Government to increase transparency of companies and limited partnerships
The Government has announced that it will introduce new legislation to make it easier to see who owns or controls New Zealand companies and limited partnerships.
The new legislation will amend the Companies Act 1993 and the Limited Partnerships Act 2008 to:
- increase the transparency of beneficial ownership; and
- establish a unique identifier for individuals who are directors of companies, general partners of limited partnerships, or beneficial owners of either of these entities.
This follows public consultation in 2018 and is intended to address some key vulnerabilities in New Zealand’s corporate governance framework, which currently provides limited information about beneficial ownership.
Under the proposed changes, companies and limited partnerships will be required to:
- take reasonable steps to ascertain who their beneficial owners are; and
- provide the Companies Office with prescribed information about their beneficial owners. Some of this information (such as the individual’s name) will be publicly available. Sensitive information (such as a person’s date of birth or residential address) will not be publicly available, but will be accessible in certain circumstances by some government agencies and anti-money laundering reporting entities.
The definition of “beneficial owner” will be defined in legislation, which is yet to be drafted. It is expected to include individuals who hold (directly or indirectly) a minimum percentage ownership interest or voting rights in the company or limited partnership, or who have significant influence or control over the company or limited partnership. Where a trust is a beneficial owner, it will include the individuals who (directly or indirectly) have significant influence or control of that trust.
This is similar to the approaches taken in the United Kingdom, Hong Kong and Singapore.
Under the proposed changes, individuals who are directors of companies, general partners of limited partnerships, or beneficial owners of either of those entities will be assigned a unique identification number - known as a ‘corporate role-holder identifier’ (CRI).
A person’s CRI will be publicly available and will enable the Companies Office to link individuals to the various entities they are (or have been) associated with.
It will also provide a more efficient way for directors to update their name and address information, and will provide consistency of information across the Companies and Limited Partnerships Registers.
Directors, general partners and shareholders will also be able to suppress their residential address from the public register by providing an address for service.
These changes are expected to be contained in a Corporate Governance (Transparency and Integrity) Bill to be introduced to the House later in 2022.
An exposure draft of the Bill will be released for consultation with industry stakeholders and the public before it is introduced.
There will be a transitional period (likely, 12 months) for existing companies and limited partnerships to comply with the new requirements. Companies or limited partnership which are “large” for the purposes of the Financial Reporting Act 2013 will likely have a shorter transitional period (expected to be 6 months).
It is likely to be a few years before this legislation comes into effect. We will continue to monitor developments and provide updates as it progresses.
If you have any questions about how this announcement may impact you, please get in touch with one of our corporate or commercial experts.
Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.