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Companies Office enforcement policy guidelines

1 July 2013

 


Introduction

  1. New Zealand’s corporate registration system is, by international standards, low-cost and simple to use. New Zealand consistently achieves high World Bank ratings for ease of starting a business and ease of doing business. In order to maintain and enhance our international reputation, the Companies Office recognises that a well-regulated corporate registration system must be not only simple and cost-effective – the information that it contains must also be seen to have integrity, and to be accurate and reliable.
  2. The Companies Office administers a number of public business registers. In so doing, it oversees some important regulatory requirements which ensure business accountability and responsibility. The Companies Office aims to:
    • promote confidence in the New Zealand business environment by ensuring integrity of registered information;
    • ensure that those who are responsible for fulfilling the statutory duties of registered bodies or individuals comply with those responsibilities, and
    • hold to account those who abuse the privileges of the corporate structure.
  3. The Registrar of Companies (sometimes under various statutory titles such as the Registrar of Friendly Societies, the Registrar of Incorporated Societies and so on) is the statutory officer responsible for establishing and maintaining the various registers, and for taking compliance and enforcement action against those who fail to comply with or breach their statutory obligations.
  4. These guidelines set out the Registrar’s approach to compliance and enforcement. They are intended to guide and inform those who are subject to statutory duties under the legislation administered through the Companies Office, the business community in New Zealand and the public. 
  5. When considering these guidelines, it is important to be aware that the primary regulator of financial markets participants is the Financial Markets Authority. The Companies Office works closely with the Financial Markets Authority in order to ensure that, in relation to financial markets participants, appropriate enforcement action is taken by the relevant agency.
  6. These guidelines are intended to be a living document, which will be revised over time to reflect developments in legislation and our organisational objectives and priorities. They are not exhaustive and are not intended to be legally binding. 

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Guiding principles

  1. The Companies Office enforcement strategy is underpinned by the philosophy that as far as possible, it aims to assist its customers and users to achieve compliance with their statutory obligations, rather than seeking to penalise them for any and every breach. It recognises that the majority of customers and users wish to and do comply with their obligations, and seeks to overcome any obvious barriers to compliance.
  2. In accordance with this underlying principle, the Companies Office will use the most appropriate and cost-effective compliance tools available to it. It will establish compliance pathways which may include progressively more serious consequences for non-compliance. In cases of severe or flagrant breaches, this may include that taking of prosecution action.

 

Complaints and investigations

  1. A complaints process will enable members of the public, creditors, insolvency practitioners and other agencies to make complaints or provide information on potential breaches of legislative obligations administered by the Companies Office.
  2. All complaints will be considered. The Companies Office will not investigate or take action on every complaint that it receives. Further investigation decisions will be made based on factors such as the principles set out in these guidelines, the strength of the available evidence, whether the public interest requires a prosecution, the best use of available resources and the cost-effectiveness of proceeding with an investigation.

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Other agencies

  1. The Companies Office coordinates with other agencies, such as the Police and the Financial Markets Authority, in order to achieve its compliance and enforcement aims. It will share information with other agencies (within the limits of the law), and collaborate in any joint agency initiatives that relate to breaches of the relevant legislation, and which may form part of wider financial or other criminal activity.
  2. In particular, when dealing with a financial markets participant (as defined in the Financial Markets Authority Act 2011), the Companies Office will work with the Financial Markets Authority to ensure that the financial markets participant is dealt with appropriately under the relevant statutory powers.

 

Register integrity

  1. The Companies Office has a focus on maintaining the integrity of the information contained on its registers, and on taking steps to provide added confidence that those who seek to incorporate in New Zealand provide valid information.
  2. Therefore the Companies Office may require applicants to provide it with additional evidence as to the identity of proposed directors and/or shareholders prior to incorporation. This may include a requirement for information to be certified in the manner stipulated by the Registrar.

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Compliance

  1. Compliance is of primary importance to the Registrar. In all cases where appropriate, the Registrar will assist entities to comply with their obligations pursuant to the Companies Act 1993, Financial Reporting Act 2013 or any other relevant legislative obligations overseen by the Companies Office.
  2. Compliance tools such as website information, a freephone telephone enquiry line, periodic seminars of matters of general interest and reminder letters will be employed to educate and inform users of the registers about their statutory obligations.
  3. In particular, there will be an emphasis on educating users on new legislative or systems requirements as they are introduced.
  4. Where compliance is not achieved using these tools, further enforcement measures will be considered. In cases which meet the prosecution criteria in the Companies Office Prosecution Strategy (set out below) this will include consideration as to whether prosecution action should be taken.

 

Enforcement

  1. Where there is a public interest in enforcement action being taken, for example because the non-compliance is serious, prolific or has caused serious financial loss, or there are persistent failures to comply through the use of the compliance tools outlined above, the Companies Office will consider further enforcement measures. These may include formal warnings, the issuing of infringement notices, the suspension or cancellation of the registration of an entity or individual, or prosecution.
  2. In cases where companies have failed, either wholly or partly due to the manner in which its affairs were managed, this may also include the prohibition of directors from managing companies. 

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Prosecution

  1. The Registrar, through the Companies Office, will consider each complaint on its own merits when making the decision to bring criminal proceedings. In making a decision whether or not to prosecute, the Registrar will ensure that decisions to prosecute will be made fairly and consistently. The Registrar will also be mindful that not all offending should result in prosecution action, and that prosecution decisions must be made in the context of the available resources and to ensure the best value outcome.
  2. In all cases, the Registrar will make an independent decision to provide instructions to the relevant Crown Solicitor to proceed with a prosecution, which will be guided by this prosecution strategy, and will take into account the Solicitors General’s Prosecution Guidelines 2013.
  3. The Registrar will also have regard to the overarching principles of the prosecution framework of the Ministry of Business, Innovation and Employment, which is attached as an Appendix to this document. That document is referred to as the “Ministry Prosecution Guidelines”.
  4. The Registrar must consider whether there is sufficient evidence to succeed in a prosecution. Relevant factors may include whether there is sufficient evidence to identify a particular offender, the credibility of available witnesses, the admissibility of available evidence and an objective assessment of the prospect of obtaining a conviction.
  5. The Registrar must also be satisfied that a prosecution is required in the public interest. This will include (but not be confined to) a consideration of the following factors:
    1. The seriousness of the offending;
    2. The extent to which the offending involves the abuse of the corporate structure, such as the use of phoenix companies;
    3. Whether the offending poses a reputational threat to the New Zealand corporate registration system
    4. There are grounds for believing the offending is likely to be continued or repeated;
    5. The offending is prevalent;
    6. The offending was premeditated;
    7. The extent and level of financial or other loss or harm caused by the offending;
    8. Whether the offender has a previous history of offending;
      The defendant was in a position of authority or trust and the offending is an abuse of that position.
  6. Once a decision to prosecute has been made, a choice as to which charges should be laid should reflect the criminality of the defendant’s conduct. In general, where the facts to be alleged at trial support a charge under both the Crimes Act and another enactment, the more serious charge should be brought. This is a general rule however, and the circumstances of each prosecution must be carefully weighed before charges are laid. In making this decision, the Registrar will have regard to any advice of the relevant Crown Solicitor.
  7. The Registrar will adhere to the Ministry Guidelines in respect of disclosure under the Criminal Disclosure Act, and in respect of the process for appeals.
  8. From time to time the Companies Office may concentrate on a particular area or areas of offending by way of focussed programmes. This aim of such focussed programmes would be to bring about compliance and provide deterrence in particular areas of concern.

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Publicity

  1. The Registrar will publicise the outcomes of prosecution cases where appropriate, unless there are legal or other compelling reasons not to. This is intended to act as a deterrent for the offender and other potential offenders who would consider offending in the same way, and to provide information and education generally on the relevant statutory obligations.

 

Evaluation and review

  1. These guidelines will be reviewed on a regular basis, and adjusted according to changes in Companies Office priorities and emerging trends or issues of concern.
  2. In order to inform such reviews, the Companies Office will undertake regular evaluations of its compliance and enforcement activities, and the costs and benefits of these activities. It may seek the views of outside agencies or interested parties in undertaking such evaluations. 

 

Inland Revenue information sharing

  1. Inland Revenue is now able to share information with the Registrar of Companies about some serious offences under the Companies Act 1993. These offences include:
    • a serious breach of a director’s duty to act in good faith and in the best interests of company (section 183A(1))
    • false statements (section 377)
    • breaches of various orders and prohibitions from directing, promoting and/or managing companies (section 382(4), section 383(6), section 385(9), and section 385AA(9))
    • breach of restrictions on involvement with phoenix companies (section 386A(2)).

This agreement improves the Registrar of Companies’ ability to enforce serious offences under the Companies Act and hold non-compliant businesses and directors accountable for breaching their corporate responsibilities. This, in turn, will prevent harm to other businesses and individuals, and promote public confidence in the integrity of New Zealand’s business environment.

This change came into effect on 1 April 2017.

For more information please visit the Inland Revenue Tax Policy website.

 

Last updated 20 April 2017