Chapman Tripp - Resource Library - Doing Business in New Zealand


Contents

	Introduction
	About Chapman Tripp
	Why do business in New Zealand?
	Overview
		Geography Climate People Government Legal system Currency Infrastructure Business conditions Holidays Living in New Zealand Cost of living
	Economy
		Major industries Markets Trade agreements Economic position Economic policies
	Starting up business
		Type of business Corporate structure options Branch or subsidiary? Government consents
	Immigration
		Entry requirements Temporary employment for foreign nationals New Zealand residence Immigration policy Returning residents' visa
	Buying and developing land and property
		Title Contracts for sale and purchase of land Resource Management Act and district plans The Building Act 1991 Barriers to buying land Maori land claims
	Taxation
		Overview Income tax Goods and Services Tax Import duties Rates Other taxes
	Finance
		Reserve Bank Financial institutions Financial markets Raising finance Repatriation of funds
	Regulations affecting business
		The Commerce Act The Fair Trading Act
	Intellectual property
	Labour and employment
		Employment Relations Act Working conditions

PDF Version

Finance

The Reserve Bank of New Zealand

The Reserve Bank of New Zealand (the Reserve Bank) is New Zealand’s central bank. Its primary function is to formulate and implement monetary policy with the aim of achieving and maintaining price stability. Policy targets are set to achieve this; these are currently defined as maintaining underlying inflation within a 1-3% range.

The Reserve Bank’s other functions are:

	acting as a banker to the Government
	maintaining the note and coin issue and the public debt and foreign exchange reserves
	advising the Government on matters relating to monetary policy, banking credit and overseas exchange
	licensing and the prudential supervision of banks.

The Reserve Bank is required to publish a monetary policy statement every quarter. Through these statements, the Reserve Bank has been successful in influencing interest rates to best achieve price stability.

Financial institutions

Among the wide range of financial institutions in New Zealand are banks, building societies, private savings banks, merchant banks, finance companies, stock and station agents, trust and mortgage companies, small loan companies and insurance companies.

Banks

Following substantial de-regulation of the banking industry, New Zealand has maintained a relatively open policy on the entry of new registered banks with the philosophy that greater competition leads to greater efficiency and innovation.

There are currently 17 registered banks operating in New Zealand, representing a particularly high banks per capita figure by international standards. Not all of these banks operate full retail banking businesses, with a number operating in niche wholesale banking sectors.

The banks with the largest operations in New Zealand are:

	ANZ National Bank Limited
	ASB Bank Limited
	Bank of New Zealand
	Westpac (through Westpac New Zealand Limited and Westpac Banking Corporation).

Financial markets

NZX regulates and facilitates New Zealand’s three securities markets, as follows:

NZSX – New Zealand Stock Market
The NZSX Market is New Zealand’s principal market for equity securities. It features the securities of the majority of New Zealand’s listed companies and a number of overseas companies. There are approximately 200 companies listed on the NZSX with a combined market capitalisation of approximately NZ$72 billion.

The NZSX Market is suited to large and established enterprises. Requirements for listing on the NZSX Market include the company having an appropriately qualified board of directors, at least 500 shareholders who hold at least 25% of the class of securities between them, and full compliance with NZX disclosure and other requirements. NZX also recommends that such companies have annual revenue of at least NZ$50 million. In certain situations, securities of overseas issuers which are listed on a recognised overseas stock exchange can be listed on the NZSX without complying with a number of these requirements.

The NZSX Market is the first of the world’s markets to open each day, due to New Zealand’s proximity to the International Date Line.

NZAX – New Zealand Alternative Market
The NZAX Market is New Zealand’s newest equities market and is designed for use by small to medium sized companies (companies with a minimum of 50 shareholders and recommended annual turnover of between NZ$5 million and NZ$50 million), which are fast-growing or looking for additional sources of capital.

The NZAX Market is also suited to non-standard companies or entities such as co-operatives and mutual societies. The NZAX Market has a non-standard listing function that allows for closed trading for companies that have a defined group of shareholders.

In comparison with the NZSX Market, the NZAX Market has lower levels of compliance and corporate governance, and lower costs associated with listing.

NZDX – New Zealand Debt Market
The NZDX Market provides investors with a transparent and liquid market to buy and sell debt securities. Debt securities which may be offered on the NZDX include:

	Government bonds
	state-owned-enterprise bonds (bonds issued by companies owned by the Government, and thus similar to Government bonds but trading at slightly higher yields)
	local authority stock (issued by city councils and regional councils, etc)
	corporate bonds and debentures
	money market instruments including treasury bills, bank bills, promissory notes and certificates of deposit
	Capital Notes
	Perpetual Notes
	Preference Shares.

Futures and options market

New Zealand futures and options contracts are currently traded on the Sydney Futures Exchange in conjunction with NZX, in relation to:

	the NZSX index of top 15 shares
	Share options in Contact Energy, Fletcher Building, Telecom and The Warehouse Group shares
	90 day bank bills
	three and ten year Government stock
	30 day official cash rate.

Dealing in futures and options contracts requires authorisation from the New Zealand Securities Commission.

Foreign exchange market

There are no restrictions on the buying and selling of foreign currencies. The New Zealand banking system offers a full range of foreign exchange services including spot, forward, futures, options and the more sophisticated derivative products.

Raising finance

New Zealand operates a very open regime. For businesses operating in New Zealand, there are no exchange control, licensing, approval or similar regulatory restrictions on on-shore or foreign borrowing or fund-raising.

Borrowers may raise finance both on and offshore and in the currency of choice. Banks are actively engaged in the provision of short and medium-to-long term debt to the consumer, commercial and corporate sectors. Market forces determine the level of interest rates.

Equity finance is available through issuing shares and listing on the NZSX or NZAX. Issuances to the public are regulated by the requirements of the Securities Act and other applicable securities legislation. Public offerings of equity securities (as well as debt securities) are made pursuant to a prospectus and an investment statement, which are required to comply with the disclosure requirements of the securities legislation.

Repatriation of funds

There are no restrictions on the repatriation of capital or earnings of a New Zealand business to overseas investors. This includes the remitting of dividends, profits, interest, royalties, management fees, etc. In many cases, however, non-resident withholding tax will be required to be deducted from the amount of those payments. For more information on New Zealand tax please refer to pages 26 to 32.

Finance section last updated April 2007