In August, 2024, the New Zealand Government announced plans to modernise and simplify the Companies Act 1993, which governs how New Zealand’s 730,000 companies are established, operated, and dissolved. While the Act has been in place for over 30 years and remains largely effective, targeted improvements are set to make it more suitable for today’s business environment. The Government has decided to progress a package of reforms that will take place in two phases.
Phase 1: Corporate Governance Reforms
Phase one of the reform will include the following key aspects:
- Modernising and Digitising the Companies Act: the Act and other related legislation will be updated to remove outdated, ambiguous and overly complex provisions. This will aim to reduce compliance costs and better utilise modern technology for both businesses and regulations.
- Director and Partner Identification Numbers: Unique identifiers will be introduced for company directors and general partners. This will help track their involvement across multiple businesses and combat illegal practices, such as phoenixing (where a business re-emerges under a different name after insolvency).
- Enhanced Privacy for Directors and Shareholders: Directors and shareholders will be allowed to list an address for service on the Companies Register instead of their residential addresses, addressing privacy and safety concerns.
- Insolvency Law Reforms: To improve outcomes for creditors, the period during which transactions with related parties can be voided when a business is insolvent will be extended to four years, following recommendations from the Insolvency Working Group.
- Improved Use of the New Zealand Business Number (NZBN): The reforms will encourage greater uptake of the NZBN, simplifying transactions between businesses and government agencies, and allowing for automatic updates to company records using NZBN data.
Phase 2: Governance and Accountability
The second phase, led by the Law Commission in 2025, will focus on enhancing corporate governance by reviewing directors’ duties, liability, offences, penalties, and improving enforcement mechanisms.
These reforms are expected to streamline corporate processes, reduce costs, and enhance transparency, benefiting both businesses and the broader New Zealand economy.
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This article is intended for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please contact a qualified legal professional. Reproduction is permitted with prior approval and credit to the source.
