Charities/NFP - Parry Field Lawyers

What is the minimum age of a trustee?

We often get asked about whether a young person can become a trustee. There are a few points to consider which we are going to go into here. The minimum age of a trustee is 18 years old under the Trusts Act 2019 (Trusts Act) under sections 15 and 20. However, the minimum age of an officer of a charity is 16 years old, as long as one of the trustees of the charity is at least 18 years or older.

How does this work?

An officer in relation to a charitable entity is someone in a position of significant influence over substantial decisions of the entity. It includes trustees of a trust, a member of a board, and a person occupying any other position that allows them to exercise such influence.[1] It also includes a person with powers conferred on them to make decisions which would otherwise fall to trustees, members of the board or the entity’s governing body.

Charities Services has stated that any person under the age of 16 is disqualified from being an officer under section 36B of the Charities Act 2005 (Charities Act). This acknowledges that people of 16 or 17 years of age can partake in charitable work as an officer. Charities are still required to have at least one officer that is 18 years or older as an essential requirement under section 13 of the Charities Act. The difference in age requirements for trusts and charities comes down to the responsibilities in each role, specifically in entering contracts and holding property.[2]

So, where someone of the age of 16 or 17 cannot be a trustee of a trust they may be an officer of a charity if there is at least one officer that is 18 years or older at any given time.

What does this mean for charitable trusts?

Where a charitable organisation wishes to be a charitable trust, the officers all need to be 18 or older to comply with the Trusts Act. If the charity wishes to be an incorporated society, they require one person that is 18 years old or older to be the contact person.

How about for an incorporated society?

Incorporated societies allow under 18-year-olds to be officers provided they are not under the age of 16 years of age.[3] However, the Incorporated Societies Act 2022 requires every society to have at least 1 contact person who is at least 18 years of age.[4]

How about for a charitable company?

The Companies Act 1993 provides that anyone under the age of 18 are disqualified from being a director of a company. The Charities Act 2005 confirms that individuals that are disqualified under the Companies Act are also disqualified from being officers of charitable entities also. This means directors of charitable companies must be 18 years or older.

We have supported many charities and produce lots of free guides such as the Charities in New Zealand Legal Handbook. If you have any further queries please do not hesitate to contact one of our experts at Parry Field Lawyers- stevenmoe@parryfield.com, sophietremewan@parryfield.com, michaelbelay@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.

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[1] Charities Act 2005, s 4 meaning of “officer”.

[2] Contract and Commercial Law Act 2017, s 86.

[3] Incorporated Societies Act 2022, s 47.

[4] Incorporated Societies Act 2022, s 113-114.

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

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

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

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

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

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

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

Our verdict

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

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

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

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

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

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

Why minutes matter

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

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

Legal Requirements

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

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

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

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

What minutes should include

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

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.

Charities benefit from receiving donations while donors also often benefit as they can help out worthy causes. Donors are financially incentivised to donate because they can apply for a Tax Refund on their Donation by applying directly to IRD or by way of payroll giving. [Link to the other article once published]

Direct donations

People often make donations to charities directly. As long as the charity has “tax donee” status and is a registered charity, the donor can then submit the receipt to IRD who will issue a tax credit, which effectively returns 33.3% of the donation to the donor. This happens at the end of the financial year. Find out more about claiming tax credits for direct donations.

So what is a tax donee organisation?

Generally a tax donee charity will also be registered with Charities Services, but not always. IRD maintains a list of donee organisations. Charities are added to the list if they use at least 75% of their funds within New Zealand (that is, they operate wholly or mainly here), or for the public good if an organisation is not a charity. For more on the threshold, you can check to see if a charity is on the IRD donee organisation list here.

It is also possible to claim tax credits on donations to charities supporting overseas causes.

We help with charity set ups and answering questions all the time. If you would like to discuss this further, please contact one of our team.

We have written a second article about another option, payroll giving. [link to the other article once published]

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.

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.

Charities often rely on donations and grants to enable them to do their work. Many donors, especially those who make substantial grants, may require that the charity is a registered charity.

The reasons for this vary. It may be that the donor wants to benefit from the tax credit they would receive from giving to a registered charity. It might be because they want the assurance that the donee organisation has passed the requirements of Charities Services to be a registered charity, with good standards of governance in place to help ensure the funds will be used as intended.

Some groups may not want to formalise their initiative by formally setting up or registering as a charity. Others may want to register, but it can take around three months to receive charitable status from Charities Services from the date of application. This can mean that newly established charitable trusts not yet registered with Charities Services are unable to receive funds from some donors. Without funds, charitable trusts are not able to get started with their intended work.

When facing just this situation and looking for a solution, a trustee of an as yet unregistered charitable trust (A) asked if it would be possible for another registered charity (B) to receive funds on its behalf as the donor would only provide funds to a registered charity.

It’s a great question. The biggest obstacle is likely to be that the donor may not agree to provide the funds to B on behalf of A. If it is agreed, we advise having a legally binding contract to confirm that the funds are being held by B ‘on trust’ for A to be provided to A when A is a registered charity.

The most important consideration, especially for B is that the charitable purposes of A must be similar to those of B. This is because what a registered charity does should be to advance its purposes, including fundholding.

The key takeaway – be aware that it takes time to apply for and be granted charitable status and try to factor that into your plans, including when you want to begin your charitable work and when you can accept funding.

We have an extensive suite of free information to assist charities in New Zealand, including our guide Charities in New Zealand a Legal Handbook. We have also prepared many articles for charities. Simply type ‘charities’ into our search (top right-hand corner of our homepage) to discuss a range of topics.

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.

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

Charities that deregister on or after 1 April 2024 without re-registering within one year may be liable to pay deregistration tax.

After deregistration your charity has one year to reregister or dispose of or transfer any assets to a registered charity or a New Zealand tax-exempt entity. Income tax will need to be paid on specific net assets if they are not transferred. These will need to be included in your charity’s income tax return for the period of one year from the deregistration date. Any depreciable property and financial arrangements need to be valued after your charity is deregistered to determine the following year’s tax. IRD has published a guide for charities tax obligations here.

This, however, does not apply to small charities who have net assets of $10,000 or less. Certain adjustments can also be made to exclude specific assets, including assets donated to the charity when it was still registered.

We support many charities and our experts here at Parry Field Lawyers are happy to help if you have any questions or queries- stevenmoe@parryfield.com, sophietremewan@parryfield.com, michaelbelay@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.

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

FAQs

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

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FAQs

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

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