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New Zealand Companies Act

NEW ZEALAND

Companies Act 1993

1. Short Title and commencement

(1) This Act may be cited as the Companies Act 1993.

(2) This Act shall come into force on 1 July 1994.

Part 1

Preliminary

2. Interpretation

(1) In this Act, unless the context otherwise requires,—

accounting period, in relation to a company, means a year ending on a balance date of the company and, if as a result of the date of the registration of the company or a change of the balance date of the company, the period ending on that date is longer or shorter than a year, that longer or shorter period is an accounting period

address for service in relation to a company, means the company’s address for service adopted in accordance with section 192

annual meeting means a meeting required to be held by section 120

annual report—

(a) means a report prepared under section 208; and

(b) does not include a concise annual report

applicable auditing and assurance standard has the same meaning as in section 5 of the Financial Reporting Act 2013

applicable financial reporting standard has the same meaning as in section 5 of the Financial Reporting Act 2013

balance date, in relation to a company or an overseas company, has the same meaning as in section 41 of the Financial Reporting Act 2013

board and board of directors have the meanings set out in section 127

charge includes a right or interest in relation to property owned by a company, by virtue of which a creditor of the company is entitled to claim payment in priority to creditors entitled to be paid under section 313; but does not include a charge under a charging order issued by a court in favour of a judgment creditor

class has the meaning set out in section 116

code company has the meaning set out in section 2(1) of the Takeovers Act 1993

company means—

(a) a company registered under Part 2:

(b) a company reregistered under this Act in accordance with the Companies Reregistration Act 1993

concise annual report, in relation to a company and an accounting period, means a report on the affairs of the company during that period that is prepared in accordance with the requirements prescribed in regulations made under this Act

constitution means a document referred to in section 29

control interest has the meaning set out in sections 365B to 365E

court means the High Court of New Zealand

designated settlement system has the meaning set out in section 156M of the Reserve Bank of New Zealand Act 1989

director has the meaning set out in section 126

distribution, in relation to a distribution by a company to a shareholder, means—

(a) the direct or indirect transfer of money or property, other than the company’s own shares, to or for the benefit of the shareholder; or

(b)the incurring of a debt to or for the benefit of the shareholder— in relation to shares held by that shareholder, and whether by means of a purchase of property, the redemption or other acquisition of shares, a distribution of indebtedness, or by some other means

dividend has the meaning set out in section 53

document means a document in any form; and includes—

(a) any writing on any material; and

(b) information recorded or stored by means of a tape recorder, computer, or other device; and material subsequently derived from information so recorded or stored; and

(d) a photograph, film, negative, tape, or other device in which 1 or more visual images are embodied so as to be capable (with or without the aid of equipment) of being reproduced

enforcement country means a country, State, or territory outside New Zealand prescribed for the purposes of section 10(d)

entitled person, in relation to a company, means—

(a) a shareholder; and

(b) a person upon whom the constitution confers any of the rights and powers of a shareholder

existing company means a body corporate registered or deemed to be registered under Part 2 or Part 10 of the Companies Act 1955, or under the Companies Act 1933, the Companies Act 1908, the Companies Act 1903, the Companies Act 1882, or the Joint Stock Companies Act 1860

financial markets participant has the same meaning as in section 4 of the Financial Markets Authority Act 2011

financial product has the same meaning as in section 7 of the Financial Markets Conduct Act 2013

financial statements has the same meaning as in section 6 of the Financial Reporting Act 2013

FMA means the Financial Markets Authority established under Part 2 of the Financial Markets Authority Act 2011

generally accepted accounting practice has the same meaning as in section 8 of the Financial Reporting Act 2013

group financial statements has the same meaning as in section 7 of the Financial Reporting Act 2013

holding company has the meaning set out in section 5

interest group has the meaning set out in section 116

interested, in relation to a director, has the meaning set out in section 139

interests register means the register kept under section 189(1)(c)

licensed insurer has the same meaning as in section 6(1) of the Insurance (Prudential Supervision) Act 2010

licensed market has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2013

limited partnership has the meaning set out in section 6 of the Limited Partnerships Act 2008

listed issuer has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2013

major transaction has the meaning set out in section 129(2)

New Zealand register means the register of companies incorporated in New Zealand kept pursuant to section 360(1)(a)

ordinary resolution has the meaning set out in section 105(2)

overseas company means a body corporate that is incorporated outside New Zealand

overseas limited partnership has the meaning set out in section 4 of the Limited Partnerships Act 2008

overseas register means the register of bodies corporate that are incorporated outside New Zealand kept pursuant to section 360(1)(b)

personal representative, in relation to an individual, means the executor, administrator or trustee of the estate of that individual

pre-emptive rights means the rights conferred on shareholders under section 45

prescribed form means a form prescribed by regulations made under this Act that contains, or has attached to it, such information or documents as those regulations may require

property means property of every kind whether tangible or intangible, real or personal, corporeal or incorporeal, and includes rights, interests, and claims of every kind in relation to property however they arise

receiver has the same meaning as in section 2(1) of the Receiverships Act 1993

records means the documents required to be kept by a company under section 189(1)

redeemable has the meaning set out in section 68

registered office has the meaning set out in section 186

Registrar means the Registrar of Companies appointed in accordance with section 357(1)

related company has the meaning set out in subsection (3)

relative, in relation to any person, means—

(a) any parent, child, brother, or sister of that person; or

(b) any spouse, civil union partner, or de facto partner of that person; or

(ba) any parent, child, brother, or sister of a spouse, civil union partner, or de facto partner of that person; or

relevant interest has the meaning set out in section 146

secured creditor, in relation to a company, means a person entitled to a charge on or over property owned by that company

share has the meaning set out in section 35

share register means the share register required to be kept under section 87

shareholder has the meaning set out in section 96

solvency test has the meaning set out in section 4

special meeting means a meeting called in accordance with section 121

special resolution means a resolution approved by a majority of 75% or, if a higher majority is required by the constitution, that higher majority, of the votes of those shareholders entitled to vote and voting on the question

spouse, in relation to a person (A), includes a person with whom A has a de facto relationship (whether that person is of the same or a different sex) and a civil union partner

stock exchange means—

(a) a licensed market; or

(b) a financial product market that is authorised to operate in an overseas jurisdiction in accordance with the laws of that jurisdiction

subsidiary has the meaning set out in section 5

surplus assets means the assets of a company remaining after the payment of creditors’ claims and available for

distribution in accordance with section 313 prior to its removal from the New Zealand register ultimate holding company, in relation to a company, means a body corporate that—

(a) is a holding company of the company; and

(b) is itself not a subsidiary of any body corporate ultimate holding company information has the meaning set out in section 94A working day means a day of the week other than—

(a) Saturday, Sunday, Good Friday, Easter Monday, Anzac Day, the Sovereign’s birthday, Labour Day, and Waitangi Day; and

(ab) if Waitangi Day or Anzac Day falls on a Saturday or a Sunday, the following Monday; and

(b) a day in the period commencing with 25 December in any year and ending with 2 January in the following year; and

(d) if 1 January in any year falls on a Saturday or a Sunday, the following Monday and Tuesday.

(2) Where,—

(a) in relation to a company or an overseas company, any document is required to be delivered or any thing is required to be done to a District Registrar or an Assistant Registrar in whose office the records relating to the company or overseas company are kept within a period specified by this Act; and

(b) the last day of that period falls on the day of the anniversary of the province in which that office is situated,— the document may be delivered or that thing may be done to that District Registrar or Assistant Registrar on the next working day.

(3) In this Act, a company is related to another company if—

(a) the other company is its holding company or subsidiary; or

(b) more than half of the issued shares of the company, other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital, are held by the other company and companies related to that other company (whether directly or indirectly, but other than in a fiduciary capacity); or

(c) more than half of the issued shares, other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital, of each of them are held by members of the other (whether directly or indirectly, but other than in a fiduciary capacity); or

(d) the businesses of the companies have been so carried on that the separate business of each company, or a substantial part of it, is not readily identifiable; or

(e) there is another company to which both companies are related;— and related company has a corresponding meaning.

(4) [Repealed]

(5) A reference in this Act to an address means,—

(a) in relation to an individual, the full address of the place where that person usually lives:

(b) in relation to a body corporate, its registered office or, if it does not have a registered office, its principal place of business.

(6) An example used in this Act is only illustrative of the provisions to which it relates. It does not limit those provisions.

(7) If an example and a provision to which it relates are inconsistent, the provision prevails.

3. Public notice

(1) Where, pursuant to this Act, public notice must be given of any matter affecting a company, that notice must be given by publishing notice of the matter—

(a) in at least 1 issue of the Gazette; and

(b) in at least 1 issue of a newspaper circulating in the area in which is situated—

i. the company’s place of business; or

ii. if the company has more than 1 place of business, the company’s principal place of business; or

iii. if the company has no place of business or neither its place of business nor its principal place of business is known, the company’s registered office.

(2) Where, pursuant to this Act, public notice must be given of any matter affecting an overseas company, that notice must be given by publishing notice of the matter—

(a) in at least 1 issue of the Gazette; and

(b) in at least 1 issue of a newspaper circulating in the area in which is situated—

i. the place of business in New Zealand of the overseas company; or

ii. if the overseas company has more than 1 place of business in New Zealand, the principal place of business in New Zealand of the overseas company.

(3) However, subsections (1) and (2) do not apply to the public notice required to be given by the Registrar under sections 319(1)(c), 320(1), 328(3)(a), and 360A(2)(b).

(4) The public notice required to be given by the Registrar under the provisions referred to in subsection (3) must be given by publishing the notice in at least 1 issue of the Gazette.

(5) The Registrar must ensure that a copy of the notice referred to in subsection (4) is available on an Internet site maintained by or on behalf of the Registrar, at all reasonable times, for a period of not less than 20 working days.

4 Meaning of solvency test

(1) For the purposes of this Act, a company satisfies the solvency test if—

(a) the company is able to pay its debts as they become due in the normal course of business; and

(b) the value of the company’s assets is greater than the value of its liabilities, including contingent liabilities.

(2) Without limiting sections 52 and 55(3), in determining for the purposes of this Act (other than sections 221 and 222 which relate to amalgamations) whether the value of a company’s assets is greater than the value of its liabilities, including contingent liabilities, the directors—

(a) must have regard to—

i. the most recent financial statements of the company that are prepared under this Act or any other enactment (if any); and

ia. the accounting records of the company; and

ii. all other circumstances that the directors know or ought to know affect, or may affect, the value of the company’s assets and the value of the company’s liabilities, including its contingent liabilities:

(b) may rely on valuations of assets or estimates of liabilities that are reasonable in the circumstances.

(3) Without limiting sections 221 and 222, in determining for the purposes of those sections whether the value of the amalgamated company’s assets will be greater than the value of its liabilities, including contingent liabilities, the directors of each amalgamating company—

(a) must have regard to—

i. the most recent financial statements of each amalgamating company that are prepared under this Act or any other enactment (if any); and

ia. the accounting records of the amalgamating company; and

ii. all other circumstances that the directors know or ought to know would affect, or may affect, the value of the amalgamated company’s assets and the value of its liabilities, including contingent liabilities:

(b) may rely on valuations of assets or estimates of liabilities that are reasonable in the circumstances.

(4) In determining, for the purposes of this section, the value of a contingent liability, account may be taken of—

(a) the likelihood of the contingency occurring; and

(b) any claim the company is entitled to make and can reasonably expect to be met to reduce or extinguish the contingent liability.

4. Meaning of holding company and subsidiary

(1) For the purposes of this Act, a company is a subsidiary of another company if, but only if,—

(a) that other company—

i. controls the composition of the board of the company; or

ii. is in a position to exercise, or control the exercise of, more than one-half the maximum number of votes that can be exercised at a meeting of the company; or

iii. holds more than one-half of the issued shares of the company, other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital; or

iv. is entitled to receive more than one-half of every dividend paid on shares issued by the company, other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital; or

(b) the company is a subsidiary of a company that is that other company’s subsidiary.

(2) For the purposes of this Act, a company is another company’s holding company, if, but only if, that other company is its subsidiary.

(3) In this section and sections 7 and 8, the expression company includes a body corporate.Compare: Corporations Act 1989 s 46 (Aust)

6. Extended meaning of subsidiary

[Repealed]

Section 6: repealed, on 5 December 2013, by section 5 of the Companies Amendment Act 2013 (2013 No 111).

7. Control defined

For the purposes of section 5, without limiting the circumstances in which the composition of a company’s board is to be taken to be controlled by another company, the composition of the board is to be taken to be so controlled if the other company, by exercising a power exercisable (whether with or without the consent or concurrence of any other person) by it, can appoint or remove all the directors of the company, or such number of directors as together hold a majority of the voting rights at meetings of the board of the company, and for this purpose, the other company is to be taken as having power to make such an appointment if—

(a) a person cannot be appointed as a director of the company without the exercise by the other company of such a power in the person’s favour; or

(b) a person’s appointment as a director of the company follows necessarily from the person being a director or other officer of the other company.

8. Certain matters to be disregarded

In determining whether a company is a subsidiary of another company,—

(a) shares held or a power exercisable by that other company in a fiduciary capacity are not to be treated as held or exercisable by it:

(b) subject to paragraphs (c) and (d), shares held or a power exercisable—

i. by a person as a nominee for that other company, except where that other company is concerned only in a fiduciary capacity; or

ii. by, or by a nominee for, a subsidiary of that other company, not being a subsidiary which is concerned only in a fiduciary capacity,— are to be treated as held or exercisable by that other company:

(c) shares held or a power exercisable by a person under the provisions of debentures of the company or of a trust deed for securing an issue of debentures shall be disregarded:

(d) shares held or a power exercisable by, or by a nominee for, that other company or its subsidiary (not being held or exercisable in the manner described in paragraph (c)) are not to be treated as held or exercisable by that other company if—

i. the ordinary business of that other company or its subsidiary, as the case may be, includes the lending of money; and

ii. the shares are held or the power is exercisable by way of security only for the purposes of a transaction entered into in the ordinary course of that business.

9. Act binds the Crown

This Act binds the Crown.

Part 2

Incorporation

Essential requirements

10. Essential requirements

A company must have—

(a) a name; and

(b) 1 or more shares; and

(d) 1 or more directors, of whom at least 1 must—

i. live in New Zealand; or

ii. live in an enforcement country and be a director of a company that is registered (except as the equivalent of an overseas company) in that enforcement country.

Method of incorporation

11. Right to apply for registration

Any person may, either alone or together with another person, apply for registration of a company under this Act.

12. Application for registration

(1) An application for registration of a company under this Act must be sent or delivered to the Registrar, and must be—

(a) in the prescribed form; and

(b) signed by each applicant; and

(c) accompanied by a document in the prescribed form signed by every person named as a director, containing his or her consent to be a director and a certificate that he or she is not disqualified from being appointed or holding office as a director of a company; and

(d) accompanied by—

i. a document in the prescribed form signed by every person named as a shareholder, or by an agent of that person authorized in writing, containing his or her consent to being a shareholder and to taking the class and number of shares specified in the document; and

ii. if the document has been signed by an agent, the instrument authorizing the agent to sign it; and

(e) accompanied by a notice reserving a name for the proposed company; and

(f) if the proposed company is to have a constitution, accompanied by a document certified by at least 1 applicant as the company’s constitution.

(2) Without limiting subsection (1), the application must state—

(a) the full name and address of each applicant; and

(b) in relation to every director of the proposed company,—

i. his or her full name and date and place of birth; and

ii. his or her residential address; and

iii. if the residential address is in an enforcement country, whether the director is a director of a company that is registered (except as the equivalent of an overseas company) in that enforcement country and, if so, the prescribed information; and

(c) the full name and residential address of every shareholder of the proposed company, and the number of shares to be issued to every shareholder; and

(ca) the proposed company’s ultimate holding company information; and

(d) the registered office of the proposed company; and

(e) the address for service of the proposed company.

13. Registration

As soon as the Registrar receives a properly completed application for registration of a company, the Registrar must—

(a) register the application; and

(b) issue a certificate of incorporation.

14. Certificate of incorporation

A certificate of incorporation of a company issued under section 13 is conclusive evidence that—

(a) all the requirements of this Act as to registration have been complied with; and

(b) on and from the date of incorporation stated in the certificate, the company is incorporated under this Act.

15. Separate legal personality

A company is a legal entity in its own right separate from its shareholders and continues in existence until it is removed from the New Zealand register.

Part 3

Capacity, powers, and validity of actions

16. Capacity and powers

(1) Subject to this Act, any other enactment, and the general law, a company has, both within and outside New Zealand,

(a) full capacity to carry on or undertake any business or activity, do any act, or enter into any transaction; and

(b) for the purposes of paragraph (a), full rights, powers, and privileges.

(2) The constitution of a company may contain a provision relating to the capacity, rights, powers, or privileges of the company only if the provision restricts the capacity of the company or those rights, powers, and privileges.

17. Validity of actions

(1) No act of a company and no transfer of property to or by a company is invalid merely because the company did not have the capacity, the right, or the power to do the act or to transfer or take a transfer of the property.

(2) Subsection (1) does not limit—

(a) section 164 (which relates to injunctions to restrain conduct by a company that would contravene its constitution); or

(b) section 165 (which relates to derivative actions by directors and shareholders); or

(d) section 170 (which relates to actions by shareholders to require the directors of a company to take action under the constitution or this Act).

(3) The fact that an act is not, or would not be, in the best interests of a company does not affect the capacity of the company to do the act.

18. Dealings between company and other persons

(1) A company or a guarantor of an obligation of a company may not assert against a person dealing with the company or with a person who has acquired property, rights, or interests from the company that—

(a) this Act or the constitution of the company has not been complied with:

(b) a person named as a director of the company in the most recent notice received by the Registrar under section 159—

i. is not a director of a company; or

ii. has not been duly appointed; or

iii. does not have authority to exercise a power which a director of a company carrying on business of the kind carried on by the company customarily has authority to exercise:

i. has not been duly appointed; or

ii. does not have authority to exercise a power which a director, employee, or agent of a company carrying on business of the kind carried on by the company customarily has authority to exercise:

(d) a person held out by the company as a director, employee, or agent of the company with authority to exercise a power which a director, employee, or agent of a company carrying on business of the kind carried on by the company does not customarily have authority to exercise, does not have authority to exercise that power:

(e) a document issued on behalf of a company by a director, employee, or agent of the company with actual or usual authority to issue the document is not valid or not genuine— unless the person has, or ought to have, by virtue of his or her position with or relationship to the company, knowledge of the matters referred to in any of paragraphs (a), (b), (c), (d), or (e), as the case may be.

(2) Subsection (1) applies even though a person of the kind referred to in paragraphs (b) to (e) of that subsection acts fraudulently or forges a document that appears to have been signed on behalf of the company, unless the person dealing with the company or with a person who has acquired property, rights, or interests from the company has actual knowledge of the fraud or forgery.

19. No constructive notice A person is not affected by, or deemed to have notice or knowledge of the contents of, the constitution of, or any other document relating to, a company merely because—

(a) the constitution or document is registered on the New Zealand register; or

(b) it is available for inspection at an office of the company.

Part 4

Company names

20. Name to be reserved

The Registrar must not register a company under a name or register a change of the name of a company unless the

21. Name of company if liability of shareholders limited

The registered name of a company must end with the word “Limited” or the words “Tāpui (Limited)” if the liability of the shareholders of the company is limited.

22. Application for reservation of name

(1) An application for reservation of the name of a company must be sent or delivered to the Registrar, and must be in the prescribed form.

(2) The Registrar must not reserve a name—

(a) the use of which would contravene an enactment; or

(b) that is identical or almost identical to the name of another company; or

(c) that is identical or almost identical to a name that the Registrar has already reserved under this Act and that is still available for registration; or

(d) that, in the opinion of the Registrar, is offensive.

(3) The Registrar must advise the applicant by notice in writing—

(a) whether or not the Registrar has reserved the name; and

(b) if the name has been reserved, that, unless the reservation is sooner revoked by the Registrar, the name is available for registration of a company with that name or on a change of name for 20 working days after the date stated in the notice.

23. Change of name

(1) An application to change the name of a company must—

(a) be in the prescribed form; and

(b) be accompanied by a notice reserving the name; and

(2) Subject to its constitution, an application to change the name of a company is not an amendment of the constitution of the company for the purposes of this Act.

(3) As soon as the Registrar receives a properly completed application, the Registrar must—

(a) enter the new name of the company on the New Zealand register; and

(b) issue a certificate of incorporation for the company recording the change of name of the company.

(4) A change of name of a company—

(a) takes effect from the date of the certificate issued under subsection (3); and

(b) does not affect rights or obligations of the company, or legal proceedings by or against the company, and legal proceedings that might have been continued or commenced against the company under its former name may be continued or commenced against it under its new name.

24. Direction to change name

(1) If the Registrar believes on reasonable grounds that the name under which a company is registered should not have been reserved, the Registrar may serve written notice on the company to change its name by a date specified in the notice, being a date not less than 20 working days after the date on which the notice is served.

(2) If the company does not change its name within the period specified in the notice, the Registrar may enter on the New Zealand register a new name for the company selected by the Registrar, being a name under which the company may be registered under this Part.

(3) If the Registrar registers a new name under subsection (2), the Registrar must issue a certificate of incorporation for the company recording the new name of the company, and section 23(4) applies in relation to the registration of the new name as if the name of the company had been changed under that section.

25. Use of company name

(1) A company must ensure that its name is clearly stated in—

(a) every written communication sent by, or on behalf of, the company; and

(b) every document issued or signed by, or on behalf of, the company that evidences or creates a legal obligation of the company.

(2) Where—

(a) a document that evidences or creates a legal obligation of a company is issued or signed by or on behalf of the company; and

(b) the name of the company is incorrectly stated in the document,— every person who issued or signed the document is liable to the same extent as the company if the company fails to discharge the obligation unless—

(c) the person who issued or signed the document proves that the person in whose favour the obligation was incurred was aware at the time the document was issued or signed that the obligation was incurred by the company; or

(d) the court is satisfied that it would not be just and equitable for the person who issued or signed the document to be so liable.

(3) For the purposes of subsections (1) and (2) and of section 180 (which relates to the manner in which a company may enter into contracts and other obligations), a company may use a generally recognised abbreviation of a word or words in its name if it is not misleading to do so.

(4) If, within the period of 12 months immediately preceding the giving by a company of any public notice, the name of the company was changed, the company must ensure that the notice states—

(a) that the name of the company was changed in that period; and

(b) the former name or names of the company.

(5) If a company fails to comply with subsection (1) or subsection (4),—

(a) the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b) every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

Part 5

Company constitution

26. No requirement for company to have constitution

A company may but does not have to have a constitution.

27. Effect of Act on company having constitution

If a company has a constitution, the company, the board, each director, and each shareholder of the company have the rights, powers, duties, and obligations set out in this Act except to the extent that they are negated or modified, in accordance with this Act, by the constitution of the company.

28. Effect of Act on company not having constitution

If a company does not have a constitution, the company, the board, each director, and each shareholder of the company have the rights, powers, duties, and obligations set out in this Act.

29. Form of constitution

The constitution of a company, if it has one, is,—

(a) in the case of a company registered under Part 2, a document certified by the applicant for registration of the company as the company’s constitution; or

(b) in the case of an existing company that is reregistered pursuant to the Companies Reregistration Act 1993, a document certified by the applicant for reregistration as the company’s constitution; or

(d) a document described in section 33; or

(e) a document described in paragraph (a) or paragraph (b) or paragraph (c) or paragraph (d) as altered by the company under section 32 or varied by the court under section 34.

30. Contents of constitution

Subject to section 16(2), the constitution of a company may contain—

(a) matters contemplated by this Act for inclusion in the constitution of a company:

(b) such other matters as the company wishes to include in its constitution.

31. Effect of constitution

(1) The constitution of a company has no effect to the extent that it contravenes, or is inconsistent with, this Act.

(2) Subject to this Act, the constitution of a company is binding as between—

(a) the company and each shareholder; and

(b) each shareholder in accordance with its terms.

32. Adoption, alteration, and revocation of constitution

(1) The shareholders of a company that does not have a constitution may, by special resolution, adopt a constitution for the company.

(2) Without limiting section 117 (which relates to an alteration of shareholders’ rights) and section 174 (which relates to the right of a shareholder to apply to the court for relief in cases of prejudice), but subject to section 57 (which relates to the reduction of shareholders’ liability), the shareholders of a company may, by special resolution, alter or revoke the constitution of the company.

(3) Within 10 working days of the adoption of a constitution by a company, or the alteration or revocation of the constitution of a company, as the case may be, the board must ensure that a notice in the prescribed form of the adoption of the constitution or of the alteration or revocation of the constitution is delivered to the Registrar for registration.

(4) If the board of a company fails to comply with subsection (3), every director of the company commits an offence and is liable, on conviction, to the penalty set out in section 374(2).

33. New form of constitution

(1) A company may, from time to time, deliver to the Registrar a single document that incorporates the provisions of a document referred to in paragraph (a) or paragraph (b) or paragraph (c) or paragraph (d) or paragraph (e) of section 29, together with all amendments to it.

(2) The Registrar may, if the Registrar considers that by reason of the number of amendments to a company’s constitution it would be desirable for the constitution to be contained in a single document, by notice in writing, require a company to deliver to the Registrar a single document that incorporates the provisions of a document referred to in paragraph (a) or paragraph (b) or paragraph (c) or paragraph (d) of section 29, together with all amendments to it.

(3) Within 20 working days of receipt by a company of a notice under subsection (2), the board must ensure that the document required by that subsection is received by the Registrar for registration.

(4) The board must ensure that a document delivered to the Registrar under this section is accompanied by a certificate signed by a person authorized by the board that the document complies with subsection (1) or subsection (2), as the case may be.

(5) As soon as the Registrar receives a document certified in accordance with subsection (4), the Registrar must register the document.

(6) If the board of a company fails to comply with subsection (3) or subsection (4), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

34. Court may alter constitution

(1) The court may, on the application of a director or shareholder of a company, if it is satisfied that it is not practicable to alter the constitution of the company using the procedure set out in this Act or in the constitution itself, make an order altering the constitution of a company on such terms and conditions that it thinks fit.

(2) The applicant for the order must ensure that a copy of an order made under subsection (1), together with a copy of the constitution as altered, is delivered to the Registrar for registration within 10 working days.

(3) A person who fails to comply with subsection (2) commits an offence and is liable on conviction to the penalty set out in section 373(2).

Part 6

Shares and debentures

35. Legal nature of shares

A share in a company is personal property.

36. Rights and powers attaching to shares

(1) Subject to subsection (2), a share in a company confers on the holder—

(a) the right to 1 vote on a poll at a meeting of the company on any resolution, including any resolution to—

i. appoint or remove a director or auditor:

ii. adopt a constitution:

iii. alter the company’s constitution, if it has one:

iv. approve a major transaction:

v. approve an amalgamation of the company under section 221:

vi. put the company into liquidation:

(b) the right to an equal share in dividends authorized by the board:

(2) Subject to section 53, the rights specified in subsection (1) may be negated, altered, or added to by the constitution of the company or in accordance with the terms on which the share is issued under section 41(b) or section 42 or section 44 or section 107(2), as the case may be.

37. Types of shares

(1) Subject to the constitution of the company, different classes of shares may be issued in a company.

(2) Without limiting subsection (1), shares in a company may—

(a) be redeemable within the meaning of section 68; or

(b) confer preferential rights to distributions of capital or income; or

(d) not confer voting rights.

38. No nominal value

(1) A share must not have a nominal or par value.

(2) Nothing in subsection (1) prevents the issue by a company of a redeemable share.

39. Transferability of shares

(1) Subject to any limitation or restriction on the transfer of shares in the constitution, a share in a company is transferable.

(2) A share is transferred by entry in the share register in accordance with section 84.

**(3)**The personal representative of a deceased shareholder may transfer a share even though the personal representative is not a shareholder at the time of transfer.

40. Contracts for issue of shares

A contract or deed under which a company is or may be required to issue shares, whether on the exercise of an option or on the conversion of financial products or otherwise, is an illegal contract for the purposes of the Illegal Contracts Act 1970 unless—

(a) the board is entitled to issue the shares; and

(b) either—

i. the board has complied with section 47 or section 49; or

ii. all entitled persons agree or concur with the issue of the shares under section 107(2); or

iii. the contract or deed expressly provides that the contract or deed is subject to—

A. the board complying with section 47 or section 49; or

B. all entitled persons agreeing to or concurring with the issue of the shares under section 107(2).

Issue of shares

41. Issue of shares on registration and amalgamation

A company must,—

(a) forthwith after the registration of the company, issue to any person or persons named in the application for registration as a shareholder or shareholders, the number of shares specified in the application as being the number of shares to be issued to that person or those persons:

(b) in the case of an amalgamated company, forthwith after the amalgamation is effective, issue to any person entitled to a share or shares under the amalgamation proposal, the share or shares to which that person is entitled.

Issue of shares

41. Issue of shares on registration and amalgamation

A company must,—

Issue of other shares

Subject to this Act and the constitution of the company, the board of a company may issue shares at any time, to any person, and in any number it thinks fit.

Notice of share issue

(1) The board of a company must deliver to the Registrar for registration, within 10 working days of the issue of shares under section 41(b) or section 42 or section 107(2), a notice in the prescribed form of the issue of the shares by the company.

(2) If the board of a company fails to comply with subsection (1), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

Shareholder approval for issue of shares

(1) Notwithstanding section 42, if shares cannot be issued by reason of any limitation or restriction in the company’s constitution, the board may issue shares if the board obtains the approval for the issue in the same manner as approval is required for an alteration to the constitution that would permit such an issue.

(2) Subject to the terms of the approval, the shares may be issued at any time, to any person, and in any number the board thinks fit.

(3) Within 10 working days of approval being given under subsection (1), the board must ensure that notice of that approval in the prescribed form is delivered to the Registrar for registration.

(4) Nothing in this section affects the need to obtain the approval of an interest group in accordance with section 117 (which relates to the alteration of shareholders’ rights) if the issue of shares affects the rights of that interest group.

(5) A failure to comply with this section does not affect the validity of an issue of shares.

(6) If the board of a company fails to comply with subsection (3), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

Pre-emptive rights

(1) Shares issued or proposed to be issued by a company that rank or would rank as to voting or distribution rights, or both, equally with or prior to shares already issued by the company must be offered for acquisition to the holders of the shares already issued in a manner and on terms that would, if accepted, maintain the existing voting or distribution rights, or both, of those holders.

(2) An offer under subsection (1) must remain open for acceptance for a reasonable time.

(3) The constitution of a company may negate, limit, or modify the requirements of this section.

Consideration for issue of shares

The consideration for which a share is issued may take any form and may be cash, promissory notes, contracts for future services, real or personal property, or other financial products of the company.

Consideration for issue of shares on registration

A shareholder is not liable to pay or provide any consideration in respect of an issue of shares under section 41(a) unless—

(a) the constitution of the company specifies the consideration to be paid or provided for those shares; or

(b) the shareholder is liable to pay or provide consideration for those shares pursuant to either a pre-incorporation contract (within the meaning of section 182) or a contract entered into after the registration of the company.

Consideration to be decided by board

(1) Before the board of a company issues shares under section 42 or section 44, the board must—

(a) decide the consideration for which the shares will be issued and the terms on which they will be issued; and

(b) if the shares are to be issued other than for cash, determine the reasonable present cash value of the consideration for the issue; and

(c) resolve that, in its opinion, the consideration for and terms of the issue are fair and reasonable to the company and to all existing shareholders; and

(d) if the shares are to be issued other than for cash, resolve that, in its opinion, the present cash value of the consideration to be provided for the issue of the shares is not less than the amount to be credited for the issue of the shares.

(2) The directors who vote in favour of a resolution required by subsection (1) must sign a certificate—

(a) stating the consideration for, and the terms of, the issue; and

(b) describing the consideration in sufficient detail to identify it; and

(c) where a present cash value has been determined in accordance with subsection (1)(b), stating that value and the basis for assessing it; and

(d) stating that, in their opinion, the consideration for and terms of issue are fair and reasonable to the company and to all existing shareholders; and

(e) if the shares are to be issued other than for cash stating that, in their opinion, the present cash value of the consideration to be provided for the issue of the shares is not less than the amount to be credited for the issue of the shares.

(3) Before shares that have already been issued are credited as fully or partly paid up other than for cash, the board must—

(a) determine the reasonable present cash value of the consideration; and

(b) resolve that, in its opinion, the present cash value of the consideration is—

i. fair and reasonable to the company and to all existing shareholders; and

ii. not less than the amount to be credited in respect of the shares.

(4) The directors who vote in favour of a resolution under subsection (3) must sign a certificate—

(a) describing the consideration in sufficient detail to identify it; and

(b) stating—

i. the present cash value of the consideration and the basis for assessing it; and

ii. that the present cash value of the consideration is fair and reasonable to the company and to all existing shareholders; and

iii. that the present cash value of the consideration is not less than the amount to be credited in respect of the shares.

(5) The board must deliver a copy of a certificate that complies with subsection (2) or subsection (4) to the Registrar for registration within 10 working days after it is given.

(6) For the purposes of this section, shares that are or are to be credited as paid up, whether wholly or partly, as part of an arrangement that involves the transfer of property or the provision of services and an exchange of cash or cheques or other negotiable instruments, whether simultaneously or not, must be treated as paid up other than in cash to the value of the property or services.

(7) A director who fails to comply with subsection (2) or subsection (4) commits an offence and is liable on conviction to the penalty set out in section 373(1).

(8) Nothing in this section applies to the issue of shares in a company on—

(a) the conversion of any convertible financial products; or

(b) the exercise of any option to acquire shares in the company.

(9) If the board of a company fails to comply with subsection (5), every director of the company commits an offence and is liable, on conviction, to the penalty set out in section 374(2).

Exceptions to section 47

48 Section 47 does not apply to—

(a) the issue of shares that are fully paid up from the reserves of the company to all shareholders of the same class in proportion to the number of shares held by each shareholder:

(b) the consolidation and division of the shares or any class of shares in the company in proportion to those shares or the shares in that class:

(c) the subdivision of the shares or any class of shares in the company in proportion to those shares or the shares in that class.

49. Consideration in relation to issue of options and convertible financial products

(1) Before the board of a company issues any financial products that are convertible into shares in the company or any options to acquire shares in the company, the board must—

(a) decide the consideration for which the convertible financial products or options, and, in either case, the shares will be issued and the terms on which they will be issued; and

(b) if the shares are to be issued other than for cash, determine the reasonable present cash value of the consideration for the issue; and

(c) resolve that, in its opinion, the consideration for and terms of the issue of the convertible financial products or options, and, in either case, the shares are fair and reasonable to the company and to all existing shareholders; and

(d) if the shares are to be issued other than for cash, resolve that, in its opinion, the present cash value of the consideration to be provided is not less than the amount to be credited for the issue of the shares.

(2) The directors who vote in favour of a resolution required by subsection (1) must sign a certificate—

(a) stating the consideration for, and the terms of, the issue of the convertible financial products or options, and, in either case, the shares; and

(b) describing the consideration in sufficient detail to identify it; and

(c) where a present cash value has been determined in accordance with subsection (1)(b), stating that value and the basis for assessing it; and

(d) stating that, in their opinion, the consideration for and terms of issue of the convertible financial products or options, and, in either case, the shares are fair and reasonable to the company and to all existing shareholders; and

(e) if the shares are to be issued other than for cash, stating that, in their opinion, the present cash value of the consideration to be provided is not less than the amount to be credited for the issue of the shares.

(3) The board must deliver a copy of a certificate that complies with subsection (2) to the Registrar for registration within 10 working days after it is given.

(4) For the purposes of this section, shares that are to be credited as paid up, whether wholly or partly, as part of an arrangement that involves the transfer of property or the provision of services and an exchange of cash or cheques or other negotiable instruments, whether simultaneously or not, must be treated as paid up other than in cash to the value of the property or services.

(5) A director who fails to comply with subsection (2) commits an offence and is liable on conviction to the penalty set out in section 373(1).

(6) If the board of a company fails to comply with subsection (3), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

50. Consent to issue of shares

The issue by a company of a share that—

(a) increases a liability of a person to the company; or

(b) imposes a new liability on a person to the company—

is void if that person or an agent of that person authorized in writing does not consent in writing to becoming the holder of the share before it is issued.

51. Time of issue of shares

A share is issued when the name of the holder is entered on the share register.

Distributions to shareholders

52. Board may authorize distributions

(1) The board of a company that is satisfied on reasonable grounds that the company will, immediately after the distribution, satisfy the solvency test may, subject to section 53 and the constitution of the company, authorize a distribution by the company at a time, and of an amount, and to any shareholders it thinks fit.

(2) The directors who vote in favour of a distribution must sign a certificate stating that, in their opinion, the company will, immediately after the distribution, satisfy the solvency test and the grounds for that opinion.

(3) If, after a distribution is authorized and before it is made, the board ceases to be satisfied on reasonable grounds that the company will, immediately after the distribution is made, satisfy the solvency test, any distribution made by the company is deemed not to have been authorized.

(4) In applying the solvency test for the purposes of this section and section 56,—

(a) debts includes fixed preferential returns on shares ranking ahead of those in respect of which a distribution is made (except where that fixed preferential return is expressed in the constitution as being subject to the power of the directors to make distributions), but does not include debts arising by reason of the authorization; and

(b) liabilities includes the amount that would be required, if the company were to be removed from the New Zealand register after the distribution, to repay all fixed preferential amounts payable by the company to shareholders, at that time, or on earlier redemption (except where such fixed preferential amounts are expressed in the constitution as being subject to the power of directors to make distributions); but, subject to paragraph (a), does not include dividends payable in the future.

(5) Every director who fails to comply with subsection (2) commits an offence and is liable on conviction to the penalty set out in section 373(1).

53. Dividends

(1) A dividend is a distribution other than a distribution to which section 59 or section 76 applies.

(2) The board of a company must not authorize a dividend—

(a) in respect of some but not all the shares in a class; or

(b) that is of a greater value per share in respect of some shares of a class than it is in respect of other shares of that class—

unless the amount of the dividend in respect of a share of that class is in proportion to the amount paid to the company in satisfaction of the liability of the shareholder under the constitution of the company or under the terms of issue of the share or is required, for a portfolio tax rate entity, as a result of section HL 7 of the Income Tax Act 2004.

(3) Notwithstanding subsection (2), a shareholder may waive his or her entitlement to receive a dividend by notice in writing to the company signed by or on behalf of the shareholder.

54. Shares in lieu of dividends

Subject to the constitution of the company, the board of a company may issue shares to any shareholders who have agreed to accept the issue of shares, wholly or partly, in lieu of a proposed dividend or proposed future dividends if—

(a) the right to receive shares, wholly or partly, in lieu of the proposed dividend or proposed future dividends has been offered to all shareholders of the same class on the same terms; and

(b) if all shareholders elected to receive the shares in lieu of the proposed dividend, relative voting or distribution rights, or both, would be maintained; and

(d) the shares issued to each shareholder are issued on the same terms and subject to the same rights as the shares issued to all shareholders in that class who agree to receive the shares; and

(e) the provisions of section 47 are complied with by the board.

55. Shareholder discounts

(1) The board of a company may resolve that the company offer shareholders discounts in respect of some or all of the goods sold or services provided by the company.

(2) The board may approve a discount scheme under subsection (1) only if it has previously resolved that the proposed discounts are—

(a) fair and reasonable to the company and to all shareholders; and

(b) to be available to all shareholders or all shareholders of the same class on the same terms.

(3) A discount scheme may not be approved or continued by the board unless it is satisfied on reasonable grounds that the company satisfies the solvency test.

(4) Subject to subsection (5), a discount accepted by a shareholder under a discount scheme approved under this section is not a distribution for the purposes of this Act.

(5) Where—

(a) a discount is accepted by a shareholder under a scheme approved or continued by the board; and

(b) at the time the scheme was approved or the discount was offered, the board ceased to be satisfied on reasonable grounds that the company would satisfy the solvency test,—

the provisions of section 56 shall apply in relation to the discount with such modifications as may be necessary as if the discount were a distribution that is deemed not to have been authorized.

56. Recovery of distributions

(1) A distribution made to a shareholder at a time when the company did not, immediately after the distribution, satisfy the solvency test may be recovered by the company from the shareholder unless—

(a) the shareholder received the distribution in good faith and without knowledge of the company’s failure to satisfy the solvency test; and

(b) the shareholder has altered the shareholder’s position in reliance on the validity of the distribution; and

(2) If, in relation to a distribution made to shareholders,—

(a) the procedure set out in section 52 or section 70 or section 77, as the case may be, has not been followed; or

(b) reasonable grounds for believing that the company would satisfy the solvency test in accordance with section 52 or section 70 or section 77, as the case may be, did not exist at the time the certificate was signed,— a director who—

(d) signed the certificate, as the case may be,— is personally liable to the company to repay to the company so much of the distribution as is not able to be recovered from shareholders.

(3) If, by virtue of section 52(3) or section 70(3) or section 77(3), as the case may be, a distribution is deemed not to have been authorized, a director who—

(a) ceased after authorization but before the making of the distribution to be satisfied on reasonable grounds for believing that the company would satisfy the solvency test immediately after the distribution is made; and

(b) failed to take reasonable steps to prevent the distribution being made,— is personally liable to the company to repay to the company so much of the distribution as is not able to be recovered from shareholders.

(4) If, by virtue of section 55(5), a distribution is deemed not to have been authorized, a director who failed to take reasonable steps to prevent the distribution being made is personally liable to the company to repay to the company so much of the distribution as is not able to be recovered from shareholders.

(5) If, in an action brought against a director or shareholder under this section, the court is satisfied that the company could, by making a distribution of a lesser amount, have satisfied the solvency test, the court may—

(a) permit the shareholder to retain; or

(b) relieve the director from liability in respect of— an amount equal to the value of any distribution that could properly have been made.

57. Reduction of shareholder liability a distribution

(1) If a company proposes to alter its constitution, or to acquire shares issued by it, or redeem shares under section 69, as the case may be, in a manner which would cancel or reduce the liability of a shareholder to the company in relation to a share held prior to that alteration, acquisition, or redemption, the proposed cancellation or reduction of liability is to be treated,—

(a) for the purposes of section 52, as if it were a distribution; and

(b) for the purposes of subsections (2) and (3) of section 53, as if it were a dividend.

(2) If a company has altered its constitution, or acquired shares, or redeemed shares under section 69, as the case may be, in a manner which cancels or reduces the liability of a shareholder to the company in relation to a share held prior to that alteration, acquisition, or redemption, that cancellation or reduction of liability is to be treated for the purposes of section 56 as a distribution of the amount by which that liability was reduced.

(3) If the liability of a shareholder of an amalgamating company to that company in relation to a share held before the amalgamation is—

(a) greater than the liability of that shareholder to the amalgamated company in relation to a share or shares into which that share is converted; or

(b) cancelled by the cancellation of that share in the amalgamation,—

the reduction of liability effected by the amalgamation is to be treated for the purposes of section 56(1) and (5) as a distribution by the amalgamated company to that shareholder, whether or not that shareholder becomes a shareholder of the amalgamated company of the amount by which that liability was reduced.

58. Company may acquire its own shares

(1) A company may, in accordance with sections 59 to 66, section 107, and sections 110 to 112C, but not otherwise, acquire its own shares.

(2) Shares acquired by a company otherwise than in accordance with sections 59 to 66 and 110 to 112C are deemed to be cancelled immediately on acquisition.

(3) Within 10 working days of the purchase or acquisition of the shares, the board of the company must ensure that notice in the prescribed form of the purchase or acquisition is delivered to the Registrar for registration.

(4) If the board of a company fails to comply with subsection (3), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

Company may acquire its own shares

59 Acquisition of company’s own shares

(1) Subject to section 52, a company may purchase or otherwise acquire shares issued by it if it is expressly permitted to do so by its constitution.

(2) The purchase or acquisition of the shares must be made in accordance with section 60 or section 63 or section 65.

(3) Nothing in this section or in sections 60 to 67 limits or affects—

(a) an order of the court that requires a company to purchase or acquire its own shares; or

(b) sections 110 and 118 (which relate to the right of a shareholder to require a company to purchase shares).

60 Board may make offer to acquire shares

(1) The board of a company may make an offer to acquire shares issued by the company if the offer is—

(a) an offer to all shareholders to acquire a proportion of their shares, that—

i. would, if accepted, leave unaffected relative voting and distribution rights; and

ii. affords a reasonable opportunity to accept the offer; or

(b) an offer to 1 or more shareholders to acquire shares—

i. to which all shareholders have consented in writing; or

ii. that is expressly permitted by the constitution, and is made in accordance with the procedure set out in section 61.

(2) Where an offer is made in accordance with subsection (1)(a),—

(a) the offer may also permit the company to acquire additional shares from a shareholder to the extent that another shareholder does not accept the offer or accepts the offer only in part; and

(b) if the number of additional shares exceeds the number of shares that the company is entitled to acquire, the number of additional shares shall be reduced rateably.

(3) The board may make an offer under subsection (1) only if it has previously resolved—

(a) that the acquisition in question is in the best interests of the company; and

(b) that the terms of the offer and the consideration offered for the shares are fair and reasonable to the company; and

i. which is material to an assessment of the value of the shares; and

ii. as a result of which the terms of the offer and consideration offered for the shares are unfair to shareholders accepting the offer.

(4) The resolution must set out in full the reasons for the director’s conclusions.

(5) The directors who vote in favour of a resolution required by subsection (3) must sign a certificate as to the matters set out in that subsection, and may combine it with the certificate required by section 52 and any certificate required under section 61.

(6) The board of a company must not make an offer under subsection (1) if, after the passing of a resolution under subsection (3) and before the making of the offer to acquire the shares,—

(a) the board ceases to be satisfied that the acquisition in question is in the best interests of the company; or

(b) the board ceases to be satisfied that the terms of the offer and the consideration offered for the shares are fair and reasonable to the company; or

i. which is material to an assessment of the value of the shares; or

ii. as a result of which the terms of the offer and consideration offered for the shares would be unfair to shareholders accepting the offer.

(7) Every director who fails to comply with subsection (5) commits an offence and is liable on conviction to the penalty set out in section 373(1).

61. Special offers to acquire shares

(1) The board may make an offer under section 60(1)(b)(ii) only if it has previously resolved—

(a) that the acquisition is of benefit to the remaining shareholders; and

(b) that the terms of the offer and the consideration offered for the shares are fair and reasonable to the remaining shareholders.

(2) The resolution must set out in full the reasons for the directors’ conclusions.

(3) The directors who vote in favour of a resolution required by subsection (1) must sign a certificate as to the matters set out in that subsection.

(4) A board must not make an offer under section 60(1)(b)(ii) if, after the passing of a resolution under subsection (1) of this section and before the making of the offer to acquire the shares, the board ceases to be satisfied that—

(a) the acquisition is of benefit to the remaining shareholders; or

(b) the terms of the offer and the consideration offered for the shares are fair and reasonable to the remaining shareholders.

(5) Before an offer is made pursuant to a resolution under subsection (1), the company must send to each shareholder a disclosure document that complies with section 62.

(6) The offer must be made not less than 10 working days and not more than 12 months after the disclosure document has been sent to each shareholder.

(7) Nothing in subsections (5) and (6) applies to an offer to a shareholder by a company if—

(a) the company is a listed issuer; and

(b) the offer is to acquire fewer of the quoted shares of the company than the minimum holding of those shares in the company determined by the operator of the relevant licensed market.

(8) A shareholder or the company may apply to the court for an order restraining the proposed acquisition on the grounds that—

(a) it is not in the best interests of the company and of benefit to remaining shareholders; or

(b) the terms of the offer and the consideration offered for the shares are not fair and reasonable to the company and remaining shareholders.

(9) Every director who fails to comply with subsection (3) commits an offence and is liable on conviction to the penalty set out in section 373(1).

(10) If a company fails to comply with subsection (5),—

(a) the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b) every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

62. Disclosure document

For the purposes of section 61, a disclosure document is a document that sets out—

(a) the nature and terms of the offer, and if made to specified shareholders, to whom it will be made; and

(b) the nature and extent of any relevant interest of any director of the company in any shares the subject of the offer; and

(c) the text of the resolution required by section 61, together with such further information and explanation as may be necessary to enable a reasonable shareholder to understand the nature and implications for the company and its shareholders of the proposed acquisition.

63. Stock exchange acquisitions subject to prior notice to shareholders

(1) The board of a company may make offers on 1 or more stock exchanges to all shareholders to acquire shares only if it has previously resolved—

(a) to acquire, by means of offers on 1 or more stock exchanges to all shareholders, not more than a specified number of shares; and

(b) that the acquisition is in the best interests of the company and its shareholders; and

(c) that the terms of the offer and the consideration offered for the shares are fair and reasonable to the company and its shareholders; and

(d) that it is not aware of any information that will not be disclosed to shareholders—

i. which is material to an assessment of the value of the shares; and

ii. as a result of which the terms of the offer and consideration offered for the shares are unfair to shareholders accepting the offer.

(2) The resolution must set out in full the reasons for the directors’ conclusions.

(3) The directors who vote in favour of a resolution required by subsection (1) must sign a certificate as to the matters set out in that subsection and may combine it with the certificate required by section 52.

(3A) Offers may be made under subsection (1) by any director or employee of the company who is authorised to do so by the resolution of the board under that subsection.

(4) An offer must not be made under subsection (1) if the number of shares to be acquired together with any shares already acquired would exceed the maximum number of shares the board has resolved to acquire under that subsection.

(5) An offer must not be made under subsection (1) if, after the passing of a resolution under that subsection and before the making of the offer to acquire the shares,—

(a) the board ceases to be satisfied that the acquisition is in the best interests of the company and its shareholders; or

(b) the board ceases to be satisfied that the terms of the offer and the consideration offered for the shares are fair and reasonable to the company and its shareholders; or

i. which is material to an assessment of the value of the shares; or

ii. as a result of which the terms of the offer and consideration offered for the shares would be unfair to shareholders accepting the offer.

(6) Before an offer is made pursuant to a resolution under subsection (1), the company must send to each shareholder a disclosure document that complies with section 64.

(7) The offer must be made not less than 10 working days and not more than 12 months after the disclosure document has been sent to each shareholder.

(8) A shareholder or the company may apply to the court for an order restraining the proposed acquisition on the grounds that—

(a) it is not in the best interests of the company or the shareholders; or

(b) the terms of the offer and, if it is disclosed, the consideration offered for the shares are not fair and reasonable to the company or the shareholders.

(9) Every director who fails to comply with subsection (3) commits an offence and is liable on conviction to the penalty set out in section 373(1).

(10) If a company fails to comply with subsection (6),—

(a) the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b) every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

64. Disclosure document

(1) For the purposes of section 63, a disclosure document is a document that sets out—

(a) the maximum number of shares that the board has resolved to acquire under section 63(1); and

(b) the nature and terms of the offer; and

(c) the nature and extent of any relevant interest of any director of the company in any shares that may be acquired; and

(d) the text of the resolution required by section 63(1), together with such further information and explanation as may be necessary to enable a reasonable shareholder to understand the nature and implications for the company and its shareholders of the proposed acquisition.

(2) Nothing in subsection (1) requires the disclosure of the consideration the board proposes to offer to acquire the shares.

65. Stock exchange acquisitions not subject to prior notice to shareholders

(1) The board of a company may acquire shares on a stock exchange from its shareholders if the following conditions are satisfied:

(a) that, prior to the acquisition, the board of the company has resolved—

i. that the acquisition in question is in the best interests of the company and the shareholders; and

ii. that the terms of and consideration for the acquisition are fair and reasonable to the company; and

iii. that it is not aware of any information that is not available to shareholders—

A. that is material to an assessment of the value of the shares; and

B. as a result of which the terms of and consideration for the acquisition are unfair to shareholders from whom any shares are acquired; and

(b) that the number of shares acquired together with any other shares acquired under this section in the preceding 12 months does not exceed 5% of the shares in the same class as at the date 12 months prior to the acquisition of the shares.

(2) Within 10 working days after the shares are acquired, the company must send to each stock exchange on which the shares of the company are listed a notice containing the following particulars:

(a) the class of shares acquired:

(b) the number of shares acquired:

(d) if known to the company, the identity of the seller and, if the seller was not the beneficial owner, the beneficial owner.

(2A) [Repealed]

(2B) Acquisitions may be made under subsection (1) by any director or employee of the company who is authorized to do so by the resolution of the board under that subsection.

(3) If a company fails to comply with subsection (2),—

(a) the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b) every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

66. Cancellation of shares repurchased

(1) Subject to sections 67A to 67C, shares that are acquired by a company pursuant to section 59 or sections 112 to 112C are deemed to be cancelled immediately on acquisition.

(2) Shares are acquired for the purposes of subsection (1) on the date on which the company would, apart from this section, become entitled to exercise the rights attached to the shares.

(3) On the cancellation of a share under this section,—

(a) the rights and privileges attached to that share expire; but

(b) the share may be reissued in accordance with this Part.

67. Enforceability of contract to repurchase shares

(1) A contract with a company providing for the acquisition by the company of its shares is specifically enforceable against the company except to the extent that the company would, by performance, be unable to satisfy the solvency test in accordance with section 52.

(2) The company has the burden of proving that performance of the contract would result in the company being unable to satisfy the solvency test in accordance with section 52.

(3) Until the company has fully performed a contract referred to in subsection (1), the other party to the contract retains the status of a claimant entitled to be paid as soon as the company is lawfully able to do so or, prior to the removal of the company from the New Zealand register, to be ranked subordinate to the rights of creditors but in priority to the other shareholders.

Treasury stock

67.a Company may hold its own shares

(1) Shares acquired by a company pursuant to section 59 or sections 112 to 112C shall not be deemed to be cancelled under section 66(1) if—

(a) the constitution of the company expressly permits the company to hold its own shares; and

(b) the board of the company resolves that the shares concerned shall not be cancelled on acquisition; and

(c) the number of shares acquired, when aggregated with shares of the same class held by the company pursuant to this section at the time of the acquisition, does not exceed 5% of the shares of that class previously issued by the company, excluding shares previously deemed to be cancelled under section 66(1).

(2) Shares acquired by a company pursuant to section 59 or sections 112 to 112C that, pursuant to this section, are not deemed to be cancelled shall be held by the company in itself.

(3) A share that a company holds in itself under subsection (2) may be cancelled by the board of the company resolving that the share is cancelled; and the share shall be deemed to be cancelled on the making of such a resolution.

67.b Rights and obligations of shares company holds in itself suspended

(1) The rights and obligations attaching to a share that a company holds in itself pursuant to section 67A shall not be exercised by or against a company while it holds the share.

(2) Without limiting subsection (1), while a company holds a share in itself pursuant to section 67A, the company shall not—

(a) exercise any voting rights attaching to the share; or

(b) make or receive any distribution authorized or payable in respect of the share.

67.c Reissue of shares company holds in itself

(1) Subject to subsection (2), section 47 shall apply to the transfer of a share held by a company in itself as if the transfer were the issue of the share under section 42 or section 44.

(2) Section 47(2) shall not apply to the transfer of a share held by a company in itself if the share is transferred by means of a system that is approved under section 376 of the Financial Markets Conduct Act 2013.

(3) Subject to subsection (1), the transfer of a share by a company in itself shall not be subject to any provisions in this Act or the company’s constitution relating to the issue of shares, except to the extent the company’s constitution expressly applies those provisions.

(4) A company must not grant an option to acquire a share it holds in itself or enter into any obligations to transfer such a share if—

(a) the company has received notice in writing of a takeover offer made under the Takeovers Code in force under the Takeovers Act 1993; or

(b) in the case of shares that are quoted on a stock exchange, the stock exchange makes a public release that a takeover offer for more than 20% of the quoted shares is to be made.

Redemption of shares

68. Meaning of redeemable

For the purposes of this Act, a share is redeemable if—

(a) the constitution of the company makes provision for the company to issue redeemable shares; and

(b) the constitution or the terms of issue of the share makes provision for the redemption of that share by the company—

i. at the option of the company; or

ii. at the option of the holder of the share; or

iii. on a date specified in the constitution or the terms of issue of the share for a consideration that is—

iv. specified; or

v. to be calculated by reference to a formula; or

vi. required to be fixed by a suitably qualified person who is not associated with or interested in the company.

69 Redemption at option of company

(1) A company must not exercise an option to redeem shares unless—

(a) the option is exercised in relation to all shareholders of the same class and in a manner that will leave unaffected relative voting and distribution rights; or

(b) the option is exercised in relation to 1 or more shareholders and—

i. all shareholders have consented in writing; or

ii. the option is expressly permitted by the constitution and is exercised in accordance with the procedure set out in section 71.

(2) A company must not exercise an option to redeem shares unless, before the exercise of the option, the board of the company has resolved—

(a) that the redemption of the shares is in the best interests of the company; and

(b) the consideration for the redemption of the shares is fair and reasonable to the company.

(3) The resolution must set out in full the grounds for the directors’ conclusions.

(4) The directors who vote in favour of a resolution required by subsection (2) must sign a certificate as to the matters set out in that subsection and may combine it with the certificate required by section 70 and any certificate required by section 71.

(5) A company must not exercise an option to redeem shares under subsection (1) if, after the passing of a resolution under that subsection and before the exercise of the option to redeem the shares, the board ceases to be satisfied that—

(a) the redemption of the shares is in the best interests of the company; or

(b) the consideration for the exercise of the option is fair and reasonable to the company.

(6) Every director who fails to comply with subsection (4) commits an offence and is liable on conviction to the penalty set out in section 373(1).

70. Company must satisfy solvency test

(1) A company must not exercise an option to redeem a share unless the board of the company is satisfied on reasonable grounds that the company will, immediately after the share is redeemed, satisfy the solvency test in accordance with section 52.

(2) The directors who vote in favour of exercising the option must sign a certificate stating that, in their opinion, the company will, immediately after the share is redeemed, satisfy the solvency test and the grounds for that opinion.

(3) If, after a resolution is passed under subsection (1) and before the option is exercised, the board ceases to be satisfied on reasonable grounds that the company will, immediately after the share is redeemed, satisfy the solvency test in accordance with section 52, any redemption of the share is deemed not to have been authorised for the purpose of that section.

(4) Every director who fails to comply with subsection (2) commits an offence and is liable on conviction to the penalty set out in section 373(1).

(5) The provisions of section 56 apply in relation to the redemption of a share at the option of the company with such modifications as may be necessary.

71. Special redemption of shares

(1) A company may exercise an option to redeem shares under section 69(1)(b)(ii) only if the board has previously resolved—

(a) that the redemption of the shares is of benefit to the remaining shareholders; and

(b) that the consideration for the redemption of the shares is fair and reasonable to the remaining shareholders.

(2) The resolution must set out in full the grounds for the directors’ conclusions.

(3) The directors who vote in favour of a resolution required by subsection (1) must sign a certificate as to the matters set out in that subsection.

(4) A company must not exercise an option to redeem shares under section 69(1)(b)(ii) if, after the passing of a resolution under subsection (1) and before the option is exercised, the board ceases to be satisfied that—

(a) the redemption of the shares is of benefit to the remaining shareholders; or

(b) the consideration for the redemption of the shares is fair and reasonable to the remaining shareholders.

(5) Before the option is exercised pursuant to a resolution under subsection (1), the company must send to each shareholder a disclosure document that complies with section 72.

(6) The option must be exercised not less than 10 and not more than 30 working days after the disclosure document has been sent to each shareholder.

(7) A shareholder or the company may apply to the court for an order restraining the proposed exercise of the option on the grounds that—

(a) it is not in the best interests of the company or of benefit to remaining shareholders; or

(b) the consideration for the redemption is not fair or reasonable to the company or remaining shareholders.

(8) Every director who fails to comply with subsection (3) commits an offence and is liable on conviction to the penalty set out in section 373(1).

(9) If a company fails to comply with subsection (5),—

(a) the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b) every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

72. Disclosure document

For the purposes of section 71, a disclosure document is a document that sets out—

(a) the nature and terms of the redemption of the shares, and if the option to redeem the shares is to be exercised in relation to specified shareholders, the names of those shareholders; and

(b) the text of the resolution required by section 71, together with such further information and explanation as may be necessary to enable a reasonable shareholder to understand the nature and implications for the company and its shareholders of the proposed redemption.

73. Cancellation of shares redeemed

(1) Shares that are redeemed by a company pursuant to section 69 are deemed to be cancelled immediately on redemption.

(2) On the cancellation of a share under this section,—

(a) the rights and privileges attached to that share expire; but

(b) the share may be reissued in accordance with this Part.

74. Redemption at option of shareholder

(1) Subject to this section, if a share is redeemable at the option of the holder of the share, and the holder gives proper notice to the company requiring the company to redeem the share,—

(a) the company must redeem the share on the date specified in the notice, or if no date is specified, on the date of receipt of the notice; and

(b) the share is deemed to be cancelled on the date of redemption; and

(c) from the date of redemption the former shareholder ranks as an unsecured creditor of the company for the consideration payable on redemption.

(2) A redemption under this section—

(a) is not a distribution for the purposes of sections 52 and 53; but

(b) is deemed to be a distribution for the purposes of subsections (1) and (5) of section 56.

75. Redemption on fixed date

(1) Subject to this section, if a share is redeemable on a specified date—

(a) the company must redeem the share on that date; and

(b) the share is deemed to be cancelled on that date; and

(c) from that date the former shareholder ranks as an unsecured creditor of the company for the consideration payable on redemption.

(2) A redemption under this section—

(a) is not a distribution for the purposes of sections 52 and 53; but

(b) is deemed to be a distribution for the purposes of subsections (1) and (5) of section 56.

Assistance by a company in the purchase of its own shares

76. Financial assistance

(1) A company may give financial assistance to a person for the purpose of, or in connection with, the purchase of a share issued or to be issued by the company, or by its holding company, whether directly or indirectly, only if the financial assistance is given in accordance with subsection (2); and—

(a) all shareholders have consented in writing to the giving of the assistance; or

(b) the procedure set out in section 78 is followed; or

(2) A company may give financial assistance under subsection (1) if the board has previously resolved that—

(a) the company should provide the assistance; and

(b) giving the assistance is in the best interests of the company; and

(3) The resolution must set out in full the grounds for the directors’ conclusions.

(4) The directors who vote in favour of a resolution under subsection (2) must sign a certificate as to the matters set out in that subsection and may combine that certificate with the certificate required under section 77 and any certificate required under section 78.

(5) A company must not give financial assistance under subsection (1) if, after the passing of a resolution under subsection (2) and before the assistance is given, the board ceases to be satisfied that—

(a) the giving of the assistance is in the best interests of the company; or

(b) the terms and conditions under which the assistance is proposed are fair and reasonable to the company.

(6) For the purposes of this section, financial assistance includes a loan, a guarantee, and the provision of a security.

(7) Every director who fails to comply with subsection (4) commits an offence and is liable on conviction to the penalty set out in section 373(1).

77. Company must satisfy solvency test

(1) A company must not give any financial assistance under section 76 unless the board of the company is satisfied on reasonable grounds that the company will, immediately after the giving of the financial assistance, satisfy the solvency test.

(2) The directors who vote in favour of the giving of the financial assistance must sign a certificate stating that, in their opinion, the company will, immediately after the financial assistance is given, satisfy the solvency test and the grounds for that opinion.

(3) If, after a resolution is passed under subsection (1) and before the financial assistance is given, the board ceases to be satisfied on reasonable grounds that the company will, immediately after the financial assistance is given, satisfy the solvency test, any financial assistance given by the company is deemed not to have been authorised.

(4) Every director of a company who fails to comply with subsection (2) commits an offence and is liable on conviction to the penalty set out in section 373(1).

(5) The provisions of section 56 apply in relation to the giving of financial assistance by a company with such modifications as may be necessary.

(6) In applying the solvency test for the purposes of this section, assets excludes amounts of financial assistance given by the company at any time under section 76 or section 107(1)(e) in the form of loans; and liabilities includes the face value of all outstanding liabilities, whether contingent or otherwise, incurred by the company at any time in connection with the giving of financial assistance under section 76 or 107(1)(e).

(7) Nothing in subsection (6) limits or affects the application of section 4(4).

78. Special financial assistance

(1) Financial assistance may be given under section 76(1)(b) only if the board has previously resolved—

(a) that giving the assistance in question is of benefit to those shareholders not receiving the assistance; and

(b) that the terms and conditions under which the assistance is given are fair and reasonable to those shareholders not receiving the assistance.

(2) The resolution must set out in full the reasons for the directors’ conclusions.

(3) The directors who vote in favour of a resolution required by subsection (1) must sign a certificate as to the matters set out in that subsection.

(4) A company must not give financial assistance under section 76(1)(b) if, after the passing of a resolution under subsection (1) and before the financial assistance is given, the board ceases to be satisfied that—

(a) the giving of the financial assistance is of benefit to those shareholders not receiving the assistance; or

(b) the terms and conditions under which the assistance is given are fair and reasonable to those shareholders not receiving it.

(5) Before the financial assistance is given under section 76(1)(b), the company must send to each shareholder a disclosure document that complies with section 79.

(6) The assistance may be given not less than 10 working days and not more than 12 months after the disclosure document has been sent to each shareholder.

(7) A shareholder or the company may apply to the court for an order restraining the proposed assistance being given on the ground that—

(a) it is not in the best interests of the company and of benefit to those shareholders not receiving the assistance; or

(b) the terms and conditions under which the assistance is to be given are not fair and reasonable to the company and to those shareholders not receiving the assistance.

(8) Every director who fails to comply with subsection (3) commits an offence and is liable on conviction to the penalty set out in section 373(1).

(9) If a company fails to comply with subsection (5),—

(a) the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b) every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

79. Disclosure document

For the purposes of section 78, a disclosure document is a document that sets out—

(a) the nature and terms of the financial assistance to be given, and to whom it will be given; and

(b) if the financial assistance is to be given to a nominee for another person, the name of that other person; and

(c) the text of the resolution required by section 78(1), together with such further information and explanation as may be necessary to enable a reasonable shareholder to understand the nature and implications for the company and its shareholders of the proposed transaction.

80. Financial assistance not exceeding 5% of shareholders’ funds

(1) Financial assistance may be given under section 76(1)(c), only if—

(a) the amount of the financial assistance, together with any other financial assistance given by the company pursuant to this paragraph, repayment of which remains outstanding, would not exceed 5% of the aggregate of amounts received by the company in respect of the issue of shares and reserves as disclosed in the relevant statements or records, and the company receives fair value in connection with the assistance; and

(b) within 10 working days of providing the financial assistance, the company sends to each shareholder a notice containing the following particulars:

i. the class and number of shares in respect of which the financial assistance has been provided:

ii. the consideration paid or payable for the shares in respect of which the financial assistance has been provided:

iii. the identity of the person receiving the financial assistance and, if that person is not the beneficial owner of the shares in respect of which the financial assistance has been provided, the identity of that beneficial owner:

iv. the nature and, if quantifiable, the amount of the financial assistance.

1A. In subsection (1), relevant statements or records means—

(a) financial statements of the company prepared for the most recently completed accounting period in accordance with generally accepted accounting practice; or

(b) if those financial statements have not been prepared, the accounting records of the company.

(2) If a company fails to comply with subsection (1)(b),—

(a) the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b) every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

81. Enforceability of transactions

(1) Failure to comply with section 76 or section 78 or section 79 or section 80 does not affect the validity of a transaction.

(2) This section does not affect a liability of a director or any other person for breach of a duty, or as a constructive trustee, or otherwise.

Cross-holdings

82. Subsidiary may not hold shares in holding company

(1) Subject to this section, a subsidiary must not hold shares in its holding company.

(2) An issue of shares by a holding company to its subsidiary is void and of no effect.

(3) A transfer of shares in a holding company to its subsidiary is void and of no effect.

(4) Where a company that holds shares in another company becomes a subsidiary of that other company—

(a) the company may, notwithstanding subsection (1), continue to hold those shares; but

(b) the exercise of any voting rights attaching to those shares shall be of no effect.

(5) Where a company on reregistration under this Act in accordance with the Companies Reregistration Act 1993 held shares in another company and was a subsidiary of that other company,—

(a) the company may, notwithstanding subsection (1), continue to hold those shares; but

(b) the exercise of any voting rights attaching to those shares shall be of no effect.

(6) Nothing in this section prevents a subsidiary holding shares in its holding company in its capacity as a personal representative or a trustee unless the holding company or another subsidiary has a beneficial interest under the trust other than an interest that arises by way of security for the purposes of a transaction made in the ordinary course of the business of lending money.

(7) This section applies to a nominee for a subsidiary in the same way as it applies to the subsidiary.

Statement of shareholder rights

83. Statement of rights to be given to shareholders

(1) Every company must issue to a shareholder, on request, a statement that sets out—

(a) the class of shares held by the shareholder, the total number of shares of that class issued by the company, and the number of shares of that class held by the shareholder; and

(b) the rights, privileges, conditions, and limitations, including restrictions on transfer, attaching to the shares held by the shareholder; and

(2) The company is not obliged to provide a shareholder with a statement if—

(a) a statement has been provided within the previous 6 months; and

(b) the shareholder has not acquired or disposed of shares since the previous statement was provided; and

(d) there are special circumstances that make it reasonable for the company to refuse the request.

(3) The statement is not evidence of title to the shares or of any of the matters set out in it.

(4) The statement must state in a prominent place that it is not evidence of title to the shares or of the matters set out in it.

(5) If a company fails to comply with subsection (1),—

(a) the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b) every director of the company commits an offence and is liable on conviction to the penalties set out in section 374(1).

Transfer of shares

84. Transfer of shares

(1) Subject to the constitution of the company, shares in a company may be transferred by entry of the name of the transferee on the share register.

(2) For the purpose of transferring shares, a form of transfer signed by the present holder of the shares or by his or her personal representative must be delivered to—

(a) the company; or

(b) an agent of the company who maintains the share register under section 87(3).

(3) The form of transfer must be signed by the transferee if registration as holder of the shares imposes a liability to the company on the transferee.

(4) On receipt of a form of transfer in accordance with subsection (2) and, if applicable, subsection (3), the company must forthwith enter or cause to be entered the name of the transferee on the share register as holder of the shares, unless—

(a) the board resolves within 30 working days of receipt of the transfer to refuse or delay the registration of the transfer, and the resolution sets out in full the reasons for doing so; and

(b) notice of the resolution, including those reasons, is sent to the transferor and to the transferee within 5 working days of the resolution being passed by the board; and

(5) Subject to the constitution of a company, the board may refuse or delay the registration of a transfer of shares if the holder of the shares has failed to pay to the company an amount due in respect of those shares, whether by way of consideration for the issue of the shares or in respect of sums payable by the holder of the shares in accordance with the constitution.

(6) If a company fails to comply with subsection (4),—

(a) the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b) every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

85. Transfer of shares under approved system

(1) Where shares in a company are transferred under a system of transfer approved under section 376 of the Financial Markets Conduct Act 2013, the company may refuse to complete or delay the registration of the transfer of the shares if—

(a) the board resolves, within 30 working days of such date as may be specified for the purpose in the Order in Council approving the system, to refuse or delay registration of the transfer, and the resolution sets out in full the reasons for doing so; and

(b) notice of the resolution, including those reasons, is sent to the transferor and to the transferee within 5 working days of the resolution being passed by the board; and

i. the Act or the constitution expressly permits the board to refuse or delay registration for the reasons stated; or

ii. any identification number assigned to the shares or issued to the holder of the shares under a system of transfer approved under section 376 of the Financial Markets Conduct Act 2013 is not recorded on the form of transfer of the shares or otherwise communicated in writing to the company by or on behalf of the transferor.

1A. If shares in a company are transferred in accordance with the rules of a designated settlement system, the company may refuse to complete or delay the registration of the transfer of the shares if—

(a) the board of the company resolves, within 30 working days of the date on which the settlement was effected, to refuse or delay registration of the transfer, and the resolution sets out in full the reasons for doing so; and

(b) notice of the resolution, including those reasons, is sent to the transferor and to the transferee within 5 working days of the resolution being passed by the board; and

(c) this Act or the constitution of the company expressly permits the board to refuse or delay registration for the reasons stated.

(2) Subject to subsections (1) and (1A), if a company fails to enter or cause to be entered the name of the transferee on the share register on a transfer of shares effected in accordance with the rules of a designated settlement system, or under a system approved under section 376 of the Financial Markets Conduct Act 2013,—

(a) the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b) every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

86. Transfer of shares by operation of law

Shares in a company may pass by operation of law notwithstanding the constitution of the company.

Share register

87 Company to maintain share register

(1) A company must maintain a share register that records the shares issued by the company and states—

(a) whether, under the constitution of the company or the terms of issue of the shares, there are any restrictions or limitations on their transfer; and

(b) where any document that contains the restrictions or limitations may be inspected.

**(2)**The share register must state, with respect to each class of shares,—

(a) the names, alphabetically arranged, and the latest known address of each person who is, or has within the last 10 years been, a shareholder; and

(b) the number of shares of that class held by each shareholder within the last 10 years; and

i. issue of shares to; or

ii. repurchase or redemption of shares from; or

iii. transfer of shares by or to— each shareholder within the last 10 years, and in relation to the transfer, the name of the person to or from whom the shares were transferred.

(3) An agent may maintain the share register of the company.

(4) If a company fails to comply with subsection (1) or subsection (2),—

(a) the company commits an offence and is liable on conviction to the penalty set out in section 373(2); and

(b) every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

88. Place of share register

(1) The share register may, if expressly permitted by the constitution, be divided into 2 or more registers kept in different places.

(2) The principal register must be kept in New Zealand.

(3) If a share register is divided into 2 or more registers kept in different places,—

(a) notice of the place where each register is kept must be delivered to the Registrar for registration within 10 working days after the share register is divided or any place where a register is kept is altered; and

(b) a copy of every register must be kept at the same place as the principal register; and

(c) if an entry is made in a register other than the principal register, a corresponding entry must be made within 10 working days in the copy of that register kept with the principal register.

(4) In this section, principal register, in relation to a company, means—

(a) if the share register is not divided into 2 or more registers, the share register:

(b) if the share register is divided into 2 or more registers, the register described as the principal register in the last notice sent to the Registrar.

(5) If a company fails to comply with subsection (2) or subsection (3),—

(a) the company commits an offence and is liable on conviction to the penalty set out in section 373(2); and

(b) every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

89. Share register as evidence of legal title

(1) Subject to section 91, the entry of the name of a person in the share register as holder of a share is prima facie evidence that legal title to the share vests in that person.

(2) A company may treat the registered holder of a share as the only person entitled to—

(a) exercise the right to vote attaching to the share; and

(b) receive notices; and

(d) exercise the other rights and powers attaching to the share.

90. Directors’ duty to supervise share register

(1) It is the duty of each director to take reasonable steps to ensure that the share register is properly kept and that share transfers are promptly entered on it in accordance with section 84.

(2) A director who fails to comply with subsection (1) commits an offence and is liable on conviction to the penalty set out in section 373(2).

91. Power of court to rectify share register

(1) If the name of a person is wrongly entered in, or omitted from, the share register of a company, the person aggrieved, or a shareholder, may apply to the court—

(a) for rectification of the share register; or

(b) for compensation for loss sustained; or

(2) On an application under this section the court may order—

(a) rectification of the register; or

(b) payment of compensation by the company or a director of the company for any loss sustained; or

(3) On an application under this section, the court may decide—

(a) a question relating to the entitlement of a person who is a party to the application to have his or her name entered in, or omitted from, the register; and

(b) a question necessary or expedient to be decided for rectification of the register.

Trusts not to be entered on register

No notice of a trust, whether express, implied, or constructive, may be entered on the share register.

93. Personal representative may be registered

(1) Notwithstanding section 92, a personal representative of a deceased person whose name is registered in a share register of a company as the holder of a share in that company is entitled to be registered as the holder of that share as personal representative.

(2) Notwithstanding section 92, a personal representative of a deceased person beneficially entitled to a share in a company, being a share registered in a share register of that company, is with the consent of the company and the registered holder of that share, entitled to be registered as the holder of that share as personal representative.

(3) The registration of a trustee, executor, or administrator pursuant to this section does not constitute notice of a trust.

94. Assignee of bankrupt may be registered

(1) Notwithstanding section 92, the assignee of the property of a bankrupt registered in a share register of a company as the holder of a share in that company is entitled to be registered as the holder of that share as the assignee of the property of the bankrupt.

(2) Notwithstanding section 92, the assignee of the property of a bankrupt beneficially entitled to a share in a company, being a share registered in a register of that company, is, with the consent of the company and the registered holder of that share, entitled to be registered as the holder of that share as the assignee of the property of the bankrupt.

Ultimate holding company

94.a Meaning of ultimate holding company information

For the purposes of this Act, ultimate holding company information means information about whether a company has an ultimate holding company and, if the company does, the following information:

(a) the name of the ultimate holding company:

(b) the ultimate holding company’s country of registration:

(d) the registered office of the ultimate holding company:

(e) any other prescribed information.

94.b Notice of ultimate holding company changes

(1) The board of a company must ensure that notice (in the form and manner required by the Registrar) of any changes in the company’s ultimate holding company information is delivered to the Registrar for registration.

(2) A notice under subsection (1) must—

(a) specify the date of the change; and

(b) include the new ultimate holding company information; and

(3) If a board of a company fails to comply with this section, every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

Share certificates

95 Share certificates

(1) Subject to subsection (2), a company whose shares are subject to a listing agreement with a stock exchange must, within 20 working days after the issue, or registration of a transfer, of shares in the company, as the case may be, send a share certificate to every holder of those shares stating—

(a) the name of the company; and

(b) the class of shares held by that person; and

(2) Nothing in subsections (1) or (5) applies in relation to a company the shares in which can be transferred in accordance with the rules of a designated settlement system, or under a system approved under section 376 of the Financial Markets Conduct Act 2013, that does not require a share certificate for the transfer of shares.

(3) A shareholder in a company, not being a company to which subsection (1) or subsection (2) applies, may apply to the company for a certificate relating to some or all of the shareholder’s shares in the company.

(4) On receipt of an application for a share certificate under subsection (3), the company must, within 20 working days after receiving the application,—

(a) if the application relates to some but not all of the shares, separate the shares shown in the register as owned by the applicant into separate parcels; one parcel being the shares to which the share certificate relates, and the other parcel being any remaining shares; and

(b) in all cases send to the shareholder a certificate stating—

i. the name of the company; and

ii. the class of shares held by the shareholder; and

iii. the number of shares held by the shareholder to which the certificate relates.

(5) Notwithstanding section 84, where a share certificate has been issued, a transfer of the shares to which it relates must not be registered by the company unless the form of transfer required by that section is accompanied by the share certificate relating to the share, or by evidence as to its loss or destruction and, if required, an indemnity in a form required by the board.

(6) Subject to subsection (1), where shares to which a share certificate relates are to be transferred, and the share certificate is sent to the company to enable the registration of the transfer, the share certificate must be cancelled and no further share certificate issued except at the request of the transferee.

(6A) Nothing in this section (except subsection (2)) limits or affects section 100 of the Financial Markets Conduct Act 2013.

(7) If a company fails to comply with subsection (1) or subsection (4),—

(a) the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b) every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

Debentures

Perpetual debentures

(1) A term that is expressed in a debenture or in a deed securing a debenture, issued or executed by a company, is not invalid by reason only that it provides that the debenture is—

(a) irredeemable; or

(b) redeemable only on the happening of a contingency, however remote, or on the expiration of a period, however long.

(2) This section applies despite anything to the contrary in section 97 of the Property Law Act 2007 or in any rule of law or equity.

95. Power to reissue redeemed debentures in certain cases

(1) A company that has redeemed debentures previously issued by it may—

(a) reissue the debentures; or

(b) issue other debentures in their place.

(2) Subsection (1) applies—

(a) whether the debentures were redeemed before, on, or after 1 January 2008:

(b) unless—

i. the company’s constitution or a contract entered into by the company contains a provision (whether express or implied) to the contrary; or

ii. the company has, by passing a resolution or by some other act, indicated its intention that the debentures are cancelled.

(3) On a reissue of redeemed debentures or of other debentures in their place, the debentures are to be treated as having, and as always having had, the same priority as the redeemed debentures.

(4) Debentures of a company deposited to secure advances from time to time (whether on current account or otherwise) are not to be treated as redeemed because the company’s account ceases to be in debit while the debentures are deposited.

(5) Subsection (4) applies whether the debentures were deposited before, on, or after 1 January 2008.

(6) The reissue of a debenture or the issue of another debenture in its place under this section (whether before, on, or after 1 January 2008)—

(a) is to be treated as the issue of a new debenture for the purposes of stamp duty payable (if any); but

(b) is not to be treated as the issue of a new debenture for the purposes of any provision limiting the amount or number of debentures to be issued.

95.c Specific performance of contracts to subscribe for debentures

(1) A court may order the specific performance of a contract with a company to take up and pay for any debentures of the company.

(2) The court must not refuse to order the specific performance of a contract of that kind on the ground that the contract is one to lend money.

Part 7

Shareholders and their rights and obligations

96. Meaning of shareholder

In this Act, the term shareholder, in relation to a company, means—

(a) a person whose name is entered in the share register as the holder for the time being of 1 or more shares in the company:

(b) until the person’s name is entered in the share register, a person named as a shareholder in an application for the registration of a company at the time of registration of the company:

(c) until the person’s name is entered in the share register, a person who is entitled to have that person’s name entered in the share register under a registered amalgamation proposal as a shareholder in an amalgamated company.

97 Liability of shareholders

(1) Except where the constitution of a company provides that the liability of the shareholders of the company is unlimited, a shareholder is not liable for an obligation of the company by reason only of being a shareholder.

(2) Except where the constitution of a company provides that the liability of the shareholders of the company is unlimited, the liability of a shareholder to the company is limited to—

(a) any amount unpaid on a share held by the shareholder:

(b) any liability expressly provided for in the constitution of the company:

(d) any liability to repay a distribution received by the shareholder to the extent that the distribution is recoverable under section 56:

(e) any liability under section 100.

(3) Nothing in this section affects the liability of a shareholder to a company under a contract, including a contract for the issue of shares, or for any tort, or breach of a fiduciary duty, or other actionable wrong committed by the shareholder.

Liability of former shareholders

(1) A former shareholder who ceased to be a shareholder during the specified period is liable to the company in respect of any amount unpaid on the shares held by that former shareholder or any liability provided for in the constitution of the company for which that former shareholder was liable to the company if the court is satisfied that the shareholders of the company are unable to discharge any liability—

(a) for any amount unpaid on shares held by them; or

(b) expressly provided for in the constitution of the company.

(2) A former shareholder is not liable under subsection (1) for any debt or liability of the company contracted after ceasing to be a shareholder.

(3) Subsections (1) and (2) apply, with such modifications as may be necessary, in relation to an existing company that has become reregistered under this Act in accordance with the Companies Reregistration Act 1993 and as if the reference to a former shareholder included a reference to a person who was a member of the company before the reregistration of the company.

(4) Where a person ceased to be a shareholder of a company before the liability of the shareholders of the company ceased to be limited and became unlimited and that person has not since become a shareholder of the company, that person is liable to the company only to the same extent as if the liability of the shareholders had remained limited.

(5) Subsection (4) applies, with such modifications as may be necessary, in relation to an existing company that has become reregistered under this Act in accordance with the Companies Reregistration Act 1993, whether or not the liability of the shareholders ceased to be limited before, on, or after the reregistration of the company and as if the reference to a person who was a shareholder included a reference to a person who was a member of the company before reregistration.

(6) For the purposes of subsection (1), specified period means—

(a) a period of 1 year before the date of commencement of the liquidation of the company together with the period commencing on that date and ending at the time at which the liquidator is appointed; and

(b) in the case of a company that has been put into liquidation by the court, the period of 1 year before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date on which, and at the time at which, the order was made; and

i. an application was made to the court to put a company into liquidation; and

ii. after the making of the application to the court a liquidator was appointed under paragraph (a) or paragraph (b) of section 241(2),—

the period of 1 year before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date and at the time of the commencement of the liquidation.

Additional provisions relating to liability of shareholders and former shareholders

(1) If—

(a) a shareholder or former shareholder of a company was, at any time, liable to the company in respect of a share held by that person; and

(b) that liability was cancelled or reduced by—

i. an alteration of the constitution, repurchase or redemption of the share, or amalgamation; or

ii. reregistration under this Act in accordance with the Companies Reregistration Act 1993; or

iii. a change of registration under section 30 of the Companies Act 1955; and

(c) the company is, at the commencement of its liquidation, subject to liabilities incurred prior to the alteration of the constitution, repurchase or redemption of the share, amalgamation, reregistration, or change of registration, as the case may be; and

(d) the assets of the company are not sufficient to discharge those liabilities in full,— that person is liable to the company for the amount specified in subsection (2).

(2) A person is liable under subsection (1) for the lesser of—

(a) the amount by which the liability in respect of that share was reduced:

(b) the amount required to be contributed in respect of each such share in order to discharge those liabilities.

(3) The liability of a person under subsection (1) is reduced by an amount received by that person as a distribution under section 57 and recovered from that person by the company.

(4) The amount received by a person as a distribution under section 57 is reduced by any amount recovered from that person pursuant to subsection (1).

(5) For the purposes of this section,—

(a) the term company includes an amalgamating company which amalgamated with 1 or more other amalgamating companies to continue as that company:

(b) a member of a company limited by guarantee registered under the Companies Act 1955 is to be treated as if the member was, prior to reregistration of that company under this Act in accordance with the Companies Reregistration Act 1993, the holder of a share which rendered the member liable to calls not exceeding the amount of contribution specified in the memorandum of association as the amount undertaken to be contributed by that member in a winding up:

(c) a member of an unlimited company registered under the Companies Act 1955 is to be treated as if the member was, prior to reregistration of that company under this Act in accordance with the Companies Reregistration Act 1993, the holder of a share which rendered the member liable to unlimited calls.

100. Liability for calls

(1) Where a share renders its holder liable to calls, or otherwise imposes a liability on its holder, that liability attaches to the holder of the share for the time being, and not to a prior holder of the share, whether or not the liability became enforceable before the share was registered in the name of the current holder.

(2) Where—

(a) all or part of the consideration payable in respect of the issue of a share remains unsatisfied; and

(b) the person to whom the share was issued no longer holds that share, liability in respect of that unsatisfied consideration does not attach to subsequent holders of the share, but remains the liability of the person to whom the share was issued, or of any other person who assumed that liability at the time of issue.

101. Shareholders not required to acquire shares by alteration to constitution Notwithstanding anything in the constitution of the company, a shareholder is not bound by an alteration of the constitution of a company that—

(a) requires the shareholder to acquire or hold more shares in the company than the number held on the date the alteration is made; or

(b) increases the liability of the shareholder to the company— unless the shareholder agrees in writing to be bound by the alteration either before, on, or after it is made.

102. Liability of personal representative

(1) The liability of the personal representative of the estate of a deceased person, who is registered as the holder of a share comprised in the estate, does not, in respect of that share, exceed the proportional amount available from the assets of the estate, after satisfaction of prior claims, for distribution among creditors of the estate, being assets which, at the time when any demand is made for the satisfaction of the liability, are held by that personal representative on the same trusts as apply to that share.

(2) For the purposes of this section, trust extends to the duties of a personal representative.

103. Liability of an assignee

(1) The liability of the assignee of the property of a bankrupt, who is registered as the holder of a share which is comprised in the property of the bankrupt, does not, in respect of that share, exceed the proportional amount available from the property of the estate of the bankrupt, after satisfaction of prior claims, for distribution among creditors of the estate, being property of the bankrupt which, at the time when demand is made for the satisfaction of the liability, is vested in the assignee.

(2) In this section, assignee means the assignee in whom the property of a bankrupt is vested pursuant to the Insolvency Act 2006.

Powers of shareholders

104 Exercise of powers reserved to shareholders

(1) Powers reserved to the shareholders of a company by this Act may be exercised only—

(a) at a meeting of shareholders pursuant to section 120 or section 121; or

(b) by a resolution in lieu of a meeting pursuant to section 122.

(2) Powers reserved to the shareholders of a company by the constitution of the company may, subject to the constitution, be exercised—

(a) at a meeting of shareholders pursuant to section 120 or section 121; or

(b) by a resolution in lieu of a meeting pursuant to section 122.

105 Exercise of powers by ordinary resolution

(1) Unless otherwise specified in this Act or the constitution of a company, a power reserved to shareholders may be exercised by an ordinary resolution.

(2) An ordinary resolution is a resolution that is approved by a simple majority of the votes of those shareholders entitled to vote and voting on the question.

106 Powers exercised by special resolution

(1) Notwithstanding the constitution of a company, when shareholders exercise a power to—

(a) adopt a constitution or, if it has one, alter or revoke the company’s constitution:

(b) approve a major transaction:

(d) put the company into liquidation, the power must be exercised by special resolution.

(2) A special resolution pursuant to paragraph (a) or paragraph (b) or paragraph (c) of subsection (1) can be rescinded only by a special resolution.

(3) A special resolution pursuant to paragraph (d) of subsection (1) cannot be rescinded in any circumstances.

107. Unanimous assent to certain types of action

(1) Notwithstanding section 52 but subject to section 108, if all entitled persons have agreed or concur,—

(a) a dividend may be authorized otherwise than in accordance with section 53:

(b) a discount scheme may be approved otherwise than in accordance with section 55:

(d) shares in a company may be redeemed otherwise than in accordance with sections 69 to 72:

(e) financial assistance may be given for the purpose of, or in connection with, the purchase of shares otherwise than in accordance with sections 76 to 80:

(f) any of the matters referred to in section 161(1) may be authorized otherwise than in accordance with that section.

(2) If all entitled persons have agreed or concur, shares may be issued otherwise than in accordance with section 42 or section 44 or section 45.

(3) If all entitled persons have agreed to or concur in a company entering into a transaction in which a director is interested, nothing in sections 140 and 141 shall apply in relation to that transaction.

(4) For the purposes of this section, no agreement or concurrence of the entitled persons is valid or enforceable unless the agreement or concurrence is in writing.

(5) An agreement or concurrence may be—

(a) a separate agreement to, or concurrence in, the particular exercise of the power referred to; or

(b) an agreement to, or concurrence in, the exercise of the power generally or from time to time.

(6) An entitled person may at any time, by notice in writing to the company, withdraw from any agreement or concurrence referred to in subsection (5)(b) and any such notice shall have effect accordingly.

(7) Where a power is exercised pursuant to an agreement or concurrence referred to in subsection (5)(b), the board of the company must, within 10 working days of the exercise of the power, send to every entitled person a notice in writing containing details of the exercise of the power.

(8) If the board of a company fails to comply with subsection (7), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

**Company to satisfy solvency test

(1) A power referred to in subsection (1) of section 107 must not be exercised unless the board of the company is satisfied on reasonable grounds that the company will, immediately after the exercise of the power, satisfy the solvency test.

(2) The directors who vote in favour of the exercise of the power must sign a certificate stating that, in their opinion, the company will, after the exercise of the power, satisfy the solvency test.

(3) If, after a resolution is passed under subsection (1) and before the power is exercised, the board ceases to be satisfied on reasonable grounds that the company will, immediately after the power is exercised, satisfy the solvency test, any exercise of the power is deemed not to have been authorized.

(4) The provisions of section 56 apply in relation to the exercise of a power referred to in subsection (1) of section 107, with such modifications as may be necessary.

(5) In applying the solvency test for the purposes of section 107(1)(e),—

(a) assets excludes all amounts of financial assistance given by the company at any time under section 76 or section 107(1)(e) in the form of loans; and

(b) liabilities includes the face value of all outstanding liabilities, whether contingent or otherwise, incurred by the company at any time in connection with the giving of financial assistance under section 76 or section 107(1)(e).

(5A) Nothing in subsection (5) limits or affects the application of section 4(4).

(6) Every director who fails to comply with subsection (2) commits an offence and is liable on conviction to the penalty set out in section 373(1).

109 Management review by shareholders

(1) Notwithstanding anything in this Act or the constitution of the company, the chairperson of a meeting of shareholders of a company must allow a reasonable opportunity for shareholders at the meeting to question, discuss, or comment on the management of the company.

(2) Notwithstanding anything in this Act or the constitution of the company, but subject to subsections (2A) and (3), a meeting of shareholders may pass a resolution under this section relating to the management of a company.

(2A) The provisions of Schedule 1 govern proceedings at a meeting of shareholders at which a resolution under this section is passed except to the extent that the constitution of the company provides for matters that are expressed in that schedule to be subject to the constitution of the company.

(3) Unless the constitution provides that the resolution is binding, a resolution passed pursuant to subsection (2) is not binding on the board.

Minority buy-out rights

110 Shareholder may require company to purchase shares

Where—

(a) a shareholder is entitled to vote on the exercise of 1 or more of the powers set out in—

i. section 106(1)(a), and the proposed alteration imposes or removes a restriction on the activities of the company; or

ii. section 106(1)(b) or (c); and

(b) the shareholders resolved, pursuant to section 106, to exercise the power; and

(c) the shareholder cast all the votes attached to shares registered in the shareholder’s name and having the same beneficial owner against the exercise of the power; or

(d) where the resolution to exercise the power was passed under section 122, the shareholder did not sign the resolution,— that shareholder is entitled to require the company to purchase those shares in accordance with section 111.

111 Notice requiring purchase

(1) A shareholder of a company who is entitled to require the company to purchase shares by virtue of section 110 or section 118 may,—

(a) within 10 working days of the passing of the resolution at a meeting of shareholders; or

(b) where the resolution was passed under section 122, before the expiration of 10 working days after the date on which notice of the passing of the resolution is given to the shareholder, give a written notice to the company requiring the company to purchase those shares.

(2) Within 20 working days of receiving a notice under subsection (1), the board must—

(a) agree to the purchase of the shares by the company; or

(b) arrange for some other person to agree to purchase the shares; or

(d) arrange, before taking the action concerned, for the resolution to be rescinded in accordance with section 106 or decide in the appropriate manner not to take the action concerned, as the case may be; and

(e) give written notice to the shareholder of the board’s decision under this subsection.

112 Price for shares to be purchased by company determined

(1) Within 5 working days of giving notice under section 111(2)(e) that the board agrees to the purchase of shares by the company, the board must give to the holder of the shares written notice of—

(a) the price it offers to pay for those shares; and

(b) how—

i. the matters in subsection (2) were calculated; or

ii. the price was calculated under subsection (3) and why calculating the price using the methodology set out in paragraphs (a) to (c) of subsection (2) would be clearly unfair.

(2) That price must be a fair and reasonable price (as at the close of business on the day before the date on which the resolution was passed) for the shares held by the shareholder, calculated as follows:

(a) first, the fair and reasonable value of the total shares in each class to which the shares belong must be calculated (the class value):

(b) secondly, each class value must be adjusted to exclude any fluctuation (whether positive or negative) in the class value that has occurred (whether before or after the resolution was passed) that was due to, or in expectation of, the event proposed or authorised by the resolution:

(c) thirdly, a portion of each adjusted class value must be allocated to the shareholder in proportion to the number of shares he, she, or it holds in the relevant class.

(3) However, a different methodology from that set out in paragraphs (a) to (c) of subsection (2) may be used to calculate the fair and reasonable price for the shares if using the methodology set out in those paragraphs would be clearly unfair to the shareholder or the company.

**(4) The shareholder may object to the price offered by the board for the shares by giving written notice to the company no later than 10 working days after the date on which the board gave written notice to the shareholder under subsection (1).

(5) If the company does not receive an objection to the price in accordance with subsection (4), the company must purchase all the shares at the nominated price no later than 10 working days after—

(a) the date on which the board’s offer under subsection (1) is accepted; or

(b) if the board has not received an acceptance, the date that is 10 working days after the date on which the board gave written notice to the shareholder under subsection (1).

(6) The time periods in subsection (5) do not apply if there is a written agreement between the board and the shareholder that specifically sets a different date for purchase of the shares.

(7) In this section, resolution means the resolution referred to in section 110 or 118 that, due to it having been passed, entitles the shareholder to require the company to purchase the shareholder’s shares in accordance with section 111.

112.a Price for shares referred to arbitration if shareholder objects to price

(1) If a company receives an objection to the price offered for shares in accordance with section 112(4),—

(a) the following issues must be submitted to arbitration:

i. the fair and reasonable price for the shares, on the basis set out in section 112(2) and (3); and

ii. the remedies available to the holder of the shares or the company in respect of any price for the shares that differs from that determined by the board under section 112; and

(b) the company must, within 5 working days of receiving the objection, pay to the shareholder a provisional price in respect of each share equal to the price offered by the board under section 112(1).

(2) If the price determined for the shares—

(a) exceeds the provisional price paid, the arbitral tribunal must order the company to pay the balance owing to the shareholder:

(b) is less than the provisional price paid, the arbitral tribunal must order the shareholder to pay the excess to the company.

(3) Except in exceptional circumstances, an arbitral tribunal must award interest on any balance owing or excess to be paid under subsection (2).

(4) If a balance is owing to the shareholder, an arbitral tribunal may award to the shareholder, in addition to or instead of an award of interest, damages for loss attributable to the shortfall in the initial payment.

(5) Any sum that must be paid in accordance with this section must be paid no later than 10 days after the date of the arbitral tribunal’s determination, unless the arbitral tribunal specifically orders otherwise.

(6) A submission to arbitration under this section is an arbitration agreement for the purposes of the Arbitration Act 1996, and the provisions of that Act apply accordingly.

(7) Clause 6 of Schedule 2 of the Arbitration Act 1996 may not be excluded from the arbitration agreement, and the term costs and expenses of an arbitration in that clause includes, where a balance is owing to the shareholder,—

(a) the reasonable legal costs of the shareholder on a solicitor-and-client basis; and

(b) the reasonable costs of expert witnesses.

112 Interest payable on outstanding payments

(1) Interest on any sum that must be paid under section 112 or 112A that is outstanding after the date on which it falls due is payable,—

(a) in the case of a share price determined under section 112, at the same rate of interest as the prescribed rate under section 87(3) of the Judicature Act 1908; and

(b) in the case of a share price determined under section 112A, on the basis and at the rate that the arbitral tribunal thinks fit having regard to all of the circumstances.

(2) The sum on which interest is payable under subsection (1)(b) includes any interest or damages for loss awarded under section 112A.

112 Timing of transfer of shares

(1) On the day on which a board gives notice under section 111(2)(e) that the board agrees to the purchase of shares by the company,—

(a) the legal title to those shares passes to the company; and

(b) the rights of the shareholder in relation to those shares end.

(2) However, for the purposes of sections 112 and 112A, shareholder and holder of the shares means the person who held the legal title to the shares immediately before the board gave notice under section 111(2)(e) that the board agrees to the purchase of those shares by the company.

(3) Subsection (2) applies despite subsection (1).

113 Purchase of shares by third party

(1) Sections 112 to 112C apply to the purchase of shares by a person with whom the company has entered into an arrangement for purchase in accordance with section 111(2)(b) subject to such modifications as may be necessary, and, in particular, as if references in that section to the board and the company were references to that person.

(2) Every holder of shares that are to be purchased in accordance with the arrangement is indemnified by the company in respect of loss suffered by reason of the failure by the person who has agreed to purchase the shares to purchase them at the price nominated or fixed by arbitration, as the case may be.

114 Court may grant exemption

(1) A company to which a notice has been given under section 111 may apply to the court for an order exempting it from the obligation to purchase the shares to which the notice relates on the grounds that—

(a) the purchase would be disproportionately damaging to the company; or

(b) the company cannot reasonably be required to finance the purchase; or

(2) On an application under this section, the court may make an order exempting the company from the obligation to purchase the shares, and may make any other order it thinks fit, including an order—

(a) setting aside a resolution of the shareholders:

(b) directing the company to take, or refrain from taking, any action specified in the order:

(d) that the company be put into liquidation.

(3) The court shall not make an order under subsection (2) on either of the grounds set out in paragraph (a) or paragraph (b) of subsection (1) unless it is satisfied that the company has made reasonable efforts to arrange for another person to purchase the shares in accordance with section 111(2)(b).

115 Court may grant exemption if company insolvent

(1) If—

(a) a notice is given to a company under section 111; and

(b) the board has resolved that the purchase by the company of the shares to which the notice relates would result in it failing to satisfy the solvency test; and

(c) the company has, having made reasonable efforts to do so, been unable to arrange for the shares to be purchased by another person in accordance with section 111(2)(b),— the company must apply to the court for an order exempting it from the obligation to purchase the shares.

(2) The court may, on an application under subsection (1), if it is satisfied that—

(a) the purchase of the shares would result in the company failing to satisfy the solvency test; and

(b) the company has made reasonable efforts to arrange for the shares to be purchased by another person in accordance with section 111(2)(b), make—

(d) an order suspending the obligation to purchase the shares:

(e) such other order as it thinks fit, including any order referred to in section 114(2).

Interest groups

116 Meaning of classes and interest groups

(1) In this Act, unless the context otherwise requires, class means a class of shares having attached to them identical rights, privileges, limitations, and conditions interest group, in relation to any action or proposal affecting rights attached to shares, means a group of shareholders—

(a) whose affected rights are identical; and

(b) whose rights are affected by the action or proposal in the same way; and

(2) For the purposes of this Act and the definition of the term interest group,—

(a) 1 or more interest groups may exist in relation to any action or proposal; and

(b) if—

i. action is taken in relation to some holders of shares in a class and not others; or

ii. a proposal expressly distinguishes between some holders of shares in a class and other holders of shares of that class, holders of shares in the same class may fall into 2 or more interest groups.

117 Alteration of shareholder rights

(1) A company must not take action that affects the rights attached to shares unless that action has been approved by a special resolution of each interest group.

(2) For the purposes of subsection (1), the rights attached to a share include—

(a) the rights, privileges, limitations, and conditions attached to the share by this Act or the constitution, including voting rights and rights to distributions:

(b) pre-emptive rights arising under section 45:

(c) the right to have the procedure set out in this section, and any further procedure required by the constitution for the amendment or alteration of rights, observed by the company:

(d) the right that a procedure required by the constitution for the amendment or alteration of rights not be amended or altered.

(3) For the purposes of subsection (1), the issue of further shares ranking equally with, or in priority to, existing shares, whether as to voting rights or distributions, is deemed to be action affecting the rights attached to the existing shares, unless—

(a) the constitution of the company expressly permits the issue of further shares ranking equally with, or in priority to, those shares; or

(b) the issue is made in accordance with the pre-emptive rights of shareholders under section 45 or under the constitution of the company.

118 Shareholder may require company to purchase shares Where—

(a) an interest group has, under section 117, approved, by special resolution, the taking of action that affects the rights attached to shares; and

(b) the company becomes entitled to take the action; and

(c) a shareholder who was a member of the interest group cast all the votes attached to the shares registered in that shareholder’s name and having the same beneficial owner against approving the action; or

(d) where the resolution approving the taking of the action was passed under section 122, a shareholder who was a member of the interest group did not sign the resolution, that shareholder is entitled to require the company to purchase those shares in accordance with section 111.

119. Actions not invalid

The taking of action by a company affecting the rights attached to shares is not invalid by reason only that the action was not approved in accordance with section 117.

Meetings of shareholders

120 Annual meeting of shareholders

(1) The board of a company must call an annual meeting of shareholders to be held—

(a) not later than 6 months after the balance date of the company; and

(b) not later than 15 months after the previous annual meeting.

(2) However, a company does not have to hold its first annual meeting in the calendar year of its registration but must hold that meeting within 18 months after its registration.

(3)[Repealed]

(4) The company must hold the meeting on the date on which it is called to be held.

121 Special meetings of shareholders

A special meeting of shareholders entitled to vote on an issue—

(a) may be called at any time by—

i. the board; or

ii. a person who is authorised by the constitution to call the meeting:

(b) must be called by the board on the written request of shareholders holding shares carrying together not less than 5% of the voting rights entitled to be exercised on the issue.

122 Resolution in lieu of meeting

(1) Subject to subsections (2) and (3), a resolution in writing signed by not less than—

(a) 75%; or

(b) such other percentage as the constitution may require for passing a special resolution,— whichever is the greater, of the shareholders who would be entitled to vote on that resolution at a meeting of shareholders who together hold not less than 75% or, if a higher percentage is required by the constitution, that higher percentage, of the votes entitled to be cast on that resolution, is as valid as if it had been passed at a meeting of those shareholders.

(2) A resolution in writing that—

(a) relates to a matter that is required by this Act or by the constitution to be decided at a meeting of the shareholders of a company; and

(b) is signed by the shareholders specified in subsection (3)— is made in accordance with this Act or the constitution of the company.

(3) For the purposes of subsection (2)(b), the shareholders are,—

(a) in the case of a resolution under section 207I or 207J, the shareholders who together hold not less than 95% of the votes entitled to be cast on the resolution:

(b) in any other case, the shareholders referred to in subsection (1).

(3A) Any resolution in writing under this section may consist of 1 or more documents in similar form (including letters, telegrams, cables, facsimiles, telex messages, electronic mail, or other similar means of communication) each signed or assented to by or on behalf of 1 or more of the shareholders specified in subsection (3).

(4) It shall not be necessary for a company to hold an annual meeting of shareholders under section 120 if everything required to be done at that meeting (by resolution or otherwise) is done by resolution in accordance with subsections (2) and (3).

(5) Within 5 working days of a resolution being passed under this section, the company must send to every shareholder who did not sign the resolution or on whose behalf the resolution was not signed,—

(a) a copy of the resolution; and

(b) if the resolution was a special resolution required by section 106(1)(a) or (b), a statement setting out the rights of shareholders under section 110.

(6) A resolution may be signed under subsection (1) or subsection (2) without any prior notice being given to shareholders.

(7) If a company fails to comply with subsection (5),—

(a) the company commits an offence and is liable on conviction to the penalty set out in section 373(1):

(b) every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

123 Court may call meeting of shareholders

(1) If the court is satisfied that—

(a) it is impracticable to call or conduct a meeting of shareholders in the manner prescribed by this Act or the constitution; or

(b) it is in the interests of a company that a meeting of shareholders be held,— the court may order a meeting of shareholders to be held or conducted in such manner as the court directs.

(2) Application to the court may be made by a director, or a shareholder, or a creditor of the company.

(3) The court may make the order on such terms as to the costs of conducting the meeting and as to security for those costs as the court thinks fit.

124 Proceedings at meetings

The provisions of Schedule 1 govern proceedings at meetings of shareholders of a company except to the extent that the constitution of the company makes provision for the matters that are expressed in that schedule to be subject to the constitution of the company.

Ascertaining shareholders

125 Shareholders entitled to receive distributions, attend meetings, and exercise rights

(1) The shareholders who are—

(a) entitled to receive distributions; or

(b) entitled to exercise pre-emptive rights to acquire shares in accordance with section 45; or

(c) entitled to exercise any other right or receive any other benefit under this Act or the constitution or pursuant to the terms of issue of shares are,—

(d) if the board fixes a date for the purpose, those shareholders whose names are registered in the share register on that date:

(e) if the board does not fix a date for the purpose, those shareholders whose names are registered in the share register on the day on which the board or the shareholders, as the case may be, pass the resolution concerned.

(2) A date must not be fixed under subsection (1) that precedes by more than 20 working days the date on which the proposed action will be taken.

(3) The shareholders who are entitled to receive notice of a meeting of shareholders are,—

(a) if the board fixes a date for the purpose, those shareholders whose names are registered in the share register on that date:

(b) if the board does not fix a date for the purpose, those shareholders whose names are registered in the share register at the close of business on the day immediately preceding the day on which the notice is given.

(4) A date must not be fixed under subsection (3) that precedes by more than 30 working days or less than 10 working days the date on which the meeting is to be held.

Part 8

Directors and their powers and duties

126 Meaning of director

(1) In this Act, director, in relation to a company, includes—

(a) a person occupying the position of director of the company by whatever name called; and

(b) for the purposes of sections 131 to 141, 145 to 149, 298, 299, 301, 318(1)(bb), 383, 385, 385AA, 386A to 386F, and clause 3(4)(b) of Schedule 7,—

i. a person in accordance with whose directions or instructions a person referred to in paragraph (a) may be required or is accustomed to act; and

ii. a person in accordance with whose directions or instructions the board of the company may be required or is accustomed to act; and

iii. a person who exercises or who is entitled to exercise or who controls or who is entitled to control the exercise of powers which, apart from the constitution of the company, would fall to be exercised by the board; and

(c) for the purposes of sections 131 to 149, 298, 299, 301, 318(1)(bb), 383, 385, 385AA, 386A to 386F, and clause 3(4)(b) of Schedule 7, a person to whom a power or duty of the board has been directly delegated by the board with that person’s consent or acquiescence, or who exercises the power or duty with the consent or acquiescence of the board; and

(d) for the purposes of sections 145 to 149, and clause 3(4)(b) of Schedule 7, a person in accordance with whose directions or instructions a person referred to in paragraphs (a) to (c) may be required or is accustomed to act in respect of his or her duties and powers as a director.

(1A) In this Act, director, in relation to a company, does not include a receiver.

(2) If the constitution of a company confers a power on shareholders which would otherwise fall to be exercised by the board, any shareholder who exercises that power or who takes part in deciding whether to exercise that power is deemed, in relation to the exercise of the power or any consideration concerning its exercise, to be a director for the purposes of sections 131 to 138.

(3) If the constitution of a company requires a director or the board to exercise or refrain from exercising a power in accordance with a decision or direction of shareholders, any shareholder who takes part in—

(a) the making of any decision that the power should or should not be exercised; or

(b) the making of any decision whether to give a direction,— as the case may be, is deemed, in relation to making any such decision, to be a director for the purposes of sections 131 to 138.

(4) Paragraphs (b) to (d) of subsection (1) do not include a person to the extent that the person acts only in a professional capacity.

127 Meaning of board

In this Act, the terms board and board of directors, in relation to a company, mean—

(a) directors of the company who number not less than the required quorum acting together as a board of directors; or

(b) if the company has only 1 director, that director.

Powers of management

128 Management of company

(1) The business and affairs of a company must be managed by, or under the direction or supervision of, the board of the company.

(2) The board of a company has all the powers necessary for managing, and for directing and supervising the management of, the business and affairs of the company.

(3) Subsections (1) and (2) are subject to any modifications, exceptions, or limitations contained in this Act or in the company’s constitution.

129 Major transactions

(1) A company must not enter into a major transaction unless the transaction is—

(a) approved by special resolution; or

(b) contingent on approval by special resolution.

(2) In this section, assets includes property of any kind, whether tangible or intangible major transaction, in relation to a company, means:

(a) the acquisition of, or an agreement to acquire, whether contingent or not, assets the value of which is more than half the value of the company’s assets before the acquisition; or

(b) the disposition of, or an agreement to dispose of, whether contingent or not, assets of the company the value of which is more than half the value of the company’s assets before the disposition; or

(c) a transaction that has or is likely to have the effect of the company acquiring rights or interests or incurring obligations or liabilities, including contingent liabilities, the value of which is more than half the value of the company’s assets before the transaction.

(2A) Nothing in paragraph (b) or paragraph (c) of the definition of the term major transaction in subsection (2) applies by reason only of the company giving, or entering into an agreement to give, a charge secured over assets of the company the value of which is more than half the value of the company’s assets for the purpose of securing the repayment of money or the performance of an obligation.

(2B) In assessing the value of any contingent liability for the purposes of paragraph (c) of the definition of major transaction in subsection (2), the directors—

(a) must have regard to all circumstances that the directors know, or ought to know, affect, or may affect, the value of the contingent liability; and

(b) may rely on estimates of the contingent liability that are reasonable in the circumstances; and

i. the likelihood of the contingency occurring; and

ii. any claim the company is entitled to make and can reasonably expect to be met to reduce or extinguish the contingent liability.

(3) Nothing in this section applies to a major transaction entered into by a receiver appointed pursuant to an instrument creating a charge over all or substantially all of the property of a company.

230 Delegation of powers

(1) Subject to any restrictions in the constitution of the company, the board of a company may delegate to a committee of directors, a director or employee of the company, or any other person, any 1 or more of its powers other than its powers under any of the sections of this Act set out in Schedule 2.

(2) A board that delegates a power under subsection (1) is responsible for the exercise of the power by the delegate as if the power had been exercised by the board, unless the board—

(a) believed on reasonable grounds at all times before the exercise of the power that the delegate would exercise the power in conformity with the duties imposed on directors of the company by this Act and the company’s constitution; and

(b) has monitored, by means of reasonable methods properly used, the exercise of the power by the delegate.

Directors’ duties

131 Duty of directors to act in good faith and in best interests of company

(1) Subject to this section, a director of a company, when exercising powers or performing duties, must act in good faith and in what the director believes to be the best interests of the company.

(2) A director of a company that is a wholly-owned subsidiary may, when exercising powers or performing duties as a director, if expressly permitted to do so by the constitution of the company, act in a manner which he or she believes is in the best interests of that company’s holding company even though it may not be in the best interests of the company.

(3) A director of a company that is a subsidiary (but not a wholly-owned subsidiary) may, when exercising powers or performing duties as a director, if expressly permitted to do so by the constitution of the company and with the prior agreement of the shareholders (other than its holding company), act in a manner which he or she believes is in the best interests of that company’s holding company even though it may not be in the best interests of the company.

(4) A director of a company that is carrying out a joint venture between the shareholders may, when exercising powers or performing duties as a director in connection with the carrying out of the joint venture, if expressly permitted to do so by the constitution of the company, act in a manner which he or she believes is in the best interests of a shareholder or shareholders, even though it may not be in the best interests of the company.

132 Exercise of powers in relation to employees

(1) Nothing in section 131 limits the power of a director to make provision for the benefit of employees of the company in connection with the company ceasing to carry on the whole or part of its business.

(2) In subsection (1), company includes a subsidiary of a company employees includes former employees and the dependants of employees or former employees; but does not include an employee or former employee who is or was a director of the company.

133 Powers to be exercised for proper purpose

A director must exercise a power for a proper purpose.

143 Directors to comply with Act and constitution

A director of a company must not act, or agree to the company acting, in a manner that contravenes this Act or the constitution of the company.

135 Reckless trading

A director of a company must not—

(a) agree to the business of the company being carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors; or

(b) cause or allow the business of the company to be carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors.

136 Duty in relation to obligations

A director of a company must not agree to the company incurring an obligation unless the director believes at that time on reasonable grounds that the company will be able to perform the obligation when it is required to do so.

137 Director’s duty of care

A director of a company, when exercising powers or performing duties as a director, must exercise the care, diligence, and skill that a reasonable director would exercise in the same circumstances taking into account, but without limitation,—

(a) the nature of the company; and

(b) the nature of the decision; and

138 Use of information and advice

(1) Subject to subsection (2), a director of a company, when exercising powers or performing duties as a director, may rely on reports, statements, and financial data and other information prepared or supplied, and on professional or expert advice given, by any of the following persons:

(a) an employee of the company whom the director believes on reasonable grounds to be reliable and competent in relation to the matters concerned:

(b) a professional adviser or expert in relation to matters which the director believes on reasonable grounds to be within the person’s professional or expert competence:

(c) any other director or committee of directors upon which the director did not serve in relation to matters within the director’s or committee’s designated authority.

(2) Subsection (1) applies to a director only if the director—

(a) acts in good faith; and

(b) makes proper inquiry where the need for inquiry is indicated by the circumstances; and

138. Offence for serious breach of director’s duty to act in good faith and in best interests of company

(1) A director of a company commits an offence if the director exercises powers or performs duties as a director of the company—

(a) in bad faith towards the company and believing that the conduct is not in the best interests of the company; and

(b) knowing that the conduct will cause serious loss to the company.

(2) However, a director does not commit an offence under subsection (1) if the power or duty in question is exercised or performed under any of section 131(2) to (4) or is a power exercised under section 132.

(3) A person who commits an offence under this section is liable on conviction to the penalties set out in section 373(4).

Transactions involving self-interest

139 Meaning of interested

(1) Subject to subsection (2), for the purposes of this Act, a director of a company is interested in a transaction to which the company is a party if, and only if, the director—

(a) is a party to, or will or may derive a material financial benefit from, the transaction; or

(b) has a material financial interest in another party to the transaction; or

(c) is a director, officer, or trustee of another party to, or person who will or may derive a material financial benefit from, the transaction, not being a party or person that is—

i. the company’s holding company being a holding company of which the company is a wholly-owned subsidiary; or

ii. a wholly-owned subsidiary of the company; or

iii. a wholly-owned subsidiary of a holding company of which the company is also a wholly-owned subsidiary; or

(d) is the parent, child, spouse, civil union partner, or de facto partner of another party to, or person who will or may derive a material financial benefit from, the transaction; or

(e) is otherwise directly or indirectly materially interested in the transaction.

(2) For the purposes of this Act, a director of a company is not interested in a transaction to which the company is a party if the transaction comprises only the giving by the company of security to a third party which has no connection with the director, at the request of the third party, in respect of a debt or obligation of the company for which the director or another person has personally assumed responsibility in whole or in part under a guarantee, indemnity, or by the deposit of a security.

140 Disclosure of interest**

(1) A director of a company must, forthwith after becoming aware of the fact that he or she is interested in a transaction or proposed transaction with the company, cause to be entered in the interests register, and, if the company has more than 1 director, disclose to the board of the company—

(a) if the monetary value of the director’s interest is able to be quantified, the nature and monetary value of that interest; or

(b) if the monetary value of the director’s interest cannot be quantified, the nature and extent of that interest.

(1A) A director of a company is not required to comply with subsection (1) if—

(a) the transaction or proposed transaction is between the director and the company; and

(b) the transaction or proposed transaction is or is to be entered into in the ordinary course of the company’s business and on usual terms and conditions.

(2) For the purposes of subsection (1), a general notice entered in the interests register and, if the company has more than 1 director, disclosed to the board to the effect that a director is a shareholder, director, officer or trustee of another named company or other person and is to be regarded as interested in any transaction which may, after the date of the entry or disclosure, be entered into with that company or person, is a sufficient disclosure of interest in relation to that transaction.

(3) A failure by a director to comply with subsection (1) does not affect the validity of a transaction entered into by the company or the director.

(4) Every director who fails to comply with subsection (1) commits an offence and is liable on conviction to the penalty set out in section 373(2).

141 Avoidance of transactions

(1) A transaction entered into by the company in which a director of the company is interested may be avoided by the company at any time before the expiration of 3 months after the transaction is disclosed to all the shareholders (whether by means of the company’s annual report or otherwise).

(2) A transaction cannot be avoided if the company receives fair value under it.

(3) For the purposes of subsection (2), the question whether a company receives fair value under a transaction is to be determined on the basis of the information known to the company and to the interested director at the time the transaction is entered into.

(4) If a transaction is entered into by the company in the ordinary course of its business and on usual terms and conditions, the company is presumed to receive fair value under the transaction.

(5) For the purposes of this section,—

(a) a person seeking to uphold a transaction and who knew or ought to have known of the director’s interest at the time the transaction was entered into has the onus of establishing fair value; and

(b) in any other case, the company has the onus of establishing that it did not receive fair value.

(6) A transaction in which a director is interested can only be avoided on the ground of the director’s interest in accordance with this section or the company’s constitution.

142 Effect on third parties

The avoidance of a transaction under section 141 does not affect the title or interest of a person in or to property which that person has acquired if the property was acquired—

(a) from a person other than the company; and

(b) for valuable consideration; and

(c) without knowledge of the circumstances of the transaction under which the person referred to in paragraph (a) acquired the property from the company.

143 Application of sections 140 and 141 in certain cases

Nothing in section 140 and section 141 applies in relation to—

(a) remuneration or any other benefit given to a director in accordance with section 161; or

(b) an indemnity given or insurance provided in accordance with section 162.

144 Interested director may vote

Subject to the constitution of the company, a director of a company who is interested in a transaction entered into, or to be entered into, by the company, may—

(a) vote on a matter relating to the transaction; and

(b) attend a meeting of directors at which a matter relating to the transaction arises and be included among the directors present at the meeting for the purpose of a quorum; and

(d) do any other thing in his or her capacity as a director in relation to the transaction— as if the director were not interested in the transaction.

145 Use of company information

(1) A director of a company who has information in his or her capacity as a director or employee of the company, being information that would not otherwise be available to him or her, must not disclose that information to any person, or make use of or act on the information, except—

(a) for the purposes of the company; or

(b) as required by law; or

(d) in complying with section 140.

(2) A director of a company may, unless prohibited by the board, disclose information to—

(a) a person whose interests the director represents; or

(b) a person in accordance with whose directions or instructions the director may be required or is accustomed to act in relation to the director’s powers and duties and, if the director discloses the information, the name of the person to whom it is disclosed must be entered in the interests register.

**(3)**A director of a company may disclose, make use of, or act on the information if—

(a) particulars of the disclosure, use, or the act in question are entered in the interests register; and

(b) the director is first authorized to do so by the board; and

146 Meaning of relevant interest

(1) For the purposes of section 148, a director of a company has a relevant interest in a share issued by a company (whether or not the director is registered in the share register as the holder of it) if the director—

(a) is a beneficial owner of the share; or

(b) has the power to exercise any right to vote attached to the share; or

(d) has the power to acquire or dispose of the share; or

(e) has the power to control the acquisition or disposition of the share by another person; or

(f) under, or by virtue of, any trust, agreement, arrangement or understanding relating to the share (whether or not that person is a party to it)—

i. may at any time have the power to exercise any right to vote attached to the share; or

ii. may at any time have the power to control the exercise of any right to vote attached to the share; or

iii. may at any time have the power to acquire or dispose of, the share; or

iv. may at any time have the power to control the acquisition or disposition of the share by another person.

(2) Where a person would, if that person were a director of the company, have a relevant interest in a share by virtue of subsection (1) and—

(a) that person or its directors are accustomed or under an obligation, whether legally enforceable or not, to act in accordance with the directions, instructions, or wishes of a director of the company in relation to—

i. the exercise of the right to vote attached to the share; or

ii. the control of the exercise of any right to vote attached to the share; or

iii. the acquisition or disposition of the share; or

iv. the exercise of the power to control the acquisition or disposition of the share by another person; or

(b) a director of the company has the power to exercise the right to vote attached to 20% or more of the shares of that person; or

(c) a director of the company has the power to control the exercise of the right to vote attached to 20% or more of the shares of that person; or

(d) a director of the company has the power to acquire or dispose of 20% or more of the shares of that person; or

(e) a director of the company has the power to control the acquisition or disposition of 20% or more of the shares of that person, that director has a relevant interest in the share.

(3) A person who has, or may have, a power referred to in any of paragraphs (b) to (f) of subsection (1), has a relevant interest in a share regardless of whether the power—

(a) is expressed or implied:

(b) is direct or indirect:

(d) is related to a particular share or not:

(e) is subject to restraint or restriction or is capable of being made subject to restraint or restriction:

(f) is exercisable presently or in the future:

(g) is exercisable only on the fulfilment of a condition:

(h) is exercisable alone or jointly with another person or persons.

(4) A power referred to in subsection (1) exercisable jointly with another person or persons is deemed to be exercisable by either or any of those persons.

(5) A reference to a power includes a reference to a power that arises from, or is capable of being exercised as the result of, a breach of any trust, agreement, arrangement, or understanding, or any of them, whether or not it is legally enforceable.

147 Relevant interests to be disregarded in certain cases

(1) For the purposes of section 148, no account shall be taken of a relevant interest of a person in a share if—

(a) the ordinary business of the person who has the relevant interest consists of, or includes, the lending of money or the provision of financial services, or both, and that person has the relevant interest only as security given for the purposes of a transaction entered into in the ordinary course of the business of that person; or

(b) that person is authorised to undertake trading activities on a licensed market and has the relevant interest by reason only of acting for another person to acquire or dispose of that share on behalf of the other person in the ordinary course of business of carrying out those trading activities; or

(c) that person has the relevant interest solely by reason of being appointed as a proxy to vote at a particular meeting of members, or of a class of members, of the company and the instrument of that person’s appointment is produced before the start of the meeting in accordance with clause 6(4) of Schedule 1 or by a time specified in the company’s constitution, as the case may be; or

(d) that person—

i. is a trustee corporation or a nominee company; and

ii. has the relevant interest by reason only of acting for another person in the ordinary course of business of that trustee corporation or nominee company; or

(e) the person has the relevant interest by reason only that the person is a bare trustee of a trust to which the share is subject.

(2) For the purposes of subsection (1)(e), a trustee may be a bare trustee notwithstanding that he or she is entitled as a trustee to be remunerated out of the income or property of the trust.

148 Disclosure of share dealing by directors

(1) A director of a company that has become registered under this Act in accordance with the Companies Reregistration Act 1993 and who has a relevant interest in any shares issued by the company must, forthwith after the reregistration of the company,—

(a) disclose to the board the number and class of shares in which the relevant interest is held and the nature of the relevant interest; and

(b) ensure that the particulars disclosed to the board under paragraph (a) are entered in the interests register.

(2) A director of a company who acquires or disposes of a relevant interest in shares issued by the company must, forthwith after the acquisition or disposition,—

(a) disclose to the board—

i. the number and class of shares in which the relevant interest has been acquired or the number and class of shares in which the relevant interest was disposed of, as the case may be; and

ii. the nature of the relevant interest; and

iii. the consideration paid or received; and

iv. the date of the acquisition or disposition; and

(b) ensure that the particulars disclosed to the board under paragraph (a) are entered in the interests register.

149 Restrictions on share dealing by directors

(1) If a director of a company has information in his or her capacity as a director or employee of the company or a related company, being information that would not otherwise be available to him or her, but which is information material to an assessment of the value of shares or other financial products issued by the company or a related company, the director may acquire or dispose of those shares or financial products only if,—

(a) in the case of an acquisition, the consideration given for the acquisition is not less than the fair value of the shares or financial products; or

(b) in the case of a disposition, the consideration received for the disposition is not more than the fair value of the shares or financial products.

(2) For the purposes of subsection (1), the fair value of shares or financial products is to be determined on the basis of all information known to the director or publicly available at the time.

(3) Subsection (1) does not apply in relation to a share or financial product that is acquired or disposed of by a director only as a nominee for the company or a related company.

(4) Where a director acquires shares or financial products in contravention of subsection (1)(a), the director is liable to the person from whom the shares or financial products were acquired for the amount by which the fair value of the shares or financial products exceeds the amount paid by the director.

(5) Where a director disposes of shares or financial products in contravention of subsection (1)(b), the director is liable to the person to whom the shares or financial products were disposed of for the amount by which the consideration received by the director exceeds the fair value of the shares or financial products.

(6) Nothing in this section applies to financial products that are quoted on a licensed market.

Appointment and removal of directors

150 Number of directors

A company must have 1 or more directors (see section 10(d)).

151 Qualifications of directors

(1) A natural person who is not disqualified by subsection (2) may be appointed as a director of a company.

(2) The following persons are disqualified from being appointed or holding office as a director of a company:

(a) a person who is under 18 years of age:

(b) a person who is an undischarged bankrupt:

(ba) [Repealed]

(d) [Repealed]

(e) a person who is prohibited from being a director or promoter of or being concerned or taking part in the management of a company under section 382, 383, 385, or 385AA:

(eaa) a person who is prohibited from being a general partner or promoter of, or being concerned or taking part in the management of, a limited partnership under section 103A, 103B, 103D, or 103E of the Limited Partnerships Act 2008:

(ea) a person who is prohibited from being a director or promoter of, or being concerned or taking part in the management of, an incorporated or unincorporated body under the Financial Markets Conduct Act 2013 or the Takeovers Act 1993:

(eab) in the case of a company that is an employer, a person who is prohibited from being an officer of an employer under sections 142M and 142N(1)(b) of the Employment Relations Act 2000:

(eb) a person who is prohibited from 1 or more of the following under an order made, or a notice given, under a law of a prescribed country, State, or territory outside New Zealand:

i. being a director of an overseas company:

ii. being a promoter of an overseas company:

iii. being concerned or taking part in the management of an overseas company:

(ec) a person who is prohibited from 1 or more of the following under an order made, or a notice given, under a law of a prescribed country, State, or territory outside New Zealand:

i. being a general partner of an overseas limited partnership:

ii. being a promoter of an overseas limited partnership:

iii. being concerned or taking part in the management of an overseas limited partnership:

(f) a person who is subject to a property order made under section 30 or section 31 of the Protection of Personal and Property Rights Act 1988:

(g) in relation to any particular company, a person who does not comply with any qualifications for directors contained in the constitution of that company.

(3) A person that is not a natural person cannot be a director of a company.

(4) A person who is disqualified from being a director but who acts as a director is a director for the purposes of a provision of this Act that imposes a duty or an obligation on a director of a company.

152 Director’s consent required

A person must not be appointed a director of a company unless he or she has consented in writing to be a director and certified that he or she is not disqualified from being appointed or holding office as a director of a company.

Appointment of first and subsequent directors

(1) A person named as a director in an application for registration or in an amalgamation proposal holds office as a director from the date of registration or the date the amalgamation proposal is effective, as the case may be, until that person ceases to hold office as a director in accordance with this Act.

(2) All subsequent directors of a company must, unless the constitution of the company otherwise provides, be appointed by ordinary resolution.

154 Court may appoint directors

(1) If—

(a) there are no directors of a company, or the number of directors is less than the quorum required for a meeting of the board; and

(b) it is not possible or practicable to appoint directors in accordance with the company’s constitution,— a shareholder or creditor of the company may apply to the court to appoint 1 or more persons as directors of the company, and the court may make an appointment if it considers that it is in the interests of the company to do so.

(2) An appointment may be made on such terms and conditions as the court thinks fit.

155 Appointment of directors to be voted on individually

(1) Subject to the constitution of the company, the shareholders of a company may vote on a resolution to appoint a director of the company only if—

(a) the resolution is for the appointment of 1 director; or

(b) the resolution is a single resolution for the appointment of 2 or more persons as directors of the company and a separate resolution that it be so voted on has first been passed without a vote being cast against it.

(2) A resolution moved in contravention of subsection (1) is void even though the moving of it was not objected to at the time.

(3) Subsection (2) does not limit the operation of section 158.

(4) No provision for the automatic reappointment of retiring directors in default of another appointment applies on the passing of a resolution in contravention of subsection (1).

(5) Nothing in this section prevents the election of 2 or more directors by ballot or poll.

156 Removal of directors

(1) Subject to the constitution of a company, a director of the company may be removed from office by ordinary resolution passed at a meeting called for the purpose or for purposes that include the removal of the director.

(2) The notice of meeting must state that the purpose or a purpose of the meeting is the removal of the director.

157 Director ceasing to hold office

(1) The office of director of a company is vacated if the person holding that office—

(a) resigns in accordance with subsection (2); or

(b) is removed from office in accordance with this Act or the constitution of the company; or

(d) dies; or

(e) otherwise vacates office in accordance with the constitution of the company.

(2) A director of a company may resign office by signing a written notice of resignation and delivering it to the address for service of the company. The notice is effective when it is received at that address or at a later time specified in the notice.

(3) Notwithstanding the vacation of office, a person who held office as a director remains liable under the provisions of this Act that impose liabilities on directors in relation to acts and omissions and decisions made while that person was a director.

158 Validity of director’s acts

The acts of a person as a director are valid even though—

(a) the person’s appointment was defective; or

(b) the person is not qualified for appointment.

159 Notice of change of directors

(1) The board of a company must ensure that notice in the prescribed form of—

(a) a change in the directors of a company, whether as the result of a director ceasing to hold office or the appointment of a new director, or both; or

(b) a change in the name or the residential address of a director of a company is delivered to the Registrar for registration.

(2) A notice under subsection (1) must—

(a) specify the date of the change; and

(b) include, in relation to every person who is a director of the company from the date of the notice, the information required by section 12(2)(b)(i) to (iii); and

(c) in the case of the appointment of a new director, have attached the form of consent and certificate required pursuant to section 152; and

(d) be delivered to the Registrar within 20 working days of—

i. the change occurring, in the case of the appointment or resignation of a director; or

ii. the company first becoming aware of the change, in the case of the death of a director or a change in the name or residential address of a director.

(3) If the board of a company fails to comply with this section, every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

Miscellaneous provisions relating to directors

160 Proceedings of board

Subject to the constitution of a company, the provisions set out in Schedule 3 govern the proceedings of the board of a company.

161 Remuneration and other benefits

(1) The board of a company may, subject to any restrictions contained in the constitution of the company, authorise—

(a) the payment of remuneration or the provision of other benefits by the company to a director for services as a director or in any other capacity:

(b) the payment by the company to a director or former director of compensation for loss of office:

(d) the giving of guarantees by the company for debts incurred by a director:

(e) the entering into of a contract to do any of the things set out in paragraphs (a), (b), (c), and (d),— if the board is satisfied that to do so is fair to the company.

(2) The board must ensure that forthwith after authorizing the making of the payment or the provision of the benefit or the making of the loan or the giving of the guarantee or the entering into of the contract, as the case may be, particulars of the payment or benefit or loan or guarantee or contract are entered in the interests register.

(3) The payment of remuneration or the giving of any other benefit to a director in accordance with a contract authorized under subsection (1) need not be separately authorized under that subsection.

(4) Directors who vote in favour of authorising a payment, benefit, loan, guarantee, or contract under subsection (1) must sign a certificate stating that, in their opinion, the making of the payment or the provision of the benefit, or the making of the loan, or the giving of the guarantee, or the entering into of the contract is fair to the company, and the grounds for that opinion.

(5) Where a payment is made or other benefit provided or a guarantee is given to which subsection (1) applies and either—

(a) the provisions of subsections (1) and (4) have not been complied with; or

(b) reasonable grounds did not exist for the opinion set out in the certificate given under subsection (4),— the director or former director to whom the payment is made or the benefit is provided, or in respect of whom the guarantee is given, as the case may be, is personally liable to the company for the amount of the payment, or the monetary value of the benefit, or any amount paid by the company under the guarantee, except to the extent to which he or she proves that the payment or benefit or guarantee was fair to the company at the time it was made, provided, or given.

(6) Where a loan is made to which subsection (1) applies and either—

(a) the provisions of subsections (1) and (4) have not been complied with; or

(b) reasonable grounds did not exist for the opinion set out in the certificate given under subsection (4),— the loan becomes immediately repayable to the company by the director, notwithstanding the terms of any agreement relating to the giving of the loan, except to the extent to which he or she proves that the loan was fair to the company at the time it was given.

162 Indemnity and insurance

(1) Except as provided in this section, a company must not indemnify, or directly or indirectly effect insurance for, a director or employee of the company or a related company in respect of—

(a) liability for any act or omission in his or her capacity as a director or employee; or

(b) costs incurred by that director or employee in defending or settling any claim or proceeding relating to any such liability.

(2) An indemnity given in breach of this section is void.

(3) A company may, if expressly authorised by its constitution, indemnify a director or employee of the company or a related company for any costs incurred by him or her in any proceeding—

(a) that relates to liability for any act or omission in his or her capacity as a director or employee; and

(b) in which judgment is given in his or her favour, or in which he or she is acquitted, or which is discontinued.

(4) A company may, if expressly authorised by its constitution, indemnify a director or employee of the company or a related company in respect of—

(a) liability to any person other than the company or a related company for any act or omission in his or her capacity as a director or employee; or

(b) costs incurred by that director or employee in defending or settling any claim or proceeding relating to any such liability, not being criminal liability or liability in respect of a breach, in the case of a director, of the duty specified in section 131 or, in the case of an employee, of any fiduciary duty owed to the company or related company.

(5) A company may, if expressly authorised by its constitution and with the prior approval of the board, effect insurance for a director or employee of the company or a related company in respect of—

(a) liability, not being criminal liability, for any act or omission in his or her capacity as a director or employee; or

(b) costs incurred by that director or employee in defending or settling any claim or proceeding relating to any such liability; or

i. that have been brought against the director or employee in relation to any act or omission in his or her capacity as a director or employee; and

ii. in which he or she is acquitted.

(6) The directors who vote in favour of authorising the effecting of insurance under subsection (5) must sign a certificate stating that, in their opinion, the cost of effecting the insurance is fair to the company.

(7) The board of a company must ensure that particulars of any indemnity given to, or insurance effected for, any director or employee of the company or a related company are forthwith entered in the interests register.

(8) Where insurance is effected for a director or employee of a company or a related company and—

(a) the provisions of either subsection (5) or subsection (6) have not been complied with; or

(b) reasonable grounds did not exist for the opinion set out in the certificate given under subsection (6),— the director or employee is personally liable to the company for the cost of effecting the insurance except to the extent that he or she proves that it was fair to the company at the time the insurance was effected.

(9) In this section, director includes a former director effect insurance includes pay, whether directly or indirectly, the costs of the insurance employee includes a former employee indemnify includes relieve or excuse from liability, whether before or after the liability arises; and indemnity has a corresponding meaning.

Part 9

*Enforcement

163 Interpretation

In this Part, unless the context otherwise requires, the terms entitled person, former shareholder, and shareholder include a reference to a personal representative of an entitled person, former shareholder, or shareholder and a person to whom shares of any of those persons have passed by operation of law.

164 Injunctions

(1) The court may, on an application under this section, make an order restraining a company that, or a director of a company who, proposes to engage in conduct that would contravene the constitution of the company or this Act from engaging in that conduct.

(2) An application may be made by—

(a) the company; or

(b) a director or shareholder of the company; or

(3) If the court makes an order under subsection (1), it may also grant such consequential relief as it thinks fit.

(4) An order may not be made under this section in relation to conduct or a course of conduct that has been completed.

**(5)**The court may, at any time before the final determination of an application under subsection (1), make, as an interim order, any order that it is empowered to make under that subsection.

166 Derivative actions

(1) Subject to subsection (3), the court may, on the application of a shareholder or director of a company, grant leave to that shareholder or director to—

(a) bring proceedings in the name and on behalf of the company or any related company; or

(b) intervene in proceedings to which the company or any related company is a party for the purpose of continuing, defending, or discontinuing the proceedings on behalf of the company or related company, as the case may be.

(2) Without limiting subsection (1), in determining whether to grant leave under that subsection, the court shall have regard to—

(a) the likelihood of the proceedings succeeding:

(b) the costs of the proceedings in relation to the relief likely to be obtained:

(d) the interests of the company or related company in the proceedings being commenced, continued, defended, or discontinued, as the case may be.

(3) Leave to bring proceedings or intervene in proceedings may be granted under subsection (1), only if the court is satisfied that either—

(a) the company or related company does not intend to bring, diligently continue or defend, or discontinue the proceedings, as the case may be; or

(b) it is in the interests of the company or related company that the conduct of the proceedings should not be left to the directors or to the determination of the shareholders as a whole.

(4) Notice of the application must be served on the company or related company.

(5) The company or related company—

(a) may appear and be heard; and

(b) must inform the court, whether or not it intends to bring, continue, defend, or discontinue the proceedings, as the case may be.

(6) Except as provided in this section, a shareholder is not entitled to bring or intervene in any proceedings in the name of, or on behalf of, a company or a related company.

166 Costs of derivative action to be met by company

The court shall, on the application of the shareholder or director to whom leave was granted under section 165 to bring or intervene in the proceedings, order that the whole or part of the reasonable costs of bringing or intervening in the proceedings, including any costs relating to any settlement, compromise, or discontinuance approved under section 168, must be met by the company unless the court considers that it would be unjust or inequitable for the company to bear those costs.

167 Powers of court where leave granted

The court may, at any time, make any order it thinks fit in relation to proceedings brought by a shareholder or a director or in which a shareholder or director intervenes, as the case may be, with leave of the court under section 165, and without limiting the generality of this section may—

(a) make an order authorising the shareholder or any other person to control the conduct of the proceedings:

(b) give directions for the conduct of the proceedings:

(c) make an order requiring the company or the directors to provide information or assistance in relation to the proceedings:

(d) make an order directing that any amount ordered to be paid by a defendant in the proceedings must be paid, in whole or part, to former and present shareholders of the company or related company instead of to the company or the related company.

168 Compromise, settlement, or withdrawal of derivative action

No proceedings brought by a shareholder or a director or in which a shareholder or a director intervenes, as the case may be, with leave of the court under section 165, may be settled or compromised or discontinued without the approval of the court.

Personal actions by shareholders

169 Personal actions by shareholders against directors

*(1) A shareholder or former shareholder may bring an action against a director for breach of a duty owed to him or her as a shareholder.

(2) An action may not be brought under subsection (1) to recover any loss in the form of a reduction in the value of shares in the company or a failure of the shares to increase in value by reason only of a loss suffered, or a gain forgone, by the company.

(3) Without limiting subsection (1), the duties of directors set out in—

(a) section 90 (which relates to the duty to supervise the share register); and

(b) section 140 (which relates to the duty to disclose interests); and

(c) section 148 (which relates to the duty to disclose share dealings) are duties owed to shareholders, while the duties of directors set out in—

(d) section 131 (which relates to the duty of directors to act in good faith and in the best interests of the company); and

(e) section 133 (which relates to the duty to exercise powers for a proper purpose); and

(f) section 135 (which relates to reckless trading); and

(g) section 136 (which relates to the duty not to agree to a company incurring certain obligations); and

(h) section 137 (which relates to a director’s duty of care); and

(i) section 145 (which relates to the use of company information) are duties owed to the company and not to shareholders.

170 Actions by shareholders to require directors to act

Notwithstanding section 169, the court may, on the application of a shareholder of a company, if it is satisfied it is just and equitable to do so, make an order requiring a director of the company to take any action that is required to be taken by the directors under the constitution of the company or this Act and, on making the order, the court may grant such other consequential relief as it thinks fit.

171 Personal actions by shareholders against company A shareholder of a company may bring an action against the company for breach of a duty owed by the company to him or her as a shareholder.

172 Actions by shareholders to require company to act

Notwithstanding section 171, the court may, on the application of a shareholder of a company, if it is satisfied that it is just and equitable to do so, make an order requiring the board of the company to take any action that is required to be taken by the constitution of the company or this Act and, on making the order, the court may grant such other consequential relief as it thinks fit.

173 Representative actions

Where a shareholder of a company brings proceedings against the company or a director, and other shareholders have the same or substantially the same interest in relation to the subject matter of the proceedings, the court may appoint that shareholder to represent all or some of the shareholders having the same or substantially the same interest, and may, for that purpose, make such order as it thinks fit including, without limiting the generality of this section, an order—

(a) as to the control and conduct of the proceedings:

(b) as to the costs of the proceedings:

(c) directing the distribution of any amount ordered to be paid by a defendant in the proceedings among the shareholders represented.

174 Prejudiced shareholders

(1) A shareholder or former shareholder of a company, or any other entitled person, who considers that the affairs of a company have been, or are being, or are likely to be, conducted in a manner that is, or any act or acts of the company have been, or are, or are likely to be, oppressive, unfairly discriminatory, or unfairly prejudicial to him or her in that capacity or in any other capacity, may apply to the court for an order under this section.

(2) If, on an application under this section, the court considers that it is just and equitable to do so, it may make such order as it thinks fit including, without limiting the generality of this subsection, an order—

(a) requiring the company or any other person to acquire the shareholder’s shares; or

(b) requiring the company or any other person to pay compensation to a person; or

(d) altering or adding to the company’s constitution; or

(e) appointing a receiver of the company; or

(f) directing the rectification of the records of the company; or

(g) putting the company into liquidation; or

(h) setting aside action taken by the company or the board in breach of this Act or the constitution of the company.

(3) No order may be made against the company or any other person under subsection (2) unless the company or that person is a party to the proceedings in which the application is made.

175 Certain conduct deemed prejudicial

(1) Failure to comply with any of the following sections of this Act is conduct which is unfairly prejudicial for the purposes of section 174:

(a) section 45 (which relates to pre-emptive rights to the issue of shares):

(b) section 47 (which relates to the consideration for which shares are issued):

(d) section 60 (which relates to offers by a company to acquire its own shares):

(e) section 61 (which relates to special offers to acquire shares):

(f) section 63 (which relates to stock exchange acquisitions subject to prior notice to shareholders):

(g) section 65 (which relates to stock exchange acquisitions not subject to prior notice to shareholders):

(h) section 76 (which relates to the provision of financial assistance by a company to acquire its own shares):

(i) section 78 (which relates to special financial assistance):

(j) section 80 (which relates to financial assistance not exceeding 5% of shareholders’ funds):

(k) section 117 (which relates to the alteration of shareholder rights):

(l) section 129 (which relates to major transactions).

(2) The signing by the directors of a company of a certificate required by this Act without reasonable grounds existing for an opinion set out in it is conduct that is unfairly prejudicial for the purposes of section 174.

178 Alteration to constitution

(1) Notwithstanding anything in this Act, but subject to the order, where the court makes an order under section 174 altering or adding to the constitution of a company, the constitution must not, to the extent that it has been altered or added to by the court, again be altered or added to without the leave of the court.

(2) Any alteration or addition to the constitution of a company made by an order under section 174 has the same effect as if it had been made by the shareholders of the company pursuant to section 32 and the provisions of this Act shall apply to the constitution as altered or added to.

(3) Within 10 working days of the making of an order under section 174 altering or adding to the constitution of company, the board of the company must ensure that a copy of the order and the constitution as altered or added to is delivered to the Registrar for registration.

(4) If the board of a company fails to comply with subsection (3), every director of the company commits an offence and is liable, on conviction, to the penalty set out in section 374(2).

Ratification

177 Ratification of certain actions of directors

(1) The purported exercise by a director or the board of a company of a power vested in the shareholders or any other person may be ratified or approved by those shareholders or that person in the same manner in which the power may be exercised.

(2) The purported exercise of a power that is ratified under subsection (1) is deemed to be, and always to have been, a proper and valid exercise of that power.

(3) The ratification or approval under this section of the purported exercise of a power by a director or the board does not prevent the court from exercising a power which might, apart from the ratification or approval, be exercised in relation to the action of the director or the board.

(4) Nothing in this section limits or affects any rule of law relating to the ratification or approval by the shareholders or any other person of any act or omission of a director or the board of a company.

Inspection of records

178 Information for shareholders

(1) A shareholder may at any time make a written request to a company for information held by the company.

(2) The request must specify the information sought in sufficient detail to enable it to be identified.

(3) Within 10 working days of receiving a request under subsection (1), the company must either—

(a) provide the information; or

(b)cagree to provide the information within a specified period; or

(c)cagree to provide the information within a specified period if the shareholder pays a reasonable charge to the company (which must be specified and explained) to meet the cost of providing the information; or

(d) refuse to provide the information specifying the reasons for the refusal.

(4) Without limiting the reasons for which a company may refuse to provide information under this section, a company may refuse to provide information if—

(a) the disclosure of the information would or would be likely to prejudice the commercial position of the company; or

(b) the disclosure of the information would or would be likely to prejudice the commercial position of any other person, whether or not that person supplied the information to the company; or

(5) If the company requires the shareholder to pay a charge for the information, the shareholder may withdraw the request, and is deemed to have done so unless, within 10 working days of receiving notification of the charge, the shareholder informs the company—

(a) that the shareholder will pay the charge; or

(b) that the shareholder considers the charge to be unreasonable.

(6) The court may, on the application of a person who has made a request for information, if it is satisfied that—

(a) the period specified for providing the information is unreasonable; or

(b) the charge set by the company is unreasonable,— as the case may be, make an order requiring the company to supply the information within such time or on payment of such charge as the court thinks fit.

(7) The court may, on the application of a person who has made a request for information, if it is satisfied that—

(a) the company does not have sufficient reason to refuse to supply the information; or

(b) the company has sufficient reason to refuse to supply the information but that other reasons exist that outweigh the refusal, make an order requiring the company to supply the information.

(8) Where the court makes an order under subsection (7), it may specify the use that may be made of the information and the persons to whom it may be disclosed.

(9) On an application for an order under this section, the court may make such order for the payment of costs as it thinks fit.

179 Investigation of records

(1) The court may, on the application of a shareholder or creditor of a company, make an order authorising a person named in the order at a time specified in the order, to inspect and to make copies of, or take extracts from, the records or other documents of the company, or such of the records or documents of the company as are specified in the order, and may make such ancillary order as it thinks fit, including an order that the accounts of the company be audited by that person.

(2) The court may make an order under subsection (1) only if it is satisfied that—

(a) in making the application, the shareholder or creditor is acting in good faith and that the inspection is proposed to be made for a proper purpose; and

(b) the person to be appointed is a proper person for the task.

(3) A person appointed by the court under subsection (1) must diligently carry out the inspection and, having done so, must make a full report to the court.

(4) On receiving the report of an inspector, the court may make such order in relation to the disclosure and use that may be made of records and information obtained as it thinks fit.

(5) An order made under subsection (4) may be varied from time to time.

(6) The reasonable costs of the inspection must be met by the company unless the court orders otherwise.

(7) A person may only disclose or make use of information or records obtained under this section in accordance with an order made under subsection (4) or subsection (5).

(8) A person who discloses or makes use of information or records obtained under this section other than in accordance with an order made under subsection (4) or subsection (5) commits an offence, and is liable on conviction to the penalty set out in section 373(2).

Part 10

Administration of companies

Authority to bind company

180 Method of contracting

(1) A contract or other enforceable obligation may be entered into by a company as follows:

(a) an obligation which, if entered into by a natural person, would, by law, be required to be by deed, may be entered into on behalf of the company in writing signed under the name of the company by—

i. 2 or more directors of the company; or

ii. if there is only 1 director, by that director whose signature must be witnessed; or

iii. if the constitution of the company so provides, a director, or other person or class of persons whose signature or signatures must be witnessed; or

iv. 1 or more attorneys appointed by the company in accordance with section 181:

(b) an obligation which, if entered into by a natural person, is, by law, required to be in writing, may be entered into on behalf of the company in writing by a person acting under the company’s express or implied authority:

(c) an obligation which, if entered into by a natural person, is not, by law, required to be in writing, may be entered into on behalf of the company in writing or orally by a person acting under the company’s express or implied authority.

(1A) A company may, in addition to complying with subsection (1), affix its common seal, if it has one, to the contract or document containing the enforceable obligation.

(2) Subsection (1) applies to a contract or other obligation—

(a) whether or not that contract or obligation was entered into in New Zealand; and

(b) whether or not the law governing the contract or obligation is the law of New Zealand. Section 180(1A): replaced, on 30 June 1997, by section 14 of the Companies Act 1993 Amendment Act 1997 (1997 No 27).

181 Attorneys

(1) Subject to its constitution, a company may, by an instrument in writing executed in accordance with section 180(1)(a), appoint a person as its attorney either generally or in relation to a specified matter.

(2) An act of the attorney in accordance with the instrument binds the company.

(3) Sections 19 to 21 of the Property Law Act 2007 apply, with all necessary modifications, in relation to a power of attorney executed by a company, to the same extent as if the company was a natural person and as if the commencement of the liquidation or, if there is no liquidation, the removal from the register kept for the purposes of this Act of the company was an event revoking the power of attorney within the meaning of those sections.

182 Pre-incorporation contracts may be ratified

(1) In this section and in sections 183 to 185, the term pre-incorporation contract means—

(a) a contract purporting to be made by a company before its incorporation; or

(b) a contract made by a person on behalf of a company before and in contemplation of its incorporation.

(2) Notwithstanding any enactment or rule of law, a pre-incorporation contract may be ratified within such period as may be specified in the contract, or if no period is specified, then within a reasonable time after the incorporation of the company in the name of which, or on behalf of which, it has been made.

(3) A contract that is ratified is as valid and enforceable as if the company had been a party to the contract when it was made.

(4) A pre-incorporation contract may be ratified by a company in the same manner as a contract may be entered into on behalf of a company under section 180.

(5) Notwithstanding the Contracts (Privity) Act 1982, if a pre-incorporation contract has not been ratified by a company, or validated by the court under section 184, the company may not enforce it or take the benefit of it.

183 Warranties implied in pre-incorporation contracts

(1) Notwithstanding any enactment or rule of law, in a pre-incorporation contract, unless a contrary intention is expressed in the contract, there is an implied warranty by the person who purports to make the contract in the name of, or on behalf of, the company—

(a) that the company will be incorporated within such period as may be specified in the contract, or if no period is specified, then within a reasonable time after the making of the contract; and

(b) that the company will ratify the contract within such period as may be specified in the contract, or if no period is specified, then within a reasonable time after the incorporation of the company.

(2) The amount of damages recoverable in an action for breach of a warranty implied by subsection (1) is the same as the amount of damages that would be recoverable in an action against the company for damages for breach by the company of the unperformed obligations under the contract if the contract had been ratified and cancelled.

(3) If, after its incorporation, a company enters into a contract in the same terms as, or in substitution for, a pre-incorporation contract (not being a contract ratified by the company under section 182 ), the liability of a person under subsection (1) (including any liability under an order made by the court for the payment of damages) is discharged.

184 Failure to ratify

(1) A party to a pre-incorporation contract that has not been ratified by the company after its incorporation may apply to the court for an order—

(a) directing the company to return property, whether real or personal, acquired under the contract to that party; or

(b) for any other relief in favour of that party relating to that property; or

(2) The court may, if it considers it just and equitable to do so, make any order or grant any relief it thinks fit and may do so whether or not an order has been made under section 183(2).

185 Breach of pre-incorporation contract

In proceedings against a company for breach of a pre-incorporation contract which has been ratified by the company, the court may, on the application of the company, any other party to the proceedings, or of its own motion, make such order for the payment of damages or other relief as the court considers just and equitable, in addition to or in substitution for any order which may be made against the company, against a person by whom the contract was made.

185 Jurisdiction of District Courts

(1) A District Court shall have jurisdiction to exercise any power conferred by sections 182 to 185 in any case where—

(a) the occasion for the exercise of the power arises in the course of civil proceedings properly before the court; or

(b) the amount of the claim or the value of the property or relief claimed or in issue is not more than $200,000; or

(c) the parties agree, in accordance with section 37 of the District Courts Act 1947, that a District Court shall have jurisdiction to determine the proceedings.

(2) For the purposes of section 43 of the District Courts Act 1947, an application made to a District Court under any of sections 182 to 185 shall be deemed to be a proceeding.

Registered office

186 Registered office

(1) A company must always have a registered office in New Zealand.

(2) Subject to section 187, the registered office of a company at a particular time is the place that is described as its registered office in the New Zealand register at that time.

(3) The description of the registered office must—

(a) state the address of the registered office; and

(b) if the registered office is at the offices of any firm of accountants, barristers and solicitors, or any other person, state—

i. that the registered office of the company is at the offices of that firm or person; and

ii. particulars of the location in any building of those offices; or

(c) if the registered office is not at the offices of any such firm or person but is located in a building occupied by persons other than the company, state particulars of its location in the building. Compare: 1955 No 63 s 115(1)

187 Change of registered office

(1) Subject to the company’s constitution and to subsection (3), the board of a company may change the registered office of the company at any time.

(2) Notice in the prescribed form of the change must be given to the Registrar for registration.

(3) The change in the registered office takes effect on a date stated in the notice not being a date that is earlier than 5 working days after the notice is registered.

188 Requirement to change registered office

(1) Subject to this section, a company must change its registered office if it is required to do so by the Registrar.

(2) The Registrar may require a company to change its registered office by notice in writing delivered or sent to the company at its registered office.

(3) The notice must—

(a) state that the company is required to change its registered office by a date stated in the notice, not being a date that is earlier than 20 working days after the date of the notice:

(b) state the reasons for requiring the change:

(d) be dated and signed by the Registrar.

(4) A copy of the notice must also be sent to each director of the company.

(5) The company must change its registered office—

(a) by the date stated in the notice; or

(b) if it appeals to the court and the appeal is dismissed, within 5 working days after the decision of the court.

(6) If a company fails to comply with this section, every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

Company records

189 Company records

(1) Subject to subsection (3) and to section 88 and section 195, a company must keep the following documents at its registered office:

(a) the constitution of the company:

(b) minutes of all meetings and resolutions of shareholders within the last 7 years:

(d) minutes of all meetings and resolutions of directors and directors’ committees within the last 7 years:

(e) certificates given by directors under this Act within the last 7 years:

(f) the full names and addresses of the current directors:

(g) copies of all written communications to all shareholders or all holders of the same class of shares during the last 7 years, including annual reports made under section 208:

(h) copies of all financial statements and group financial statements required to be completed by this Act or any other enactment for the last 7 completed accounting periods of the company:

(i) the accounting records required by section 194 for the current accounting period and for the last 7 completed accounting periods of the company:

(j) the share register.

(2) The references in paragraphs (b), (d), (e), and (g) of subsection (1) to 7 years and the references in paragraphs (h) and (i) of that subsection to 7 completed accounting periods include such lesser periods as the Registrar may approve by notice in writing to the company.

(3) The records referred to in paragraphs (a) to (i) of subsection (1) may be kept at a place in New Zealand, notice of which is given to the Registrar in accordance with subsection (4).

(4) If any records are not kept at the registered office of the company, or the place at which they are kept is changed, the company must ensure that within 10 working days of their first being kept elsewhere or moved, as the case may be, notice is given to the Registrar for registration of the places where the records are kept.

(5) If a company fails to comply with subsection (1) or subsection (4),—

(a) the company commits an offence and is liable on conviction to the penalty set out in section 373(2):

(b) every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

190 Form of records

(1) The records of a company must be kept—

(a) in written form; or

(b) in a form or in a manner that allows the documents and information that comprise the records to be easily accessible and convertible into written form.

(2) The board must ensure that adequate measures exist to—

(a) prevent the records being falsified; and

(b) detect any falsification of them.

(3) If the board fails to comply with subsection (2), every director commits an offence and is liable on conviction to the penalty set out in section 374(2).

191 Inspection of records by directors

(1) Subject to subsection (2), every director of a company is entitled, on giving reasonable notice, to inspect the records of the company—

(a) in written form; and

(b) without charge; and

(2) The court may, on application by the company, if it is satisfied that—

(a) it would not be in the company’s interests for a director to inspect the records; or

(b) the proposed inspection is for a purpose that is not properly connected with the director’s duties,— direct that the records need not be made available for inspection or limit the inspection of them in any manner it thinks fit.

192 Address for service

(1) A company must have an address for service in New Zealand.

(2) The address for service may be the company’s registered office or another place, but it must not be at a postal centre or document exchange.

(3) A company’s address for service at any particular time is the address that is described as its address for service in the New Zealand register at that time.

(4) The description of the address for service must state that it is at the registered office of the company, or if it is at another place, must—

(a) state the address of that place; and

(b) if the address for service is at the offices of any firm of accountants, barristers and solicitors, or any other person, state—

i. that the address for service of the company is at the offices of that firm or person; and

ii. particulars of the location in any building of those offices; or

(c) if the address for service is not at the offices of any such firm or person but is located in a building occupied by persons other than the company, state particulars of its location in the building.

193 Change of address for service

(1) Subject to the company’s constitution and to subsection (3), the board of a company may change the address for service of the company at any time.

(2) Notice in the prescribed form of the change must be given to the Registrar for registration.

(3) A change of address for service takes effect on a date stated in the notice, not being a date that is earlier than 5 working days after the notice is registered.

193A Rectification or correction of address for service

(1) This section applies if the address for service of a company is rectified or corrected under section 360A or section 360B.

(2) The rectification or correction takes effect at the time that the rectification or correction is made to the New Zealand register.

Part 11

Accounting records and financial reporting

Part 11: replaced, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

Subpart 1 —Accounting records

Subpart 1 heading: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments)

Act 2013 (2013 No 102).

194 Accounting records must be kept

(1) The board of a company must ensure that there are kept at all times accounting records that—

(a) correctly record the transactions of the company; and

(b) will enable the company to ensure that the financial statements or group financial statements of the company comply with generally accepted accounting practice (if the company is required to prepare such statements under this Act or any other enactment); and

(c) will enable the financial statements or group financial statements of the company to be readily and properly audited (if those statements are required to be audited).

(1A) For the purpose of subsection (1), the transactions of the company include any transaction that constitutes an act of the type described in section 105C(3) of the Crimes Act 1961.

(2) The board of a company must establish and maintain a satisfactory system of control of its accounting records.

(3) The accounting records must be kept—

(a) in written form in English; or

(b) in a form or manner in which they are easily accessible and convertible into written form in English.

(4) If the board of a company fails to comply with the requirements of this section, every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(3).

195 Place accounting records to be kept

(1) A company need not keep its accounting records in New Zealand.

(2) If the records are not kept in New Zealand,—

(a) the company must ensure that accounts and returns for the operations of the company that satisfy the following requirements are sent to, and kept at, a place in New Zealand:

i. the accounts and returns must enable the preparation of the company’s financial statements or group financial statements required by this Act or any other enactment; and

ii. the accounts and returns must enable the preparation of any other document required by this Act; and

(b) notice of the place where the accounting records and the accounts and returns required under paragraph (a) are kept must be given to the Registrar.

(3) If a company fails to comply with subsection (2),—

(a) the company commits an offence and is liable on conviction to the penalty set out in section 373(2):

(b) every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

Subpart 2—Financial reporting

Subpart 2 heading: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

196 Overview

(1) This subpart imposes financial reporting requirements on—

(a) every large company; and

(b) every large overseas company that carries on business in New Zealand; and

(d) every other company with fewer than 10 shareholders if shareholders of the company holding at least 5% of the voting shares require the company to comply.

(2) This section is only a guide to the general scheme and effect of this subpart.

197 Non-application of subpart if alternative financial reporting duties under financial markets legislation

This subpart does not apply to a company or an overseas company in relation to an accounting period if financial statements of the company or overseas company, or group financial statements of the group that comprises the company or overseas company and its subsidiaries, are required to be prepared for that period under subpart 3 of Part 7 of the Financial Markets Conduct Act 2013 or section 55 of the Financial Reporting Act 2013.

198 Interpretation

In this subpart, group means a group comprising a company or an overseas company and its subsidiaries large company means a company that is large under section 45 of the Financial Reporting Act 2013 large overseas company means a body corporate incorporated outside New Zealand that—

(a) carries on business in New Zealand within the meaning of section 332; and

(b) is large under section 45 of the Financial Reporting Act 2013 public entity has the same meaning as in section 5 of the Public Audit Act 2001 qualified auditor has the same meaning as in section 35 of the Financial Reporting Act 2013 subsidiary—

(a) means a subsidiary within the meaning of sections 5 to 8; and

(b) includes, except in section 207D, any entity that is classified as a subsidiary in any applicable financial reporting standard voting share, in relation to a company, means a share in the company that confers a currently exercisable right to cast a vote at meetings of shareholders of the company, not being a right to vote that is exercisable only in 1 or more of the following circumstances:

(a) during a period in which a payment or distribution (or part of a payment or distribution) in respect of the share is in arrears or some other default exists:

(b) on a proposal that affects rights attached to the share:

(d) in respect of a special, immaterial, or remote matter that is inconsequential to control of the company.

199 Determining number of shareholders

(1) For the purposes of this subpart and section 208, the number of shareholders that a company has, in relation to an accounting period, is the number of shareholders that hold voting shares as at the close of the first day of the period.

(2) Joint holders of a parcel of shares must be counted as a single shareholder.

Preparation of financial statements

Heading: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

200 Application of preparation provisions

(1) Sections 201 and 202 apply to—

(a) every large company; and

(b) every company that is a public entity; and

(d) every other company with 10 or more shareholders unless the company has opted out of compliance with the provision in accordance with section 207I; and

(e) every other company with fewer than 10 shareholders if the company has opted into compliance with the provision in accordance with section 207K.

(2) However, section 201 does not apply to a company or an overseas company in relation to a balance date if the company or overseas company has, on that date, 1 or more subsidiaries (see section 202).

201 Financial statements must be prepared

Every company or overseas company to which this section applies (A) must ensure that, within 5 months after the balance date of A, financial statements that comply with generally accepted accounting practice are—

(a) completed in relation to A and that balance date; and

(b) dated and signed on behalf of A by 2 directors of A, or, if A has only 1 director, by that director.

202 Group financial statements must be prepared

(1) Every company or overseas company to which this section applies (A) that has, on the balance date of A, 1 or more subsidiaries must ensure that, within 5 months after that balance date, group financial statements that comply with generally accepted accounting practice are—

(a) completed in relation to that group and that balance date; and

(b) dated and signed on behalf of A by 2 directors of A, or, if A has only 1 director, by that director.

(2) Group financial statements are not required under subsection (1) in relation to a balance date if,—

(a) on the balance date, A is a subsidiary of a body corporate that is incorporated in New Zealand (B); and

(b) group financial statements in relation to a group comprising B, A, and all other subsidiaries of B that comply with generally accepted accounting practice are completed in relation to that balance date under this Act or any other enactment.

203 Recognition of financial reporting requirements of overseas countries

(1) Subsection (2) applies if the Registrar notifies a large overseas company (A) that the Registrar is satisfied that

(a) the financial statements of A comply with the requirements of the law in force in the country where A is incorporated or constituted; and

(b) those requirements are—

i. substantially the same as those of this Act; or

ii. sufficiently equivalent, in relation to the quality of financial reporting they achieve, to the requirements of this Act.

(2) The financial statements must be treated as complying with generally accepted accounting practice.

(3) Subsection (4) applies if the Registrar notifies a large overseas company (A) that the Registrar is satisfied that

(a) the group financial statements of the group that comprises A and its subsidiaries comply with the law in force in the country where A is incorporated or constituted; and

(b) those requirements are—

i. substantially the same as those of this Act; or

ii. sufficiently equivalent, in relation to the quality of financial reporting they achieve, to the requirements of this Act.

(4) The group financial statements must be treated as complying with generally accepted accounting practice.

204 Financial statements for overseas company must include financial statements for large New Zealand business

(1) If an overseas company is required to prepare financial statements under section 201 and its New Zealand business is large, the financial statements that are prepared must include, in addition to the financial statements of the overseas company, financial statements for its New Zealand business prepared as if that business were conducted by a company formed and registered in New Zealand.

(2) If an overseas company is required to prepare group financial statements under section 202 and the group’s New Zealand business is large, the group financial statements that are prepared must include, in addition to the financial statements of the group, financial statements for the group’s New Zealand business prepared as if the members of the group were companies formed and registered in New Zealand.

(3) In this section, the New Zealand business or the group’s New Zealand business is large in respect of an accounting period if at least 1 of the following paragraphs applies (calculated as if that business were an entity):

(a) as at the balance date of each of the 2 preceding accounting periods, the total assets of the business exceed $20 million:

(b) in each of the 2 preceding accounting periods, the total revenue of the business exceeds $10 million.

(4) A financial reporting standard (or a part of a standard) issued by the External Reporting Board that is expressed as applying for the purposes of subsection (3) must be applied in determining whether that provision applies.

(5) If an overseas company has been granted an exemption under section 207L from a requirement to prepare financial statements under section 201 or group financial statements under section 202, subsection (1) or (2) (as the case may be) still applies (except that the financial statements for the New Zealand business are not in addition to the financial statements of the overseas company or its group).

205 Balance date of subsidiaries

(1) The board of a company or an overseas company that is required to comply with section 202 must ensure that, unless in the board’s opinion there are good reasons against it, the balance date of each subsidiary of the company is the same as the balance date of the company.

(2) If the balance date of a subsidiary of a company or an overseas company referred to in subsection (1) is not the same as that of the company, the balance date of the subsidiary for the purposes of any particular group financial statements must be a date that precedes the balance date of the company.

Audit of financial statements

Heading: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

206 Application of audit requirement

(1) Section 207 applies to—

(a) every large company unless subsection (2) applies; and

(b) every company that is a public entity; and

(d) every company with 10 or more shareholders unless the company has opted out of compliance with that section in accordance with section 207I; and

(e) every company with fewer than 10 shareholders if the company has opted into compliance with the section in accordance with section 207K.

(2) Subsection (1)(a) does not apply to a large company (A) if—

(a) A has opted out of compliance with section 207 in accordance with section 207J; or

(b) the following requirements are satisfied:

i. A is a wholly-owned subsidiary of another company (B) or of a large overseas company (B); and

ii. group financial statements in relation to a group comprising B, A, and all other subsidiaries of B that comply with generally accepted accounting practice are completed and signed within the time specified in section 202; and

iii. a copy of the group financial statements referred to in subparagraph (ii) and a copy of the auditor’s report on those statements are delivered for registration under this Act or for lodgement under another Act.

207 Financial statements must be audited

(1) Every company or overseas company to which this section applies (A) must ensure that the financial statements or group financial statements prepared in respect of A under section 201, 202, or 204 (if any) are audited by a qualified auditor.

(2) See sections 37 to 39 of the Financial Reporting Act 2013 (which provide for the appointment of a partnership and access to information in relation to a company or an overseas company).

207.a Audit must be carried out in accordance with auditing and assurance standards

(1) An auditor must, in carrying out an audit for the purposes of section 207, comply with all applicable auditing and assurance standards.

(2) Subsection (3) applies if the Registrar notifies a large overseas company (A) that the Registrar is satisfied that standards relating to auditing or assurance that are in force in the country where A is incorporated or constituted (the overseas standards) are—

(a) substantially the same as the applicable auditing and assurance standards referred to in subsection (1); or

(b) sufficiently equivalent, in relation to the quality of auditing they achieve, to the applicable auditing and assurance standards referred to in subsection (1).

(3) The auditor of A’s financial statements or group financial statements may, in carrying out the audit of those statements and in preparing the auditor’s report, comply with the overseas standards instead of the applicable auditing and assurance standards.

(4) This section does not apply to a company that is a public entity.

207.b Auditor must report to shareholders

(1) The auditor of a company must make a report to the shareholders on the financial statements or group financial statements audited by the auditor.

(2) The auditor’s report must comply with the requirements of all applicable auditing and assurance standards.

(3) Subsection (2) is subject to section 207A(3).

207.c Auditor’s report must be sent to Registrar and External Reporting Board if requirements have not been complied with

If the auditor’s report indicates that the requirements of this Act have not been complied with, the auditor must, within 7 working days after signing the report, send a copy of the report and a copy of the financial statements or group financial statements to which it relates to the Registrar and the External Reporting Board.

Registration of financial statements of overseas companies and other companies with significant overseas ownership

Heading: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207.D Application of registration provisions

(1) Section 207E applies to each of the following:

(a) every large overseas company:

(b) every large company in which shares that in aggregate carry the right to exercise or control the exercise of 25% or more of the voting power at a meeting of the company are held by—

i. a subsidiary of a body corporate incorporated outside New Zealand; or

ii. a body corporate incorporated outside New Zealand; or

iii. a person not ordinarily resident in New Zealand.

(2) However, section 207E does not apply to a company or an overseas company (A) if the following requirements are satisfied:

(a) A is a subsidiary of a company that is incorporated in New Zealand (B); and

(b) group financial statements in relation to a group comprising B, A, and all other subsidiaries of B that comply with generally accepted accounting practice are completed and signed within the time specified in section 202; and

(c) a copy of the group financial statements referred to in paragraph (b) and a copy of the auditor’s report on those statements are delivered for registration under this Act or for lodgement under another Act.

(3) For the purposes of subsection (1), a person is ordinarily resident in New Zealand if that person—

(a) is domiciled in New Zealand; or

(b) is living in New Zealand and the place where that person usually lives, and has been living for the immediately preceding 12 months, is in New Zealand, whether or not that person has on occasions been away from New Zealand during that 12-month period.

207.E Financial statements must be registered

(1) A company or an overseas company to which this section applies must ensure that, within 5 months after the balance date of the company or overseas company, copies of its financial statements or group financial statements completed in relation to that balance date under section 201, 202, or 204 together with a copy of the auditor’s report on those statements (if any) are delivered to the Registrar for registration.

(2) The company or overseas company must, when the financial statements or group financial statements are registered, pay to the Registrar the prescribed registration fee (if any).

(3) Any person may, on payment of the prescribed fee (if any), inspect the copies of the financial statements, group financial statements, and auditor’s report on those statements delivered to the Registrar under this section.

Shareholders may request copy of financial statements prepared for tax purposes

Heading: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207.F Shareholders may request copy of financial statements prepared for tax purposes

(1) This section applies if—

(a) neither financial statements in relation to a company nor group financial statements in relation to a company’s group are prepared under this Act or Part 7 of the Financial Markets Conduct Act 2013; but

(b) financial statements in relation to the company, or group financial statements in relation to its group, are prepared under, or for the purposes of, any of the Inland Revenue Acts (as defined in section 3(1) of the Tax Administration Act 1994).

(2) A shareholder of the company may at any time make a written request to the company for a copy of the financial statements or group financial statements (or both) referred to in subsection (1)(b).

(3) The company must, within 10 working days of receiving a request under subsection (2), provide, free of charge, a copy of the financial statements or group financial statements (or both) to the shareholder together with a copy of the auditor’s report on those statements (if any).

Financial reporting offences

Heading: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207.G Financial reporting offences

(1) This section applies if—

(a) a company or an overseas company is required to comply with section 201 and financial statements of the company or overseas company—

i. are not completed and signed within the time specified in that section; or

ii. fail to comply with an applicable financial reporting standard; or

(b) a company or an overseas company is required to comply with section 202 and group financial statements of a group comprising the company or overseas company and its subsidiaries—

i. are not completed and signed within the time specified in that section; or

ii. fail to comply with an applicable financial reporting standard; or

(c) an overseas company is required to comply with section 204 and the financial statements or group financial statements referred to in that section—

i. are not completed and signed within 5 months after the balance date of the overseas company; or

ii. fail to comply with an applicable financial reporting standard; or

(d) a company or an overseas company fails to comply with section 207 (which relates to auditing); or

(e) a company or an overseas company fails to comply with section 207E (which relates to registration of financial statements); or

(f) a company fails to comply with section 207F (which relates to the supply of copies of financial statements prepared for tax purposes).

(2) The company or overseas company commits an offence and is liable on conviction to a fine not exceeding $50,000.

(3) Every director of the company or overseas company commits an offence and is liable on conviction to the penalty set out in section 374(3).

(4) See section 376(2) (which provides defences to directors in respect of an offence under this section).

Provisions relating to opting out and opting in

Heading: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207.H Period during which company may opt in or opt out

In sections 207I to 207K, the opting period, in relation to the accounting period referred to in section 207I(3), 207J(3), or 207K(2), is the period from the start of the accounting period until the close of the earliest of the following dates:

(a) the date that is 6 months after the start of the accounting period:

(b) the date of the annual meeting to be held in the accounting period:

(c) in the case of an accounting period that is shorter than 6 months (as a result of the date of the registration of the company or a change of the balance date of the company), the balance date of the period.

207.I Companies with 10 or more shareholders may opt out

(1) This section applies to a company with 10 or more shareholders.

(2) However, this section does not apply—

(a) if the constitution of the company expressly provides that this section does not apply; or

(b) if the company is a large company or a public entity.

(3) The shareholders of the company may, at a meeting of shareholders held within the opting period, opt out of compliance with 1 or more of the following provisions in relation to the accounting period by way of a resolution approved by not less than 95% of the votes of those shareholders entitled to vote and voting on the question:

(a) sections 201 and 202 (preparation of financial statements and group financial statements):

(b) section 207 (audit requirement):

(4) If the shareholders opt out of compliance with a provision in relation to an accounting period under this section, the provision does not apply to the company in relation to that period.

207.J Large companies may opt out of audit requirement

(1) This section applies to a large company.

(2) However, this section does not apply if—

(a) the constitution of the company expressly provides that this section does not apply; or

(b) the company is a public entity; or

(3) The shareholders of the company may, at a meeting of shareholders held within the opting period, opt out of compliance with section 207 in relation to the accounting period by way of a resolution approved by not less than 95% of the votes of those shareholders entitled to vote and voting on the question.

(4) If the shareholders opt out of compliance with section 207 in relation to an accounting period under this section, that section does not apply to the company in relation to that period.

207.K Companies with fewer than 10 shareholders may opt in

(1) This section applies to a company (other than a large company) with fewer than 10 shareholders.

(2) A shareholder of the company who holds, or shareholders of the company who together hold, not less than 5% of the voting shares may, by written notice given to the company within the opting period but not later than 5 working days before the end of that period, require the company to comply with 1 or more of the following provisions in relation to the accounting period:

(a) section 201 or 202 (preparation of financial statements or group financial statements):

(b) section 207 (audit requirement):

(3) If a notice is given under subsection (2) in relation to a provision and an accounting period, the provision applies to the company in relation to that period.

Registrar may grant exemptions to overseas companies

Heading: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

*207.L Registrar may grant exemptions to overseas companies

(1) The Registrar may, by notice in the Gazette, exempt any large overseas company, or any class of large overseas companies, from compliance with any provision of sections 201, 202, 207, and 207E.

(2) The Registrar must not grant an exemption under this section unless he or she is satisfied that—

(a) compliance with the relevant provision would require the overseas company to comply with requirements that are unduly onerous or burdensome; and

(b) financial reporting requirements must be complied with in relation to the overseas company under the law in force in the country where the overseas company is incorporated or constituted and that those requirements are satisfactory; and

(c) the extent of the exemption is not broader than what is reasonably necessary to address the matters that gave rise to the exemption.

(3) The exemption may be granted on any terms and conditions that the Registrar thinks fit.

(4) The Registrar may vary or revoke an exemption in the same way as an exemption may be granted under this section.

207.M Publication and status of exemptions

(1) The Registrar may give notice of the exemption in any publications he or she thinks fit (in addition to notifying the exemption in the Gazette).

(2) Each notice published in the Gazette under section 207L is a disallowable instrument, but not a legislative instrument, for the purposes of the Legislation Act 2012 and must be presented to the House of Representatives under section 41 of that Act.

(3) The Registrar’s reasons for granting an exemption (including why the exemption is appropriate) must be notified in the Gazette together with the exemption.

Consultation

In deciding whether or not to grant, amend, or revoke an exemption under section 207L, the Registrar—

(a) may consult with any persons or organisations that the Registrar thinks fit; but

(b) must consult with the Commissioner of Inland Revenue if the exemption involves any provision of section 201 or 202.

207.O Exemption may apply to accounting period before exemption is granted

An exemption under section 207L may, if the Registrar thinks fit, apply to an accounting period that commenced before the exemption is granted (including an accounting period that ended before the exemption is granted) if the exemption is granted before financial statements or group financial statements for that period are required to be delivered for registration under section 207E.

Subpart 3—Miscellaneous auditing provisions

Subpart 3: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207.P Auditor must be appointed if financial statements must be audited

(1) This section applies to a company in relation to an accounting period if financial statements or group financial statements of the company for that period are required to be audited under this Act, the Financial Markets Conduct Act 2013, or any other enactment.

(2) A company must, at the annual meeting held in the accounting period referred to in subsection (1), appoint a qualified auditor to—

(a) hold office from the conclusion of the meeting until the conclusion of the next annual meeting; and

(b) audit the financial statements or group financial statements referred to in subsection (1).

(3) However, if a company is a public entity, the Auditor-General is its auditor in accordance with that Act and subsection (2) does not apply.

(4) The first auditor of a company may be appointed by the directors of the company before the first annual meeting, and, if so appointed, holds office until the conclusion of that meeting.

207.Q Registrar may appoint auditor

(1) The Registrar may appoint an auditor if,—

(a) at an annual meeting of a company, no auditor is appointed or reappointed as required by section 207P; or

(b) a casual vacancy in the office of auditor is not filled within 1 month of the vacancy occurring and the company is required to comply with section 207P.

(2) A company must, within 5 working days of the power becoming exercisable, give written notice to the Registrar of the fact that the Registrar is entitled to appoint an auditor under this section.

(3) If a company fails to comply with subsection (2),—

(a) the company commits an offence and is liable on conviction to the penalty set out in section 373(2); and

(b) every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

207.R Resignation and casual vacancy

(1) An auditor may resign at any time by giving written notice to the board of the company, and the company must, as soon as practicable, notify its shareholders of the auditor’s resignation.

(2) If a company fails to comply with subsection (1),—

(a) the company commits an offence and is liable on conviction to the penalty set out in section 373(2); and

(b) every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

(3) The board of a company may fill any casual vacancy in the office of auditor, but while the vacancy remains the surviving or continuing auditor, if any, may continue to act as auditor.

207.S Auditor’s fees and expenses

The fees and expenses of an auditor of a company must be fixed,—

(a) if the auditor is appointed at a meeting of the company, by the company at the meeting or in the manner that the company determines at the meeting:

(b) if the auditor is appointed by the directors, by the directors:

(d) if the auditor is the Auditor-General, in accordance with the Public Audit Act 2001.

207.T Automatic reappointment

(1) An auditor of a company, other than an auditor appointed under section 207P(4), is automatically reappointed at an annual meeting of the company unless—

(a) the auditor is not a qualified auditor; or

(b) the company passes a resolution at the meeting appointing another person to replace him or her as auditor; or

(d) the auditor has given notice to the company that the auditor does not wish to be reappointed.

(2) An auditor is not automatically reappointed if the person who it is proposed will replace the auditor dies, or is or becomes incapable of, or disqualified from, appointment.

207.U Replacement of auditor

(1) A company must not appoint a new auditor in the place of an auditor who is a qualified auditor, unless—

(a) at least 20 working days’ written notice of a proposal to do so has been given to the auditor; and

(b) the auditor has been given a reasonable opportunity to make representations to the shareholders on the appointment of another person either in writing or by the auditor or the auditor’s representative speaking at a shareholders’ meeting (whichever the auditor may choose).

(2) The auditor is entitled to be paid by the company reasonable fees and expenses for making the representations to shareholders.

207.V Auditor not seeking reappointment or resigning

(1) If an auditor gives the board of a company written notice that the auditor does not wish to be reappointed or of the auditor’s resignation, the board must, if requested to do so by that auditor,—

(a) distribute, as soon as practicable, to all shareholders, at the expense of the company, a written statement of the auditor’s reasons for the auditor’s wish not to be reappointed or for the auditor’s resignation; or

(b) permit the auditor or the auditor’s representative to explain at a shareholders’ meeting the reasons for wishing not to be reappointed or for resigning.

(2) An auditor is entitled to be paid by the company reasonable fees and expenses for making the representations to shareholders.

207.W Auditor’s attendance at shareholders’ meeting

**(1) The board of a company must ensure that an auditor of the company—

(a) is permitted to attend a meeting of shareholders of the company; and

(b) receives the notices and communications that a shareholder is entitled to receive that relate to a meeting of shareholders; and

(c) may be heard at a meeting of shareholders that the auditor attends on any part of the business of the meeting that concerns the auditor as auditor.

(2) If the board of a company fails to comply with subsection (1), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

Subpart 4—Infringement offence for failing to register financial statements

Subpart 4: inserted, on 1 April 2014, by section 30 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).

207.X Interpretation in this subpart

In this subpart, infringement fee, in relation to an infringement offence, means $7,000 infringement notice means a notice issued under section 207Z infringement offence means an offence under section 207G(2) or (3) in respect of a failure referred to in section 207G(1)(e) (which relates to failing to register financial statements).

**207Y Infringement offences

(1) If a person is alleged to have committed an infringement offence, that person may—

(a) be proceeded against by filing a charging document under section 14 of the Criminal Procedure Act 2011; or

(b) be served with an infringement notice as provided in section 207Z.

(2) Proceedings commenced in the way described in subsection (1)(a) do not require leave of a District Court Judge or Registrar under section 21(1)(a) of the Summary Proceedings Act 1957.

207.Z Infringement notices

(1) The Registrar may issue an infringement notice to a person if the Registrar believes on reasonable grounds that the person is committing, or has committed, an infringement offence.

(2) The Registrar may revoke an infringement notice before the infringement fee is paid, or before an order for payment of a fine is made or deemed to be made by a court under section 21 of the Summary Proceedings Act 1957.

(3) An infringement notice is revoked by giving written notice to the person to whom it was issued that the notice is revoked.

207.Z.A Procedural requirements for infringement notices

(1) An infringement notice may be served on a person—

(a) by delivering it, or a copy of it, personally to the person who appears to have committed the infringement offence; or

(b) by sending it, or a copy of it, by post, addressed to the person at the person’s last known place of residence or business.

(2) An infringement notice sent under subsection (1)(b) must be treated as having been served on the person on the date it was posted.

**(3) An infringement notice must be in the prescribed form and must contain—

(a) details of the alleged infringement offence that are sufficient to fairly inform a person of the time, place, and nature of the alleged infringement offence; and

(b) the amount of the infringement fee; and

(d) the time within which the infringement fee must be paid; and

(e) a summary of the provisions of section 21(10) of the Summary Proceedings Act 1957; and

(f) a statement that the person served with the notice has a right to request a hearing; and

(g) a statement of what will happen if the person served with the notice does not pay the fee and does not request a hearing; and

(h) any other prescribed matters.

(4) If an infringement notice has been issued, proceedings in respect of the infringement offence to which the notice relates may be commenced in accordance with section 21 of the Summary Proceedings Act 1957 and, in that case,—

(a) reminder notices may be prescribed under regulations made under this Act; and

(b) in all other respects, section 21 of the Summary Proceedings Act 1957 applies with all necessary modifications.

(5) Reminder notices must contain the prescribed information.

207.Z.B Payment of infringement fee

The Registrar must pay all infringement fees received into a Crown Bank Account.

Part 12

Disclosure by companies

Disclosure to shareholders

208 Obligation to prepare annual report

(1) This section applies to—

(a) every large company (within the meaning of section 198); and

(b) every company that is a public entity; and

(c) every company that is required to prepare financial statements or group financial statements under Part 7 of the Financial Markets Conduct Act 2013 or section 55 of the Financial Reporting Act 2013; and

(d) every company with 10 or more shareholders unless the company has opted out of compliance with this section in accordance with section 207I (in relation to the accounting period referred to in subsection (2)); and

(e) every company with fewer than 10 shareholders if the company has opted into compliance with this section in accordance with section 207K (in relation to the accounting period referred to in subsection (2)).

(2) The board of every company to which this section applies must, within 5 months after the balance date of the company, prepare an annual report on the affairs of the company during the accounting period ending on that date.

(3) If the board of a company fails to comply with subsection (2), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

209 Obligation to make annual report available to shareholders

(1) The board of a company must send to every shareholder of the company, not less than 20 working days before the date fixed for holding the annual meeting of shareholders,—

(a) a copy of the annual report; or

(b) a notice containing the statements specified in subsection (3).

(1A) Subsection (1) does not apply if the annual report is not required to be prepared under section 208.

(2) Subsection (1) is subject to section 212.

(3) The notice referred to in subsection (1)(b) must contain—

(a) a statement to the effect that the shareholder has a right to receive from the company, free of charge, a copy of the annual report if the shareholder, within 15 working days of receiving the notice, makes a request to the company to receive a copy of the annual report; and

(b) a statement to the effect that the shareholder may obtain a copy of the annual report by electronic means; and

(c) a statement as to how the shareholder may obtain a copy of the annual report by electronic means (for example, from a specified website address); and

(d) a statement as to whether the board of the company has prepared, in relation to the same accounting period as the annual report, a concise annual report and, if so, a statement—

i. to the effect that the shareholder has a right to receive from the company, free of charge, a copy of the concise annual report if the shareholder, within 15 working days of receiving the notice, makes a request to the company to receive a copy of the concise annual report; and

ii. to the effect that the shareholder may obtain a copy of the concise annual report by electronic means; and

iii. as to how the shareholder may obtain a copy of the concise annual report by electronic means (for example, from a specified website address).

(4) The notice referred to in subsection (1)(b) may be accompanied by any additional information or documentation that the board of the company thinks fit.

(5) For the purposes of this section and sections 209A and 209B, every concise annual report for a company must, in relation to an accounting period, include,—

(a) in relation to a company that has, on the balance date of the company, no subsidiaries,—

i. financial statements for the accounting period that comply with generally accepted accounting practice and any auditor’s report on those financial statements; or

ii summary financial statements for the accounting period that comply with generally accepted accounting practice:

(b) in relation to a company that has, on the balance date of the company, 1 or more subsidiaries,—

i. group financial statements for the accounting period that comply with generally accepted accounting practice and any auditor’s report on those group financial statements; or

ii. summary financial statements for the accounting period, prepared in relation to the group comprising the company and its subsidiaries, that comply with generally accepted accounting practice.

(6) [Repealed]

(7) If the board of a company fails to comply with this section, every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

209.A Board must send copy of annual report or concise annual report on request

(1) If the board of a company has sent a notice to a shareholder under section 209(1)(b) and the shareholder, within 15 working days of receiving that notice, makes a request to the company to receive a copy of the annual report, the board of the company must, as soon as practicable, send to the shareholder, free of charge, a copy of that annual report.

(2) If a shareholder makes a request under subsection (1),—

(a) the request must be treated as a request by the shareholder to send to the shareholder each year a copy of the annual report under section 209(1)(a); and

(b) the board of the company must send to the shareholder each year a copy of the annual report under section 209(1)(a) until the shareholder revokes the request by notice to the company.

(2A) Subsection (2) does not require a company to send a copy of an annual report on the affairs of the company during a particular accounting period if the board of the company is not required to comply with section 208 in respect of that period.

(3) Subsection (4) applies if—

(a) the board of a company has sent a notice to a shareholder under section 209(1)(b); and

(b) that notice states that the board has prepared a concise annual report; and

(c) the shareholder, within 15 working days of receiving that notice, makes a request to the company to receive a copy of the concise annual report.

(4) The board of the company must send to the shareholder a copy of the concise annual report, free of charge, as soon as practicable after receiving the request.

(5) If the board of a company fails to comply with this section, every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

209B Annual report and concise annual report made available by electronic means

(1) If the board of a company has sent a notice to a shareholder under section 209(1)(b), the board must ensure that—

(a) a copy of the annual report is available in the manner described in the notice under section 209(3)(c) at all reasonable times during the period beginning on the date the notice is sent and ending on the date the board acts under section 209(1) in relation to the next accounting period; and

(b) the manner described in the notice under section 209(3)(c) allows a copy of the annual report to be readily accessible so as to be usable for subsequent reference.

(2) If the board of a company has sent a notice to a shareholder under section 209(1)(b) and that notice states that the board has prepared a concise annual report, the board must—

(a) ensure that a copy of the concise annual report is available in the manner described in the notice under section 209(3)(d)(iii) at all reasonable times during the period beginning on the date the notice is sent and ending on the date the board acts under section 209(1) in relation to the next accounting period; and

(b) ensure that the manner described in the notice under section 209(3)(d)(iii) allows a copy of the concise annual report to be readily accessible so as to be usable for subsequent reference.

(3) If the board of a company fails to comply with this section, every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

210 Information for shareholders who elect not to receive annual report

[Repealed]

211 Contents of annual report

(1) Every annual report for a company must be in writing and be dated and, subject to subsection (3), must—

(a) describe, so far as the board believes is material for the shareholders to have an appreciation of the state of the company’s affairs and will not be harmful to the business of the company or of any of its subsidiaries, any change during the accounting period in—

i. the nature of the business of the company or any of its subsidiaries; or

ii. the classes of business in which the company has an interest, whether as a shareholder of another company or otherwise; and

(b) include any financial statements or group financial statements for the accounting period that are required to be prepared under Part 11, Part 7 of the Financial Markets Conduct Act 2013, or any other enactment (if any); and

(c) if an auditor’s report is required under Part 11, Part 7 of the Financial Markets Conduct Act 2013, or any other enactment in relation to the financial statements or group financial statements included in the report, include that auditor’s report; and

(d)[Repealed]

(e) state particulars of entries in the interests register made during the accounting period; and

(f) state, in respect of each director or former director of the company, the total of the remuneration and the value of other benefits received by that director or former director from the company during the accounting period; and

(g) state the number of employees or former employees of the company, not being directors of the company, who, during the accounting period, received remuneration and any other benefits in their capacity as employees, the value of which was or exceeded $100,000 per annum, and must state the number of such employees or former employees in brackets of $10,000; and

(h) state the total amount of donations made by the company during the accounting period; and

(i) state the names of the persons holding office as directors of the company as at the end of the accounting period and the names of any persons who ceased to hold office as directors of the company during the accounting period; and

(j) state the amounts payable by the company to the person or firm holding office as auditor of the company as audit fees and, as a separate item, fees payable by the company for other services provided by that person or firm; and

(k) be signed on behalf of the board by 2 directors of the company or, if the company has only 1 director, by that director.

(2) A company that is required to include group financial statements in its annual report must include, in relation to its subsidiaries, the information specified in paragraphs (e) to (j) of subsection (1).

(3) The annual report of a company need not comply with any of paragraphs (a), and (e) to (j) of subsection (1), and subsection (2) if shareholders who together hold at least 95% of the voting shares (within the meaning of section 198) agree that the report need not do so.

(4) [Repealed]

211.A Obligations to prepare and make available annual reports or financial statements do not apply to non-active companies

[Repealed]

212 Shareholders may elect not to receive documents

(1) A shareholder of a company may from time to time, by written notice to the company, waive the right to receive all or any documents from the company and may revoke the waiver in the same manner and, while the waiver is in effect, the company need not send to the shareholder the documents to which the waiver relates.

(2) However, if a shareholder of a company purports to waive the right to receive both a copy of the annual report and a notice under section 209(1)(b),—

(a) the purported waiver is invalid; and

(b) the board of the company must, in accordance with section 209(1), send to the shareholder a copy of the annual report or a notice under section 209(1)(b).

(3) Subsection (2)(b) does not apply if the board of the company is not required to comply with section 209(1) in respect of an accounting period.

213 Failure to disclose

Subject to the constitution of a company, the failure to send an annual report, notice, or other document to a shareholder in accordance with this Act does not affect the validity of proceedings at a meeting of the shareholders of the company if the failure to do so was accidental.

214 Annual return

(1) The board of a company must ensure that there is delivered to the Registrar each year, for registration, during the month allocated to the company for the purpose, an annual return in the prescribed form or in a form the use of which by the company has been approved by the Registrar pursuant to subsection (8), or as near to it as circumstances allow, and containing as much of the information specified in Schedule 4 as is prescribed.

(2) The annual return must be dated as at a day within the month during which the return is required to be delivered to the Registrar and the information required to be contained in it must be compiled as at that date.

(3) The annual return must be signed by a director of the company or by a solicitor or qualified statutory accountant (within the meaning of section 5(1) of the Financial Reporting Act 2013) authorised for that purpose.

(4) On registration of a company under Part 2, the Registrar must allocate a month to the company for the purposes of this section.

(5) The Registrar may, by written notice to a company, alter the month allocated to the company under subsection (4).

**(6) Notwithstanding subsection (1),—

(a) a company need not make an annual return in the calendar year of its registration:

(b) a subsidiary may, with the written approval of the Registrar, make an annual return during the month allocated to its holding company instead of during the month allocated to it.

(7) For the purposes of this section, prescribed means prescribed by regulations made under this Act or by the Registrar by notice in the Gazette and different forms of annual return may be prescribed in respect of different classes of companies.

(8) The Registrar may, on the application of any person, approve the use, by such company or companies as the Registrar may specify, of a form of annual return different from that prescribed, and may at any time revoke, in whole or in part, any such approval.

(9) An annual return in a form approved under subsection (8) must contain all the prescribed information.

(10) If the board of a company fails to comply with subsection (1) or subsection (2), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

214.A Registrar may alter New Zealand register

If the annual return contains—

(a) an address of the registered office of the company; or

(b) an address for service of the company; or

(c) a postal address of the company that is different from the address of the registered office, the address for service, or the postal address of the company entered on the New Zealand register, the Registrar may alter the New Zealand register accordingly.

Inspection of company records

215 Public inspection of company records

(1) A company must keep the following records available for inspection in the manner prescribed in section 217 by a person who serves written notice of intention to inspect on the company:

(a) the certificate of incorporation or registration of the company:

(b) the constitution of the company, if it has one:

(ca) the company’s ultimate holding company information:

(d) the full names and residential addresses of the directors:

(e) the registered office and address for service of the company.

(2) If a company fails to comply with subsection (1),—

(a) the company commits an offence and is liable on conviction to the penalty set out in section 373(2); and

(b) every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

216 Inspection of company records by shareholders

(1) In addition to the records available for public inspection, a company must keep the following records available for inspection in the manner prescribed in section 217 by a shareholder of the company, or by a person authorised in writing by a shareholder for the purpose, who serves written notice of intention to inspect on the company:

(a) minutes of all meetings and resolutions of shareholders:

(b) copies of written communications to all shareholders or to all holders of a class of shares during the preceding 10 years, including annual reports, financial statements, summary financial statements (if any), and group financial statements:

(d) the interests register of the company.

(2) If a company fails to comply with subsection (1),—

(a) the company commits an offence and is liable on conviction to the penalty set out in section 373(2); and

(b) every director of a company commits an offence and is liable on conviction to the penalty set out in section 374(2).

217 Manner of inspection

(1) Documents which may be inspected under section 215 or section 216 must be available for inspection at the place at which the company’s records are kept between the hours of 9 am and 5 pm on each working day during the inspection period.

(2) In this section, the term inspection period means the period commencing on the third working day after the day on which notice of intention to inspect is served on the company by the person or shareholder concerned and ending with the eighth working day after the day of service.

218 Copies of documents

(1) A person may require a copy of, or extract from, a document which is available for inspection by him or her under section 215 or section 216 to be sent to him or her—

(a) within 5 working days after he or she has made a request in writing for the copy or extract; and

(b) if he or she has paid a reasonable copying and administration fee prescribed by the company.

(2) If a company fails to provide a copy of, or extract from, a document in accordance with a request under subsection (1),—

(a) the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and

(b) every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).

Part 13

Amalgamations

219 Amalgamations

(1) Except as provided in subsection (2), 2 or more companies may amalgamate, and continue as 1 company, which may be one of the amalgamating companies, or may be a new company.

(2) A code company may not amalgamate under sections 220 and 221.

220 Amalgamation proposal

(1) An amalgamation proposal must set out the terms of the amalgamation, and in particular—

(a) the name of the amalgamated company, if it is the same as the name of one of the amalgamating companies:

(b) the registered office of the amalgamated company:

(c) in relation to every director of the amalgamated company, his or her full name and the information required by section 12(2)(b)(ii) and (iii):

(d) the address for service of the amalgamated company:

(e) the share structure of the amalgamated company, specifying—

i. the number of shares of the company:

ii. the rights, privileges, limitations, and conditions attached to each share of the company, if different from those set out in section 36:

ea. the ultimate holding company information of each of the amalgamating companies and of the amalgamated company:

f. the manner in which the shares of each amalgamating company are to be converted into shares of the amalgamated company:

g. if shares of an amalgamating company are not to be converted into shares of the amalgamated company, the consideration that the holders of those shares are to receive instead of shares of the amalgamated company:

h. any payment to be made to a shareholder or director of an amalgamating company, other than a payment of the kind described in paragraph (g):

i. details of any arrangement necessary to complete the amalgamation and to provide for the subsequent management and operation of the amalgamated company.

(2) An amalgamation proposal may specify the date on which the amalgamation is intended to become effective.

(3) If shares of one of the amalgamating companies are held by or on behalf of another of the amalgamating companies, the amalgamation proposal—

(a) must provide for the cancellation of those shares without payment or the provision of other consideration when the amalgamation becomes effective:

(b) must not provide for the conversion of those shares into shares of the amalgamated company.

221 Approval of amalgamation proposal

(1) The board of each amalgamating company must resolve that—

(a) in its opinion the amalgamation is in the best interest of the company; and

(b) it is satisfied on reasonable grounds that the amalgamated company will, immediately after the amalgamation becomes effective, satisfy the solvency test.

(2) The directors who vote in favour of a resolution required by subsection (1) must sign a certificate stating that, in their opinion, the conditions set out in that subsection are satisfied, and the grounds for that opinion.

(3) The board of each amalgamating company must send to each shareholder of the company, not less than 20 working days before the amalgamation is proposed to take effect,—

(a) a copy of the amalgamation proposal:

(b) copies of the certificates given by the directors of each board:

(d) a statement that a copy of the constitution of the amalgamated company will be supplied to any shareholder who requests it:

(e) a statement setting out the rights of shareholders under section 110:

(f) a statement of any material interests of the directors in the proposal, whether in that capacity or otherwise:

(g) such further information and explanation as may be necessary to enable a reasonable shareholder to understand the nature and implications for the company and its shareholders of the proposed amalgamation.

(4) The board of each amalgamating company must, not less than 20 working days before the amalgamation is proposed to take effect,—

(a) send a copy of the amalgamation proposal to every secured creditor of the company; and

(b) give public notice of the proposed amalgamation, including a statement that—

i. copies of the amalgamation proposal are available for inspection by any shareholder or creditor of an amalgamating company or any person to whom an amalgamating company is under an obligation at the registered offices of the amalgamating companies and at such other places as may be specified during normal business hours; and

ii. a shareholder or creditor of an amalgamating company or any person to whom an amalgamating company is under an obligation is entitled to be supplied free of charge with a copy of the amalgamation proposal upon request to an amalgamating company.

(5) The amalgamation proposal must be approved—

(a) by the shareholders of each amalgamating company, in accordance with section 106; and

(b) if a provision in the amalgamation proposal would, if contained in an amendment to an amalgamating company’s constitution or otherwise proposed in relation to that company, require the approval of an interest group, by a special resolution of that interest group.

(6) A director who fails to comply with subsection (2) commits an offence and is liable on conviction to the penalty set out in section 373(1).

222 Short form amalgamation

**(1)**A company and 1 or more other companies that is or that are directly or indirectly wholly owned by it may amalgamate and continue as 1 company (being the company first referred to) without complying with section 220 and section 221 if—

(a) the amalgamation is approved by a resolution of the board of each amalgamating company; and

(b) each resolution provides that—

i. the shares of each amalgamating company, other than the amalgamated company, will be cancelled without payment or other consideration; and

ii. the constitution of the amalgamated company, if it has one, will be the same as the constitution of the company first referred to, if it has one; and

iii. the board is satisfied on reasonable grounds that the amalgamated company will, immediately after the amalgamation becomes effective, satisfy the solvency test; and

iv. the person or persons named in the resolution will be the director or directors of the amalgamated company.

(2) Two or more companies, each of which is directly or indirectly wholly owned by the same person, may amalgamate and continue as 1 company without complying with section 220 or section 221 if—

(a) the amalgamation is approved by a resolution of the board of each amalgamating company; and

(b) each resolution provides that—

i. the shares of all but 1 of the amalgamating companies will be cancelled without payment or other consideration; and

ii. the constitution of the amalgamated company, if it has one, will be the same as the constitution of the amalgamating company whose shares are not cancelled, if it has one; and

iii. the board is satisfied on reasonable grounds that the amalgamated company will, immediately after the amalgamation becomes effective, satisfy the solvency test; and

iv. the person or persons named in the resolution will be the director or directors of the amalgamated company.

(3) The board of each amalgamating company must, not less than 20 working days before the amalgamation is proposed to take effect, give written notice of the proposed amalgamation to every secured creditor of the company.

(4) The resolutions approving an amalgamation under this section, taken together, shall be deemed to constitute an amalgamation proposal that has been approved.

(5) The directors who vote in favour of a resolution required by subsection (1) or subsection (2), as the case may be, must sign a certificate stating that, in their opinion, the condition set out in subsection (1)(b)(iii) or subsection (2)(b)(iii) is satisfied, and the grounds for that opinion.

(6) A director who fails to comply with subsection (5) commits an offence and is liable on conviction to the penalty set out in section 373(1).

223 Registration of amalgamation proposal

For the purpose of effecting an amalgamation the following documents must be delivered to the Registrar for registration:

(a) the approved amalgamation proposal; and

(b) any certificates required under section 221(2) or section 222(5); and

(ba) the date and place of birth of every director of the amalgamated company; and

(c) a certificate signed by the board of each amalgamating company stating that the amalgamation has been approved in accordance with this Act and the constitution of the company, if it has one; and

(d) if the amalgamated company is a new company or the amalgamation proposal provides for a change of the name of the amalgamated company, a copy of the notice reserving the name of the company; and

(da) if an amalgamating company is a licensed insurer, a copy of the written approval of the Reserve Bank of New Zealand given under section 44 of the Insurance (Prudential Supervision) Act 2010; and

(e) a certificate signed by the board, or proposed board, of the amalgamated company stating that, where the proportion of the claims of creditors of the amalgamated company in relation to the value of the assets of the company is greater than the proportion of the claims of creditors of an amalgamating company in relation to the value of the assets of that amalgamating company, no creditor will be prejudiced by that fact; and

(f) a document in the prescribed form signed by each of the persons named in the amalgamation proposal as a director of the amalgamated company containing his or her consent to be a director and a certificate that he or she is not disqualified from being appointed or holding office as a director of a company.

224 Certificate of amalgamation

(1) Forthwith after receipt of the documents required under section 223, the Registrar must,—

(a) if the amalgamated company is the same as one of the amalgamating companies, issue a certificate of amalgamation; or

(b) if the amalgamated company is a new company,—

i. enter particulars of the company on the New Zealand register; and

ii. issue a certificate of amalgamation together with a certificate of incorporation.

(2) If an amalgamation proposal specifies a date on which the amalgamation is intended to become effective, and that date is the same as, or later than, the date on which the Registrar receives the documents, the certificate of amalgamation, and any certificate of incorporation must be expressed to have effect on the date specified in the amalgamation proposal.

225 Effect of certificate of amalgamation

On the date shown in a certificate of amalgamation,—

(a) the amalgamation is effective; and

(b) if it is the same as a name of one of the amalgamating companies, the amalgamated company has the name specified in the amalgamation proposal; and

(c) the Registrar must remove the amalgamating companies, other than the amalgamated company, from the New Zealand register; and

(d) the amalgamated company succeeds to all the property, rights, powers, and privileges of each of the amalgamating companies; and

(e) the amalgamated company succeeds to all the liabilities and obligations of each of the amalgamating companies; and

(f) proceedings pending by, or against, an amalgamating company may be continued by, or against, the amalgamated company; and

(g) a conviction, ruling, order, or judgment in favour of, or against, an amalgamating company may be enforced by, or against, the amalgamated company; and

(h) any provisions of the amalgamation proposal that provide for the conversion of shares or rights of shareholders in the amalgamating companies have effect according to their tenor.

225A Registers

(1) Where an amalgamation becomes effective, no Registrar of Deeds or District Land Registrar or other person charged with the keeping of any books or registers shall be obliged, solely by reason of the amalgamation becoming effective, to change the name of an amalgamating company to that of an amalgamated company in those books or registers or in any documents.

(2) The presentation to any Registrar or other person of any instrument (whether or not comprising an instrument of transfer) by the amalgamated company—

(a) executed or purporting to be executed by the amalgamated company; and

(b) relating to any property held immediately before the amalgamation by an amalgamating company; and

(c) stating that that property has become the property of the amalgamated company by virtue of this Part— shall, in the absence of evidence to the contrary, be sufficient evidence that the property has become the property of the amalgamated company.

(3) Without limiting subsection (1) or subsection (2), where any financial product issued by any person or any rights or interests in property of any person become, by virtue of this Part, the property of an amalgamated company, that person, on presentation of a certificate signed on behalf of the board of the amalgamated company, stating that that financial product or any such rights or interests have, by virtue of this Part, become the property of the amalgamated company, shall, notwithstanding any other enactment or rule of law or the provisions of any instrument, register the amalgamated company as the holder of that financial product or as the person entitled to such rights or interests, as the case may be.

(4) [Repealed]

(5) Except as provided in this section, nothing in this Part derogates from the provisions of the Land Transfer Act 1952.

226 Powers of court in other cases

(1) If the court is satisfied that giving effect to an amalgamation proposal would unfairly prejudice a shareholder or creditor of an amalgamating company or a person to whom an amalgamating company is under an obligation, it may, on the application, made at any time before the date on which the amalgamation becomes effective, of that person, make any order it thinks fit in relation to the proposal, and may, without limiting the generality of this subsection, make an order—

(a) directing that effect must not be given to the proposal:

(b) modifying the proposal in such manner as may be specified in the order:

(2) An order may be made under subsection (1) on such conditions as the court thinks fit.

Part 14

Compromises with creditors

227 Interpretation

In this Part, unless the context otherwise requires, company includes an overseas company registered under Part 18 compromise means a compromise between a company and its creditors, including a compromise—

(a) cancelling all or part of a debt of the company; or

(b) varying the rights of its creditors or the terms of a debt; or

(c) relating to an alteration of a company’s constitution that affects the likelihood of the company being able to pay a debt

creditor includes—

(a) a person who, in a liquidation, would be entitled to claim in accordance with section 303 that a debt is owing to that person by the company; and

(b) a secured creditor proponent means a person referred to in section 228 who proposed a compromise in accordance with this Part.

228 Compromise proposal

(1) Any of the following persons may propose a compromise under this Part if that person has reason to believe that a company is or will be unable to pay its debts within the meaning of section 287—

(a) the board of directors of the company:

(b) a receiver appointed in relation to the whole or substantially the whole of the assets and undertaking of the company:

(d) with the leave of the court, any creditor or shareholder of the company.

(2) Where the court grants leave to a creditor or shareholder under subsection (1)(d), the court may make an order directing the company to supply to the creditor or shareholder, within such time as may be specified, a list of the names and addresses of the company’s creditors showing the amounts owed to each of them or such other information as may be specified to enable the creditor or shareholder to propose a compromise.

229 Notice of proposed compromise

(1) The proponent must compile, in relation to each class of creditors of the company, a list of creditors known to the proponent who would be affected by the proposed compromise, setting out—

(a) the amount owing or estimated to be owing to each of them; and

(b) the number of votes which each of them is entitled to cast on a resolution approving the compromise.

(2) The proponent must give to each known creditor, the company, any receiver or liquidator, and deliver to the

Registrar for registration,—

(a) notice in accordance with Schedule 5 of the intention to hold a meeting of creditors, or any 2 or more classes of creditors, for the purpose of voting on the resolution; and

(b) a statement—

i. containing the name and address of the proponent and the capacity in which the proponent is acting; and

ii. containing the address and telephone number to which inquiries may be directed during normal business hours; and

iii. setting out the terms of the proposed compromise and the reasons for it; and

iv. setting out the reasonably foreseeable consequences for creditors of the company of the compromise being approved; and

v. setting out the extent of any interest of a director in the proposed compromise; and

vi. explaining that the proposed compromise and any amendment to it proposed at a meeting of creditors or any classes of creditors will be binding on all creditors, or on all creditors of that class, if approved in accordance with section 230; and

vii. containing details of any procedure proposed as part of the proposed compromise for varying the compromise following its approval; and

230 Effect of compromise

(1) A compromise, including any amendment proposed at the meeting, is approved by creditors, or a class of creditors, if, at a meeting of creditors or that class of creditors conducted in accordance with Schedule 5, the compromise, including any amendment, is adopted in accordance with clause 5 of that schedule.

(2) A compromise, including any amendment, approved by creditors or a class of creditors of a company in accordance with this Part is binding on the company and on—

(a) all creditors; or

(b) if there is more than 1 class of creditors, on all creditors of that class— to whom notice of the proposal was given under section 229.

(3) If a resolution proposing a compromise, including any amendment, is put to the vote of more than 1 class of creditors, it is to be presumed, unless the contrary is expressly stated in the resolution, that the approval of the compromise, including any amendment, by each class is conditional on the approval of the compromise, including any amendment, by every other class voting on the resolution.

(4) The proponent must give written notice of the result of the voting to each known creditor, the company, any receiver or liquidator, and the Registrar.

231 Variation of compromise

(1) A compromise approved under section 230 may be varied either—

(a) in accordance with any procedure for variation incorporated in the compromise as approved; or

(b) by the approval of a variation of the compromise in accordance with this Part which, for that purpose, shall apply with such modifications as may be necessary as if any proposed variation were a proposed compromise.

(2) The provisions of this Part shall apply to any compromise that is varied in accordance with this section.

232 Powers of court

(1) On the application of the proponent or the company, the court may—

(a) give directions in relation to a procedural requirement imposed by this Part, or waive or vary any such requirement, if satisfied that it would be just to do so; or

(b) order that, during a period specified in the order, beginning not earlier than the date on which notice was given of the proposed compromise and ending not later than 10 working days after the date on which notice was given of the result of the voting on it,—

i. proceedings in relation to a debt owing by the company be stayed; or

ii. a creditor refrain from taking any other measure to enforce payment of a debt owing by the company.

(2) Nothing in subsection (1)(b) affects the right of a secured creditor during that period to take possession of, realise, or otherwise deal with, property of the company over which that creditor has a charge.

(3) If the court is satisfied, on the application of a creditor of a company who was entitled to vote on a compromise that—

(a) insufficient notice of the meeting or of the matter required to be notified under section 229 was given to that creditor; or

(b) there was some other material irregularity in obtaining approval of the compromise; or

(c) in the case of a creditor who voted against the compromise, the compromise is unfairly prejudicial to that creditor, or to the class of creditors to which that creditor belongs,— the court may order that the creditor is not bound by the compromise or make such other order as it thinks fit.

(4) An application under subsection (3) must be made not later than 10 working days after the date on which notice of the result of the voting was given to the creditor.

233 Effect of compromise in liquidation of company

(1) Where a compromise is approved under section 230, the court may, on the application of—

(a) the company; or

(b) a receiver appointed in relation to property of the company; or

(c) with the leave of the court, any creditor or shareholder of the company,— make such order as the court thinks fit with respect to the extent, if any, to which the compromise will, if the company is put into liquidation, continue in effect and be binding on the liquidator of the company.

(2) Where a compromise is approved under section 230 and the company is subsequently put into liquidation, the court may, on the application of—

(a) the liquidator; or

(b) a receiver appointed in relation to property of the company; or

(c) with the leave of the court, any creditor or shareholder of the company,— make such order as the court thinks fit with respect to the extent, if any, to which the compromise will continue in effect and be binding on the liquidator of the company.

234 Costs of compromise

Unless the court orders otherwise, the costs incurred in organising and conducting a meeting of creditors for the purpose of voting on a proposed compromise—

(a) must be met by the company; or

(b) if incurred by a receiver or a liquidator, are a cost of the receivership or liquidation; or

(c) if incurred by any other person, are a debt due to that person by the company and, if the company is put into liquidation, are payable in the order of priority specified in Schedule 7.

Part 15

Approval of arrangements, amalgamations, and compromises by court

235 Interpretation

In this Part, unless the context otherwise requires, arrangement includes a reorganization of the share capital of a company by the consolidation of shares of different classes, or by the division of shares into shares of different classes, or by both those methods

company means—

(a) a company within the meaning of section 2:

(b) an overseas company that is registered on the overseas register:

creditor includes—

(a) a person who, in a liquidation, would be entitled to claim in accordance with section 303 that a debt is owing to that person by the company; and

(b) a secured creditor.

236 Approval of arrangements, amalgamations, and compromises

(1) Notwithstanding the provisions of this Act or the constitution of a company, the court may, on the application of a company or any shareholder or creditor of a company, order that an arrangement or amalgamation or compromise shall be binding on the company and on such other persons or classes of persons as the court may specify and any such order may be made on such terms and conditions as the court thinks fit.

(2) Before making an order under subsection (1), the court may, on the application of the company or any shareholder or creditor or other person who appears to the court to be interested, or of its own motion, make any 1 or more of the following orders:

(a) an order that notice of the application, together with such information relating to it as the court thinks fit, be given in such form and in such manner and to such persons or classes of persons as the court may specify:

(b) an order directing the holding of a meeting or meetings of shareholders or any class of shareholders or creditors or any class of creditors of a company to consider and, if thought fit, to approve, in such manner as the court may specify, the proposed arrangement or amalgamation or compromise and, for that purpose, may determine the shareholders or creditors that constitute a class of shareholders or creditors of a company:

(c) an order requiring that a report on the proposed arrangement or amalgamation or compromise be prepared for the court by a person specified by the court and, if the court thinks fit, be supplied to the shareholders or any class of shareholders or creditors or any class of creditors of a company or to any other person who appears to the court to be interested:

(d) an order as to the payment of the costs incurred in the preparation of any such report:

(e) an order specifying the persons who shall be entitled to appear and be heard on the application to approve the arrangement or amalgamation or compromise.

(2A) If the arrangement or amalgamation or compromise involves a transfer or amalgamation that requires the written approval of the Reserve Bank of New Zealand under section 44 of the Insurance (Prudential Supervision) Act 2010, the court may not make an order under this section unless that approval has been given.

(3) An order made under this section has effect on and from the date specified in the order.

(4) Within 10 working days of an order being made by the court, the board of the company must ensure that a copy of the order is delivered to the Registrar for registration.

(5) If the board of a company fails to comply with subsection (4), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

236A Arrangement or amalgamation involving code company

(1) If a proposed arrangement or amalgamation affects the voting rights of a code company, the applicant for an order under section 236(1) must, at the same time as filing the application, notify the Takeovers Panel of the application.

(2) The court may not make an order under section 236(1) that affects the voting rights of a code company unless—

(a) the code company’s shareholders approve the arrangement or amalgamation in accordance with subsection (4); and

(b) either of the following applies:

i. the court is satisfied that the shareholders of the code company will not be adversely affected by the use of section 236(1) rather than the takeovers code to effect the change involving the code company; or

ii. the applicant has filed a statement from the Takeovers Panel indicating that the Takeovers Panel has no objection to an order being made under section 236(1).

(3) The court need not approve a proposed arrangement or amalgamation merely because the Takeovers Panel has no objection to an order being made under section 236(1).

(4) For the purposes of subsection (2)(a), the code company’s shareholders may only approve the arrangement or amalgamation in the following way:

(a) by a resolution approved by a majority of 75% of the votes of the shareholders in each interest class entitled to vote and voting on the question; and

(b) by a resolution approved by a simple majority of the votes of those shareholders entitled to vote.

(5) For the purposes of this section and section 236B,— affects the voting rights, in respect of an arrangement or amalgamation, means an arrangement or amalgamation that involves a change in the relative percentage of voting rights held or controlled by 1 or more shareholders interest class may be determined in accordance with the principles set out in Schedule 10 voting right has the meaning set out in section 2(1) of the Takeovers Act 1993.

236B Takeovers code does not apply where court order under section 236 The takeovers code does not apply where the court has made an order under section 236(1) that affects the voting rights of a code company.

237 Court may make additional orders

(1) Without limiting section 236, the court may, for the purpose of giving effect to any arrangement or amalgamation or compromise approved under that section, either by the order approving the arrangement or amalgamation or compromise, or by any subsequent order, provide for, and prescribe terms and conditions relating to,—

(a) the transfer or vesting of real or personal property, assets, rights, powers, interests, liabilities, contracts, and engagements:

(b) the issue of shares, financial products, or policies of any kind:

(d) the liquidation of any company:

(e) the provisions to be made for persons who voted against the arrangement or amalgamation or compromise at any meeting called in accordance with any order made under subsection (2)(b) of that section or who appeared before the court in opposition to the application to approve the arrangement or amalgamation or compromise:

(f) such other matters that are necessary or desirable to give effect to the arrangement or amalgamation or compromise.

(2) Within 10 working days of an order being made by the court, the board of the company must ensure that a copy of the order is delivered to the Registrar for registration.

(3) If the board of a company fails to comply with subsection (2), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).

238 Parts 13 and 14 not affected

The court may—

(a) approve an amalgamation under section 236 even though the amalgamation could be effected under Part 13:

(b) approve a compromise under section 236 even though the compromise could be approved under Part 14.

239 Application of section 233

The provisions of section 233 shall apply with such modifications as may be necessary in relation to any compromise approved under section 236.

Part 15A

Voluntary administration

Part 15A: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

Subpart 1—Preliminary

Subpart 1: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239A Objects of this Part

The objects of this Part are to provide for the business, property, and affairs of an insolvent company, or a company that may in the future become insolvent, to be administered in a way that—

(a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or

(b) if it is not possible for the company or its business to continue in existence, results in a better return for the company’s creditors and shareholders than would result from an immediate liquidation of the company.

239B Interpretation of some key terms

The following are some key terms used in this Part and their meanings:

administrator means the person who is appointed the administrator of the company in administration

deed administrator, who may or may not be the same person as the administrator, is the person who is appointed the administrator of the deed of company arrangement

deed of company arrangement means the deed that is executed by the company and its creditors providing for payments towards the creditors’ debts

watershed meeting means the creditors’ meeting called by the administrator to decide the future of the company and, in particular, whether the company and the deed administrator should execute a deed of company arrangement.

239C Interpretation of other terms

In this Part, unless the context otherwise requires,—

company includes an overseas company

convening period has the meaning given to it in section 239AT(2)

creditor includes—

(a) a person who, in a liquidation, would be entitled to claim in accordance with section 303 that a debt is owing to that person by the company; and

(b) a secured creditor

enforcement process, in relation to property, means—

(a) execution against that property; or

(b) any other enforcement process in relation to that property that involves a court or a sheriff

insolvent means, in relation to a company, that the company is unable to pay its debts

sheriff includes a person charged with the execution of a writ or other enforcement process.

239D When administration begins

The administration of a company begins when an administrator is appointed under this Part.

239EI When administration ends

(1) The administration of a company ends when—

(a) a deed of company arrangement is executed by both the company and the deed administrator; or

(b) the company’s creditors resolve that the administration should end; or

(2) However, the administration of a company may also end in the following instances:

(a) if the court orders that the administration end, for example because the court is satisfied that the company is solvent, the administration ends on the date specified in the order or, if no date is specified, when the order is made; or

(b) if the convening period expires without the watershed meeting having been convened or without an application having been made to extend the convening period, the administration ends at the end of that period; or

(c) if an application has been made to extend the convening period, which has expired after the application was made, the administration ends when the application is refused or otherwise disposed of without the convening period being extended; or

(d) if the watershed meeting ends without a resolution that the company execute a deed of company arrangement, the administration ends at the end of that meeting; or

(e) if the company fails to execute a proposed deed of company arrangement within the time allowed by section 239ACO or 239ACP, the administration ends when that time expires; or

(f) if the court appoints a liquidator or an interim liquidator, the administration ends at the time when the order is made.

239EA Voluntary administration of licensed insurers

If a company is a licensed insurer, this Part applies in respect of the insurer subject to subpart 3 of Part 4 of the Insurance (Prudential Supervision) Act 2010.

Subpart 2—Appointment of administrator

Subpart 2: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239F Who may be appointed administrator

(1) A natural person who is not disqualified under subsection (2) may be appointed an administrator of a company.

(2) Unless the court orders otherwise, a person is disqualified from appointment as an administrator if that person—

(a) is disqualified under section 280(1) from being appointed or acting as a liquidator of the company; or

(b) is prohibited from being an administrator by an order made under section 239ADV.

239G Administrator must consent in writing

A person must not be appointed the administrator of a company unless that person has consented in writing and has not withdrawn the consent at the time of appointment.

239H Who may appoint administrator

(1) An administrator may be appointed to a company by—

(a) the company (see section 239I); or

(b) if the company is in liquidation, the liquidator (see section 239J); or

(d) a secured creditor holding a charge over the whole, or substantially the whole, of the company’s property (see section 239K); or

(e) the court (see section 239L).

(2) If the company is already in administration, an administrator may be appointed only by—

(a) the court; or

(b) the creditors, as a replacement administrator for an administrator that the creditors have removed; or

239I Appointment by company

(1) A company may appoint an administrator if the board of the company has resolved that,—

(a) in the opinion of the directors voting for the resolution, the company is insolvent or may become insolvent; and

(b) an administrator of the company should be appointed.

(2) The appointment must be in writing and must state the date of the appointment. I (3) The company must not appoint an administrator if the company is already in liquidation.

(4) If an application has been filed for the appointment of a liquidator of the company by the court under section 241(2)(c), the company may only appoint an administrator if the administrator is appointed within 10 working days after service on the company of the application.

(5) Subsection (4) does not apply once the application has been finally disposed of.

239J Appointment by liquidator or interim liquidator

(1) The liquidator or interim liquidator of a company may appoint an administrator if he or she thinks that the company is insolvent or is likely to become insolvent.

(2) The appointment must be in writing and must state the date of the appointment.

(3) The liquidator or interim liquidator may appoint himself or herself administrator if he or she first obtains—

(a) the permission of the court; or

(b) in the case of a liquidator but not an interim liquidator, the approval of the company’s creditors in the form of a resolution passed at a meeting of the creditors.

(4) A liquidator or interim liquidator must not appoint as administrator a person who is the liquidator’s or interim liquidator’s business or professional partner, employer, or employee, unless the appointment has been approved by the company’s creditors in the form of a resolution passed at a creditors’ meeting.

(5) An administrator who is appointed to a company already in liquidation may apply to the court for an order under section 250 terminating the liquidation.

239K Appointment by secured creditor

(1) A person who holds a charge over the whole, or substantially the whole, of a company’s property may appoint an administrator if the charge has become, and is still, enforceable.

(2) The appointment must be in writing and must state the date of the appointment.

(3) A secured creditor must not appoint an administrator if the company is already in liquidation.

239L Appointment by court

(1) The court may appoint an administrator on the application of a creditor, the liquidator (if the company is in liquidation), the FMA (if the company is a financial markets participant), or the Registrar.

(2) The court may appoint an administrator if—

(a) the court is satisfied that the company is or may become insolvent and that an administration is likely to result in a better return for the company’s creditors and shareholders than would result from an immediate liquidation of the company; or

(b) it is just and equitable to do so.

(3) In the case of a licensed insurer, the court may appoint an administrator on the application of the Reserve Bank of New Zealand or a person referred to in subsection (1) if—

(a) subsection (2)(a) or (b) apply; or

(b) the insurer is failing to maintain a solvency margin (within the meaning of section 6(1) of the Insurance (Prudential Supervision) Act 2010).

239N Appointment of 2 or more administrators

(1) Two or more persons may be appointed administrators in any case where this Act provides for the appointment of an administrator.

(2) If 2 or more persons are appointed administrators of a company,—

(a) an administrator’s function or power may be performed or exercised by any one of them, or by any 2 or more of them together, except so far as the order, instrument, or resolution appointing them provides otherwise; and

(b) a reference in this Act to an administrator or the administrator refers to whichever 1 or more of the administrators the case requires.

239O Remuneration of administrator

(1) The administrator is entitled to charge reasonable remuneration for carrying out his or her duties and exercising his or her powers as administrator.

(2) The court may, on the application of the administrator, a director or officer of the company, a creditor, or a shareholder, review or fix the administrator’s remuneration at a level that is reasonable in the circumstances.

(3) A creditor or shareholder may make an application under subsection (2) only with the leave of the court.

Subpart 3—Resignation and removal of administrator

Subpart 3: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239P When office of administrator is vacant

The office of administrator is vacant if the administrator—

(a) resigns; or

(b) dies; or

(d) is removed by the court.

239Q Administrator may resign

(1) The administrator may resign by giving written notice to the company and to his or her appointor.

(2) The administrator must—

(a) give written notice of the resignation to as many of the company’s creditors as practicable; and

(b) advertise the resignation in accordance with section 3(1)(b).

239R Removal of administrator

(1) The administrator may be removed—

(a) by the court, on the application of a creditor, the liquidator (if the company is in liquidation), the FMA (if the company is a financial markets participant), or the Registrar; or

(b) by a resolution of creditors passed at the first creditors’ meeting; or

(c) by a resolution of creditors at a meeting convened under section 239T(1) to consider whether to remove a replacement administrator.

(2) The creditors may not remove the administrator by a resolution passed at a creditors’ meeting unless—

(a) the same resolution also appoints as administrator another person who is not disqualified; and

(b) the person named in the resolution as the new administrator has, before the resolution is considered, tabled at the meeting—

i. a signed, written consent to act as administrator; and

ii. an interests statement.

239S Appointor may appoint new administrator to fill vacancy

(1) The appointor of an administrator may appoint a replacement to fill the vacancy that occurs if the administrator—

(a) resigns; or

(b) dies; or

(2) The appointment of a replacement administrator by a company must be made by a resolution of the board of the company.

239T Creditors must consider appointment of replacement administrator

(1) A replacement administrator, unless appointed by the court or by the creditors under section 239R(1)(b), must convene a meeting of the creditors at which the creditors may vote to remove the replacement administrator and appoint another person in his or her place.

(2) The meeting must be held not more than 5 working days after the date on which the replacement administrator is appointed.

(3) The replacement administrator must convene the meeting by—

(a) giving written notice of the meeting to as many of the company’s creditors as reasonably practicable; and

(b) advertising the meeting in accordance with section 3(1)(b).

(4) The replacement administrator must take the steps in subsection (3) not less than 2 working days before the meeting.

Subpart 4—Effect of appointment of administrator

Subpart 4: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239U Outline of administrator’s role

While a company is in administration, the administrator—

(a) has control of the company’s business, property, and affairs; and

(b) may carry on that business and manage that property and those affairs; and

(d) may perform any function, and exercise any power, that the company or any of its officers could perform or exercise if the company were not in administration.

239V Administrator’s powers

(1) The administrator has the powers—

(a) to carry out the functions and duties of an administrator under this Act; and

(b) conferred on an administrator under this Act.

(2) An administrator’s powers include the powers to—

(a) begin, continue, discontinue, and defend legal proceedings; and

(b) carry on, to the extent necessary for the administration of the company, the business of the company; and

239W Administrator is company’s agent

The administrator of a company, when performing a function or exercising a power in that capacity, is the company’s agent.

239X Effect on directors

(1) The appointment of an administrator does not remove the directors of the company from office.

(2) However, a director of a company that is in administration must not exercise or perform, or purport to exercise or perform, a function or power as a director of the company except—

(a) with the prior, written approval of the administrator; or

(b) as expressly permitted by this Part.

239Y Effect on employees

(1) The appointment of an administrator does not automatically terminate an employment agreement to which the company is a party.

(2) The administrator is not personally liable for any obligation of the company under an employment agreement to which the company is a party, unless—

(a) the administrator expressly adopts the agreement in writing; or

(b) subsection (3) applies.

(3) The administrator is personally liable for payment of wages or salary that, during the administration of the company, accrue under a contract of employment with the company that was entered into before the administrator’s appointment, unless the administrator has lawfully given notice of the termination of the contract within 14 days of appointment.

(4) The court may, on the administrator’s application, extend the period of 14 days in subsection (3) within which notice of termination must be given, and may extend it on the terms and conditions, if any, that the court thinks appropriate.

(5) From the date of the appointment of the administrator, the duty of good faith set out in section 4 of the Employment Relations Act 2000 continues to apply between each employee of the company and his or her employer (who may be the administrator if the administrator has adopted the employment agreement under subsection (2)).

239Z Effect on dealing with company property

(1) A transaction or dealing by a company in administration, or by a person on behalf of the company, that affects the company’s property is void unless the transaction or dealing was entered into—

(a) by the administrator, on the company’s behalf; or

(b) with the administrator’s prior written consent; or

(2) The court may validate a transaction or dealing that is void under subsection (1).

(3) Subsection (1) does not apply to a payment made by a registered bank—

(a) out of an account kept by the company with the bank; and

(b) in good faith and in the ordinary course of the bank’s banking business; and

(c) on or before the day on which the bank was notified in writing by the administrator that the administration had begun, or before the bank had reason to believe that the company was in administration, whichever was earlier.

(4) A director or officer of the company commits an offence if he or she—

(a) purported, on the company’s behalf, to enter into a transaction or dealing that is void under subsection (1); or

(b) was in any other way knowingly concerned in, or party to, the void transaction or dealing, whether—

i. by act or omission; or

ii. directly or indirectly.

239AA Company officer’s liability for compensation for void transaction or dealing The court may order a director or officer of a company who is convicted of an offence under section 239Z(4) to compensate any person, including the company, who has suffered loss as a result of the act or omission constituting the offence.

239AB Effect on transfer of shares

(1) A share in a company in administration must not be transferred and the rights or liabilities of a shareholder of the company must not be altered.

(2) However, the administrator may consent to the transfer of a share in a company in administration if the administrator is satisfied that the transfer is in the best interests of the company’s creditors.

(3) Also, despite subsection (1), the court may make an order—

(a) for the transfer of a share in a company in administration, but only after the administrator has been asked to consent to the transfer and has refused or failed to respond in a reasonable time; or

(b) altering the rights and liabilities of a shareholder in a company in administration.

239AC Effect on liquidation

(1) The appointment of an administrator to a company in liquidation suspends the liquidation, including the powers of the liquidator to act on the company’s behalf, but does not remove the liquidator from office.

(2) The liquidator may apply to the court for any orders that may be necessary in relation to the suspension of the liquidation.

(3) In this section, liquidator includes a liquidator or interim liquidator appointed before the administration began.

239AD Effect on receivership

The appointment of an administrator to a company in receivership does not remove the receiver from office.

Subpart 5—Administrator’s investigation of company’s affairs

Subpart 5: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AE Administrator must investigate company’s affairs and consider possible courses of action

As soon as practicable after the administration of a company begins, the administrator must—

(a) investigate the company’s business, property, affairs, and financial circumstances; and

(b) form an opinion about each of the following matters:

i. whether it would be in the creditors’ interests for the company to execute a deed of company arrangement:

ii. whether it would be in the creditors’ interests for the administration to end:

iii. whether it would be in the creditors’ interests for a liquidator to be appointed.

239AF Directors’ statement of company’s position

(1) Within 5 working days after the administration of a company begins, the directors must give to the administrator a statement about the company’s business, property, affairs, and financial circumstances.

(2) The administrator may extend the time for compliance with subsection (1).

(3) The administrator must table the directors’ statement—

(a) at the first creditors’ meeting; or

(b) if the administrator has extended the time for compliance by the directors, at the watershed meeting.

239AG Administrator’s right to documents, etc

Sections 261 and 263 to 267 apply with all necessary modifications as if every reference to liquidator and liquidation was a reference to administrator and administration.

239AH Administrator may lodge report with Registrar

The administrator may lodge a report with the Registrar specifying any matter that, in his or her opinion, should be brought to the Registrar’s notice.

239AI Administrator must report misconduct

(1) The administrator must as soon as practicable report the matter to the Registrar if the administrator believes that—

(a) a past or present director, officer, or shareholder of the company has committed an offence in relation to the company; or

(b) an offence material to the administration has been committed by the company or any director, officer, or shareholder of the company under this Act or any of the following Acts:

i. the Crimes Act 1961:

ii. the Financial Markets Conduct Act 2013:

iii. [Repealed]

iv. [Repealed]

v. the Takeovers Act 1993; or

i. may have misapplied or retained or become liable or accountable for the company’s money or property (whether in New Zealand or elsewhere); or

ii. may have been guilty of negligence, default, or breach of duty or trust in relation to the company.

(2) In any case where the administrator makes a report under subsection (1), the administrator must give the Registrar assistance that the Registrar may reasonably require by way of—

(a) provision of information; and

(b) access to documents; and

(3) In any case where the court is satisfied that the administrator should make a report under subsection (1) and has not done so, the court may, on the application of an interested person, direct the administrator to make a report.

Subpart 6—Creditors’ meetings generally

Subpart 6: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AJ Administrator must call creditors’ meetings

The administrator must call—

(a) the first creditors’ meeting, for the appointment (if any) of a committee of creditors; and

(b) the watershed meeting (see section 239AS); and

239AK Conduct of creditors’ meetings

(1) The following clauses of Schedule 5 apply to creditors’ meetings called under this Part as if references to the liquidator were references to the administrator:

(a) subject to section 239AZ, clause 4; and

(b) clauses 6 to 11.

(2) At any meeting of creditors or class of creditors held under this Part, a resolution is adopted if a majority in number representing 75% in value of the creditors or class of creditors voting in person, or by proxy vote or by postal vote, vote in favour of the resolution.

(3) The administrator or the administrator’s nominee must chair a creditors’ meeting, and has a casting vote.

(4) For the purposes of voting at a creditors’ meeting, the administrator may estimate the amount of a creditor’s claim that is for any reason uncertain.

(5) On the application of the administrator, or of a creditor who is aggrieved by an estimate made by the administrator, the court must determine the amount of the claim as it sees fit.

239AL Joint meetings of creditors of related companies in administration

(1) The administrators of related companies may call meetings of creditors of their respective companies to be held at the same time and place, but only with the consent of all the creditors.

(2) In the case of a joint meeting, a creditor of a company in administration may vote only on a resolution that relates to the administration of the company of which that person is a creditor.

(3) For the purposes of subsection (1), a creditor is taken to have consented to the joint meeting if—

(a) a written notice that complies with subsection (4) accompanies the notice of meeting; and

(b) the creditor has not objected to the joint meeting within the time, and in the manner, specified in the written notice.

(4) The notice must—

(a) be in writing; and

(b) state the administrator’s postal, email, and street addresses; and

(d) state that the creditor to whom it is sent may object to the joint meeting by sending a written objection to the administrator at the administrator’s postal, email, or street address for receipt by the administrator within the time specified in the notice; and

(e) state that, unless the creditor objects in accordance with the notice, the creditor will be taken to have agreed to the joint meeting.

(5) For the purposes of subsection (4)(d), the administrator may in his or her discretion determine the time for receipt of an objection, but must specify a time that is reasonably practicable in the circumstances.

239AM Power of court where outcome of voting at creditors’ meeting determined by related entity

(1) This section applies if the court is satisfied that—

(a) a resolution at a creditors’ meeting under this Part was passed, defeated, or required to be decided by a casting vote; and

(b) the resolution would not have been passed, defeated, or required to be decided by a casting vote if the vote or votes cast by a particular related creditor or particular related creditors were disregarded; and

i. is contrary to the interests of the creditors, or a class of creditors, as a whole; and

ii. has prejudiced, or is reasonably likely to prejudice, the interest of the creditors who voted against the resolution, or for it, as the case may be, to an extent that is unreasonable having regard to—

(A) the benefits accruing to the related creditor, or to some or all of the related creditors, from the resolution, or from the failure to pass the resolution; and

(B) the nature of the relationship between the related creditor and the company, or between the related creditors and the company; and

(2) The court may, on the application of a creditor or the administrator,—

(a) order that the resolution be set aside:

(b) order that a new meeting be held to consider and vote on the resolution:

(c) order that a specified related creditor or creditors must not vote on the resolution or on a resolution to vary or amend it:

(d) make any other orders that the court thinks necessary.

(3) In this section,—

related creditor means a creditor who is a related entity of the company in administration

related entity means, in relation to the company in administration,—

(a) a promoter; or

(b) a relative or spouse of a promoter; or

(d) a director or shareholder; or

(e) a relative or spouse of a director or shareholder; or

(f) a relative of a spouse of a director or shareholder; or

(g) a related company; or

(h) a beneficiary under a trust of which the company in administration is or has at any time been a trustee; or

(i) a relative or spouse of that beneficiary; or

(j) a relative of a spouse of that beneficiary; or

(k) a company one of whose directors is also a director of the company in administration; or

(l) a trustee of a trust under which a person (A) is a beneficiary, if A is a related entity of the company in administration under this subsection.

Subpart 7—First creditors’ meeting to appoint creditors’ committee

Subpart 7: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AN Administrator must call first creditors’ meeting

(1) The administrator must call the first creditors’ meeting to—

(a) decide whether to appoint a creditors’ committee and, if so, to appoint its members; and

(b) decide whether to replace the administrator.

(2) The meeting must be held within 8 working days after the date on which the administration began.

239AO Notice of first and subsequent creditors’ meetings

(1) The administrator must call the first and subsequent creditors’ meetings by—

(a) giving written notice of the meeting to as many of the company’s creditors as reasonably practicable; and

(b) advertising the meeting in accordance with section 3(1)(b).

(2) The administrator must take the steps in subsection (1) not less than 5 working days before the meeting.

239AO Notice of first and subsequent creditors’ meetings

(1) The administrator must call the first and subsequent creditors’ meetings by—

(a) giving written notice of the meeting to as many of the company’s creditors as reasonably practicable; and

(b) advertising the meeting in accordance with section 3(1)(b).

(2) The administrator must take the steps in subsection (1) not less than 5 working days before the meeting.

239AP Administrator must table interests statement

(1) The administrator must table at the first creditors’ meeting an interests statement that complies with subsection (2).

(2) The interests statement must disclose whether the administrator, or a firm of which the administrator is a partner, has a relationship (whether professional, business, or personal) with the company in administration, or any of its officers, shareholders, or creditors.

(3) The administrator must, before tabling the interests statement, make the inquiries that are reasonably necessary for ensuring that the interests statement is complete.

239AQ Functions of creditors’ committee

(1) The functions of the creditors’ committee of a company in administration are—

(a) to consult with the administrator about matters relating to the administration; and

(b) to receive and consider reports by the administrator.

(2) The committee must not give directions to the administrator, but the administrator must report to the committee about matters relating to the administration as and when the committee reasonably requires.

**239AR Membership of creditors’ committee

A person may be a member of the creditors’ committee only if he or she is—

(a) a creditor of the company; or

(b) the agent of a creditor under a general power of attorney; or

Subpart 8—Watershed meeting

Subpart 8: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AS What watershed meeting is

The watershed meeting is the meeting of creditors called by the administrator to decide the future of the company and, in particular, whether the company and the deed administrator should execute a deed of company arrangement.

239AT Administrator must convene watershed meeting

(1) The administrator must convene the watershed meeting within the convening period.

(2) The convening period is the period of 20 working days after the date on which the administrator is appointed, and includes any period for which it is extended under subsection (3).

(3) The court may, on the administrator’s application, extend the convening period.

(4) The application to extend may be made before or after the convening period has expired.

239AU Notice of watershed meeting

(1) The administrator must convene the watershed meeting by—

(a) giving written notice of the meeting to as many of the company’s creditors as reasonably practicable; and

(b) advertising the meeting in accordance with section 3(1)(b).

(2) The administrator must take the steps in subsection (1) not less than 5 working days before the meeting.

(3) The following documents must accompany the notice of the watershed meeting that is sent to the company’s creditors:

(a) a report by the administrator about—

i. the company’s business, property, affairs, and financial circumstances; and

ii. any other matter material to the creditors’ decisions to be considered at the meeting; and

(b) a statement setting out the administrator’s opinion, with reasons for that opinion, about each of the following matters:

i. whether it would be in the creditors’ interests for the company to execute a deed of company arrangement:

ii. whether it would be in the creditors’ interests for the administration to end:

iii. whether it would be in the creditors’ interests for the company to be placed in liquidation; and

239AV When watershed meeting must be held

The watershed meeting must be held within 5 working days after the end of the convening period or extended convening period, as the case may be.

239AW Directors must attend watershed meeting

(1) The directors of the company must attend the watershed meeting, including any occasion to which the meeting is adjourned, but cannot be required to answer questions at the meeting.

(2) A director need not attend the watershed meeting if—

(a) the director has a valid reason for not attending; or

(b) the administrator or the creditors by resolution have excused the director from attending.

(3) A director attending the watershed meeting must leave for all or part of the remainder of the meeting if required by a resolution of the creditors to do so.

(4) A director who contravenes subsection (1) commits an offence, unless subsection (2) applies, and is liable on conviction to the penalty set out in section 373(1).

*239AX Disclosure of voting arrangements

The administrator and the directors of the company under administration must, before the meeting votes on any resolution, inform the meeting of any voting arrangement of which the administrator or a director, as the case may be, is aware that requires 1 or more creditors to vote in a particular way on any resolution that will or may be voted on by the meeting.

239AY Court may order that pooled property owners are separate class

(1) On the application of the administrator, the court may order that, for the limited purposes of this section only, pooled property owners are a separate class.

(2) In this section—

pooled property owners means all the owners or lessors of property that is pooled in a single enterprise forming part of the business of a company in administration

requisite majority means a majority in number representing 75% in value of the pooled property owners voting in person or by proxy vote or by postal vote

resolution means a resolution that the company in administration execute the deed of company arrangement specified in the resolution.

(3) Each pooled property owner is bound by the deed of company arrangement as if that person had voted in favour of the resolution at the watershed meeting if—

(a) the court has ordered that the pooled property owners are a separate class; and

(b) at the watershed meeting the creditors (including the pooled property owners) approved the resolution; and

(c) the requisite majority of the pooled property owners were included in the creditors who voted in favour of the resolution.

(4) It is not necessary that a separate meeting of the pooled property owners be held for the purpose of voting on the resolution.

(5) Subsection (3) applies no matter what sections 239ACS and 239ACT say.

239AZ Adjournment of watershed meeting

(1) The watershed meeting may be adjourned, but only to a day that is not more than 30 working days after the first day on which the meeting was held.

(2) However, the court may, on the administrator’s application, order that the meeting be adjourned for more than 30 working days.

239ABA What creditors may decide at watershed meeting

At the watershed meeting, the creditors may—

(a) resolve that the company execute a deed of company arrangement specified in the resolution (and it does not matter that the deed to be executed differs from any proposed deed of which details were given in the notice of the meeting); or

(b) resolve that the administration should end; or

239ABB What happens if proposed deed not fully approved at watershed meeting

(1) If, at the watershed meeting, the creditors resolve that the company execute a deed of company arrangement, but the proposed deed is not fully approved at the meeting, then the administrator must take the steps set out in section 239ACP (briefly, the administrator must draft a deed and circulate it to creditors).

(2) The administrator must inform the creditors at the watershed meeting that—

(a) they have the right to inspect and comment on the draft deed; and

(b) the administrator has the ultimate responsibility for drafting the deed and the executed deed may differ from the draft.

Subpart 9—Protection of company’s property during administration

Subpart 9: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABC Charge unenforceable

Subject to subpart 10, a person must not, during the administration of a company, enforce a charge over the property of the company, except—

(a) with the administrator’s written consent; or

(b) with the permission of the court.

239ABD Owner or lessor must not recover property used by company

During the administration of a company, the owner or lessor of property that was used or occupied by, or is in the possession of, the company must not take possession of the property or otherwise recover it, except—

(a) with the administrator’s written consent; or

(b) with the permission of the court.

239ABE Proceeding must not be begun or continued

During the administration of a company, a proceeding in a court against the company or in relation to any of its property must not be begun or continued, except—

(a) with the administrator’s written consent; or

(b) with the permission of the court and in accordance with the terms that the court imposes.

239ABF Administrator not liable in damages for refusing consent

An administrator is not liable in damages for a refusal to give an approval or consent for the purposes of this subpart.

239ABG Enforcement process halted

During the administration of a company, an enforcement process in relation to the company’s property must not be begun or continued except with the permission of the court and in accordance with the terms that the court imposes.

239ABH Duties of court officer in relation to company’s property

(1) This section applies to a court officer, that is, a sheriff or registrar or other appropriate officer of the court, who receives written notice that a company is in administration.

(2) During the administration, the court officer must not—

(a) take action to sell property of the company under an execution process; or

(b) pay to a person (other than the administrator)—

i. proceeds of the sale of the company’s property (at any time) under an execution process; or

ii. money of the company seized (at any time) under an execution process; or

iii. money paid (at any time) to avoid seizure or sale of property of the company under an execution process; or

(d) pay to any person (other than the administrator) money received because of the attachment of a debt due to the company.

(3) The court officer must deliver to the administrator any property of the company that is in the court officer’s possession under an execution process (whenever begun).

(4) The court officer must pay to the administrator all proceeds or money of a kind referred to in subsection (2)(b) or (d) that—

(a) are in the court officer’s possession; or

(b) have been paid into the court and have not since been paid out.

(5) The costs of the execution or attachment are a first charge over property delivered under subsection (3) or proceeds or money paid under subsection (4).

(6) In order to give effect to a charge under subsection (5) on proceeds or money the court officer may retain, on behalf of the person entitled to the charge, so much of the proceeds as the court officer thinks necessary.

(7) The court may, if it is satisfied that it is appropriate to do so, permit the court officer to take action, or make a payment, that subsection (2) would otherwise prevent.

(8) A person who buys property in good faith under a sale under an execution process obtains a good title to the property as against the company and the administrator, despite anything else in this section.

239ABIL is pendens taken to exist

(1) This section has effect only for the purposes of a law about the effect of a lis pendens on purchasers or mortgagees.

(2) During the administration of a company, an application for the appointment of a liquidator to the company is taken to be pending.

(3) An application that is taken because of subsection (2) to be pending constitutes a lis pendens.

239ABJ Administration not to trigger enforcement of guarantee of liability of director or relative

(1) During the administration of a company, except with the court’s permission and in accordance with the terms that the court may impose, a guarantee of a liability of the company must not be enforced against—

(a) a director of the company; or

(b) that person’s spouse or relative.

(2) In this section, liability means a debt, liability, or other obligation.

Subpart 10—Rights of secured creditor, owner, or lessor

Subpart 10: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABK Meaning of terms used in this subpart

In this subpart, unless the context otherwise requires,— decision period means, in relation to a secured creditor holding a charge over property of a company in administration,

the period that—

(a) begins—

i. if notice of the appointment of the administrator must be given to the secured creditor under section 239ADW(1)(c), on the day when that notice is given; or

ii. in any other case, on the day when the administration begins; and

(b) ends at the end of the tenth working day after the day when it begins enforce, in relation to a charge over property of a company in administration, includes—

(a) to appoint a receiver of property of the company under a power contained in an instrument relating to the charge; or

(b) to obtain an order for the appointment of a receiver of that property for the purpose of enforcing the charge; or

(d) to appoint a person to enter into possession or assume control (whether as agent for the secured creditor or for the company) for that purpose; or

(e) to exercise, as secured creditor or as a receiver or person so appointed, a right, power, or remedy existing because of the charge, whether arising under an instrument relating to the charge, under a written or unwritten law, or otherwise.

239ABL If secured creditor acts before or during decision period

(1) This section applies if—

(a) the whole, or substantially the whole, of the property of a company in administration is subject to a charge; and

(b) before or during the decision period, the secured creditor enforces the charge in relation to all property of the company subject to the charge, whether or not the charge is enforced in the same way in relation to all that property.

(2) This section also applies if—

(a) a company is in administration; and

(b) the same person is the secured creditor in relation to each of 2 or more charges over the property of the company; and

(c) the property of the company (in this subsection called the charged property) subject to the respective charges together constitutes the whole, or substantially the whole, of the company’s property; and

(d) before or during the decision period, the secured creditor enforces together the charges in relation to all the charged property—

i. whether or not the charges are enforced in the same way in relation to all the charged property; and

ii. whether or not any of the charges is enforced in the same way in relation to all the property of the company subject to that charge; and

iii. in so far as the charges are enforced in relation to property of the company in a way referred to in paragraph (a), (b), or (d) of the definition of enforce in section 239ABK, whether or not the same person is appointed in respect of all of the last-mentioned property.

(3) Nothing in section 239ABC or in an order under section 239ABO prevents any of the following persons from enforcing the charge:

(a) the secured creditor:

(b) a receiver or person appointed as mentioned in paragraph (a), (b), or (d) of the definition of enforce in section 239ABK as that definition applies in relation to the charge, or any of the charges (even if appointed after the decision period).

(4) Section 239Z does not apply in relation to a transaction or dealing that affects property of the company and is entered into by the secured creditor or a receiver or person of a kind referred to in subsection (3)(b) in the performance or exercise of a function or power as that secured creditor, receiver, or person, as the case may be.

239ABM If enforcement of charges begins before administration

(1) This section applies if, before the beginning of the administration of a company, a secured creditor, receiver, or other person, for the purpose of enforcing a charge over the property,—

(a) entered into possession, or assumed control, of the property of the company; or

(b) entered into an agreement to sell the property; or

(d) publicly invited tenders for the purchase of the property; or

(e) exercised any other power in relation to the property.

(2) Nothing in section 239ABC prevents the secured creditor, receiver, or other person from enforcing the charge in relation to the property.

(3) Section 239Z does not apply in relation to a transaction or dealing that affects the property and is entered into, as the case may be,—

(a) in the exercise of a power of the secured creditor as secured creditor; or

(b) in the performance or exercise of a function or power of the receiver or other person.

239ABN Charge over perishable property

(1) This section applies if perishable property of a company in administration is subject to a charge.

(2) Nothing in section 239ABC prevents the secured creditor, a receiver, or a person appointed (at any time) as mentioned in paragraph (a), (b), or (d) of the definition of enforce in section 239ABK from enforcing the charge, so far as it is a charge over perishable property.

(3) Section 239Z does not apply in relation to a transaction or dealing that affects perishable property of the company and is entered into, as the case may be,—

(a) in the exercise of a power of the secured creditor as secured creditor; or

(b) in the performance or exercise of a function or power of the receiver or other person.

239ABO Court may limit powers of secured creditor, etc, in relation to property subject to charge

(1) This section—

(a) applies if,—

i. for the purpose of enforcing a charge over property of a company, the secured creditor, a receiver, or other person does an act of a kind referred to in section 239ABM(1); and

ii. the company is in administration when the secured creditor, receiver, or other person does that act, or an administrator is later appointed to the company:

(b) does not apply in a case where section 239ABL applies.

(2) On an application by the administrator, the court may order the secured creditor, receiver, or other person not to perform specified functions or exercise specified powers, except as permitted by the order.

(3) The court may make an order only if satisfied that what the administrator proposes to do during the administration will adequately protect the secured creditor’s interests.

(4) An order—

(a) may be made only, and has effect only, during the administration; and

(b) has effect despite section 239ABM and 239ABN.

239ABP Giving notice under security agreement

Section 239ABC does not prevent a person from giving a notice under the provisions of a security agreement.

239ABQ If recovery of property begins before administration

(1) This section applies if, before the beginning of the administration of a company, a receiver or other person, for the purpose of enforcing a right of the owner or lessor of the property to take possession of the property or otherwise recover it,—

(a) entered into possession of, or assumed control of, property used or occupied by, or in the possession of, the company; or

(b) exercised any other power in relation to the property.

(2) Section 239ABD does not prevent the receiver or other person from performing a function, or exercising a power, in relation to the property.

(3) Section 239Z does not apply in relation to a transaction or dealing that affects the property and is entered into in the performance or exercise of a function or power of the receiver or other person.

239ABR Recovering perishable property

(1) Nothing in section 239ABD prevents a person from taking possession of, or otherwise recovering, perishable property.

(2) Section 239Z does not apply in relation to a transaction or dealing that affects perishable property and is entered into for the purpose of enforcing a right of the owner or lessor of the property to take possession of the property or otherwise recover it.

239ABS Court may limit powers of receiver, etc, in relation to property used by company

(1) This section applies if,—

(a) for the purpose of enforcing a right of the owner or lessor of property used or occupied by, or in the possession of, a company to take possession of the property or otherwise recover it, a person—

i. enters into possession, or assumes control, of the property; or

ii. exercises any other power in relation to the property; and

(b) the company is in administration when the person does so, or an administrator is later appointed to the company.

(2) On an application by the administrator, the court may order the person not to perform specified functions, or exercise specified powers, in relation to the property, except as permitted by the order.

(3) The court may make an order only if satisfied that what the administrator proposes to do during the administration will adequately protect the interests of the owner or lessor.

(4) An order—

(a) may be made only, and has effect only, during the administration; and

(b) has effect despite sections 239ABQ and 239ABR.

239ABT Giving notice under agreement about property

Nothing in section 239ABD prevents a person from giving a notice to a company under an agreement relating to property that is used or occupied by, or is in the possession of, the company.

Subpart 11—Interface with liquidation

Subpart 11: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ABU When liquidator may be appointed to company in administration

A liquidator may be appointed to a company in administration—

(a) by the court, on an application for the appointment of a liquidator under section 241(2)(c); or

(b) by resolution of the creditors at the watershed meeting or at a meeting convened under section 239ADF to consider the termination of the deed of company arrangement.

239ABV Court may adjourn application for liquidation

The court may adjourn an application under section 241(2)(c) for the appointment of a liquidator of a company in administration if the court is satisfied that it is in the interests of the company’s creditors for the company to continue in administration rather than be placed in liquidation.

239ABW Court must not appoint interim liquidator if administration in creditors’ interests The court must not appoint an interim liquidator of a company in administration if the court is satisfied that it is in the interests of the company’s creditors for the company to continue in administration rather than have an interim liquidator appointed.

239ABX Effect of appointment of liquidator

The appointment of a liquidator to a company in administration ends the administration.

239ABY Former administrator is default liquidator

In the case of the appointment of a liquidator to a company in administration by the creditors, the former administrator is the liquidator if—

(a) the creditors’ resolution does not nominate a person for appointment; or

(b) the person nominated is disqualified from acting as the liquidator or has not consented in writing; or

239ABZ Person in control of company must lodge revised report with Registrar

(1) This section applies when a liquidator is appointed to a company that is in administration or under a deed of company arrangement.

(2) The administrator or, if the company is under a deed of company arrangement, the deed administrator must as soon as practicable lodge the following documents with the Registrar:

(a) a copy of the administrator’s report that accompanied the notice to creditors of the watershed meeting; and

(b) a further report updating the administrator’s report with any matters of which the administrator or deed administrator is aware that—

i. are not referred to in the administrator’s report, or have changed since that report; and

ii. affect the financial position of the company.

(3) If there is no administrator or deed administrator acting when the company is placed in liquidation, the director or directors of the company at the date of liquidation must take the steps described in subsection (2) as if they were the administrator or deed administrator.

239ACA Act of administrator in good faith must not be set aside in liquidation

A payment made, transaction entered into, or any other act or thing done, in good faith, by or with the consent of the administrator of a company in administration, must not be set aside in a liquidation of the company.

239ACB Voidable transactions

(1) The voidable transaction provisions do not apply to a transaction by a company in administration if the transaction is—

(a) carried out by or with the authority of the administrator or deed administrator; or

(b) specifically authorised by the deed of company arrangement and carried out by the deed administrator.

(2) In this section, voidable transaction provisions means sections 292 to 296.

Subpart 12—Deed administrator

Subpart 12: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACC Who is deed administrator

The administrator of the company is the deed administrator, unless the creditors at the watershed meeting by resolution appoint someone else to be the deed administrator.

239ACD Who may be appointed deed administrator

(1) A natural person who is not disqualified under subsection (2) may be appointed deed administrator.

(2) Unless the court orders otherwise, a person is disqualified from appointment as a deed administrator if that person is—

(a) disqualified under section 280(1) from acting as a liquidator of the company; or

(b) prohibited from being a deed administrator by an order made under section 239ADV.

239ACE Deed administrator must consent in writing

A person must not be appointed deed administrator unless that person has consented in writing and has not withdrawn the consent at the time when the deed of company arrangement is executed.

239ACF Appointment of deed administrator must not be revoked

Except in the case of removal by the court, the appointment of the deed administrator must not be revoked.

239ACG Appointment of 2 or more deed administrators

(1) Two or more persons may be appointed deed administrators in any case where this Act provides for the appointment of a deed administrator.

(2) If 2 or more persons are appointed deed administrators jointly,—

(a) a deed administrator’s function or power may be performed or exercised by any one of them, or by any 2 or more of them together, except so far as the order, instrument, or resolution appointing them provides otherwise; and

(b) a reference in this Act to a deed administrator or the deed administrator refers to whichever 1 or more of the deed administrators the case requires.

239ACH When office of deed administrator vacant

The office of the deed administrator is vacant if the deed administrator—

(a) resigns; or

(b) becomes disqualified from appointment as a deed administrator (see section 239ACD(2)); or

239ACI Deed administrator may resign

The deed administrator may resign by giving written notice to the company.

239ACJ Removal of deed administrator

(1) The court may—

(a) remove the deed administrator, and appoint a person in his or her place; or

(b) appoint a new deed administrator, if the deed of company arrangement has not yet terminated but for some reason no deed administrator is acting.

(2) The court may make an order under subsection (1) on the application of a creditor of the company, a shareholder, the liquidator (if the company is in liquidation), the FMA (if the company is a financial markets participant), or the Registrar.

239ACK Remuneration of deed administrator

(1) The deed administrator is entitled to charge reasonable remuneration for carrying out his or her duties and exercising his or her powers as deed administrator.

(2) The court may, on the application of the deed administrator, a director or officer of the company, a creditor, or a shareholder, review or fix the deed administrator’s remuneration at a level that is reasonable in the circumstances.

(3) A creditor or shareholder may make an application under subsection (2) only with the leave of the court.

239ACL Deed administrator may sell shares in company

(1) The deed administrator may sell existing shares in the company—

(a) with the consent of the shareholder in question; or

(b) if the shareholder does not consent, with the permission of the court given on an application of the deed administrator.

(2) The shareholder concerned, a creditor, the FMA (if the company is a financial markets participant), or the Registrar may oppose an application by the administrator for the court’s permission.

Subpart 13—Execution and effect of deed of company arrangement

Subpart 13: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACM When this subpart applies

This subpart applies when the creditors, at the watershed meeting, have resolved that the company execute a deed of company arrangement.

239ACN Preparation and contents of deed

(1) The deed administrator must prepare a document that sets out the terms of the deed.

(2) The document must also specify the following:

(a) who the deed administrator is:

(b) the property of the company (whether or not it is already owned by the company when it executes the deed) that will be available to pay creditors:

(d) to what extent the company will be released from its debts:

(e) the conditions (if any) for the deed to come into operation:

(f) the conditions (if any) for the deed to continue in operation:

(g) the circumstances in which the deed terminates:

(h) the order in which the proceeds of realization of the property referred to in paragraph (b) will be distributed among creditors who are bound by the deed:

(i) the day (which is called the cut-off day and which must not be later than the day when the administration began) on or before which creditors’ claims must have arisen if they are to be admissible under the deed.

(3) The document is treated as including any prescribed provisions, except those prescribed provisions that the document expressly excludes.

239ACO Execution of deed

(1) The deed is a deed of company arrangement when it is executed by both the company in administration and the deed administrator.

(2) The deadline for the execution of the deed by the company and the deed administrator is—

(a) 15 working days after the watershed meeting has approved it; or

(b) the further time that the court allows, if the deed administrator has applied to the court for an extension before the end of the initial period of 15 working days after approval.

(3) The company may not execute the deed unless the board of the company has, by resolution, authorised the deed to be executed by the company or on its behalf.

(4) Subsection (3) has effect despite section 239X, but does not limit the functions and powers of the administrator of the company.

239ACP Procedure if deed not fully approved at watershed meeting

(1) If, at the watershed meeting, the creditors resolve that the company execute a deed of company arrangement, but the proposed deed is not fully approved at the meeting, then—

(a) the administrator must draft the complete deed and circulate it to the creditors within 10 working days after the meeting (called in this section the preparation period); and

(b) the creditors have a period of 3 working days (called in this section the inspection period) after the end of the preparation period in which to inspect and comment on the deed; and

(c) the company and the deed administrator must execute the deed within 2 working days (called in this section the execution period) after the end of the inspection period.

(2) The court may extend the preparation period by up to 10 working days, on an application by the administrator, but only if the application is made within the original preparation period.

(3) The court may extend the execution period by up to 2 working days, on an application by the administrator, but only if the application is made within the original execution period.

239ACQ Creditor must not act inconsistently with deed, etc, before execution

(1) In this section, interim period means the period between a resolution passed at the watershed meeting that the company execute a deed of company arrangement and the sooner of—

(a) execution of the deed by the company and the deed administrator; or

(b) expiry of the period during which the deed may be executed.

(2) In the interim period, in so far as a person would be bound by the deed if it had already been executed, that person—

(a) must not do anything inconsistent with the deed, except with the permission of the court; and

(b) must not take a step that is prohibited under section 239ACU.

239ACR Company’s failure to execute deed

If the creditors at the watershed meeting have passed a resolution that the company execute a deed of company arrangement, and the company fails to do so within the deadline for execution, then, notwithstanding section 239E(2)(e),—

(a) the administrator must apply for the appointment of a liquidator to the company; or

(b) if the company is already in liquidation, the administrator must apply for the liquidation to resume.

239ACS Who is bound by deed

A deed of company arrangement binds—

(a) the company’s creditors, to the extent provided by section 239ACT; and

(b) the company; and

(d) the deed administrator.

239ACT Extent to which deed binds creditors

(1) A deed of company arrangement binds all creditors in respect of claims that arise on or before the cut-off day (see section 239ACN(2)(i)) specified in the deed.

(2) This section does not prevent a secured creditor from enforcing or otherwise dealing with the charge, except so far as—

(a) the deed provides otherwise in relation to a secured creditor who at the watershed meeting voted in favour of the resolution as a result of which the company executed the deed; or

(b) the court orders otherwise under section 239ACV(1)(a).

(3) This section does not affect a right that an owner or lessor of property has in relation to that property, except so far as—

(a) the deed provides otherwise in relation to an owner or lessor of property who at the watershed meeting voted in favour of the resolution as a result of which the company executed the deed; or

(b) the court orders otherwise under section 239ACV(1)(b).

239ACU Person bound by deed must not take steps to liquidate, etc

(1) A person who is bound by a deed of company arrangement must not, while the deed is in force,—

(a) apply, or continue with an application, to the court for the appointment of a liquidator of the company:

(b) except with the court’s permission, begin or continue a proceeding against the company or in relation to any of its property:

(2) In this section, property includes property used or occupied by the company, or in its possession.

239ACV Court may restrain creditors and others from enforcing charge or recovering property

(1) The court may, at any time after creditors have resolved at the watershed meeting that a deed of company arrangement be executed, order that, except as permitted by the order,—

(a) a secured creditor must not enforce or otherwise deal with the charge; or

(b) the owner or lessor of property that is used or occupied by the company or is in the company’s possession must not take possession of the property or otherwise recover it.

(2) The court may make the order only if—

(a) it is satisfied that achieving the purposes of the deed would be materially adversely affected if the order was not made; and

(b) having regard to the terms of the deed and the order, and any other relevant matter, it is satisfied that the interests of the person affected by the order, that is the creditor, property owner, or lessor, will be adequately protected.

(3) An application for an order under this section may be made only,—

(a) if the deed has not yet been executed, by the administrator; or

(b) if the deed has been executed, by the deed administrator.

(4) The court’s order may be made subject to conditions.

239ACW Effect of deed on company’s debts

(1) A deed of company arrangement releases the company from a debt only in so far as—

(a) the deed provides for the release; and

(b) the creditor concerned is bound by the deed.

(2) The release of the company from a debt under subsection (1) does not discharge or otherwise affect the liability of—

(a) a guarantor of the debt; or

(b) a person who has indemnified the creditor concerned against default by the company in relation to the debt.

239ACX Court may rule on validity of deed

(1) The court may rule on the validity of a deed of company arrangement if there is doubt, on a specific ground, whether a deed of company arrangement—

(a) was entered into in accordance with this Part; or

(b) complies with this Part.

(2) An application under this section may be made by—

(a) the deed administrator; or

(b) a shareholder or creditor of the company; or

(ba) the FMA (if the company is a financial markets participant); or

(3) On an application under this section,—

(a) the court may declare the deed void or not void:

(b) if the deed is void for contravention of a provision of this Part, the court may validate the deed, or any part of it, provided the court is satisfied that—

i. the provision was substantially complied with; and

ii. no injustice will result for anyone bound by the deed if the contravention is disregarded.

(4) The court may, if it declares that a provision of the deed is void, vary the deed, but only if the deed administrator consents.

Subpart 14—Administrator’s duty to file accounts

Subpart 14: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ACY Administrator includes deed administrator

In this subpart, unless the context otherwise requires, administrator includes a deed administrator.

239ACZ Administrator must file accounts

(1) Every administrator must file an account with the Registrar for each of the following periods:

(a) the period of 6 months (or shorter, as the administrator decides) after the day on which the administrator was appointed; and

(b) each subsequent period of 6 months during which the administrator holds office; and

(c) the period between the last period of the kind referred to in paragraph (b) and the day on which the administrator vacates office.

(2) The administrator must file the account within 20 working days after the end of the period in question.

(3) The account must be in the prescribed form and must show,—

(a) for each period, the administrator’s receipts and payments; and

(b) for each period except the first, the aggregates of the administrator’s receipts and payments since the day on which the administrator was appointed.

Subpart 15—Variation and termination of deed

Subpart 15: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADA Creditors may vary deed

The creditors may vary a deed of company arrangement by a resolution passed at a meeting convened under section 239ADF, but the variation must not be materially different from the proposed variation set out in the notice of the meeting.

239ADB Court may cancel creditors’ variation

(1) A creditor of a company in administration may apply to the court for an order cancelling the variation of the deed of company arrangement by the creditors.

(2) On the application, the court may, if it is just and equitable to do so,—

(a) cancel or confirm the variation, wholly or in part, on specified conditions (if any); and

(b) make any other orders that the court thinks appropriate.

239ADC Termination of deed

(1) A deed of company arrangement may be terminated—

(a) by the court under section 239ADD; or

(b) by a resolution of the creditors under section 239ADE; or

(2) The deed administrator must give written notice to the Registrar of the fact that a deed has been terminated under subsection (1)(a) or (c).

239ADD Termination by court

**(1)**The court may terminate a deed of company arrangement on the application of—

(a) the company; or

(b) a creditor; or

(d) any other interested person.

(2) The court may terminate a deed of company arrangement if it is satisfied that—

(a) an information breach has occurred; or

(b) there has been a material contravention of the deed by a person bound by it; or

(d) the deed or a provision of it is, an act or omission done or made under the deed was, or an act or omission proposed to be done or made under the deed would be,—

i. oppressive or unfairly prejudicial to, or unfairly discriminatory against, 1 or more of the creditors; or

ii. contrary to the interests of the company as a whole; or

(e) the deed should be terminated for some other reason.

(3) The court must not terminate the deed without first taking into account the rights of third parties.

(4) In this section, an information breach has occurred if—

(a) false or misleading information about the company’s business, property, affairs, or financial circumstances—

i. was given to the administrator or the creditors; or

ii. was contained in a report or statement under section 239AU(3) that accompanied a notice of the watershed meeting at which a resolution that the company execute a deed of company arrangement was passed; or

(b) there was an omission from the report or statement referred to in paragraph (a)(ii); and

(c) the information or the omission, as the case may be, can reasonably have been expected to be material to the creditors in deciding whether to vote in favour of the resolution that the company execute the deed of company arrangement.

239ADE Termination by creditors

(1) The creditors, by a resolution passed at a meeting convened under section 239ADF, may terminate the deed if there has occurred a material breach of the deed that has not been rectified.

(2) The creditors may also appoint a liquidator if the notice of the meeting sets out a proposed resolution that a liquidator be appointed to the company.

239ADF Creditors’ meeting to consider proposed variation or termination of deed

(1) The deed administrator—

(a) may at any time convene a meeting of the company’s creditors to consider a variation to, or the termination of, the deed; and

(b) must convene a meeting if requested to do so in writing by creditors whose claims against the company are not less than 10% in value of the total value of all creditors’ claims.

(2) The deed administrator must convene the meeting by—

(a) giving written notice to as many of the company’s creditors as reasonably practicable; and

(b) advertising the meeting in accordance with section 3(1)(b).

(3) The administrator must take the steps in subsection (2) not less than 5 working days before the meeting.

(4) The notice given to the creditors must set out any resolution for varying or terminating the deed that is to be considered by the meeting.

(5) The deed administrator must preside at the meeting.

(6) The meeting may be adjourned from time to time.

Subpart 16—Administrator’s liability and indemnity for debts of administration

Subpart 16: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADG Administrator not liable for company’s debts except as provided in this subpart and in section 239Y

The administrator is not liable for the debts of the company except as provided in this subpart and in section 239Y.

239ADH Administrator liable for general debts

(1) The administrator is liable for debts that he or she incurs in the performance or exercise, or purported performance or exercise, of any of his or her functions and powers as administrator, for—

(a) the purpose of funding the company; or

(b) any services rendered; or

(d) any property hired, leased, or occupied.

(2) Subsection (1) has effect despite any agreement to the contrary, but without prejudice to the administrator’s rights against the company or anyone else.

239ADI Administrator’s liability for rent

**(1)**The administrator is personally liable, to the extent specified in subsection (2), for rent and other payments becoming due by the company under an agreement—

(a) made before the administration began; and

(b) relating to the use, possession, or occupation of property by the company.

**(2)**The administrator is liable for rent and other payments that accrue in the period—

(a) beginning more than 7 days after the administration begins; and

(b) throughout which—

i. the company continues to use or occupy, or be in possession of, the property; and

ii. the administration continues; and

i. the end of the administration; or

ii. the administrator ceasing to hold office; or

iii. the appointment of a receiver of the property; or

iv. the appointment of an agent by a secured creditor of the property, under the provisions of a charge over the property, to enter into possession or to assume control of the property; or

v. when a secured creditor takes possession or assumes control of the property under the provisions of a charge over the property.

(3) The administrator is not taken, because of subsection (2),—

(a) to have adopted the agreement; or

(b) to be liable under the agreement except as set out in subsection (2).

(4) This section does not affect the liability of the company for rent and other payments due under the agreement.

239ADJ Administrator not liable for rental if non-use notice in force

(1) The administrator is not liable under section 239ADI for any period for which a non-use notice is in force.

(2) In this section, non-use notice means, in relation to the property to which it refers, a notice that—

(a) is given by the administrator to the owner or the lessor of the property within 7 days after the administration begins; and

(b) specifies the property to which it relates; and

(3) A non-use notice ceases to have effect if—

(a) the administrator revokes it by written notice to the owner or lessor; or

(b)the company exercises, or purports to exercise, a right in relation to the property.

(4) In subsection (3)(b), the company does not exercise, or purport to exercise, a right in relation to the property merely because the company continues to occupy, or to be in possession of, the property, unless the company—

(a) also uses the property; or

(b) asserts a right, as against the owner or the lessor, to continue to occupy or be in possession.

(5) A non-use notice does not affect the company’s liability for rent and other payments.

239ADK Court may exempt administrator from liability for rent

The court may exempt an administrator from liability for rent and other payments under section 239ADI, but the court’s order does not affect the company’s liability.

239ADL Administrator’s indemnity

The administrator is indemnified out of the company’s property for—

(a) a personal liability incurred in the due performance of his or her duties, but not a personal liability incurred in bad faith or negligently; and

(b) the remuneration to which the administrator is entitled under section 239O.

239ADM Administrator’s right of indemnity has priority over other debts

Subject to section 312, the administrator’s right of indemnity under this subpart has priority over—

(a) all the company’s unsecured debts; and

(b) debts of the company secured by a charge of the kind described in clause 2(1)(b) of Schedule 7.

239ADN Lien to secure indemnity

(1) The administrator has a lien on the company’s property to secure a right of indemnity under this subpart.

(2) A lien under subsection (1) has priority over a charge to the same extent as the right of indemnity has priority over debts secured by the relevant charge.

Subpart 17—Powers of court

Subpart 17: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).*

239ADO Court’s general power

(1) The court may make any order that it thinks appropriate about how this Part is to operate in relation to a particular company.

(2) For example, the court may terminate the administration under subsection (1) if the court is satisfied that the administration should end—

(a) because the company is solvent; or

(b) because the provisions of this Part are being abused; or

(3) The court’s order may be made subject to conditions.

(4) The court may make an order under this section on the application of—

(a) the company or a shareholder of the company; or

(b) a creditor of the company; or

(d) the deed administrator; or

(da) the FMA (if the company is a financial markets participant); or

(e) the Registrar; or

(f) any other interested person.

239ADP Orders to protect creditors during administration

(1) On the application of the Registrar or, if the company is a financial markets participant, the FMA, the court may make any order that it thinks necessary to protect the interests of the company’s creditors while the company is in administration.

(2) On the application of a creditor of a company, the court may make any order that it thinks necessary to protect the interests of that creditor while the company is in administration.

(3) An order may be made subject to conditions.

239ADQ Court may rule on validity of administrator’s appointment

(1) If there is doubt, on a specific ground, as to the validity of the appointment of a person as administrator or deed administrator, any of the following persons may apply to the court for a ruling on the validity of the appointment:

(a) the person appointed; or

(b) the company in question; or

(2) In ruling that the appointment is invalid, the court is not limited to the grounds specified in the application.

239ADR Administrator may seek directions

(1) The administrator or the deed administrator may apply to the court for directions in relation to the performance or exercise of any of the administrator’s functions and powers.

*(2) The deed administrator may apply to the court for directions in relation to the operation of, or giving effect to, the deed.

239ADS Court may supervise administrator or deed administrator

(1) The court may make any order it thinks just if it is satisfied that—

(a) the administrator’s or the deed administrator’s management of the company’s business, property, or affairs is prejudicial to the interests of some or all of the company’s creditors or shareholders; or

(b) the administrator’s or deed administrator’s conduct or proposed conduct has been or is or will be prejudicial to those interests.

(2) An application for an order under this section may be made by—

(a) a creditor or shareholder of the company in question; or

(b) the Registrar.

239ADT Court may order administrator or deed administrator to remedy default

(1) The court may order an administrator or deed administrator to remedy his or her default.

(2) Examples of default include the following:

(a) the administrator or deed administrator has failed, as required by this Act or otherwise by law, to make or file any return, account, or other document or to give a notice, and has not remedied the default within 10 working days after service on him or her of a notice by a shareholder or creditor of the company in administration requiring that the default be remedied:

(b) the administrator or deed administrator has failed, after being required at any time by the liquidator of the company to do so,—

i. to render proper accounts of, and to vouch, his or her receipts and payments as administrator or deed administrator:

ii. to pay to the liquidator the amount properly payable to the liquidator.

(3) An application for an order under this section may be made by—

(a) a shareholder or creditor of the company, in the case of a default referred to in subsection (2)(a):

(b) the liquidator, in the case of a default referred to in subsection (2)(b):

239ADU Court’s power when office of administrator or deed administrator vacant, etc

(1) The court may make any order it thinks just if it is satisfied that,—

(a) in the case of a company in administration, the office of the administrator is vacant or no administrator is acting; or

(b) in the case of a deed of company arrangement that is still in force, the office of the deed administrator is vacant or no deed administrator is acting.

(2) An application for an order under this section may be made by—

(a) a creditor or shareholder of the company; or

(b) if the company is in liquidation, the liquidator; or

(ba) if the company is a financial markets participant, the FMA; or

239ADV Prohibition order

(1) The court must make a prohibition order in relation to a person if it is shown to the satisfaction of the court that that person is unfit to act as administrator or deed administrator by reason of persistent failures to comply or the seriousness of a failure to comply.

(2) The period of the order is a matter for the discretion of the court and the court may make a prohibition period for an indefinite period.

(3) A person to whom a prohibition order applies must not act as an administrator or deed administrator in a current or other administration.

(4) The court may make an order under this section in relation to a past or current administrator or deed administrator of a company in administration on the application of—

(a) the company or a shareholder of the company; or

(b) a creditor of the company; or

(d) the Registrar; or

(e) any other interested person.

(5) In this section, failure to comply means a failure of an administrator or deed administrator to comply with a relevant duty arising—

(a) under this or any other enactment or law or rules of court; or

(b) under any order or direction of the court made under this subpart.

(6) In subsection (5), relevant duty includes the duty of a person in his or her capacity as liquidator of a company.

(7) A copy of every order made under subsection (1) must, within 10 working days of the order being made, be delivered by the applicant to the Official Assignee for New Zealand who must keep it on a file indexed by reference to the name of the administrator or deed administrator concerned.

Subpart 18—Notices about steps taken under this Part

Subpart 18: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239ADW Administrator must give notice of appointment

(1) An administrator appointed by the company under section 239I, by the liquidator or interim liquidator under section 239J, by a secured creditor under section 239K, by the court under section 239L, or by the creditors under section 239R(2)(a) must,—

(a) before the end of the next working day after appointment, lodge a notice of the appointment with the Registrar; and

(b) not later than 3 working days after appointment, advertise the appointment in accordance with section 3(1)(b); and

(c) as soon as practicable, and in any event not later than the end of the next working day after appointment, give written notice of the appointment to—

i. each person who holds a charge over the whole, or substantially the whole, of the company’s property; or

ii. each person who holds 2 or more charges in the property of the company if the property of the company subject to those charges together is the whole, or substantially the whole, of the company’s property; and

(d) in the notice referred to in paragraph (c), set out the rights of the creditor to enforce the charge under section 239ABL.

(2) The administrator need not give notice under subsection (1) to the person who appointed him or her.

239ADX Secured creditor who appoints administrator must give notice to company

A secured creditor who appoints an administrator under section 239K must give written notice of the appointment to the company as soon as practicable and in any event before the end of the next working day.

239ADY Deed administrator must give notice of execution of deed of company arrangement

As soon as practicable after a deed of company arrangement is executed, the deed administrator must—

(a) send to each creditor a written notice of the execution of the deed; and

(b) advertise the execution of the deed in accordance with section 3(1)(b); and

239ADZ Deed administrator must give notice of failure to execute deed of company arrangement

If a company does not meet the deadline under section 239ACO or 239ACP(1)(c) for the execution of a deed of company arrangement, the deed administrator must as soon as practicable—

(a) cause a notice of the failure to execute the deed to be advertised in accordance with section 3(1)(b); and

(b) file a copy of the notice with the Registrar.

239AEA Deed administrator must give notice of termination by creditors of deed of company arrangement

If the creditors terminate the deed of company arrangement, the deed administrator must as soon as practicable—

(a) send a notice of the termination to each of the creditors; and

(b) advertise the termination in accordance with section 3(1)(b); and

239AEB Company must disclose fact of administration

(1) A company must set out, in every document issued or signed by, or on behalf of, the company that evidences or creates a legal obligation of the company, after the company’s name where it first appears,—

(a) for as long as the company is in administration, the words “administrator appointed”; and

(b) for as a long as a deed of company arrangement is in force, the words “subject to deed of company arrangement”.

(2) The court may, on an application by the company, exempt the company from the requirement in subsection (1)(b).

(3) A company that fails to comply with subsection (1) commits an offence and is liable on conviction to the penalty set out in section 373(1).

239AEC Notice of change of name

(1) A company in administration that changed its name less than 6 months before the appointment of the administrator must, in any document of the company where its name appears, include also its former name.

(2) If a company to which subsection (1) applies is, in the course of the administration, placed in liquidation, the liquidator must, in any document of the company where its name appears, include also its former name.

239AED Effect of contravention of this subpart

A contravention of this subpart does not affect the validity of anything done or omitted under this Part, except so far as the court orders otherwise.

Subpart 19—Miscellaneous

Subpart 19: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AEE Effect of things done during administration of company

A payment made, transaction entered into, or any other act or thing done, in good faith, by or with the consent of the administrator of a company in administration is valid and effective for the purposes of this Act.

239AEF Interruption of time for doing act

If there is a time before which, or a period during which, an act for any purpose may or must be done, and this Act prevents the act from being done in time, then the time or period in question is extended by the period during which this Act prevents the act from being done in time.

Subpart 20—Set-off and netting agreements

Subpart 20: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AEG Mutual credit and set-off

Where there have been mutual credits, mutual debts, or other mutual dealings between a company and a person who seeks or, but for the operation of this section, would seek to have a claim admitted under a deed of company arrangement,—

(a) an account must be taken of what is due from one party to the other in respect of those credits, debts, or dealings; and

(b) an amount due from one party must be set off against an amount due from the other party; and

(c) only the balance of the account may be admitted under the deed of company arrangement, or is payable to the company, as the case may be.

239AEH Application of set-off under netting agreement

(1) Sections 239AEI to 239AEP apply—

(a) to a netting agreement—

i. made in or evidenced by writing; and

ii. in which the application of sections 239AEI to 239AEP has not been expressly excluded; and

iii. whether made before or after the commencement of this section; and

(b) to all obligations under a netting agreement (whether those obligations are payable in New Zealand currency or in some other currency).

(2) Sections 239AEI to 239AEP apply despite—

(a) any disposal of rights under a transaction that is subject to a netting agreement, in contravention of a prohibition in the netting agreement; or

(b) the creation of a charge or other interest in respect of the rights referred to in paragraph (a) in contravention of a prohibition in the netting agreement.

(3) Nothing in sections 239AEI to 239AEP applies to an amount paid or payable by a shareholder—

(a) as the consideration, or part of the consideration, for the issue of a share; or

(b) in satisfaction of a call in respect of an outstanding liability of the shareholder made by the board of the company or by the administrator.

239AEI Calculation of netted balance

If a company in administration is a party to a netting agreement,—

(a) any netted balance payable by or to the company must be calculated in accordance with the netting agreement; and

(b) that netted balance constitutes, in respect of the transactions that are included in the calculation,—

i. the debt that is owed to the creditor and that may be admitted under the deed of company arrangement; or

ii. the amount that is payable to the company,—

as the case may be.

239AEJ Mutuality required for transactions under bilateral netting agreements

Sections 239AEI to 239AEP apply to transactions that are subject to a bilateral netting agreement only if those transactions constitute mutual credits, mutual debts, or other mutual dealings.

239AEK When mutuality required for transactions under recognized multilateral netting agreements

(1) Sections 239AEI to 239AEP apply to transactions that are subject to a recognized multilateral netting agreement, whether or not those transactions constitute mutual credits, mutual debts, or other mutual dealings.

(2) Despite subsection (1), sections 239AEI to 239AEP do not apply to transactions that are subject to a recognized multilateral netting agreement if—

(a) those transactions do not constitute mutual credits, mutual debts, or other mutual dealings; and

(b) a party to any of those transactions is acting as a trustee for another person; and

(c) the party acting as trustee is not authorized by the terms of the trust of which the party is a trustee to enter into the transaction.

239AEL Application of set-off under section 239AEG to transactions subject to netting agreements

(1) Section 239AEG does not apply to transactions that are subject to a netting agreement to which sections 239AEI to 239AEP apply.

(2) However, a netted balance is to be treated as an amount to which section 239AEG applies if the company in administration and the other party to the netting agreement also have mutual credits, mutual debts, or other mutual dealings between them that are not subject to the netting agreement.

239AEM Transactions under netting agreement and effect on certain sections

(1) Nothing in sections 239AEH to 239AEP prevents the operation of section 56 or, subject to section 239ACB, section 292, 297 or 298 in respect of a transaction that is subject to a netting agreement.

(2) However, nothing in section 292(4A) applies to a transaction that is subject to a netting agreement.

(3) For the purposes of sections 292 and 297, the term transaction, in relation to a company, does not include a netting agreement entered into by the company, except to the extent that the effect of entering into the netting agreement is to reduce any amount that was owing by or to the company at the time the company entered into the agreement.

239AEN Rights under netting agreement not affected by commencement of administration Nothing in section 239Z affects, in respect of a company in administration, the exercise of any of the following rights under a netting agreement:

(a) the termination, in accordance with the netting agreement, of all or any transactions that are subject to the netting agreement by reason of the occurrence of an event specified in the netting agreement, being an event (including the appointment of an administrator) occurring not later than the commencement of the administration; or

(b) the taking of an account, in accordance with the netting agreement, of all money due between the parties to the netting agreement in respect of transactions affected by the termination.

239AEO Effect of declaration of person as recognized clearing house under section 310K A person who is declared a recognised clearing house under section 310K is deemed to be a recognized clearing house for the purposes of sections 239AEI to 239AEP also.

239AEP Transactions under recognized multilateral netting agreement not affected by variation or revocation of declaration under section 310K

The variation or revocation of a declaration under section 310K does not affect the application of sections 239AEI to 239AEP to any transaction—

(a) that is or was subject to a recognized multilateral netting agreement; and

(b) that was entered into before the variation or revocation of the declaration.

Subpart 21—Single administration of related companies in administration

Subpart 21: inserted, on 1 November 2007, by section 6 of the Companies Amendment Act 2006 (2006 No 56).

239AEQ Interpretation of terms for purposes of this subpart

(1) In this subpart,—

pool means a pool of related companies in a single administration under a single administration order made under section 239AER

pool administrator means the administrator of a pool

pool company means a company in respect of which a single administration order has been made under section 239AER.

(2) For the purposes of the single administration of a pool, in this Part, unless the context indicates otherwise,—

administrator includes a pool administrator

company includes a pool

deed administrator includes the deed administrator of a deed of company administration executed by a pool

deed of company administration includes a deed of company administration executed under section 239AEW.

239AER Court may order single administration for related companies in administration

(1) If 2 or more related companies are in administration, the court may, if it is satisfied that it is just and equitable, order that the administration in respect of each company must proceed together as if they were 1 company to the extent that the court orders and subject to the terms and conditions that the court imposes.

(2) An application under subsection (1) may be made by the administrator or a creditor of any of the companies in administration.

(3) Notwithstanding anything in this Part, the court may, on first making the order and otherwise from time to time, make any other order, or give any direction to facilitate giving effect to an order, under subsection (1) as it sees fit.

(4) The fact that creditors of the company in administration relied on the fact that another company was, or is, related to it is not a ground for making an order under this section.

239AES Notice that application filed must be given to administrators and creditors

(1) Unless the court orders otherwise, an applicant for an order under section 239AER must give notice that the application has been filed to—

(a) the administrator of each company in administration; and

(b) each creditor of each company in administration.

(2) The notice must—

(a) identify each company to which the proposed order relates; and

(b) summarize all information known to the applicant that is material to whether the order should be made; and

(c) state that a person to whom the notice must be given may oppose the application by filing a statement of defence in accordance with the High Court Rules.

(3) The notice requirement in this section is in addition to anything required by the High Court Rules to be done.

239AET Guidelines for single administration order

In deciding whether it is just and equitable to make an order under section 239AER, the court must have regard to the following criteria:

(a) the extent to which any of the companies took part in the management of any of the other companies in the proposed pool:

(b) the conduct of any of the companies towards the creditors of any of the other companies in the proposed pool:

(c) the extent to which the circumstances that gave rise to any of the companies in the proposed pool being placed in administration are attributable to the actions of any of the other companies:

(d) the extent to which the businesses of the companies in the proposed pool have been combined:

(e) any other matters that the court thinks fit.

239AEU Court may order that related company in administration be added to existing pool

(1) The court may order that a company in administration that is related to the companies in an existing pool be added to the pool for the purposes of administration.

(2) An application under subsection (1) may be made by—

(a) the administrator or any creditor of the company; or

(b) the administrator or any creditors of the pool.

(3) The court may make the order if it is satisfied that it is just and equitable to do so having regard to any 1 or more of the criteria in section 239AET.

(4) Sections 239AER and 239AES apply with all necessary modifications to an application under this section.

(5) The court must not make the order unless the pool administrator consents.

239AEV Creditors’ meetings in single administration of pool companies

(1) The provisions of this Part in relation to creditors’ meetings apply except that, subject to subsection (2), a creditor of a pool company may only vote on a matter related to the pool company of which that person is a creditor.

(2) If separate voting by creditors is impracticable (because, for example, the affairs of the pool companies are intermingled), the court may, on the application of the pool administrator, give directions as to how voting at a creditors’ meeting must proceed.

239AEW Pool companies may execute single deed of company administration

For the purposes of the single administration of a pool, the pool companies may execute a single deed of company arrangement.

Part 16

Liquidations

The process of liquidation

240 Interpretation

(1) In this Act, unless the context otherwise requires,— creditor means a person who, in a liquidation, would be entitled to claim in accordance with section 303 that a debt is owing to that person by the company; and includes a secured creditor only—

(a) for the purposes of sections 241(2)(c), 247, 250, and 289; or

(b) to the extent of the amount of any debt owing to the secured creditor in respect of which the secured creditor claims under section 305 as an unsecured creditor

liquidation committee means a liquidation committee appointed under section 314

Official Assignee means an Official Assignee or Deputy Assignee appointed under the Insolvency Act 2006

statutory demand has the meaning set out in section 289.

(2) For the purposes of this Act, the power to appoint a liquidator of a company includes the power to appoint 2 or more persons as liquidators of a company.

240A Liquidation of licensed insurers

If a licensed insurer may be put into liquidation under or in accordance with this Part, this Part applies in respect of the insurer subject to subpart 3 of Part 4 of the Insurance (Prudential Supervision) Act 2010.

241 Commencement of liquidation

(1) A company may be put into liquidation by the appointment as liquidator of a named person or of an Official Assignee for a named district.

(2) A liquidator may be appointed by—

(a) special resolution of those shareholders entitled to vote and voting on the question; or

(b) the board of the company on the occurrence of an event specified in the constitution; or

i. the company; or

ii. a director; or

iii. a shareholder or other entitled person; or

iv. a creditor (including any contingent or prospective creditor); or

v. if the company is in administration, the administrator; or

va. if the company is a financial markets participant, the FMA; or

vi. the Registrar; or

vii. if the company is a licensed insurer, the Reserve Bank of New Zealand; or

viii. in the case of a company that has been removed from the New Zealand register, the Registrar or a person who, immediately before the company was removed from the New Zealand register, was a person described in subparagraph (ii), (iii), (iv), or (vii); or

(d) a resolution of the creditors passed at the watershed meeting held under section 239AT.

(2A) However, the court must not appoint a liquidator under subsection (2)(c)(viii) unless the company is restored to the New Zealand register under section 328 or 329.

(3) An Official Assignee may be appointed liquidator of a company only—

(a) if the special resolution passed in accordance with paragraph (a) of subsection (2) is passed by reason of the Official Assignee exercising voting rights attaching to shares in the company of—

i. a person who has been adjudged bankrupt; or

i. another company of which the Official Assignee is liquidator; or

(b)by the court.

(4) The court may appoint a liquidator if it is satisfied that—

(a) the company is unable to pay its debts; or

(b) the company or the board has persistently or seriously failed to comply with this Act; or

(ba) the company, or 1 or more of its directors or shareholders, has intentionally provided the Registrar with inaccurate information; or

(bb) the company, or 1 or more of its directors or shareholders, has in a persistent or serious way failed to comply with duties relating to the company—

i. under this Act; or

ii. under the Financial Reporting Act 1993 while in force, except that this subparagraph does not apply after 5 years have elapsed after this subparagraph came into force; or

(d) it is just and equitable that the company be put into liquidation.

(5) The liquidation of a company commences on the date on which, and at the time at which, the liquidator is appointed.

241AA Restriction on appointment of liquidator by shareholders or board after application filed for court appointment

(1) This section applies if an application has been filed for the appointment of a liquidator of a company by the court under section 241(2)(c).

(2) A liquidator of the company may only be appointed under section 241(2)(a) or (b) if the liquidator is appointed within 10 working days after service on the company of the application.

(3) If a liquidator is appointed under section 241(2)(a) or (b), the creditor who filed the application referred to in subsection (1) may apply to the court under section 283(4) for the review of his or her appointment as if the words “successor to a liquidator” in section 283(4) read “liquidator”.

(4) Subsection (2) does not apply once the application has been finally disposed of.

241A Commencement of liquidation to be recorded

(1) If—

(a) a liquidator is appointed under section 241(2)(a), the shareholders must record in the special resolution appointing the liquidator the date on which, and the time at which, the special resolution was passed; or

(b) a liquidator is appointed under section 241(2)(b), the board of the company must record in the instrument appointing the liquidator the date on which, and the time at which, the liquidator was appointed; or

(c) a liquidator is appointed under section 241(2)(c), the court must record in the order appointing the liquidator the date on which, and the time at which, the order was made; or

(d) a liquidator is appointed under section 241(2)(d), the creditors must record in the resolution appointing the liquidator the date on which, and the time at which, the resolution was passed.

(2) If any question arises as to whether on the date on which a liquidator was appointed an act was done or a transaction was entered into or effected before or after the time at which the liquidator was appointed, that act or transaction is, in the absence of proof to the contrary, deemed to have been done or entered into or effected, as the case may be, after that time.

242 Liquidators to act jointly unless otherwise stated Where 2 or more persons are appointed as liquidators of a company, those persons must act jointly unless the special resolution of shareholders or the resolution of the board of the company or the order of the court appointing the liquidators states that the liquidators may exercise their powers individually.

243 Liquidator to summon meeting of creditors

(1) Subject to section 245 and to subsection (8), the liquidator of a company must call a meeting of the creditors of the company for the purpose,—

(a) in the case of a liquidator appointed pursuant to paragraph (a) or paragraph (b) of subsection (2) of section 241, of resolving whether to confirm the appointment of that liquidator or to appoint another liquidator in place of the liquidator so appointed:

(b) in the case of a liquidator appointed pursuant to paragraph (c) of subsection (2) of section 241, of resolving whether to confirm the appointment of that liquidator or to make an application to the court for the appointment of a liquidator in place of the liquidator so appointed:

(1A) If the appointment of a liquidator under paragraph (a) or paragraph (b) of section 241(2) is not confirmed at a meeting of creditors and another liquidator is not appointed in place of that liquidator, the appointment of the liquidator under paragraph (a) or paragraph (b) of section 241(2) continues until another liquidator is appointed.

(2) Notice in writing of a meeting of creditors—

(a) must be given to every known creditor together with the report and notice referred to in section 255(2)(c); and

(b) if the liquidator receives a notice under section 245(1)(b)(iii), must be given within 10 working days after receiving the notice.

(3) Public notice of the meeting of creditors must also be given by the liquidator not less than 5 working days before the date of the meeting.

(4) Except if subsection (2)(b) applies, a meeting of creditors must be held,—

(a) in the case of a liquidator appointed under paragraph (a) or paragraph (b) of subsection (2) of section 241, within 10 working days of the liquidator’s appointment; or

(b) in the case of a liquidator appointed under paragraph (c) of subsection (2) of section 241, within 30 working days of the liquidator’s appointment; or

(4A) If subsection (2)(b) applies, a meeting of creditors must be held within 15 working days after the liquidator receives a notice under section 245(1)(b)(iii) requiring a meeting of creditors to be called.

(5) Every meeting of creditors must be held in accordance with Schedule 5.

(6) If at a meeting of creditors it is resolved to appoint a person as liquidator of the company in place of the liquidator appointed pursuant to paragraph (a) or paragraph (b) of subsection (2) of section 241, the person who it is resolved to appoint as liquidator shall, subject to section 282, be the liquidator of the company.

(7) If at a meeting of creditors it is resolved to apply to the court for the appointment of a person as liquidator in place of the liquidator appointed pursuant to paragraph (c) of subsection (2) of section 241, the liquidator of the company must forthwith apply to the court for the appointment of that person as liquidator and the court may, if it thinks fit, appoint that person as the liquidator of the company.

(8) Nothing in this section applies to the liquidator of a company appointed pursuant to paragraph (a) or paragraph (b) of subsection (2) of section 241 if, within 20 working days before the appointment of the liquidator, the board of the company resolved that the company would, on the appointment of a liquidator under either paragraph (a) or paragraph (b) of that subsection, be able to pay its debts and a copy of the resolution is delivered to the Registrar for registration.

(9) The directors who vote in favour of such a resolution must sign a certificate stating that, in their opinion, the company would, on the appointment of a liquidator under either paragraph (a) or paragraph (b) of subsection (2) of section 241, as the case may be, be able to pay its debts, and the grounds for that opinion.

(10) Every director who fails to comply with subsection (9) commits an offence and is liable on conviction to the penalty set out in section 373(1).

(11) Except for subsection (5), this section does not apply if the liquidator is appointed under section 241(2)(d).

244 Liquidator to summon meeting of creditors in other cases

Subject to section 245, the liquidator of a company who was not, by reason of section 243(8), required to call a meeting of creditors of the company must,—

(a) if the liquidator is satisfied that the directors who voted in favour of a resolution referred to in that subsection did not have reasonable grounds to believe that the company would, on the appointment of a liquidator under paragraph (a) or paragraph (b) of subsection (2) of section 241, be able to pay its debts; or

(b) if the liquidator is satisfied that the company is not able to pay its debts,— forthwith call a meeting of the creditors of the company for the purpose specified in paragraph (a) or paragraph (b) of subsection (1) of section 243, as the case may be; and the provisions of that section shall apply accordingly with such modifications as may be necessary.

245 Liquidator may dispense with meetings of creditors

(1) A liquidator is not required to call a meeting of creditors under section 243 or section 244, as the case may be, if—

(a) the liquidator considers, having regard to the assets and liabilities of the company, the likely result of the liquidation of the company, and any other relevant matters, that no such meeting should be held; and

(b) the liquidator gives notice in writing to the creditors stating—

i. that the liquidator does not consider that a meeting should be held; and

ii. the reasons for the liquidator’s view; and

iii. that no such meeting will be called unless a creditor gives notice in writing to the liquidator, within 10 working days after receiving the notice, requiring a meeting to be called; and

2. Notice under subsection (1)(b) must be given to every known creditor together with the report and notice referred to in section 255(2)(c).

245A Power of court where outcome of voting at meeting of creditors determined by related entity

(1) This section applies if the court is satisfied that—

(a) a resolution at a meeting of creditors was passed, defeated, or required to be decided by a casting vote; and

i. is contrary to the interests of the creditors, or a class of creditors, as a whole; and

ii. has prejudiced, or is reasonably likely to prejudice, the interest of the creditor who voted against the resolution, or for it, as the case may be, to an extent that is unreasonable having regard to—

(A) the benefits accruing to the related creditor, or to some or all of the related creditors, from the resolution, or from the failure to pass the resolution; and

(B) the nature of the relationship between the related creditor and the company, or between the related creditors and the company; and (C) any other related matter.

(2) The court may, on the application of the liquidator or a creditor,—

(a) order that the resolution be set aside:

(b) order that a new meeting be held to consider and vote on the resolution:

(c) order that a specified related creditor or creditors must not vote on the resolution or on a resolution to vary or amend it:

(d) make any other orders that the court thinks necessary.

(3) In this section,—

related creditor means a creditor who is a related entity of the company in liquidation

related entity means, in relation to the company in liquidation,—

(a) a promoter; or

(b) a relative or spouse of a promoter; or

(d) a director or shareholder; or

(e) a relative or spouse of a director or shareholder; or

(f) a relative of a spouse of a director or shareholder; or

(g) a related company; or

(h) a beneficiary under a trust of which the company in liquidation is or has at any time been a trustee; or

(i) a relative or spouse of that beneficiary; or

(j) a relative of a spouse of that beneficiary; or

(k) a company one of whose directors is also a director of the company in liquidation; or

(l) a trustee of a trust under which a person (A) is a beneficiary, if A is a related entity of the company in liquidation under this subsection.

246 Interim liquidator

(1) If an application has been made to the court for an order that a company be put into liquidation, the court may, if it is satisfied that it is necessary or expedient for the purpose of maintaining the value of assets owned or managed by the company, appoint a named person, or an Official Assignee for a named district, as interim liquidator.

(2) Subject to subsection (3), an interim liquidator has the rights and powers of a liquidator to the extent necessary or desirable to maintain the value of assets owned or managed by the company.

(3) The court may limit the rights and powers of an interim liquidator in such manner as it thinks fit.

(4) The appointment of an interim liquidator takes effect on the date on which, and at the time at which, the order appointing that interim liquidator is made.

(5) The court must record in the order appointing the interim liquidator the date on which, and the time at which, the order was made.

(6) If any question arises as to whether on the date on which an interim liquidator was appointed an act was done or a transaction was entered into or effected before or after the time at which the interim liquidator was appointed, that act or transaction is, in the absence of proof to the contrary, deemed to have been done or entered into or effected, as the case may be, after that time.

247 Power to stay or restrain certain proceedings against company At any time after the making of an application to the court under section 241(2)(c) to appoint a liquidator of a company and before a liquidator is appointed, the company or any creditor or shareholder of the company may,—

(a) in the case of any application or proceeding against the company that is pending in the court or Court of Appeal, apply to the court or Court of Appeal, as the case may be, for a stay of the application or proceeding:

(b) in the case of any other application or proceeding pending against the company in any court or tribunal, apply to the court to restrain the application or proceeding— and the court or Court of Appeal, as the case may be, may stay or restrain the application or proceeding on such terms as it thinks fit.

248 Effect of commencement of liquidation

(1) With effect from the commencement of the liquidation of a company,—

(a) the liquidator has custody and control of the company’s assets:

(b) the directors remain in office but cease to have powers, functions, or duties other than those required or permitted to be exercised by this Part:

i. commence or continue legal proceedings against the company or in relation to its property; or

ii. exercise or enforce, or continue to exercise or enforce, a right or remedy over or against property of the company:

(d) unless the court orders otherwise, a share in the company must not be transferred:

(e) an alteration must not be made to the rights or liabilities of a shareholder of the company:

(f) a shareholder must not exercise a power under the constitution of the company or this Act except for the purposes of this Part:

(g) the constitution of the company must not be altered.

(2) Subsection (1) does not affect the right of a secured creditor, subject to section 305, to take possession of, and realize or otherwise deal with, property of the company over which that creditor has a charge.

(3) This section is subject to section 139J(1) to (3) of the Reserve Bank of New Zealand Act 1989.

249 Completion of liquidation

The liquidation of a company is completed when the liquidator—

(a) complies with section 257(1)(b); or

(b) delivers to the Registrar for registration—

i. a copy of any order made by the court under section 257(2)(a); or

ii. a copy of any order made by the court under section 257(2)(b) together with any documents required to comply with the order,—

as the case may be.

**250 Court may terminate liquidation

(1) The court may, at any time after the appointment of a liquidator of a company, if it is satisfied that it is just and equitable to do so, make an order terminating the liquidation of the company.

(2) An application under this section may be made by—

(a) the liquidator; or

(b) if the company has executed a deed of company arrangement, the deed administrator; or

(d) any other entitled person; or

(e) a creditor of the company; or

(ea) if the company is a financial markets participant, the FMA; or

(f) the Registrar.

(2A) On an application by a deed administrator, the court must have regard to—

(a) any misconduct by the company’s officers reported by the deed administrator, the liquidator, or the Registrar; and

(b) the commercial decision of the creditors in accepting the deed of company arrangement; and

(d) any other matters that the court thinks fit.

(3) The court may require the liquidator of the company to furnish a report to the court with respect to any facts or matters relevant to the application.

(4) The court may, on making an order under subsection (1), or at any time thereafter, make such other order as it thinks fit in connection with the termination of the liquidation.

(5) Where the court makes an order under this section, the person who applied for the order must, within 10 working days after the order was made, deliver a copy of the order to the Registrar for registration.

(6) Where the court makes an order under subsection (1), the company ceases to be in liquidation and the liquidator ceases to hold office with effect on and from the making of the order or such other date as may be specified in the order.

(7) Every person who fails to comply with subsection (5) commits an offence and is liable on conviction to the penalty set out in section 373(2).

Provisions relating to prior execution process

251 Restriction on rights of creditors to complete execution, distraint, or attachment

(1) Subject to subsection (3), a creditor is not entitled to retain the benefit of any execution process, distress, or attachment over or against the property of a company unless the execution process, distress, or attachment is completed before—

(a) the passing of a special resolution under section 241(2)(a) or a resolution under section 241(2)(d) appointing a liquidator of the company, or the date on which the creditor had notice of the calling of a meeting at which such a resolution was proposed, whichever occurs first; or

(b) the passing of a resolution by the board of a company under section 241(2)(b) appointing a liquidator of the company, or the date on which the creditor had notice of the calling of a meeting at which such a resolution was proposed, whichever occurs first; or

(2) Notwithstanding subsection (1),—

(a) a person who, in good faith, purchases property of a company from an officer charged with an execution process acquires a good title as against the liquidator of the company:

(b) a person who, in good faith, purchases property of a company on which distress has been levied acquires a good title as against the liquidator of the company.

(3) The court may set aside the application of subsection (1) to such an extent and on such terms and conditions as the court thinks fit.

**(4)**For the purposes of this section,—

(a) an execution or distraint against personal property is completed by seizure and sale:

(b) an attachment of a debt is completed by receipt of the debt:

(c) an execution against land is completed by sale, and, in the case of an equitable interest, by the appointment of a receiver.

(5) Nothing in this section limits or affects section 292.

252 Duties of officer in execution process

(1) Subject to subsection (6), where—

(a) property of a company is taken in an execution process; and

(b) before completion of the execution process the officer charged with the execution process receives notice that a liquidator of the company has been appointed,— he or she must, on being required by the liquidator to do so, deliver or transfer the property and any money received in satisfaction or partial satisfaction of the execution or paid to avoid a sale of the property, as the case may be, to the liquidator.

(2) The costs of the execution process are a first charge on any property or money delivered or transferred to the liquidator under subsection (1) and the liquidator may sell all or some of the property to satisfy that charge.

(3) Subject to subsection (6), where—

(a) property of a company is sold in an execution process in respect of a judgment for a sum exceeding $500; or

(b) money is paid to the officer charged with the execution process to avoid a sale of the property,— the officer must retain the proceeds of sale or the money so paid for 10 working days.

(4) Subject to subsection (6), if,—

(a) within the period of 10 working days, the officer has notice of—

i. the calling of a meeting at which a special resolution is proposed to appoint a liquidator pursuant to section 241(2)(a); or

ii. the calling of a meeting of the board at which a resolution is proposed to appoint a liquidator pursuant to section 241(2)(b); or

iii. the making of an application to the court to appoint a liquidator pursuant to section 241(2)(c); and

(b) the company is put into liquidation— the officer must deduct from the amount the costs of the execution process and pay the balance to the liquidator.

(5) A liquidator to whom money is paid under subsection (4) is entitled to retain it as against the execution creditor.

**(6)**The court may set aside the application of this section to such extent and on such terms and conditions as it thinks fit.

Duties, rights, and powers of liquidators

253 Principal duty of liquidator

Subject to section 254, the principal duty of a liquidator of a company is—

(a) to take possession of, protect, realize, and distribute the assets, or the proceeds of the realization of the assets, of the company to its creditors in accordance with this Act; and

(b) if there are surplus assets remaining, to distribute them, or the proceeds of the realization of the surplus assets, in accordance with section 313(4)—

in a reasonable and efficient manner.

254 Liquidator not required to act in certain cases

Notwithstanding any other provisions of this Part,—

(a) except where the charge is surrendered or taken to be surrendered or redeemed under section 305, a liquidator may, but is not required to, carry out any duty or exercise any power in relation to property that is subject to a charge:

(b) where—

i. a company is put into liquidation under section 241(2)(c); and

ii. the Official Assignee is the liquidator of the company; and

iii. the company has no assets available for distribution to creditors of the company,— the Official Assignee shall not be required, without the consent of the Minister of the Crown who, under the authority of any warrant or with the authority of the Prime Minister, is for the time being responsible for the administration of this Act, to carry out any duty or exercise any power in connection with the liquidation if, to do so, would or would be likely to involve incurring any expense.

255 Other duties of liquidator

(1) Without limiting section 253, a liquidator has the other functions and duties specified in this Act.

(2) Without limiting subsection (1), a liquidator must,—

(a) forthwith after being appointed or being notified of his or her appointment, give public notice of—

i. the liquidator’s appointment; and

ii. the date and time of the commencement of the liquidation; and

iii. the address and telephone number to which, during normal business hours, inquiries may be directed by a creditor or shareholder; and

(b) within 10 working days of being appointed or being notified of his or her appointment, deliver to the Registrar for registration a notice of the liquidator’s appointment; and

i. prepare a list of every known creditor of the company with each creditor’s address (if known); and

ii. prepare and send to every known creditor, every shareholder, and the Registrar for registration,—

(A) a report containing a statement of the company’s affairs, proposals for conducting the liquidation, and, if practicable, the estimated date of its completion; and

(B) a notice explaining the right of a creditor or shareholder to require the liquidator to call a meeting of creditors under section 314; and

(d) within 20 working days of the end of each period of 6 months following the date of commencement of the liquidation, prepare and send to every known creditor and every shareholder, and send or deliver to the Registrar, a report—

i. on the conduct of the liquidation during the preceding 6 months; and

ii. of any further proposals which the liquidator has for completing the liquidation.

(3) For the purposes of subsection (2)(c), applicable period means,—

(a) in the case of a liquidator appointed under section 241(2)(a), (b), or (d), 5 working days after the liquidator’s appointment; or

(b) in the case of a liquidator appointed under paragraph (c) of subsection (2) of section 241, 25 working days after the liquidator’s appointment; or

**(4)**The court may, on the application of a liquidator,—

(a) exempt the liquidator from compliance with the provisions of paragraph (c) or paragraph (d) of subsection (2); or

(b) modify the application of those provisions in relation to the liquidator,—

on such terms and conditions as the court thinks fit.

(5)[Repealed]

(6) [Repealed]

256 Duties in relation to accounts

**(1)**Subject to subsection (2), the liquidator of a company must—

(a) keep accounts and records of the liquidation and permit those accounts and records, and the accounts and records in the company, to be inspected by—

i. any liquidation committee appointed under section 314, unless the liquidator believes on reasonable grounds that inspection would be prejudicial to the liquidation; and

ii. if the court so orders, a creditor or shareholder; and

(b) retain the accounts and records of the liquidation and of the company for not less than 1 year after completion of the liquidation.

(2) The Registrar may, whether before or after the completion of the liquidation,—

(a) authorize the disposal of any accounts and records; and

(b) require any accounts or records to be retained for longer than 1 year after the completion of the liquidation.

257 Duties in relation to final report and accounts

(1) As soon as practicable after completing his or her duties in relation to the liquidation, the liquidator of a company must—

(a) prepare and send to every creditor whose claim has been admitted and every shareholder—

i. the final report and statement of realization and distribution in respect of the liquidation; and

ii. a statement that—

(A) all known assets have been disclaimed, or realized, or distributed without realization; and

(B) all proceeds of realization have been distributed; and

iii. a summary of the applicable grounds on which the creditor or shareholder may object to the removal of the company from the New Zealand register under section 321:

(b)send or deliver copies of the documents referred to in paragraph (a) to the Registrar for registration.

(2) The court may, on the application of a liquidator,—

(a) exempt the liquidator from compliance with the provisions of subsection (1); or

(b) modify the application of those provisions in relation to the liquidator,—

on such terms and conditions as the court thinks fit.

258 Duty to have regard to views of creditors and shareholders

(1) The liquidator must have regard to—

(a) the views of the shareholders by whom any special resolution was passed at a meeting held for the purposes of section 241(2)(a) set out in a resolution passed at that meeting:

(b) the views of creditors set out in any resolution passed at a meeting held for the purposes of section 243:

(c) the views of creditors or shareholders set out in a resolution passed at a meeting called in accordance with subsection (2):

(d) the views of any liquidation committee given in writing to the liquidator.

(2) For the purposes of subsection (1), a liquidator—

(a) must summon meetings of shareholders at such times as may be specified by any resolution of shareholders passed at a meeting held for the purposes of section 241(2)(a):

(b) must summon meetings of creditors at such times as may be specified by any resolution of creditors passed at a meeting held for the purposes of section 243:

(c) must summon a meeting of shareholders forthwith when required to do so by notice in writing given by shareholders holding shares on which has been paid up not less than 10% of the total amount paid up on all shares issued by the company:

(d) must summon a meeting of creditors forthwith when required to do so by notice in writing given by creditors to whom is owed not less than 10% of the total amount owed to all creditors of the company:

(e) may, at his or her discretion, summon a meeting of shareholders or creditors of the company.

(3) A liquidator who calls a meeting of creditors or shareholders must call such a meeting in accordance with Schedule 1 or, if applicable, Schedule 5, as the case may be.

(4) Nothing in this section limits or prevents a liquidator from exercising his or her discretion in carrying out his or her functions and duties under this Act.

258A Duty to report suspected offences

**(1)**A liquidator of a company who considers that an offence that is material to the liquidation has been committed by the company or any director of the company against this Act or any of the following Acts must report that fact to the Registrar:

(a) the Crimes Act 1961:

(b) the Financial Markets Conduct Act 2013:

(d) [Repealed]

(e) the Takeovers Act 1993:

(f) the Insurance (Prudential Supervision) Act 2010.

(2) A report made under subsection (1), and any communications between the liquidator and Registrar relating to that report, are protected by absolute privilege.

(3) If the company is a licensed insurer, a copy of the report made under subsection (1) must be sent to the Reserve Bank of New Zealand.

(4) A copy of a report sent under subsection (3), and any communications between the liquidator and Reserve Bank of New Zealand relating to that report, are protected by absolute privilege.

(5) A liquidator who fails to comply with subsection (1) or (3) commits an offence and is liable on conviction to the penalty set out in section 373(2).

258B Registrar may supply report to FMA

(1) If a report is made under section 258A in respect of a financial markets participant, the Registrar may supply a copy of the report to the FMA.

(2) Any communications between—

(a) the Registrar and the FMA that relate to that report are protected by absolute privilege:

(b) the liquidator and the FMA that relate to that report are protected by absolute privilege.

259 Documents to state company in liquidation

Every document entered into, made, or issued by a liquidator of a company on behalf of the company must state in a prominent position that the company is in liquidation.

260 Powers of liquidator

(1) A liquidator has the powers—

(a) necessary to carry out the functions and duties of a liquidator under this Act; and

(b) conferred on a liquidator by this Act.

(2) Without limiting subsection (1), a liquidator has the powers set out in Schedule 6.

260A Liquidator may assign right to sue under this Act

**(1)**The liquidator may, if the court has first approved it, assign any right to sue that is conferred on the liquidator by this Act.

**(2)**The application for approval may be—

(a) made by the liquidator or the person to whom it is proposed to assign the right to sue; and

(b) opposed by a person who is a defendant to the liquidator’s action, if already begun, or a proposed defendant.

261 Power to obtain documents and information

(1) A liquidator may, from time to time, by notice in writing, require a director or shareholder of the company or any other person to deliver to the liquidator such books, records, or documents of the company in that person’s possession or under that person’s control as the liquidator requires.

(2) A liquidator may, from time to time, by notice in writing require—

(a) a director or former director of the company; or

(b) a shareholder of the company; or

(d) a person who is, or has been, an employee of the company; or

(e) a receiver, accountant, auditor, bank officer, or other person having knowledge of the affairs of the company; or

(f) a person who is acting or who has at any time acted as a solicitor for the company— to do any of the things specified in subsection (3).

(3) A person referred to in subsection (2) may be required—

(a) to attend on the liquidator at such reasonable time or times and at such place as may be specified in the notice:

(b) to provide the liquidator with such information about the business, accounts, or affairs of the company as the liquidator requests:

(c) to be examined on oath or affirmation by the liquidator or by a barrister or solicitor acting on behalf of the liquidator on any matter relating to the business, accounts, or affairs of the company:

(d) to assist in the liquidation to the best of the person’s ability.

(3A) Without limiting subsection (3)(a), a person may be required to attend on the liquidator under that subsection at a meeting of creditors of the company.

(4) Without limiting subsection (5), the liquidator may pay to a person referred to in paragraph (d) or paragraph (e) or paragraph (f) of subsection (2), not being an employee of the company, reasonable travelling and other expenses in complying with a requirement of the liquidator under subsection (3).

(5) The court may, on the application of the liquidator or a person referred to in paragraph (d) or paragraph (e) or paragraph (f) of subsection (2), not being an employee of the company, order that that person is entitled to receive reasonable remuneration and travelling and other expenses in complying with a requirement of the liquidator under subsection (3).

(6) A person referred to in paragraph (d) or paragraph (e) or paragraph (f) of subsection (2) is not entitled to refuse to comply with a requirement of the liquidator under subsection (3) by reason only that—

(a) an application to the court to be paid remuneration or travelling and other expenses has not been made or determined; or

(b) remuneration or travelling and other expenses to which that person is entitled have not been paid in advance; or

(6A) A person who fails to comply with a notice given under this section commits an offence and is liable on conviction to the penalty set out in section 373(3).

(7) Nothing in this section limits or affects section 260.

262 Documents in possession of receiver

(1) A receiver is not required to deliver to a liquidator under section 261 any books, records, or documents that the receiver requires for the purpose of exercising any powers or functions as receiver in relation to property of a company in liquidation.

(2) The liquidator may, from time to time, by notice in writing, require the receiver—

(a) to make such books, records, and documents available for inspection by the liquidator at any reasonable time or times; and

(b) to provide the liquidator with copies of such books, records, and documents or extracts from them.

(3) The liquidator may take copies of such books, records, and documents made available for inspection or extracts from them.

(4) The liquidator must pay the reasonable expenses of the receiver in complying with a requirement of the liquidator under subsection (2).

263 Restriction on enforcement of lien over documents

(1) A person is not entitled, as against the liquidator of a company, to claim or enforce a lien over books, records, or documents of the company.

(2) If the lien arises in relation to a debt for the provision of services to the company before the commencement of the liquidation, the debt is a preferential claim against the company under section 312 to the extent of 10% of the total value of the debt, up to a maximum amount of $2,000.

(3) Nothing in this section applies to a company that was put into liquidation pursuant to paragraph (a) or paragraph (b) of subsection (2) of section 241 if—

(a) the board of the company passed a resolution of the kind referred to in section 243(8); and

(b) section 244 does not apply in relation to the company.

264 Delivery of document creating charge over property

(1) A person is required to deliver a document to a liquidator under section 261 even though possession of the document creates a charge over property of a company.

(2) Production of the document to the liquidator does not prejudice the existence or priority of the charge, but the liquidator must make the document available to the person entitled to it for the purpose of dealing with or realising the charge or the secured property.

265 Examination by liquidator

(1) A liquidator or a barrister or solicitor acting on behalf of the liquidator may administer an oath to, or take the affirmation of, a person required to be examined under section 261.

(2) A person required to be examined under section 261 is entitled to be represented by a barrister or solicitor.

(3) A liquidator or a barrister or solicitor acting on behalf of the liquidator who conducts an examination under section 261 must ensure that the examination is recorded in writing or by means of a tape recorder or other similar device.

266 Powers of court

(1) The court may, on the application of the liquidator, order a person who has failed to comply with a requirement of the liquidator under section 261 to comply with that requirement.

(2) The court may, on the application of the liquidator, order a person to whom section 261 applies to—

(a) attend before the court and be examined on oath or affirmation by the court or the liquidator or a barrister or solicitor acting on behalf of the liquidator on any matter relating to the business, accounts, or affairs of the company:

(b) produce any books, records, or documents relating to the business, accounts, or affairs of the company in that person’s possession or under that person’s control.

(3) Where a person is examined under subsection (2)(a),—

(a) the examination must be recorded in writing; and

(b) the person examined must sign the record.

(4) Subject to any directions by the court, a record of an examination under this section is admissible in evidence in any proceedings under this Part, section 383, subpart 6 of Part 8 of the Financial Markets Conduct Act 2013, or section 44F of the Takeovers Act 1993.

267 Self-incrimination

(1) A person is not excused from answering a question in the course of being examined under section 261 or section 266 on the ground that the answer may incriminate or tend to incriminate that person.

(2) The testimony of the person examined is not admissible as evidence in criminal proceedings against that person except on a charge of perjury in relation to that testimony.

268 Power of liquidator to enforce liability of shareholders and former shareholders

(1) The liquidator may—

(a) if a shareholder is liable to calls, make calls on the shares held by that shareholder:

(b) if a shareholder or former shareholder is liable to the company, enforce that liability.

(2) A call made under subsection (1)(a) must be made in writing.

269 Power to disclaim onerous property

(1) Subject to section 270, a liquidator may disclaim onerous property even though the liquidator has taken possession of it, tried to sell it, or otherwise exercised rights of ownership in relation to it.

(2) For the purposes of this section, onerous property—

(a) means—

i. an unprofitable contract; or

ii. property of the company that is unsaleable, or not readily saleable, or that may give rise to a liability to pay money or perform an onerous act; or

iii. a litigation right that, in the opinion of the liquidator, has no reasonable prospect of success or cannot reasonably be funded from the assets of the company; but

(b) does not include—

i. a netting agreement to which sections 310A to 310O apply; or

ii. any contract of the company that constitutes a transaction under a netting agreement; or

iii. a settlement instruction or a settlement under the rules of a settlement system that is declared to be a designated settlement system under Part 5C of the Reserve Bank of New Zealand Act 1989.

(3) A disclaimer under this section—

(a) brings to an end on and from the date of the disclaimer the rights, interests, and liabilities of the company in relation to the property disclaimed:

(b) does not, except so far as necessary to release the company from a liability, affect the rights or liabilities of any other person.

(4) A liquidator who disclaims onerous property must, within 10 working days of the disclaimer, give notice in writing of the disclaimer to every person whose rights are, to the knowledge of the liquidator, affected by the disclaimer.

(5) A person suffering loss or damage as a result of a disclaimer under this section may—

(a) claim as a creditor of the company for the amount of the loss or damage, taking account of the effect of an order made by the court under paragraph (b):

(b) apply to the court for an order that the disclaimed property be delivered to or vested in that person.

(6) The court may make an order under subsection (5)(b) if it is satisfied that it is just that the property should be vested in the applicant.

270 Liquidator may be required to elect whether to disclaim onerous property

If a person whose rights would be affected by the disclaimer of onerous property gives a liquidator notice in writing requiring the liquidator to elect, before the close of such date as is stated in the notice, not being a date that is less than 20 working days after the date on which the notice is received by the liquidator, whether to disclaim the onerous property, the liquidator is not entitled to disclaim the onerous property unless he or she does so before the close of that date.

271 Pooling of assets of related companies

(1) On the application of the liquidator, or a creditor or shareholder, the court, if satisfied that it is just and equitable to do so, may order that—

(a) a company that is, or has been, related to the company in liquidation must pay to the liquidator the whole or part of any or all of the claims made in the liquidation:

(b) where 2 or more related companies are in liquidation, the liquidations in respect of each company must proceed together as if they were 1 company to the extent that the court so orders and subject to such terms and conditions as the court may impose.

(2) The court may make such other order or give such directions to facilitate giving effect to an order under subsection (1) as it thinks fit.

(3) This section is subject to section 139J(4) of the Reserve Bank of New Zealand Act 1989.

271A Notice that application filed must be given to administrators and creditors

(1) Unless the court orders otherwise, an applicant for an order under section 271(1)(b) must give notice that the application has been filed to the liquidator and each creditor of each related company in liquidation.

(2) An applicant need not give notice to himself or herself.

*(3) The notice must—

(a) identify each company to which the proposed order relates; and

(b) summarize all information known to the applicant that is material to whether the order should be made; and

(c) state that a person to whom the notice must be given may oppose the application by filing a statement of defence in accordance with the High Court Rules.

(4) The notice requirement in this section is in addition to anything required to be done by the High Court Rules.

272 Guidelines for orders

(1) In deciding whether it is just and equitable to make an order under section 271(1)(a), the court must have regard to the following matters:

(a) the extent to which the related company took part in the management of the company in liquidation:

(b) the conduct of the related company towards the creditors of the company in liquidation:

(c) the extent to which the circumstances that gave rise to the liquidation of the company are attributable to the actions of the related company:

(d) such other matters as the court thinks fit.

(2) In deciding whether it is just and equitable to make an order under section 271(1)(b), the court must have regard to the following matters:

(a) the extent to which any of the companies took part in the management of any of the other companies:

(b) the conduct of any of the companies towards the creditors of any of the other companies:

(c) the extent to which the circumstances that gave rise to the liquidation of any of the companies are attributable to the actions of any of the other companies:

(d) the extent to which the businesses of the companies have been combined:

(e)such other matters as the court thinks fit.

(3) The fact that creditors of a company in liquidation relied on the fact that another company is, or was, related to it is not a ground for making an order under section 271.

**273 Certain conduct prohibited

(1) If a company is in liquidation, or an application has been made to the court for an order that a company be put into liquidation, as the case may be, no person may—

(a) leave New Zealand with the intention of—

i. avoiding payment of money due to the company; or

ii. avoiding examination in relation to the affairs of the company; or

iii. avoiding compliance with an order of the court or some other obligation under this Part in relation to the affairs of the company; or

(b) conceal or remove property of the company with the intention of preventing or delaying the liquidator taking custody or control of it; or

(2) A person who contravenes subsection (1) commits an offence and is liable on conviction to the penalty set out in section 373(3).

274 Duty to identify and deliver property

(1) A present or former director or employee of a company in liquidation must,—

(a) forthwith after the company is put into liquidation, give the liquidator details of property of the company in his or her possession or under his or her control; and

(b) on being required to do so by the liquidator, forthwith or within such time as may be specified by the liquidator, deliver the property to the liquidator or such other person as the liquidator may direct, or dispose of the property in such manner as the liquidator may direct.

(2) A person who fails to comply with subsection (1) commits an offence and is liable on conviction to the penalty set out in section 373(3).

275 Refusal to supply essential services prohibited

(1) For the purposes of this section, an essential service means—

(a) the retail supply of gas:

(b) the retail supply of electricity:

(d) telecommunications services.

(2) For the purposes of this section, telecommunications services means the conveyance from one device to another by a line, radio frequency, or other medium, of a sign, signal, impulse, writing, image, sound, instruction, information, or intelligence of any nature, whether or not for the information of a person using the device.

(3) Notwithstanding the provisions of any other Act or any contract, a supplier of an essential service must not—

(a) refuse to supply the service to a liquidator, or to a company in liquidation, by reason of the company’s default in paying charges due for the service in relation to a period before the commencement of the liquidation; or

(b) make it a condition of the supply of the service to a liquidator, or to a company in liquidation, that payment be made of outstanding charges due for the service in relation to a period before the commencement of the liquidation; or

(c) make it a condition of the supply of the service to a company in liquidation that the liquidator personally guarantees payment of the charges that would be incurred for the supply of the service.

(4) The charges incurred by a liquidator for the supply of an essential service are an expense incurred by the liquidator for the purposes of clause 1(1)(a) of Schedule 7.

276 Remuneration of liquidators

(1) Subject to section 284(1)(e), every liquidator, not being an Official Assignee, appointed under paragraph (a) or paragraph (b) of subsection (2) of section 241 is entitled to charge reasonable remuneration for carrying out his or her duties and exercising his or her powers as liquidator.

(2) Unless the court otherwise orders, every Official Assignee who is appointed a liquidator under paragraph (a) of subsection (2) of section 241 and every liquidator appointed under paragraph (c) of that subsection shall charge remuneration either—

(a) of an amount equal to the amount fixed under section 277; or

(b) at, or in accordance with, such rate or rates as may be prescribed under that section.

277 Rates of remuneration

(1) The Governor-General may from time to time, by Order in Council, for the purposes of section 276, make regulations fixing an amount or prescribing a rate or rates in respect of the remuneration of liquidators to which that section applies.

(2) Without limiting subsection (1), such regulations may—

(a) prescribe an hourly or other rate or rates of remuneration and different rates may be prescribed in respect of work undertaken in the liquidation by different classes of persons:

(b) prescribe a rate or rates by reference to the net value of the assets realized by the liquidator, together with such other amounts as may be specified:

(d) prescribe a rate or rates by reference to such other criteria as may be specified.

*278 Expenses and remuneration payable out of assets of company

The expenses and remuneration of the liquidator are payable out of the assets of the company.

279 Liquidator ceases to hold office on completion of liquidation

(1) A liquidator ceases to hold office on the completion of the liquidation in accordance with section 249.

(2) Subsection (1) does not limit section 284 or section 286.

Qualifications and supervision of liquidators

280 Qualifications of liquidators

(1) Unless the court orders otherwise, none of the following persons may be appointed or act as a liquidator of a company:

(a) a person less than 18 years old:

(b) a creditor of the company in liquidation:

(c) a person who has, within the 2 years immediately preceding the commencement of the liquidation, been a shareholder, director, auditor, or receiver of the company or of a related company:

(ca) a person who has, or whose firm has, within the 2 years immediately before the commencement of the liquidation, provided professional services to the company, unless, within 20 working days before the appointment of the liquidator, the board of the company resolves that the company will, on the appointment of the liquidator, be able to pay its debts and a copy of the resolution is delivered to the Registrar for registration:

(cb) a person who has, or whose firm has, within the 2 years immediately before the commencement of the liquidation, had a continuing business relationship (other than through the provision of banking or financial services) with the company, its majority shareholder, any of its directors, or any of its secured creditors, unless, within 20 working days before the appointment of the liquidator, the board of the company resolves that the company will, on the appointment of the liquidator, be able to pay its debts and a copy of the resolution is delivered to the Registrar for registration:

(d) an undischarged bankrupt:

(e) a person who is, or is deemed to be, subject to a compulsory treatment order made under Part 2 of the Mental Health (Compulsory Assessment and Treatment) Act 1992:

(f) a person in respect of whom an order has been made under section 30 or section 31 of the Protection of Personal and Property Rights Act 1988:

(g) a person in respect of whom an order has been made under section 286(5):

(h) a person in respect of whom an order has been made under section 37(6) of the Receiverships Act 1993:

(ha) [Repealed]

(i) [Repealed]

(j) [Repealed]

(k) a person who is prohibited from being a director or promoter of or being concerned or taking part in the management of a company under section 382, 383, 385, or 385AA:

(kaa) a person who is prohibited from being a general partner or promoter of, or being concerned or taking part in the management of, a limited partnership under section 103A, 103B, 103D, or 103E of the Limited Partnerships Act 2008:

(ka) a person who is prohibited from being a director or promoter of, or being concerned or taking part in the management of, an incorporated or unincorporated body under the Financial Markets Conduct Act 2013, or the Takeovers Act 1993:

(l) a person who is prohibited under section 299(1)(c) of the Insolvency Act 2006 from acting as a director or taking part directly or indirectly in the management of any company or class of company:

(m) a person who is prohibited from being administrator or deed administrator under section 239ADV.

(1A) Subsection (1)(ca) or (cb) does not apply if all the creditors consent to the appointment of the person in question.

(2) A body corporate must not be appointed or act as a liquidator.

(3) A person who contravenes subsection (1) or subsection (2) commits an offence and is liable on conviction to the penalty set out in section 373(2).

(4) A person other than the Official Assignee must not be appointed a liquidator unless he or she has first certified in writing that he or she is not disqualified under subsection (1).

281 Validity of acts of liquidators

The acts of a person as a liquidator are valid even though that person is not qualified to act as a liquidator.

282 Consent to appointment

The appointment of a person, other than an Official Assignee, as liquidator is of no effect unless that person has consented in writing to the appointment.

283 Vacancies in office of liquidator

(1) The office of liquidator becomes vacant if the person holding office resigns, dies, or becomes disqualified under section 280.

(2) A person, other than an Official Assignee, may resign from the office of liquidator by appointing another such person as his or her successor and sending or delivering notice in writing of the appointment of his or her successor to the Registrar for registration.

(3) With the approval of the Official Assignee for New Zealand, an Official Assignee may resign from the office of liquidator by appointing another Official Assignee as his or her successor.

(4) The court may, on the application of the company, or a shareholder or other entitled person, or a director or creditor of the company, review the appointment of a successor to a liquidator and may appoint any person who could be appointed as liquidator under paragraph (a) or paragraph (b) or paragraph (c), as the case may be, of subsection (2) of section 241 to be the liquidator of the company.

(5) If, for any reason other than resignation, a vacancy occurs in the office of liquidator, written notice of the vacancy must forthwith be sent or delivered to the Official Assignee for New Zealand by the person vacating office or, if that person is unable to act, by his or her personal representative.

(6) If, as the result of the vacation of office by a liquidator, other than an Official Assignee, no person is acting as liquidator, the Official Assignee for New Zealand may appoint a person to act as liquidator until a successor is appointed under this section.

(7) If a vacancy occurs in the office of the liquidator, or a liquidator has been appointed under subsection (6), as the case may be, the court may, on the application of the company, or a shareholder or other entitled person, or a director or creditor of the company, or the Official Assignee for New Zealand, appoint any person who could be appointed as liquidator under paragraph (a) or paragraph (b) or paragraph (c), as the case may be, of subsection (2) of section 241 to be the liquidator of the company.

(8) A liquidator appointed under subsection (7) must, within 10 working days of being appointed or being notified of his or her appointment, deliver a notice of his or her appointment to the Registrar for registration.

(9) A person vacating the office of liquidator must, where practicable, provide such information and give such assistance to that person’s successor as he or she reasonably requires in taking over the duties of liquidator.

284 Court supervision of liquidation

(1) On the application of the liquidator, a liquidation committee, or, with the leave of the court, a creditor, shareholder, other entitled person, or director of a company in liquidation, the court may—

(a) give directions in relation to any matter arising in connection with the liquidation:

(b) confirm, reverse, or modify an act or decision of the liquidator:

(d) order the liquidator to produce the accounts and records of the liquidation for audit and to provide the auditor with such information concerning the conduct of the liquidation as the auditor requests:

(e) in respect of any period, review or fix the remuneration of the liquidator at a level which is reasonable in the circumstances:

(f) to the extent that an amount retained by the liquidator as remuneration is found by the court to be unreasonable in the circumstances, order the liquidator to refund the amount:

(g) declare whether or not the liquidator was validly appointed or validly assumed custody or control of property:

(h) make an order concerning the retention or the disposition of the accounts and records of the liquidation or of the company.

(2) The powers given by subsection (1) are in addition to any other powers a court may exercise in its jurisdiction relating to liquidators under this Part, and may be exercised in relation to a matter occurring either before or after the commencement of the liquidation, or the removal of the company from the New Zealand register, and whether or not the liquidator has ceased to act as liquidator when the application or the order is made.

(3) Subject to subsection (4), a liquidator who has—

(a) obtained a direction of a court with respect to a matter connected with the exercise of the powers or functions of liquidator; and

(b) acted in accordance with the direction—

is entitled to rely on having so acted as a defence to a claim in relation to anything done or not done in accordance with the direction.

(4) A court may, on the application of any person, order that, by reason of the circumstances in which a direction was obtained under subsection (1), the liquidator does not have the protection given by subsection (3).

285 Meaning of failure to comply

(1) In section 286 unless the context otherwise requires, failure to comply means a failure of a liquidator to comply with a relevant duty arising—

(a) under this or any other Act or rule of law or rules of court; or

(b) under any order or direction of a court other than an order to comply made under that section;— and comply, compliance, and failed to comply have corresponding meanings.

(2) In subsection (1), relevant duty includes the duty of a person in his or her capacity as administrator or deed administrator of a company.

286 Orders to enforce liquidator’s duties

(1) An application for an order under this section may be made by—

(a) a liquidator:

(b) a person seeking appointment as a liquidator:

(d) a creditor, shareholder, other entitled person, or a director of the company in liquidation:

(e) a receiver appointed in relation to property of the company in liquidation:

(f) if the liquidator is a qualified statutory accountant (within the meaning of section 5(1) of the Financial Reporting Act 2013), a member of the governing body of the association of accountants of which the qualified statutory accountant is a member:

(g) if the liquidator is a barrister and solicitor or a solicitor, the President of the New Zealand Law Society:

(h) an Official Assignee.

(2) No application may be made to a court by a person other than a liquidator in relation to a failure to comply unless notice of the failure to comply has been served on the liquidator not less than 5 working days before the date of the application and, as at the date of the application, there is a continuing failure to comply.

(3) If the court is satisfied that there is, or has been, a failure to comply, the court may—

(a) relieve the liquidator of the duty to comply wholly or in part; or

(b) without prejudice to any other remedy which may be available in relation to a breach of duty by the liquidator, order the liquidator to comply to the extent specified in the order.

(4) A court may, in relation to a person who fails to comply with an order made under subsection (3), or is or becomes disqualified under section 280 to become or remain a liquidator,—

(a) remove the liquidator from office; or

(b) order that the person may be appointed and act, or may continue to act, as liquidator, notwithstanding the provisions of section 280.

(5) If the court is satisfied that a person is unfit to act as a liquidator by reason of persistent failures to comply or the seriousness of a failure to comply,—

(a) the court must make a prohibition order; and

(b) the period of the order is a matter for the discretion of the court but the court may make a prohibition period for an indefinite period.

(6) A person to whom a prohibition order applies must not—

(a) act as a liquidator in a current or other liquidation; or

(b) act as a receiver in a current or other receivership.

(7) Evidence that, on 2 or more occasions,—

(a) a court has made an order to comply under this section in respect of the same person; or

(b) an application for an order to comply under this section has been made in respect of the same person and that in each case the person has complied after the making of the application and before the hearing,— is, in the absence of special reasons to the contrary, evidence of persistent failures to comply for the purposes of this section.

(8) In making an order under this section a court may, if it thinks fit,—

(a) make an order extending the time for compliance; or

(b) impose a term or condition; or

(9) A copy of every order made under subsection (5) must, within 10 working days of the order being made, be delivered by the applicant to the Official Assignee for New Zealand who must keep it on a file indexed by reference to the name of the liquidator concerned.

Company unable to pay its debts

287 Meaning of inability to pay debts

Unless the contrary is proved, and subject to section 288, a company is presumed to be unable to pay its debts if—

(a) the company has failed to comply with a statutory demand; or

(b) execution issued against the company in respect of a judgment debt has been returned unsatisfied in whole or in part; or

(c) a person entitled to a charge over all or substantially all of the property of the company has appointed a receiver under the instrument creating the charge; or

(d) a compromise between a company and its creditors has been put to a vote in accordance with Part 14 but has not been approved.

288 Evidence and other matters

**(1)**On an application to the court for an order that a company be put into liquidation, evidence of failure to comply with a statutory demand is not admissible as evidence that a company is unable to pay its debts unless the application is made within 30 working days after the last date for compliance with the demand.

**(2)**Section 287 does not prevent proof by other means that a company is unable to pay its debts.

(3) Information or records acquired under section 178 or, if the court so orders, under section 179, may be received as evidence that a company is unable to pay its debts.

**(4)**In determining whether a company is unable to pay its debts, its contingent or prospective liabilities may be taken into account.

(5) An application to the court for an order that a company be put into liquidation on the ground that it is unable to pay its debts may be made by a contingent or prospective creditor only with the leave of the court; and the court may give such leave, with or without conditions, only if it is satisfied that a prima facie case has been made out that the company is unable to pay its debts.

289 Statutory demand

(1) A statutory demand is a demand by a creditor in respect of a debt owing by a company made in accordance with this section.

(2) A statutory demand must—

(a) be in respect of a debt that is due and is not less than the prescribed amount; and

(b) be in writing; and

(d) require the company to pay the debt, or enter into a compromise under Part 14, or otherwise compound with the creditor, or give a charge over its property to secure payment of the debt, to the reasonable satisfaction of the creditor, within 15 working days of the date of service, or such longer period as the court may order.

290 Court may set aside statutory demand

(1) The court may, on the application of the company, set aside a statutory demand.

(2) The application must be—

(a) made within 10 working days of the date of service of the demand; and

(b) served on the creditor within 10 working days of the date of service of the demand.

(3) No extension of time may be given for making or serving an application to have a statutory demand set aside, but, at the hearing of the application, the court may extend the time for compliance with the statutory demand.

(4) The court may grant an application to set aside a statutory demand if it is satisfied that—

(a) there is a substantial dispute whether or not the debt is owing or is due; or

(b) the company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or

(5) A demand must not be set aside by reason only of a defect or irregularity unless the court considers that substantial injustice would be caused if it were not set aside.

(6) In subsection (5), defect includes a material misstatement of the amount due to the creditor and a material misdescription of the debt referred to in the demand.

(7) An order under this section may be made subject to conditions.

291 Additional powers of court on application to set aside statutory demand

(1) If, on the hearing of an application under section 290, the court is satisfied that there is a debt due by the company to the creditor that is not the subject of a substantial dispute, or is not subject to a counterclaim, set-off, or cross-demand, the court may—

(a) order the company to pay the debt within a specified period and that, in default of payment, the creditor may make an application to put the company into liquidation; or

(b) dismiss the application and forthwith make an order under section 241(4) putting the company into liquidation,— on the ground that the company is unable to pay its debts.

(2) For the purposes of the hearing of an application to put the company into liquidation pursuant to an order made under subsection (1)(a), the company is presumed to be unable to pay its debts if it failed to pay the debt within the specified period.

Voidable transactions

292 Insolvent transaction voidable

(1) A transaction by a company is voidable by the liquidator if it—

(a) is an insolvent transaction; and

(b) is entered into within the specified period.

(2) An insolvent transaction is a transaction by a company that—

(a) is entered into at a time when the company is unable to pay its due debts; and

(b) enables another person to receive more towards satisfaction of a debt owed by the company than the person would receive, or would be likely to receive, in the company’s liquidation.

(3) In this section, transaction means any of the following steps by the company:

(a) conveying or transferring the company’s property:

(b) creating a charge over the company’s property:

(d) undergoing an execution process:

(e) paying money (including paying money in accordance with a judgment or an order of a court):

(f) anything done or omitted to be done for the purpose of entering into the transaction or giving effect to it.

(4) In this section, transaction includes a transaction by a receiver, except a transaction that discharges, whether in part or in full, a liability for which the receiver is personally liable under section 32(1) or (5) of the Receiverships Act 1993 or otherwise personally liable under a contract entered into by the receiver.

(4A) A transaction that is entered into within the restricted period is presumed, unless the contrary is proved, to be entered into at a time when the company is unable to pay its due debts.

(4B) Where—

(a) a transaction is, for commercial purposes, an integral part of a continuing business relationship (for example, a running account) between a company and a creditor of the company (including a relationship to which other persons are parties); and

(b) in the course of the relationship, the level of the company’s net indebtedness to the creditor is increased and reduced from time to time as the result of a series of transactions forming part of the relationship; then—

(c) subsection (1) applies in relation to all the transactions forming part of the relationship as if they together constituted a single transaction; and

(d) the transaction referred to in paragraph (a) may only be taken to be an insolvent transaction voidable by the liquidator if the effect of applying subsection (1) in accordance with paragraph (c) is that the single transaction referred to in paragraph (c) is taken to be an insolvent transaction voidable by the liquidator.

(5) For the purposes of subsections (1) and (4B), specified period means—

(a) the period of 2 years before the date of commencement of the liquidation together with the period commencing on that date and ending at the time at which the liquidator is appointed; and

(b) in the case of a company that was put into liquidation by the court, the period of 2 years before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date on which, and at the time at which, the order was made; and

i. an application was made to the court to put a company into liquidation; and

ii. after the making of the application to the court a liquidator was appointed under paragraph (a) or paragraph (b) of section 241(2),—

the period of 2 years before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date and at the time of the commencement of the liquidation.

(6) For the purposes of subsection (4A), restricted period means—

(a) the period of 6 months before the date of commencement of the liquidation together with the period commencing on that date and ending at the time at which the liquidator is appointed; and

(b) in the case of a company that was put into liquidation by the court, the period of 6 months before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date on which, and at the time at which, the order of the court was made; and

i an application was made to the court to put a company into liquidation; and

ii. after the making of the application to the court a liquidator was appointed under paragraph (a) or paragraph (b) of section 241(2),—

the period of 6 months before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date and at the time of the commencement of the liquidation.

293 Voidable charges

(1) A charge over any property or undertaking of a company is voidable by the liquidator if—

(a) the charge was given within the specified period; and

(b) immediately after the charge was given, the company was unable to pay its due debts.

(1A) Subsection (1) does not apply if—

(a) the charge secures money actually advanced or paid, or the actual price or value of property sold or supplied to the company, or any other valuable consideration given in good faith by the grantee of the charge at the time of, or at any time after, the giving of the charge; or

(b) the charge is in substitution for a charge given before the specified period.

(2) Unless the contrary is proved, a company giving a charge within the restricted period is presumed to have been unable to pay its due debts immediately after giving the charge.

(3) Subsection (1A)(b) does not apply to the extent that—

(a) the amount secured by the substituted charge exceeds the amount secured by the existing charge; or

(b) the value of the property subject to the substituted charge at the date of the substitution exceeds the value of the property subject to the existing charge at that date.

(4) Nothing in subsection (1) applies to a charge given by a company that secures the unpaid purchase price of property, whether or not the charge is given over that property, if the instrument creating the charge is executed not later than 30 days after the sale of the property or, in the case of the sale of an estate or interest in land, not later than 30 days after the final settlement of the sale.

(5) For the purposes of subsection (1A)(a) and subsection (4), where any charge was given by the company within the period specified in subsection (1), all payments received by the grantee of the charge after it was given shall be deemed to have been appropriated so far as may be necessary—

(a) towards repayment of money actually advanced or paid by the grantee to the company on or after the giving of the charge; or

(b) towards payment of the actual price or value of property sold by the grantee to the company on or after the giving of the charge; or

(c) towards payment of any other liability of the company to the grantee in respect of any other valuable consideration given in good faith on or after the giving of the charge.

(6) For the purposes of subsection (1), specified period means—

(a) the period of 2 years before the date of commencement of the liquidation together with the period commencing on that date and ending at the time at which the liquidator is appointed; and

(b) in the case of a company that was put into liquidation by the court, the period of 2 years before the making of the application to the court together with the period commencing on the date of the making of the application and ending on the date on which, and at the time at which, the order of the court was made; and

i. an application was made to the court to put a company into liquidation; and

ii. after the making of the application to the court a liquidator was appointed under paragraph (a) or paragraph (b) of section 241(2),—

the period of 2 years before the making of the application to the court together with the period commencing on the date of

the making of that application and ending on the date and at the time of the commencement of the liquidation.

(7) For the purposes of subsection (2), restricted period means—

(a) the period of 6 months before the date of commencement of the liquidation together with the period commencing on that date and ending at the time at which the liquidator is appointed; and

(b) in the case of a company that was put into liquidation by the court, the period of 6 months before the making of the application to the court together with the period commencing on the date of the making of the application and ending on the date on which, and at the time at which, the order of the court was made; and

i. an application was made to the court to put a company into liquidation; and

ii. after the making of the application to the court a liquidator was appointed under paragraph (a) or paragraph (b) of section 241(2),—

294 Procedure for setting aside transactions and charges

(1) A liquidator who wishes to set aside a transaction or charge that is voidable under section 292 or 293 must—

(a) file a notice with the court that meets the requirements set out in subsection (2); and

(b) serve the notice as soon as practicable on—

i. the other party to the transaction or the charge holder, as the case may be; and

ii. any other party from whom the liquidator intends to recover.

(2) The liquidator’s notice must—

(a) be in writing; and

(b) state the liquidator’s postal, email, and street addresses; and

(d) describe the property or state the amount that the liquidator wishes to recover; and

(e) state that the person named in the notice may object to the transaction or charge being set aside by sending to the liquidator a written notice of objection that is received by the liquidator at his or her postal, email, or street address within 20 working days after the liquidator’s notice has been served on that person; and

(f) state that the written notice of objection must contain full particulars of the reasons for objecting and must identify any documents that evidence or substantiate the reasons for objecting; and

(g) state that the transaction or charge will be set aside as against the person named in the notice if that person does not object; and

(h) state that if the person named in the notice does object, the liquidator may apply to the court for the transaction or charge to be set aside.

(3) The transaction or charge is automatically set aside as against the person on whom the liquidator has served the liquidator’s notice, if that person has not objected by sending to the liquidator a written notice of objection that is received by the liquidator at his or her postal, email, or street address within 20 working days after the liquidator’s notice has been served on that person.

(4) The notice of objection must contain full particulars of the reasons for objecting and must identify documents that evidence or substantiate the reasons for objecting.

(5) A transaction or charge that is not automatically set aside may still be set aside by the court on the liquidator’s application.

*295 Other orders

If a transaction or charge is set aside under section 294, the court may make 1 or more of the following orders:

(a) an order that a person pay to the company an amount equal to some or all of the money that the company has paid under the transaction:

(b) an order that a person transfer to the company property that the company has transferred under the transaction:

(c) an order that a person pay to the company an amount that, in the court’s opinion, fairly represents some or all of the benefits that the person has received because of the transaction:

(d) an order that a person transfer to the company property that, in the court’s opinion, fairly represents the application of either or both of the following:

i. money that the company has paid under the transaction:

ii. proceeds of property that the company has transferred under the transaction:

(e) an order releasing, in whole or in part, a charge given by the company:

(f) an order requiring security to be given for the discharge of an order made under this section:

(g) an order specifying the extent to which a person affected by the setting aside of a transaction or by an order made under this section is entitled to claim as a creditor in the liquidation.

296 Additional provisions relating to setting aside transactions and charges

(1) The setting aside of a transaction or an order made under section 295 does not affect the title or interest of a person in property which that person has acquired—

(a) from a person other than the company; and

(b) for valuable consideration; and

(2) The setting aside of a charge or an order made under section 295 does not affect the title or interest of a person in property which that person has acquired—

(a) as the result of the exercise of a power of sale by the grantee of the charge; and

(b) for valuable consideration; and

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