Proposed new information disclosure requirements for companies, limited partnerships - and their owners
30 March 2022
On 22 March 2022, the New Zealand Government announced that it will be introducing the Corporate Governance (Transparency and Integrity) Reform Bill later in 2022, intending to reduce the number of global and domestic criminals who use New Zealand companies and limited partnerships to hide money laundering, tax evasion and the financing of terrorism. In conjunction with this announcement, the Ministry of Business, Innovation and Employment (MBIE) released a Cabinet paper entitled "better visibility of individuals who control companies and limited partnerships" (Paper), which outlined the recommended changes.
The key proposed changes include:
- Requiring companies and limited partnerships to provide to the New Zealand Companies Office information about their beneficial owners
- Establishing a unique identifier for individuals who hold the positions of beneficial owners, directors, and general partners of these entities.
The proposed changes will apply to all registered companies and limited partnerships, other than listed issuers if they are already subject to equal or more stringent public disclosure requirements.
The Paper proposes to require companies and limited partnerships to provide information to the New Zealand Companies Office on their beneficial owners. The information collected is proposed to include their full legal name, the date and basis on which they are a beneficial owner, an address for service, their date and place of birth, a telephone number and an email address used by the person, their nationalities and countries of residence, and their residential address. The Paper proposes that the definition of "beneficial owner" should capture individuals who:
- Hold, directly or indirectly, a minimum percentage ownership interest in a company or limited partnership, to be prescribed by regulations
- Hold, directly or indirectly, a minimum percentage of the voting rights in a company or limited partnership, to be prescribed by regulations
- Have the right, directly or indirectly, to appoint or remove a majority of the board of directors of a company or general partners of a limited partnership
- Have the right to exercise, or actually exercise, significant influence or control over a company or limited partnership, and/or
- Have the right to exercise, or actually exercise, significant influence or control over the activities of a trust or other organisation which is not a legal entity, but would itself satisfy any of the above conditions if it were an individual.
The obligation of disclosing the beneficial owner's information will fall on the company or limited partnership itself. Shareholders and limited partners will have obligations to take reasonable steps to ascertain whether they are or have become a beneficial owner and to inform their company or limited partnership if they are. Additionally, individuals who are aware or should reasonably be aware, that they are or have become beneficial owners are obliged to provide the necessary information to the company or limited partnership.
While the Paper notes a recommendation by officials in their Regulatory Impact Statement that information about beneficial owners should be held on a private, internal database and that none of that information should be publicly available, the Minister took a different view and considered that having some information publicly available would strike a better balance between privacy concerns and the broader public interest. The Minister's recommendation in the Paper is that some of the information collected about beneficial owners, namely the individual's full legal name, address for service, the date of and basis for becoming a beneficial owner, and chains of beneficial ownership, will be made publicly available on the relevant register.
The Paper does not explicitly recommend that all limited partners' information would be publicly available. The implication therefore is that only the identity and details of those limited partners who would qualify as 'beneficial owners' will be publicly available and searchable on the limited partnership register, and those limited partners who are not beneficial owners will not be searchable and their identity and details will remain private. We expect the Bill will seek to clarify this position.
In any event, the recommendation that beneficial owners of limited partnerships be required to publicly disclose such information would be a significant deviation from the current position under the Limited Partnerships Act 2008 - which provides that the Registrar must treat limited partner information as confidential and not make it available to a member of the public.
It is proposed that law enforcement and certain appropriate agencies (including the Financial Markets Conduct Authority, the Serious Fraud Office, MBIE and the Overseas Investment Office) will have the right to request access to non-public information about a specified individual. Additionally, it is proposed that reporting entities under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 will have the right to request access to the residential address of a specific beneficial owner, director or general partner, and may access additional information about a specified individual where they have the prior written consent of that individual concerned.
The Paper proposes introducing a unique identifier (CRI) for individuals who are or become beneficial owners, directors or general partners of a company or limited partnership. The CRI will mean that an individual can be linked to all of the director, general partner, and beneficial owner positions they hold.
Due to the lower risk associated with these positions, a shareholder of a company or a limited partner of a partnership will not be required to apply for a CRI, or have these positions associated with a pre-existing CRI (except to the extent that they are a beneficial owner due to this position). However, these individuals will have the option of applying for a CRI if they wish. Likewise, a general partner that is not an individual will not be required to apply for a CRI.
A benefit of the CRI is that it will streamline the process of updating personal details of an individual (ie these details will only need to be updated once as opposed to updated individually for every position the person holds).
Address for service
It is proposed that directors and shareholders of companies, and general partners of limited partnerships, will be able to request that their residential addresses be supressed from the relevant register if they provide an address for service as an alternative. This will bring these positions in line with beneficial owners, who can provide an address for service. However, it is recommended that creditors, insolvency practitioners, shareholders and other parties should have the right to request access to the residential address of a director or general partner where they have been unable to reach the person using their address for service about a matter related to that person’s statutory role or duties.
It is proposed that there will be a transitional period of 6-18 months (with shorter periods applying where the entity is large or has offshore directors or beneficial owners) in which existing companies, limited partnerships and individuals associated with these entities (either as beneficial owners or as directors/general partners) can meet their new obligations. Proposed penalties for non-compliance can apply to both the entity and the individuals, and include, fines, criminal liability (in some cases), and the ability of the Registrar to remove the entity from the relevant register.
The proposed Bill is still in the early stages of development and is subject to the usual process through Parliament, including public submissions. The Bill is expected to be made available for public consultation around mid-2022, with the final Bill anticipated to be introduced to Parliament in late 2022. If you would like advice on how these proposed amendments may impact you, please contact a member of our corporate team.
This article was co-authored by special counsel Benjamin Sutton, and solicitor Siobhan Reynolds.