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14 May 2015
New Zealand is a trusted place to do business. In 2014, the World Bank "Doing Business Index" ranked NZ number 1 for starting a business and number 3 (behind Singapore and Hong Kong) for overall ease of doing business.
Sounds good doesn't it? However the overall ease with which shell companies can be set up in NZ has also led to notoriety overseas. In December 2009, an aircraft was siezed carrying illegal arms from Korea to Iran. The plane had been leased by a NZ registered shelf company. There are also claims that NZ registered companies have been involved in money laundering and other fraudulent or illegal activities.
To limit the opportunity for dodgy individuals to use shelf companies to exploit our good name, NZ's Companies legislation required strengthening.
The Companies Amendment Act (no 4) 2014, which was passed into law on 24 June 2014, covered the areas of governance, registration and reconstructions of companies.
The governance amendments, which came into force on 3 July 2014, included creating criminal offences for serious breaches of director's duties where:
The fine for a guilty director is up to $200,000 or up to 5 years in prison.
The director registration amendments require that:
- who lives in New Zealand or
- lives in and is also a director of a company incorporated in an "enforcement country". Currently the only qualifying country is Australia, but this may be extended in the future to include USA & UK.
The new director residence requirements apply to any company registered on or after 1 May 2015. Existing companies have a 180 day transitional period to meet the new requirements. This means that the company must meet the requirements and details must be lodged with the Companies Office by 28 October 2015, or on any earlier change of directors (after 1st May).
The Amendment Act also gives the Registrar enhanced powers to de-register companies where:
It is very important that, before changing company directors or shareholders, your taxation adviser is consulted. Changes to shareholding can adversely affect the carry forward of imputation and tax losses, qualifying company status and may even result in a deemed sale of the underlying assets of Look Through Companies.
Remember that there are two laws applying to companies - Tax Law and Company Law. What might work for one may cause major problems in the other.
For more information on how we can help your business, get in touch