Most businesses in New Zealand are small, closely held companies. Often, their directors and shareholders are the same and they also work for the business. This means the lines between acting as director, shareholder, or manager get very blurred.

The Companies Act 1993 imposes a number of obligations on shareholders to ensure that directors/shareholders act appropriately in their different roles.Parry Field Lawyers provide legal advice on a range of commercial matters including company management and the rights and obligations of shareholders.

 

Shareholders hold the power behind the throne

The directors of a company make the day to day decisions.  Section 104 of the Companies Act 1993 (Act) restricts shareholder power, and the exercising of it, to the annual meetings and special meetings of shareholders (or a resolution in place of an actual meeting, which is often the preferred option).  It must be remembered that a director may be linked to another entity which is a shareholder in the company, such as where a director is trustee and/or beneficiary of a family trust, holding shares in the company. In that situation, the role of independent trustees in those trusts becomes important in ensuring that the interests of the shareholders are met and that the shareholders do not simply rubber stamp the directors wishes.

Shareholder power

The Act prescribes that certain powers must be exercised only by the shareholders of a company. These powers include adopting, altering or revoking a constitution (s32), altering shareholder rights (s119), approving a major financial transaction (s129), appointing and removing directors (s153), approving an amalgamation (s221) and putting the company into liquidation (s241).  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.

Sometimes all or nothing

There are instances where unanimous resolutions from shareholders may circumvent the requirements of the Act.  Under s107 of the Act shareholders acting unanimously may authorise a dividend, approve a discount scheme, allow a company to acquire or redeem its own shares, provide financial assistance to purchase its own shares and sign off on benefits, guarantees, remuneration packages and the like for the company’s directors.  These unanimous resolutions however, do not override the requirement for the solvency test to be met by the company, and for the related directors solvency certificate under s108.

Role at meetings

Annual meetings are the most usual ones for shareholders to turn their minds to.  Business carried out in such a meeting may be limited to receiving and adopting financial reports, election of directors, appointment of auditors, any other business requiring a special resolution and general business.

Special meetings can be called at any time to discuss a specific resolution provided the calling procedure has been adhered to.

In signing a resolution in lieu of a meeting each shareholder must ensure that all the requirements are included in the resolution and all matters to be resolved are clearly stated – if there is any doubt seek clarification, have it rectified or have the actual meeting.

 

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Should you need any assistance, please contact Tim Rankin at Parry Field Lawyers (348-8480) timrankin@parryfield.com

 

The phrase “Due diligence” usually refers to a process of investigation before purchasing or confirming an agreement to purchase a business or shares in a company which operates that business. Parry Field Lawyers provide legal advice on a range of commercial matters including drafting purchase agreements, making due diligence examinations and business purchases.

Read more

The Credit Contracts and Consumer Finance Act 2003 (“Act”) was enacted to simplify and update the law relating to the provision of credit. The previous Credit Contracts Act 1981 (“CCA”) was complicated and not well understood. Parry Field Lawyers provide legal advice on a range of commercial matters including entering credit contracts.

Read more

If you are a director of a small or medium sized company, you may be faced with the question of determining what is a reasonable and acceptable level of remuneration for yourself as a director. Parry Field Lawyers provide legal advice for managing your company including payment of directors’ fees.

Read more

The New Zealand Government enacted the Construction Contracts Act 2002 to help sub-contractors get paid on time and without fuss for construction work and to enable fast resolution to disputes arising under construction contracts. Parry Field Lawyers provides assistance with making and defending claims under the Construct Contracts Act.

Does the Construction Contracts Act apply to me?

The Act applies to a wide range of construction work, namely:

  • Construction, installation, alteration, repair, restoration, maintenance, extension, demolition, removal, or dismantling of any building or other structure.
  • Installing roadways, pipelines, water mains, sewers, electricity, water, gas, or telephone reticulation.
  • Heating , lighting, air conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection, security, and communications systems.
  • Any cleaning work carried out as part of the construction work.
  • Preparation for construction work such as site clearance, earth-moving, excavation, laying foundations; scaffolding.
  • Site restoration and landscaping, painting and decorating.

Making a Payment Claim

The parties to a construction contract are free to agree between themselves on:

  1. The number of progress payments under the contract.
  2. The gap between those payments.
  3. The amount of each of those payments.
  4. The date when each of those payments becomes due.

Where the contract does not address these issues, a contractor who carries out construction work for another person is entitled to issue monthly ‘payment claims’ for work done during that month. A payment claim must either be disputed or paid by the customer within the time period agreed for a response in the contract, by default this is 20 working days.

A payment claim must:

  1. Be in writing.
  2. Contain sufficient details to identify the construction contract to which the progress payment relates
  3. Identify the construction work and the relevant period to which the progress payment relates.
  4. Indicate a claimed amount and the due date for payment.
  5. Indicate the manner in which the payee calculated the claimed amount.
  6. State that it is made under the Construction Contracts Act.

If a payment claim is to be given to a residential occupier of a property, it must include a notice in a form prescribed by the Act setting out what the residential customer must do in response to the payment claim.

Payment Schedules

If the customer wants to dispute the payment claim, they must object to the payment claim by giving the contractor a ‘payment schedule’ in writing identifying the payment claim to which it relates and indicating what amount the customer is prepared to pay (which can be nothing). The amount the customer is willing to pay is called the ‘scheduled amount’.

If the scheduled amount is less than the claimed amount, the payment schedule must indicate:

  1. How the customer calculated the scheduled amount.
  2. The customer’s reason or reasons for the difference between the scheduled amount and the claimed amount.
  3. In a case where the difference is because the customer is withholding payment on any basis, the customer’s reason or reasons for withholding payment.

If the customer does not give the contractor a payment schedule by the deadline agreed in the contract, the customer becomes liable to pay the full amount claimed in the payment claim and the contractor may recover it from the customer by court proceedings, which cannot easily be defended by the customer.

Adjudication

If the customer issues a payment schedule within the time limit disputing all or part of the claimed amount, the contractor can refer the matter as a dispute for adjudication under the Construction Contracts Act.

The Act provides an adjudication process that enables a contractor to quickly get a decision on how much is owed by the customer. After the adjudicator is appointed, the contractor has five days to provide information in support of their claim. The customer then has five working days to respond. The Adjudicator must then issue a decision within 30 working days.

An adjudicator’s decision can be enforced in the District or High Court in the same that a judgment of those courts can be enforced.  This means the adjudication process can be an effective way to obtain quick payment for work.

 

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. If we can assist in any way please do not hesitate to contact Paul Cowey at Parry Field Lawyers (348-8480), paulcowey@parryfield.com 

In November 2009, Parliament implemented significant changes to the claim process in New Zealand’s District Courts.  The aim of the changes is to simplify the claim process, reduce the cost of litigation, and bring relevant information to light quickly to promote settlement discussions.

Read more

New Zealand law imposes time limits on suing other people.  These time limits often trip people up, and prevent them bringing what would otherwise have been strong claim. Parry Field Lawyers provide legal advice on a range of commercial matters include disputes and court proceedings.
Read more

“An ounce of prevention is worth a pound of cure.”

For most small businesses, your lease will be one of your most important contractual documents.  Get it wrong and the profitability of your business may be seriously affected.  Even so it is common for business to sign up agreements to lease without getting legal help. The lawyers at Parry Field have considerable experience in helping tenants to negotiate lease terms that fairly protect the tenant from undue risk and cost.
Read more

Many businesses operate without clear written terms and conditions of trade.  Services are provided and goods are supplied without any clear record of who will cover the cost if something goes wrong. Taking the time to prepare clear and reasonable terms and conditions of trade can help ensure that your business risk is identified and properly managed.  The team at Parry Field Lawyers are experienced at drafting terms of trade to ensure that risks associated with your work are clearly identified and allocated.

Read more

Many small businesses struggle with cashflow due to slow paying customers. Often customers choose to move bills from small businesses to the back of the pile, and pay other bills first.  Well drafted terms and conditions of trade can turn customer behaviour around so they pay your bills first.  The team at Parry Field Lawyers are experienced in drafting terms and conditions of trade that can help improve cashflow. Read more

Christchurch CBD

PHONE: +64 3 348 8480
FAX: +64 3 348 6305

PHYSICAL ADDRESS:
Level 1, 60 Cashel Street
Christchurch 8013, New Zealand

POSTAL ADDRESS:
PO Box 744
Christchurch, 8140, New Zealand

Christchurch

PHONE: +64 3 348 8480
FAX: +64 3 348 6305

PHYSICAL ADDRESS:
1 Rimu Street, Riccarton,
Christchurch 8041, New Zealand

POSTAL ADDRESS:
PO Box 8020, Riccarton,
Christchurch, 8440, New Zealand

Rolleston

PHONE: +64 3 348 8480
FAX: +64 3 348 6305

PHYSICAL ADDRESS:
Level 1, 80 Rolleston Drive,
Rolleston, 7614, New Zealand

POSTAL ADDRESS:
PO Box 8020, Riccarton,
Christchurch, 8440, New Zealand

Hokitika

PHONE: +64 3 755 8673
FAX: +64 3 755 8073

PHYSICAL ADDRESS:
26 Weld Street,
Hokitika 7810, New Zealand

POSTAL ADDRESS:
PO Box 44,
Hokitika 7842, New Zealand

Parry Field Charitable Foundation

Parry Field charitable members of NZ LAw, Global Cross Legal and SCLA

© Copyright – Parry Field Lawyers     |     Privacy Policy