A new Companies Office levy is one step closer

The Companies (Levies) Amendment Bill passed its first reading in the House yesterday and has now been referred to Select Committee for public consultation. The bill amends the Companies Act 1993 to create a new levy-making power.

The Government's intention in introducing the bill is to give the New Zealand Companies Office the ability to charge levies to users of its registry services, as well as fees as it does now. The new levies, which will be set by regulations after public consultation, will apply only to select users – including companies, auditors, limited partnerships and licensed insolvency practitioners.

A funding shortfall

The Companies Office administers 16 different online registers, including registers of entities such as companies, incorporated societies, and retirement villages, professional services registers for licensed auditors and insolvency practitioners, and registers for disclosure of financial products and security interests over personal property. Currently, the Companies Office is required by legislation to charge and use money collected as fees separately for each of the 16 different registers. It is not permitted to fund the administration of one register from money collected from users of another. And it may not pool funds to use for the good of the registry systems as a whole.

In practice, the fees charged in some smaller registers have not kept up with the costs of upgrading them and this shortfall has been met from surpluses that have been generated from fees collected under legislation governing other registers, which is not in line with the current rules. The Government wants to use the introduction of levies (in addition to fees) to provide a long-term funding solution to help the Companies Office to administer all its registers.

Who would this effect?

The purpose of the bill is to allow the Companies Office to charge levies and fees that go towards supporting all 16 registers. However, the benefits and costs will not be shared evenly — only some users (such as companies) will be charged levies. In effect, smaller users of registry systems such as incorporated societies and trusts will be subsidised, which the Government says is fair.

Consultation on the bill

The Government introduced the bill without any public pre-consultation on the underlying policy, saying that it needs to move quickly towards a new funding model for the Companies Office.

The bill provides for a requirement that before any levies are set by regulations themselves, there needs to be a full consultation with those who are affected. The Government says consultation will cover who is charged and how much, what the money is intended to be used for and why, and how the levies will be paid. However, the bill also states that any new levy-making regulation will not be invalid because consultation didn’t occur; or because it occurred, but about a levy that subsequently changed in amount or method.

The bill also provides other safeguards to make sure that the levies are set at a fair and appropriate level. These include an express stipulation that the Companies Office cannot collect more money from users than it needs to recover its overall costs.

Next steps

The bill passed its first reading 87 votes to 32 and has now been referred to the Finance and Expenditure Committee. Public consultation about the quantum of the levy and how it is administered will be an important part of the Select Committee process. Please click the link below to read the bill.

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