Business law reform legal update - November 2011

, , , , and , 25 November 2011
The Government's business law reform agenda is in full swing, although the election has resulted in a brief hiatus. The following is a summary of the current status of various law reform projects as at November 2011.

With Parliament dissolved for the 2011 General Election, all legislation in progress has automatically lapsed.  Based on events following the 2008 General Election, we expect all these lapsed bills to be reinstated when the new Parliament sits.  Some urgent or politically significant legislation may be progressed before the end of the year, although it is likely that most reinstated legislation will not be progressed until 2012.

Securities law reform

What's it about?

What's next?

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The Ministry of Economic Development (MED) is carrying out a comprehensive review of the Securities Act 1978 and parts of the Securities Markets Act 1988.  This review will result in all-new securities legislation.

MED has consulted on a draft Financial Markets Conduct Bill.  A revised version of the Bill has been introduced to Parliament, but not yet referred to Select Committee.  Once it is referred to Select Committee, the public will have another chance to submit on the Bill.  We do not expect substantive changes to be in effect for at least 18 months to two years.

Separately, MED has indicated that it will soon start work with industry and other stakeholders on developing the regulations to be made under the Bill.

Buddle Findlay will shortly be publishing an update on the differences between the exposure draft and latest versions of the Financial Markets Conduct Bill.

Financial Reporting Act changes

What's it about?

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The Government has announced wide ranging changes to the financial reporting requirements in New Zealand.  This includes matters relating to:

  • Small and medium companies
  • Charities and not for profits
  • Parent financial statements
  • Time for filing.

Related to this, the External Reporting Board (XRB) is currently consulting on a new Accounting Standards Framework.

A Financial Reporting Amendment Bill is currently being developed.  We anticipate this will be introduced to Parliament in 2012.

Submissions on the XRB consultation papers were due Friday 16 September 2011.

Companies and Limited Partnerships rule changes

What's it about?

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The Government has announced significant changes to the Companies Act 1993 and Limited Partnerships Act 2006, including:

  • Criminalising certain serious breaches of directors' duties
  • Requiring companies and limited partnerships to have a New Zealand resident director or agent
  • Enhancing the investigation and enforcement powers of the Registrar, including "flagging" the register entries of suspect companies and limited partnerships
  • Changing the rules for arrangements, amalgamations and compromises of companies subject to the Takeovers Code
  • Introducing qualifications for general partners, including disqualifying undischarged bankrupts and banned directors from being general partners.

The Companies and Limited Partnerships Amendment Bill has been introduced to Parliament, but not yet referred to Select Committee.  Once it is referred to Select Committee, the public will have another chance to submit on the Bill.

 

Financial Markets Authority fees and levies

What's it about?

What's next?

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In June 2011, MED consulted on fees and levies payable to the FMA by certain financial markets participants.

There has been no change in relation to FMA fees and levies since our August 2011 business law reform legal update.  MED has not yet provided any update as to the fees and levies payable by financial markets participants.

Securities Trustees and Statutory Supervisors Regulations and further amendments to Securities Regulations

What's it about?

What's next?

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Various detailed matters and forms relating to the Securities Trustees and Statutory Supervisors Act have been prescribed by regulation.  This includes licensing criteria, content of reports, fees payable and additional matters to be contained in trust deeds and deeds of participation.

The regulations have been made.  Securities trustees and statutory supervisors by now should have submitted their applications to the FMA.  The new regime becomes fully effective on 1 October 2012.

KiwiSaver changes

What's it about?

What's next?

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The KiwiSaver Amendment Act 2011 amended the KiwiSaver Act 2006 to treat KiwiSaver schemes more like unit trusts rather than traditional workplace superannuation schemes.  In particular, the manager of the scheme rather than the trustee will now be the "issuer" for the purposes of the Securities Act.

As a related project, the Government is considering changes to the disclosure of returns, fees, assets and conflicts of interest.

There has been no change in relation to KiwiSaver since our August 2011 business law reform legal update.  The amendments came into force on 1 May 2011, however existing schemes have a transition period to 1 October 2012 to make the necessary changes.

MED has not yet provided any update as to the disclosure requirements.

Auditor Regulation Act

What's it about?

What's next?

For further information

The Auditor Regulation Act 2011 creates a licensing and oversight regime for auditors and audit firms of public issuers.

There has been no change in relation to auditor regulation since our August 2011 business law reform legal update.  The Act comes into force (at the latest) on 1 July 2012.  Prior to then, auditors of issuers must obtain a licence from an accredited body and audit firms must be registered.

Electronic AGMS

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The Government has proposed amendments to the Companies Act 1993 to facilitate "electronic" annual general meetings.

There has been no change in relation to electronic AGMs since our August 2011 business law reform legal update.  The Select Committee has reported back on the amendments to the Companies Act, and the Bill is currently awaiting its second reading.

Anti-Money Laundering

What's it about?

What's next?

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The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 is designed to detect, manage and mitigate the possibility of money-laundering and terrorist financing.  Work in this area is ongoing.

The AML supervisors have recently released two new AML documents:

  • Guidelines on the "ordinary course of business"
  • The Identity Verification Code of Practice.

The AML requirements come fully into force on 30 June 2013.

Financial Services and Financial Advisers regulation

What's it about?

What's next?

For further information

The Financial Advisers Act 2008 (FAA) creates an occupational licensing regime for all persons providing "financial adviser services".

The Financial Service Providers (Registration and Dispute Resolution) Act 2008 (FSPA) creates a central public register of all persons that are in the business of providing financial services, and requires "retail" financial service providers to join a dispute resolution scheme.

With the inclusion of Canterbury financial advisers from 1 October 2011, both Acts are now fully in force.

 

 

Cartel criminalisation

What's it about?

What's next?

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The Government has proposed criminalising "hard-core" cartel conduct in New Zealand.

The Commerce (Cartels and Other Matters) Amendment Bill has been introduced to Parliament, but not yet referred to Select Committee.  Once it is referred to Select Committee, the public will have the chance to submit on the Bill.

Basel III

What's it about?

What's next?

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The Basel III reforms, developed by the Basel Committee on Banking Supervision, aim to strengthen the regulation, supervision and risk management of the banking sector, in light of the global financial crisis.

The Reserve Bank is currently consulting on the implementation of the Basel III capital adequacy requirements in New Zealand.

Submissions to the Reserve Bank are due 27 January 2012.  The Reserve Bank has stated that its "starting position" is that the Basel III requirements will not take effect until 1 January 2013.

Non-bank Deposit Takers

What's it about?

What's next?

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Non-bank deposit takers (NBDTs) are subject to prudential oversight by the Reserve Bank.

The first phase of reforms require NBDTs to have credit ratings, risk management policies, minimum capital ratios and limit related party exposures.

The second phase of reforms will introduce licensing requirements and suitability tests for directors and officers of NBDTs.  These changes, along with the existing Part 5D of the Reserve Bank of New Zealand Act 1989, will be incorporated into a new NBDT Act.

Finally, the Reserve Bank and MED are together considering the requirements for prudential disclosure by NBDTs.

The first phase of reforms was fully in force as of 1 December 2010.

The NBDT Bill will implement the second phase of reforms.  The Bill was referred to the Finance and Expenditure Select Committee in August 2011, and the Committee was due to report on 20 October 2011.  As yet, the Select Committee has not released its report.

The Reserve Bank advises that prudential disclosure regulations are expected to be released some time in 2012.

Insurance (Prudential Supervision) Act

What's it about?

What's next?

For further information

The Insurance (Prudential Supervision) Act 2010 will require all insurers carrying on business in New Zealand to obtain a licence and to comply with various prudential standards.

There is currently a transitional period.  All insurers will be required to have a licence by 7 March 2012, although existing insurers may be able to obtain a provisional licence.

The Reserve Bank has recently issued several guidelines and standards for insurers, including:

  • Small insurers exemption guidelines
  • Transfers and amalgamations guidelines
  • Solvency standards for non-life insurance, life insurance and captive insurance

Offshore financial hub

What's it about?

What's next?

For further information

The International Funds Services Development Group was established by Cabinet in March 2010 to look at the benefits of establishing a funds domicile and investigate the broader financial services opportunities for New Zealand.

There has been no change in relation to the offshore financial hub since our August 2011 business law reform legal update.  The Group released its report in 2011.  The Government has not committed to implementing the Group's recommendations, but will consider its recommendations as part of an existing review of tax rules.

However see also the PIE tax rule for foreign investors update below.

PIE tax rules for foreign investors

What's it about?

What's next?

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Parliament has recently introduced new tax rules to attract foreign investors to invest in portfolio investment entities (PIEs) by removing old tax impediments.  Certain existing and future PIEs can take advantage of the new tax rules by becoming one of the following types of PIEs:

  • Foreign investment zero-rate PIEs
  • Foreign investment variable-rate PIEs

The rules applicable to foreign investment zero-rate PIEs are now in effect, and those applicable to foreign investment variable-rate PIEs will apply from the start of the 2012/2013 tax year.

 

 

Takeovers

What's it about?

What's next?

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The Takeovers Panel has released a consultation paper on a range of minor "technical" amendments to the Takeovers Code.

Separately, the Government has proposed amendments to the Takeovers Act 1993 to clarify that the Code only applies to companies with more than 50 shareholders and 50 share parcels.

Finally, the Takeovers Panel has made a new class exemption in relation to scaling oversubscribed partial takeover offers.

There have been no changes in relation to the amendments to the Takeovers Act and Code since our August 2011 business law reform update:

  • Submissions on the consultation paper were due 26 August 2011, however no further announcements have been made since then
  • The Select Committee has reported back on the amendments to the Takeovers Act, and the Bill is currently awaiting its second reading

The Takeovers Code (Class Exemptions) Notice (No 2) 2001 Amendment Notice (No 2) 2011 has been made and is now in force.

See also the announced changes to the Companies Act 1993 discussed above.

Consumer Law Reform Bill

What's it about?

What's next?

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The Government has introduced a Bill to amend and consolidate various consumer laws, including the Consumer Guarantees Act 1993, Fair Trading Act 1986, and Sale of Goods Act 1908.  Changes to direct selling rules are also proposed.

The Consumer Law Reform Bill has been introduced, but has not yet had its first reading or been referred to Select Committee.

 

Credit laws

What's it about?

What's next?

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The Government has recently released plans to amend New Zealand's credit laws, including strengthening the Credit Contracts and Consumer Finance Act 2003 and introducing responsible lending requirements.

Separately, the Law Commission has sought public feedback on New Zealand’s credit repossession laws, particularly the Credit (Repossession) Act 1997.

We expect the Government to release draft legislation for consultation in 2012.

Submissions on the Law Commission paper closed 19 August 2011.  The Law Commission has not yet made any further announcements in relation to this review.

Review of incorporated societies

What's it about?

What's next?

For further information

The Law Commission recently sought public feedback on incorporated societies and the not-for-profit sector.

The due date for submissions was extended to 31 October 2011.  The Law Commission has not yet made any further announcements in relation to this review.

Fax spam banned

What's it about?

What's next?

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The Unsolicited Electronic Messages Order 2011 amends the schedule to the Unsolicited Electronic Messages Act 2007 (the "Spam Act").  The effect of this is to bring unsolicited messages sent by fax within the anti-spam laws.

This amendment is effective from 21 October 2011.