Temporary changes to the Companies Act | OIO & other provisions

The Government has implemented measures relating to NZ businesses in light of the COVID-19 pandemic. One such measure relates to overseas investments. On 16 June 2020, the NZ Government introduced a temporary requirement for overseas investors making certain investments in New Zealand to notify the Overseas Investment Office (OIO), regardless of the value of their investment.

Particularly, overseas investors must notify the OIO of all investments that would result in:

1. more than 25% overseas ownership of a New Zealand business or its assets; or
2. an increase to an existing holding beyond 50% or 75% or up to 100%.

The notification process has been somewhat streamlined by the OIO providing an online form to be completed on their website.

There are three main categories:

1. Information about the overseas investor (including who is the ultimate owner(s) of the investor and their country of origin, and details of those who manage the investor(whether individuals or company directors (as applicable)) including whether or not they have ever held a position or interest in a foreign government, military or intelligence agency);
2. Information about the proposed transaction (including proposed settlement date and whether the transaction is conditional upon receiving an order from the OIO allowing the transaction to proceed); and
3. Information about the target business, including financial information and whether it is a “strategically important business” (for example, airports, telecommunications or financial institutions).

There is no fee payable to the OIO as part of the notification process.

Once notified, the OIO will complete an initial assessment within 10 working days to ascertain whether the transaction would be contrary to New Zealand’s national interests or involves a “strategically important business”. The OIO consider that a small number of transactions may require a further 30 working days for a thorough assessment.

Overseas investors and businesses should keep in mind the following:

1. Notification must be given to the OIO before a transaction is given effect. If necessary, transactions can be made conditional on a direction order (approval) from the OIO.
2. The OIO will not publish details of notifications.
3. If the OIO gives a direction order that a transaction may proceed and there are no attached conditions, the OIO does not publish any details of that transaction. However, if a direction order is given with conditions attached, or a prohibition order or disposal order is made, that decision will be published in a public “decision summary" on the OIO’s website.
4. Applications, notifications and information about an investment and its participants will goon public record and are subject to the Official Information Act 1982. If a request for information is made under the OI Act, the OIO can withhold such information if the information is of a commercially sensitive nature. If information is not a public “decision summary” then the OIO would consult with the applicant before releasing any information.

This regime will be reviewed by the Government every 90 days until it decides that the regime is no longer needed.  The first review is due mid-September 2020.

‍Additional changes

Additional changes to the Companies Act and other legislation to support businesses include:

1. Amendments to the Contract and Commercial Law Act 2017 allow electronic signatures to be used for security agreements containing powers of attorney;
2. Until 30 November 2020 (unless otherwise extended), companies may modify certain provisions in their constitutions if a majority of directors believe in good faith that it is not reasonably practical to comply with those provisions due to COVID-19. The provisions that may be modified include how to call meetings, procedures at meetings, method of voting, permitting electronic communications and a deferral of auditing or financial reporting. If a company modifies their constitution under this new legislation, it must notify to the Registrar of Companies and keep a record of those modifications to the constitution along with reasons why those changes were made.
3. Changes have also been made to the voidable transactions regime that reduces the vulnerable period from two years to six months, provided the debtor company and creditor are not related parties.

Note that the previous relaxation of deadlines relating to holding annual general meetings and filing annual returns for companies no longer apply and the imposed deadlines that Registrars are required to work to(for example, to process applications to reserve company names) have been reinstated. The Companies Office has made it clear that despite the recent escalation regionally to Alert Level 2 and Level 3, they are back to normal for compliance.  

We will be keeping a close eye on the implementation of further regimes to assist businesses during these unprecedented times. We will provide further updates if any changes are made or if new measures are introduced. In the interim, please get in touch with us for a chat if you want to discuss these changes or anything else affecting your business.  

Stay home and stay safe – we are all in this together. Kia kaha New Zealand.

This update was co-authored along with Ainsleigh Stone and Andrew Nicoll.

Social media image credit: Kyle Glenn

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