This article details many significant items contained within the Companies Act 1993.  It does not detail all clauses of the Companies Act 1993 and professional advice should be obtained  for full clarification of all clauses and explanations of clauses.



In order to be incorporated under the Companies Act 1993, a company must have:

A name which has been reserved by the Registrar of Companies

At least one share

At least one shareholder

At least one director

A registered office, and

An address for service  

The registered office and the address for service need not be at the company business, nor in the same place.   The address for service must not be a Post Office box or Document Exchange.  



All companies must have a Registered Office located in New Zealand.


Companies are required to maintain the following books and registers.

A Share Register
Company records
Accounting records



Companies must maintain a Share register that records the shares issued by the company and states:

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
Where any document that contains the restrictions may be inspected

The Share Register must state the following with respect to each class of share:

Names and addresses (last known) of current and former (within the last 10 years) shareholders

Number of shares held by each shareholder (within the last 10 years)

Dates of any issue of shares

 Dates of any repurchase or redemption of shares from, or transfer of shares by each shareholder (within the last 10 years) and record the name of who they were transferred to.

 An agent may maintain the Share Register  



The following documents must be kept at the company’s Registered Office:

The constitution of the company
Minutes of all meetings and resolutions of shareholders within the last seven years.
An Interests register (of director’s interests)
Minutes of all meetings and resolutions of directors and director’s committees within the last seven years
The full names and addresses of the current directors
Copies of all written communications to all shareholders or all holders of the same class of shares during the last seven years
Copies of all financial statements and group financial statements (if any) required to be completed under the Act or the Financial Reporting Act 1993 for the last seven completed accounting periods of the company
The accounting records required by the Act for the current period and for the last seven completed accounting periods of the company
The Share Register



The Companies Office should be notified of:

Initial appointment of directors at registration of the company
Changes to a Director’s name or residential address
Removal from office
Disqualification from holding office as a director

New appointments or resignations must be notified to the Companies Office within 20 working days of an appointment or resignation taking place.  

The following circumstances disqualify a person to act as a director:

Under 18 years of age
An undischarged bankrupt
A person prohibited from directing, promoting , or participating in the management of a company under  statutory provisions
A person subject to a property order made under the Protection of Personal and Property Rights Act 1988
A person not qualified pursuant to the company constitution



A company must appoint an auditor, but a New Zealand resident company need not appoint an auditor if a unanimous resolution of shareholders not to appoint is passed

The following companies must appoint an auditor:

A New Zealand subsidiary of a company that is incorporated outside New Zealand
A company in which 25% or more of the voting power in controlled by overseas interests
A company that is an issuer of securities as defined by the Financial Reporting Act 1993



The Registrar sends a reminder in the month before the return is due to be filed.   All annual returns are required to be filed in the designated month.   The prescribed fee must be paid at the time of filing



New Zealand companies may be incorporated with or without a Constitution.  If a Constitution is not specifically created, legal requirements revert back to the clauses of the Companies Act.   Shareholders may, by special resolution, adopt a Constitution, which may have different rules than the Act.  Shareholders by special resolution may also alter or revoke the Constitution of the Company.  



Once the company is registered , the shares are issued forthwith  to the named shareholders as per the application declarations to the Companies Office when applying for registration. The Act provides the Board of Directors with authority to issue further shares at any time to any person and in any number it thinks fit.  The restricting element is the company constitution and other provisions of the Act



The board may authorize a distribution to shareholders at any time, and of any amount, and to any shareholders it sees fit.   But before doing so, it must:

Be satisfied, on reasonable grounds, that the company will be able to satisfy the solvency test immediately after the distribution
Ensure that any distribution meets the requirements of the constitution and that a dividend is not authorized for only some of the classes in a share in a class, or for different amounts per share in a class, unless the difference is to repay a liability from the shareholder of the company

Directors who vote in favour of the distribution must sign a certificate and pass the appropriate resolutions that the company can satisfy the solvency test.  To satisfy the solvency test, the company must:

Be able to pay its debts as they become due in the normal course of business, and
The value of the company’s assets are greater than the value of its liabilities including contingent liabilities

Share repurchases are regarded as distributions for the purposes of the solvency test.



The overriding document is the company constitution.   If the constitution has more stringent rules than the Act, this is the overriding authority to govern shareholder power.  The powers reserved to shareholders by the act are to:

Adopt, alter or revoke a constitution

Alter shareholder rights

Approve a major transaction

Appoint and remove directors

Approve an amalgamation

 Place the company into liquidation  

The above generally must be exercised by resolution and require approval by 75 per cent in number and voting power (or higher if required by the constitution) 

 Where all shareholders unanimously agree in writing and the company satisfies the solvency test a company may: 

1.        Authorise a dividend,

2.        Approve a discount scheme,

3.        Acquire its own shares,

4.        Redeem its own shares,

5.        Provide assistance for the purchase of shares

6.        Authorise remuneration, benefits, compensation for loss of office, loans and guarantees relating to company directors  

Shareholders must be given a reasonable opportunity at meetings to question, discuss or comment on the management of the company. Shareholders may pass resolutions at meetings relating to the management of the company.  



Each company must hold an annual meeting of shareholders once every calendar year. The meeting cannot be later than six months after balance date and no longer than 15 months after the previous annual meeting.   For new companies, the first meeting can be within 18 months of its registration.      Traditionally, annual meetings consider the following types of ordinary business:

Receive, consider  and adopt financial statements

 Election of directors

 Appointment ( or decision not to appoint) auditors- this is the only mandatory requirement of an Annual General Meeting

 Appointment ( or decision not to appoint) auditors- this is the only mandatory requirement of an Annual General Meeting

 Any other business that may require a special resolution (e.g. amend company constitution)

 General business  



The Act allows for special meetings of shareholders to be held.  These are called by either the Board or a person authorised by the constitution to do so.   If more than five percent of the voting shareholders request a special meeting, the Board must call a meeting.   Generally , special meetings may be called to deal with extraordinary events that require a special resolution to be passed.


The Act confers responsibilities on directors and the Board to manage the company.   Directors are responsible for making key decisions as to the operation of a company.  

The duties of care for directors can be summarised as follows:

To act in good faith and in the interests of the company
To exercise powers for a proper purpose
Not to act in a manner which contravenes the Act or the Constitution
Not to agree to or cause or allow the company’s business to be carried on in a manner which is likely to create a substantial risk of serious loss to the company’s creditors (reckless trading)
Not to agree to incurring an obligation unless the company can perform the obligation when required
To exercise care, diligence and skill, taking into account nature of the company, nature of the decision, position of the director and responsibilities undertaken
When exercising powers or performing duties may rely on professional and expert advice. This may be from an employee, professional adviser or expert, or other director

The Act provides the following duties for directors in relation to transactions involving self-interest:

To disclose transactions in which directors are interested
Not to disclose information that is not in the public domain that is known to them in their capacity as director or employee without prior Board approval
To disclose relevant interests in the company’s shares and any acquisition or disposal of the company’s shares



To satisfy the solvency test, the company must:

Be able to pay its debts as they become due in the normal course of business, and
The value of the company’s assets are greater than the value of its liabilities including contingent liabilities

The Act provides clear guidance as to the responsibility of directors making distributions to shareholders and the completion of a solvency certificate by the directors when doing so.   Directors can be held personally liable if:

They fail to complete a solvency certificate
The procedure for authorizing distributions has not been followed
Reasonable grounds for believing that the company would satisfy the solvency did not exist at the time the solvency certificate was signed
Between the date of approving the distribution and its date of execution, there has been a change in circumstances in relation to the company’s ability to meet the solvency test

If a distribution is made to shareholders at any time after a date that a company is unable to meet the solvency test ,the liability of directors amounts to the amount paid to shareholders since the date the company was unable to meet the solvency test, and where by prudent management the directors should have realised this was the case.



The purpose of the solvency test is to ensure that the rights of creditors are protected.  However, under the current legislation, the Act does not provide creditors with any direct remedies upon a breach of the solvency test.   This would, however, only become an issue after the payment of a distribution had been authorized at a time when the company was insolvent.   The creditors only redress may be through the general powers of competence of directors, and being able to prove in liquidation that these powers had been breached.



The Act clearly states that a director must fulfill in this circumstance, which include:

A duty to not allow the company to trade recklessly

 A duty not to agree to the company incurring an obligation unless the director has reasonable grounds that the company will be able to perform the obligation

 The requirements of these duties can place directors in potentially difficult situations, where they are required to balance the duties conferred on them against their desire to have the company trade its way out of difficulties it may find itself in.    Where this happens, it is important for the directors to:

Ensure that they have been fully appraised of the situation of the company.   This is particularly important for directors who are not directly involved in the running of the company
Document their assessment as to why the company is able to continue in the foreseeable future
It is important to ensure that when a company is in difficult times  that such considerations are made regularly (e.g. monthly) to ensure that the directors are meeting their statutory duties.  This may also serve to limit their liability should the company be placed into liquidation and actions are taken against the directors.



Four principal prescribed remedies available to creditors are:

Statutory demand- these are a common method for creditors to instigate recovery of debts, after normal debt collection procedures
Place the company in liquidation under the Companies Act 1993
Place the company into receivership under the Receiverships act 1993
Apply for the company to be placed under statutory management under the Corporations (Investigations and Management) Act 1989



A liquidator can be appointed by three groups of people:

The shareholders of the company by special resolution of those shareholders entitled to vote and voting on the question
The Board of the company upon the occurrence of an event specified in the constitution
The Court, upon application of the company, or a director or shareholder or other entitled person, or a creditor of the company, or the Registrar

In cases where application is made to the Court to appoint a liquidator, it will do so, if it is satisfied that:

The company is unable to pay its debts. Or
The company or the Board has persistently or seriously failed to comply with the Act, or
The company does not comply with the essential requirements of a company (i.e. has a name, one or more shares, one or more shareholders, one or more directors, or
It is considered just and equitable that the company be put into liquidation

The principle duty of a liquidator is to take possession, protect, realize and distribute the assets to the creditors of the company.    



A receiver can be appointed in respect of the property of a person by a deed or agreement to which that person is a party- usually a debenture.   Where a receiver is appointed, the debenture that provided the means for appointment usually specifies the grounds on which a receiver can be appointed.  These may include

Default in the payment of loans under the debenture
Where the company ceases to trade
Where the company makes arrangements with other creditors in respect of the payment of debts outstanding
Failure to meet obligations placed on the company by the debenture

Generally speaking, the receiver, when appointed, becomes the agent of the grantor, and will be appointed to obtain sufficient assets to meet the demands of the debenture holder. However, this agency ceases upon the appointment of a liquidator.



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