– A significant section of the community is likely to feel that the use or registration of the mark should be the subject of censure.

– A significant section of the community is likely to feel that the mark should be the subject of censure where the mark is likely to undermine current religious, family or social values.

Influential on the New Zealand approach to assessing what suffices ‘a significant section of the community’ was the 1976 ‘Hallelujah Trade Mark’ case in the UK. When deciding whether to allow the trade mark ‘Hallelujah’ as the name of a women’s clothing brand, the Registrar’s Hearing Officer found the trade mark was “reasonably likely to offend the religious susceptibilities of a not insubstantial number of persons”.

Although this trade mark application might be decided differently today, the Hearing Officer stressed that rejection of an application is warranted even where the group of people offended are a minority, so long as they are substantial in number. Influenced by this UK decision, IPONZ also outlines that its examiners will also take into account the following considerations:

– The significant section of the community may be a minority that is nevertheless substantial in number.

– A higher degree of outrage or censure among a smaller section of the community, or a lesser degree of outrage or censure among a larger section of the community, may suffice.

Lastly, one interesting principle that the IPONZ examiner will consider is that the application should not be rejected merely because the mark is considered to be poor taste. In a more recent decision by the Office for Harmonisation in the Internal Market (the trade mark registry for the European Union) the previous examiner had rejected the trade mark ‘Dick & Fanny’ on the basis it could offend a significant portion of English speaking consumers. However upon appeal, the trade mark was accepted, on grounds that the trade mark “may, at most, raise a question of taste, but not one of public policy or morality”.

This decision has made it clear that a distinction should be drawn between trademarks that are offensive and trade marks that could be considered poor taste. While the former will be rejected, registration of the latter is not necessarily prohibited.

Likely to offend Māori

In the mid 1990’s, in response to claims that the Trade Marks Act 1953 insufficiently protected Māori intellectual property, the New Zealand Government established the Māori Trade Marks Focus Group. On the focus group’s recommendation, the commissioner now has access to the Māori Trade Marks Advisory Committee when making decisions on Māori trade marks. While not binding, the committee provides advice to the commissioner to minimise the risk of registering trade marks that are likely to cause offence to Māori.

All trade mark applications using Māori text or imagery will be referred to the advisory committee, who will then make a recommendation to the commissioner. One of their key considerations concerns the Māori words ‘Tapu’ and ‘Noa’. Tapu is the strongest force in Māori life, and can be used to describe people, objects or places that are ‘sacred’ or carry ‘spiritual restrictions’. Conversely, noa can be used to describe people, objects and places that are ‘common’, from which the tapu has been lifted. Therefore, trade marks that combine or associate tapu and noa can be considered offensive or inappropriate to a number of Māori.

For example, in 1927 the ‘Native Brand Co’ produced Worcester sauce under a logo that depicted a rangatira (Māori Chief, which is a position considered tapu). IPONZ considers that such a trade mark would not likely be registered today, because associating tapu (a Māori Chief) and noa (a household food items) signifies an attempt to lift the tapu of a Māori Chief, which could be considered offensive.

In some circumstances, it may be appropriate for a Māori name to be gifted to a business or organisation by tangata whenua – the Māori people of the land. Such a gifting or blessing is often done in accordance with mana whenua – the mana or power that comes from the land or rights to the land. A recent example was the gifting of the name ‘Tūranga’ to the new Christchurch City Central Library by Ngāi Tūāhuriri, a subtribe of Ngāi Tahu. Because the name honours a North Island settlement that was home to the Ngāi Tahu ancestor Paikea, use of the name without Māori consent could have likely been considered offensive.

If you are still unsure whether your trade mark might be considered as too offensive to be registered, you may like to consider getting a ‘Search and Preliminary Advice Report’ from IPONZ. This preliminary assessment will give an indication whether your Trade Mark will be allowed. You can read our article about getting a Search and Preliminary Advice Report here.

Should you need any assistance with these, or with any other Commercial matters, please contact Kris Morrison or Steven Moe at Parry Field Lawyers (+64 3 348 8480).
For a more general overview of registering a trade mark, please see our original article here.

This review outlines the key messages in “Building a Story Brand: Clarify your message so customers will listen”. Donald Miller is an American author who runs a podcast of the same name. He has written a variety of books over the years (I remember reading “Blue like Jazz” about 15 years ago).

The premise is that you can approach telling your brand by thinking about the story that your customers can resonate with. So what are the drivers behind people making decisions to purchase a product or engage you to provide services? The promise is that the book will transform how you think about who you are, what you do and the unique value that you can bring to your customers.

It all boils down to the fact that movies are predictable, but we still go see them, because we identify with the narrative arc of the characters even if we know how it ends. Think about romantic comedies, buddy films, superheroes – they all are basically very similar. The introduction lays out the premise: “This is not a book about telling your company’s story … customers don’t generally care about your story; they care about their own. Your customer should be the hero of the story, not your brand. That is the secret every phenomenally successful business understands.”

So the central theme is clear – put you customer’s stories above your own. The question is how you go about doing that and the guidance takes the form of a framework. Underpinning that is the principle that you need to explain how your company will help people survive and thrive and explain that in a simple way. The example given is Apple, which went from advertising with long articles about technical specifications to simply two words on a billboard: “Think different”. They realised that communication needed to be simple and ‘tell the story’ of how their product could help the consumer become the hero. Buying a product became about being an alternative thinker. Amazing really. They clarified the role they can play in their customers life and communicated that simply.

So down to the actual framework proposed, the key point is that every story has the following elements and you need to tell your story so it resonates with each of these points:

1. A Character – The customer is the hero, not your brand

2. Has a problem – Customers buy solutions to their problems

3. Meets a guide – Customer wants help from a guide (Yoda)

4. Who gives them a plan – Someone who offers a plan is trusted

5. And calls them to action – Needs some challenge from the guide to take action

6. That helps avoid failure – The customer wants to avoid a tragic ending

7. And ends in success – Tell the customer how their lives can be changed

In working out how your brand will do the above the book also looks at websites and notes that they should clearly state what the offer is eg “We help you cook like a pro” or “We make better websites”. So the idea here is that the website itself should be aspirational, promise to solve a problem, state what they do, and have obvious calls to action.

The last part of the book deals with the fact that if you can tell the story well then it will also be useful for your team to understand how they fit in the scheme of things. So, this can help call people back to the mission of the company – which may not have been clear in the first place.

I found this book was interesting to read through because so much of it made logical sense but I hadn’t seen it expressed in the way it was here before. I recommend it if you are looking at your own branding and messaging and thinking about how that could be improved.

Note: While this was not a legal book or a review focusing on legal issues we see the “telling the story” as an issue all of our clients face. So, we hope this summary is a useful tool for you as you revisit how you are telling your story in the market. Do you know a book we should review here? Drop us a line and let me know on stevenmoe@parryfield.com

Steven Moe

The purpose of the Credit Contracts and Consumer Finance Act 2003 (“CCCFA”) is to protect the interests of borrowers by placing obligations on creditors to be responsible lenders. It does this by providing general rules of credit contracts and by setting out disclosure requirements for consumer credit contracts. This article discusses these rules and requirements to help you understand your obligations as a lender, or your rights as a borrower.

Credit Contracts vs. Consumer Credit Contracts:

The CCCFA defines both general credit contracts and consumer credit contracts. A credit contract is defined in section 7 as a contract under which credit is or may be provided. On the other hand, a consumer credit contract is a loan taken out by a natural person who is going to use the funds for wholly or predominantly (more than 50% household or domestic use (this for example could be a mortgage for a house, but it does not include a loan for investment purposes). There must also be interest charges or credit fees and the creditor must carry on a business of providing credit or make practice of entering into credit contracts.
A consumer credit contract carries with it additional disclosure obligations that are imposed on the lender to ensure that the interests of the borrower are adequately protected.

A loan might fit under the class of a consumer credit contract, but it will definitely constitute a credit contract. It is generally presumed that where a party claims that a credit contract is a consumer credit contract, it will be just that. However, as set out in section 14 of the CCCFA, the borrower can make a declaration before entering into the contract stating that the credit is going to be used for business/investment purposes and that it is therefore not a consumer credit contract.

Responsibility of lenders:

The responsibilities of lenders are set out in section 9C of the CCCFA. These are not binding on the lender but it is strongly advised that they are complied with as they can be used as evidence to prove that the lender was a responsible one. Where applicable to the particular contract, the lender must at all times:

Exercise the care, diligence and skill of a responsible lender.
The lender must make reasonable inquiries in relation to the borrower before they enter into the agreement. In particular, they need to be satisfied that the credit provided will meet the borrower’s requirements, and that the borrower will not be subject to substantial hardship when they make payments under the agreement.
Assist the borrower in reaching an informed decision as to whether or not to enter into the agreement and to be reasonably aware of the full implications of entering into the agreement. This includes ensuring that any advertising is not likely to mislead and that the terms of the agreement are expressed to the borrower in a clear, concise and intelligible manner. The same goes for information provided after the contract is entered into, and any subsequent dealings, insurance contracts, and guarantees.
Treat the borrower and their property reasonably and in an ethical manner.
Ensure that the agreement is not oppressive.
Meet lender’s legal obligations under various other statutes including the Fair Trading Act 1986 and the Consumer Guarantees Act 1993.

The main thing is that lenders ensure that the credit contract is not harsh or oppressive, and that the borrowers are aware of any implications associated with the contract.

What should a credit contract (for example, a loan agreement) include to ensure compliance with the CCCFA?

What needs to be done in order to comply with the CCCFA largely depends on the nature of the particular credit contract. Ultimately though, the CCCFA is seeking to ensure that the borrower is properly protected and that the lender has been a responsible lender and has made sure that the borrower is fully informed as to the nature of the agreement and the implications of entering into it. Consumer credit contracts require an initial disclosure statement as well as continuing disclosure statements to be made at least every six months (where applicable).

Initial Disclosure Statements

A consumer credit contract needs to make key information available in a clear and concise manner to the borrower such as interest rates, default fees and the borrower’s right to relief or cancellation. It is essential that the implications of entering into a credit contract are made known to the customer.

Before a contract is entered into, the following information (in summary) must be disclosed to the consumer (where applicable to the contract), pursuant to schedule 1 of the CCCFA:

Full name and address of creditor;
Initial unpaid balance;
Subsequent advance;
Total advances;
Credit limit;
Annual interest rate;
Method of charging interest;
Total interest charges;
Interest free period;
Credit fees and charges;
Payments required;
Fully prepayment;
Security interest;
Disabling devices;
Default interest charges and default fees;
Debtor’s right to cancel;
Debtor’s right to apply for relief on grounds of unforeseen hardship;
Continuing disclosure statements;
Consent to electronic communications; and
Dispute resolution and Registration under Financial Service Providers (Registration and Dispute Resolution) Act 2008.

This information needs to be disclosed in a way that is clear, concise and intelligible.

Continuing Disclosure Statements

Continuing disclosure statements must also be made pursuant to section 19 of the Act, insofar as they apply to the contract. These are summarised as follows:

a. The opening and closing dates of the period covered by the statement; and
b. The opening and closing unpaid balances; and
c. The date, amount, and a description of each advance during the statement period; and
d. The date and amount of each interest charge debited to the debtor’s account during the statement period; and
e. The date and amount paid by the debtor to the creditor, or credited to the debtor, during the statement period; and
f. The date, amount and a description of each fee or charge debited the debtor’s account during the statement period; and
g. The amount and the time for payment of the next payment that must be made by the debtor under the contract; and
h. The annual interest rate or rates during the statement period (expressed as a percentage or percentages); and
i. In the case of a credit card contract, a prescribed minimum repayment warning and other prescribed information in connection with payments under a credit card contract.

A continuing disclosure statement may not be required in certain situations, for example where interest charges or credit fees are not charged. The full list of exemptions is set out in section 21 of the CCCFA.

The information contained in this outline is of a general nature, should only be used as a guide and does not amount to legal advice. It should not be used or relied upon as a substitute for detailed advice or as a basis for formulating decisions. Special considerations apply to individual fact situations. Before acting, clients should consult their Parry Field Lawyer.

Consequential loss is a loss that arises as a result of a breach of contract. In contracts, parties often exclude liability for consequential loss which is provided for in an exclusion clause.

If you are entering into negotiations for a contract, it is important that you understand what consequential loss is, when damages can be claimed for consequential loss, and how to effectively exclude liability.

A question that arises when dealing with consequential loss is how far you can actually go in claiming damages for a consequential loss? Where do you draw the line?

Say, for example, that Mrs Smith has purchased a freezer for her catering business from Mr Jones, which she has filled with ice cream. This ice cream is for a stall that she has been running at the local fair for a few years now, and is a favourite for many fair-goers. Unfortunately, the freezer broke the day before the fair causing all of the ice cream to melt and meaning that Mrs Smith cannot serve ice cream at her ice cream stall and would therefore not make any profit. The lack of ice cream at the stall meant that there were a lot of grumpy children, and grumpy children meant grumpy parents which resulted in a lot of backlash on the fair.

The following year, the fair suffered a 50% reduction in attendance as a direct result of the grumpy children and the lack of ice cream, and the organisers then had to cancel the fair in subsequent years and claimed the amounts they lost from poor Mrs Smith.

Mrs Smith now wants to sue Mr Jones in damages for the loss of profit and the amounts claimed by the fair organisers, which were losses resulting from the breaking of the freezer. But how far can Mrs Jones actually go in claiming these damages? Let’s look at some cases and see what they say.

Hadley v Baxendale

In an 1854 English Court of Exchequer decision Hadley v Baxendale, Alderson B famously established the remoteness test, which is a two-limb approach where the losses must be:

Considered to have arisen naturally (according to the usual course of things); or
Reasonably considered to have been in the contemplation of the parties at the time when they made the contract as a probable result of the breach of it.

Alderson B said that in order for a party to successfully claim damages on the grounds of consequential loss, the loss must fall into either of those two categories.

McElroy Milne v Commercial Electronics

In 1992 in New Zealand, Cooke P said this test no longer applied in modern law, and he established a multi-factorial discretionary approach in which a range of factors are to be taken into consideration, including foreseeability.

Transfield Shipping v Mercator Shipping (The Achilleas)

This is more recent English House of Lords decision concerning the late return of a ship. In this case, the judges established that while Hadley v Baxendale is generally a good approach, there are certain circumstances where it may not necessarily apply.

These judgments create confusion in determining what actually constitutes a consequential loss and where to draw the line. Generally speaking, however, the loss must have been in the contemplation of the parties for it to amount to a consequential loss.

A way forward: What should the clause say?

In our view there are three ways forward:

No exclusion of consequential loss – this means that the parties are leaving it up to the interpretation of the Courts;
Include a general consequential loss clause; or
Incorporate a bespoke clause for the specific contract.

Where possible, we recommend a general exclusion of consequential loss with some examples of specific situations (essentially a bit of both 2 and 3 above).

Other options available:

Remember that a contract is ultimately a give and take from each side and another way that a party can limit liability in a contract is by putting a total cap on their liability.

Another option is that a party could limit liability by stating a time period in which the other party can bring a claim. A small company negotiating with a large multinational will have less scope and a template agreement is much more difficult to get changes made to it.

Ultimately, whichever route is taken depends on the preference of the parties, and their negotiations will also play a role in determining what liability is excluded.

Every situation is unique and how much Mrs Smith could claim for will depend on what the contract said and the circumstances of the situation. Whatever your scenario, we have a dedicated commercial team at Parry Field Lawyers who can give you personalised advice on all aspects of your business ventures. This article is also based on a more detailed analysis of the cases mentioned above – contact us if you would like a free copy of that.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Please contact Kris Morrison or Steven Moe at Parry Field Lawyers (348-8480).

If you are in start-up mode then you have plenty to think about – so when it comes to setting up your Company you may be wondering what is essential and what is not? In this article we talk about a Constitution and explain what it is and the role it can play for your Company.

To set up a Company the key things you need are a Shareholder and Director (needs to be NZ resident or a director in an Australian company). A Constitution is not legally essential in order to set up a Company but they are very common. This is because they can alter the ‘default’ position under the Companies Act. Without a Constitution the Companies Act provisions apply to your new venture. That may be fine in some simple situations where there is only one shareholder and director but in the usual scenario of multiple people involved it can pay to be specific and customise how you want the rules to apply.

It is worth remembering that because a Constitution is a public document it also allows for transparency in case someone wants to look it up on the Companies Office website (as opposed to a Shareholders’ Agreement which is a private document). More on the Shareholders’ Agreement and what that is another time.

So turning to what a Constitution would typically cover, they deal with how the Company will run in relation to matters such as:

• Setting out clearly the purpose of the Company;
• Information regarding the Shares such as how they are issued and transferred and whether there are any restrictions on selling or transferring shares;
• About distributions and when dividends will be paid and the process;
• Regarding Directors such as the number of directors, how they are appointed and how they resign or are removed;
• Meetings and what will make up quorums of the Board or Shareholder meetings; and
• What happens if the Company is wound up and ceases to trade.

While it may seem like having a Constitution is not necessary if you will be the sole Director and sole Shareholder it is important to think long term – how about in 2 years when you want to bring in an investor? It is likely that having a framework to show that covers off the key points about how the Company operates will be helpful. We would be happy to talk through some of the issues involved as we deal with start-ups most days of the week.

Recently we prepared a guide called “The Start-ups Legal Toolkit” which is a free ebook – contact us if you would like a copy. We also have resources on our “Innovate” website with templates and articles and guides there.

Contacts: Steven Moe – stevenmoe@parryfield.com and Kris Morrison – krismorrison@parryfield.com

When setting up a company, there are lots of new roles to get your head around. Whether you are a shareholder yourself, or a director in a company, it is important to understand what is expected from the role.

Generally, the constitution of a company determines the rules for how the company is to run. The Companies Act 1993 (“the Act”) often sets out that a company can only do certain things if its constitution allows it. In New Zealand however, a company is not required to have a constitution. Although it is very useful to have, it is not a legal requirement. In the absence of one, the Act sets out the rights, duties and obligations of shareholders, amongst other matters.

Shareholders’ Powers

Although shareholders are not responsible for, and don’t participate in, the day-to-day management of the company, the Act holds that there are certain powers that only shareholders of a company can exercise. These include:

Adopting, altering or revoking a constitution (section 32);
Altering shareholder rights (section 119);
Approving a major financial transaction (section 129);
Appointing and removing directors (sections 153 and 156);
Approving an amalgamation (section 221); and
Putting the company into liquidation (section 241).

While the appointing and removing of directors is usually done by an ordinary shareholders’ resolution (simple majority vote), the other powers require a shareholders’ resolution to be passed by a majority of 75% (or higher if required by the company’s constitution) of those shareholders entitled to vote, and voting on the decision.

Under section 109 of the Act, shareholders may also question and pass a resolution relating to the management of the company. However, unless the constitution says otherwise, the resolution is not binding on the board.

Limitations

Shareholders can bring an action against a director for a breach of duty owed to them, but not all directors’ duties are owed to shareholders. Section 169(2) makes it clear that a shareholder cannot bring an action against a director for any loss in the value of their shares by reason only of the loss being suffered by the company.

Reporting Requirements

Under section 178, a shareholder may, at any time, make a written request to a company for information held by the company. The company then has 10 working days from receiving the request to:

provide the information; or
agree to provide the information within a specific period; or
agree to provide the information within a specified period if the shareholder pays a reasonable charge to the company to meet the cost of providing the information; or
refuse to provide the information specifying the reasons for refusal.

The company may refuse if:

disclosure would or would be likely to prejudice the commercial position of the company; or
disclosure would or would be likely to prejudice the commercial position of any other person, whether or not that person supplied the information to the company; or
the request for the information is frivolous or vexatious.

Shareholders’ Exit Strategy

Unlike a director, a shareholder cannot just be removed from a company by the other shareholders. If problems between shareholders arise, the Companies Act allows a shareholder to apply to the Court to seek orders against the company or other shareholders – for example for the liquidation of the Company. However, this is where it can often be helpful to have a Shareholders’ Agreement which adds to the ordinary rights and responsibilities of the shareholders under the Companies Act. The agreement can set out who can buy their shares, how the shares will be valued, and any restrictions a shareholder may face once leaving, like a restraint of trade. Again, this Agreement isn’t legally required, but it brings clearer rules that are agreed upon by the shareholders.

Conclusion

Without a constitution, there are laws in place to govern what a shareholder can and can’t do. However if you have a company with more than one shareholder, you may want to look into getting a constitution and/or shareholders agreement. They can provide greater guidance on matters already in the Act, but can also allow shareholders greater involvement in how the business itself is run.

The information contained in this outline is of a general nature, should only be used as a guide and does not amount to legal advice. It should not be used or relied upon as a substitute for detailed advice or as a basis for formulating decisions. Special considerations apply to individual fact situations. Before acting, clients should consult their Parry Field Lawyer.

We get many questions from start-ups, charities and social enterprises on what they need to consider when establishing themselves. This made us think – “why not put all our answers in one spot?!”

After the initial buzz of coming up with your great idea, the next practical stage can be quite overwhelming – particularly if this is your first time engaged in a start-up. This toolkit seeks to guide you through the process, informing you on different structures, key contracts, and highlighting the topics people often forget about.

The book covers a range of topics including:

how to set up a company;
specific guidance on social enterprise and not for profits;
fundraising;
liability and ongoing duties;
employment issues; and
includes a template of a non-disclosure agreement.

With the success last year of “Social Enterprises in New Zealand: A Legal Handbook,” we are excited to see the impact this book will have.

To get the ebook, click here.

The book launch, which includes a bit of a busking theme by Kris Morrison and Steven Moe can be viewed here

If you find this resource helpful then please consider joining us in spreading the word to others by sharing this page on social media or emailing the link to one or two other people.

Applying as an individual:

Applying as a business already on a Companies Office register:

Applying as another entity or body:

For all applications:

When registering as a FSP there are transaction fees to pay:

Trade Mark Protection: Key things to know when registering and maintaining a trade mark in New Zealand

Conducting your own Search

Self-Assessing the Distinguishability of your Trade Mark

Likely to offend a significant section of the community

Likely to offend Māori

Credit Contracts vs. Consumer Credit Contracts:

Responsibility of lenders:

Initial Disclosure Statements

Continuing Disclosure Statements

Hadley v Baxendale

McElroy Milne v Commercial Electronics

Transfield Shipping v Mercator Shipping (The Achilleas)

A way forward: What should the clause say?

Shareholders’ Powers

Limitations

Reporting Requirements

Shareholders’ Exit Strategy

Conclusion

Christchurch CBD

Christchurch – Riccarton

Rolleston

Hokitika

Auckland