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

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Starting up business

This chapter discusses types of business activities permitted in New Zealand and looks at the issues surrounding the main corporate structure options for overseas companies starting up business in this country.

Type of business

Restrictions
Very few restrictions are imposed on foreign companies on the type of business operations permitted in New Zealand. For the most part, decisions on industry sectors and the nature of goods and services are left to the discretion of the company and its evaluation of appropriateness for the New Zealand market. Exceptions are for activities that may involve natural resources, such as commercial fishing or rural farming.

Incentives
Foreign companies investing in New Zealand in tourism or in sectors that contribute to foreign exchange earnings (such as exporting locally manufactured goods) are particularly welcomed by the New Zealand Government. Bodies such as Tourism New Zealand and New Zealand Trade and Enterprise are in place to assist business activities in these areas.

Corporate structure options

There are three main ways for overseas companies to do business in New Zealand:

There are three main ways for overseas companies to do business in New Zealand:

	registering a branch
	forming a subsidiary company
	merging with or taking over a New Zealand company.

Registering a branch
An overseas company seeking to register a branch in New Zealand must reserve its name with the Registrar of Companies. The other administrative requirements would be satisfied by filing an application within 10 working days from the start of business in New Zealand.

An application must:

	state the names and residential addresses of the directors of the overseas company (at the date of application)
	state the address of the overseas company’s main place of business in New Zealand
	attach evidence of incorporation of the overseas company and a copy of the instrument constituting or defining its constitution (in English)
	state the name and address of at least one person in New Zealand who is authorised to accept service of documents on the company’s behalf.

Forming and registering a subsidiary company
A subsidiary company incorporated in New Zealand must have at least one shareholder and one director (who may be the same person). Non-resident shareholders and directors are permitted. Generally, any legal entity may be a shareholder, but only people may be appointed directors. There is no statutory requirement to appoint a company secretary.

There is no restriction on the size of a company’s share capital. Companies are not permitted to have a par or nominal value attached to their shares. Instead, company directors are required to determine the consideration for the issue of shares, and to resolve that the consideration and terms of issue are fair (in their opinion). It is not necessary for the issue price to be fully paid.

As in the case of a branch, the first step to register a subsidiary is to apply to reserve the proposed subsidiary’s name. Once the name of the proposed subsidiary company has been approved and reserved with the Registrar, the following incorporation documents must be filed:

	consent to act as director and a certificate that he or she is not disqualified from acting (for each director)
	consent of shareholder (for each shareholder)
	a copy of the constitution, if the company is to have one.

Applications to the Registrar of Companies must also include:

	the name and residential address of each director
	similar details of the proposed shareholders
	details of the registered office, and address for service of documents, which must both be in New Zealand.

Branch or subsidiary?

The decision of whether to establish a branch office or a subsidiary company will be influenced by legal, tax and commercial considerations. The following issues may be relevant:

Annual accounts
A New Zealand branch of an overseas company must file two separate sets of audited financial statements, one for its worldwide operations and one for its New Zealand business. A subsidiary is required to file audited financial statements relating to its New Zealand business only. Every company must file an annual return at the Companies Office.

Filing of documents
It is necessary to notify the Registrar of any changes to incorporation or branch documents within stipulated time frames which can be as short as 10 working days. In the case of large companies registered as a branch, this requirement may prove cumbersome. In comparison, changes to a subsidiary’s incorporation documents may occur less often.

Liability
While an overseas company would be liable for damages resulting from the activities of its branch in New Zealand, it would not normally be directly liable for activities of its subsidiary in New Zealand. However, establishing a special purpose overseas company as the branch may help ring-fence liability for the activities of the branch.

Tax
A New Zealand branch of an overseas company will generally be considered as non-resident for taxation purposes. If an overseas company incorporates a subsidiary in New Zealand, that subsidiary is a New Zealand tax resident.

Please refer to the Taxation chapter (p. 22) for more information on the New Zealand tax environment.

Fees
The filing fees for establishing a subsidiary or a branch electronically are approximately NZ$60 as at May 2005 in each case.

Merger or take-over proposal
If a company decides to carry on its business by merging with or buying a New Zealand company, it must consider the applicability of the Commerce Act 1986. Please refer to the Regulations Affecting Business chapter (p. 32) for an outline of the key restrictions governing business acquisitions.

If the New Zealand company is listed on the New Zealand Stock Exchange or, if not listed, has more than 50 shareholders, the Takeovers Code is likely to apply. Specific advice on the implications of the Code applying should be sought.

Government consents

An overseas person may require the consent of the Overseas Investment Commission (from 1 September 2005, the Overseas Investment Office) before undertaking certain business activities in New Zealand. In this instance, the definition of an overseas person includes:

	an individual who is not a New Zealand citizen and who is not ordinarily resident in New Zealand
	a company incorporated outside New Zealand
	a company incorporated in New Zealand where an overseas person holds 25% or more of any class of share, or 25% or more of the voting rights.

Overseas Investment Act 1973

Nearly all applications for consent in the last five years have been approved and the Overseas Investment Commission deals speedily with the applications. In November 2003, the government announced that it intended to review and strengthen the requirements of the Overseas Investment Act 1973 (“the Act”). On 20 July 2004 Finance Minister Michael Cullen announced changes which will subject overseas buyers wanting to buy sites of special historic, cultural or environmental significance to a tougher screening and compliance regime. The legislation that will introduce the proposed changes is still in the process of being drafted. The bill was introduced in November 2004 and is currently before the Finance and Expenditure Select Committee. It is likely to come into force by late 2005.

Under the current regime, the threshold for the areas of land that require consent if they include or adjoin the foreshore is 0.2 hectares (prior to the Overseas Investment Amendment Act 1998 the threshold was 0.4 hectares).

Otherwise, consent is only required if a threshold of NZ$50 million is exceeded (increased in 1999 from NZ$10 million).

	In the case of setting up a new business, the threshold relates to the total expenditure involved in establishing the business.
	In the case of an asset or business acquisition, the threshold relates to the amount paid for the assets or business.
	In the case of an overseas person acquiring shares, the threshold applies to both the amount paid for the shares and the gross value of the assets of the company whose shares are being acquired. If either exceeds NZ$50 million, consent is required.

One of the key changes announced in July 2004 is that the threshold above which business acquisitions not involving land (as defined in the Overseas Investment Regulations 1995 (“the Regulations”)) will require consent, will increase from NZ$50 million to NZ$100 million.

Other key changes are:

	overseas applicants wishing to purchase land assets will have to include in the asset management plan, attached to their application, details on how they will manage any historic, heritage, conservation or public access relevant to the property as well as any economic development planned
	plans submitted by an overseas investor in support of his/her purchase will be made conditions of consent
	investors may be required to report regularly on how they are complying with the terms of their consent and outline any reasons for non-compliance (monitoring will continue until all obligations have been met)
	the Crown may have a right of first refusal over foreshore and seabed land where this would otherwise be sold into foreign ownership
	purchases involving land with an unimproved value of more than $10 million will no longer require consent where land is not screened for other reasons (the Minister indicated that this amendment is only likely to exempt purchases of land within the main centre CBDs as any rural land sales over 5 hectares will still require consent)
	land adjoining some non-sensitive reserves, for example drainage and hospital reserves, will be removed from the purview of the Act
	the Overseas Investment Commission will be disestablished and its regulatory functions performed by a dedicated unit within Land Information New Zealand.

The Regulations provide for application procedures, a fee structure and reporting and monitoring requirements in respect of approved activities.

Starting up business section last updated June 2005