New law cuts costs to business

Key business law changes flowing from the passage yesterday of the Regulatory Reform Bill will come into effect early next week.

These will reduce compliance costs for all businesses but are particularly relevant to listed issuers and to companies with a large number of shareholders.

We discussed the amendments proposed to the Companies Act, the Unit Trusts Act and the Takeovers regime in an earlier Brief Counsel.

On-line AGMs

Amendments to the Companies Act enable on-line AGMs by:

  • explicitly providing that shareholders may lawfully cast proxy or postal votes electronically (in our view this was already provided under the Electronic Transactions Act (ETA) but it is now also written into the Companies Act), and
  • allowing for direct real-time online electronic voting (a facility which some service providers and share registries are already geared to provide).

Use of both of these provisions will be subject to the consent of the company's board of directors.

Shareholders will, however, now be able to require a company to provide notices, annual reports and other documents electronically. The ETA currently provides for this, but on an optional basis. Companies will still be able to send a hard copy to those that require electronic distribution.

An amendment made by the Select Committee at the request of the Listed Companies Association (LCA) clarifies that a shareholder can appoint more than one proxy. This will allow different clients of a custodian or depositary to appoint their own proxies and vote in different ways, which is particularly important in New Zealand as most institutional shareholdings are held through the Reserve Banks’ custodian New Zealand Central Securities Depository Limited.

The LCA previously estimated savings of $1.5 million a year by listed companies alone as a result of enhanced electronic shareholder participation.

A company undertaking an on-market buyback of less than 5% of the company’s shares will no longer need to send shareholders a notice detailing the shares bought back within three months of the buyback. This removes a totally redundant compliance cost as NZX Listing Rule 7.12 already requires companies to advise the stock exchange of an on-market buy-back by the end of the same trading day.

Application of the Takeovers regime

The definition of a “code company” has been clarified and narrowed and will now apply only to listed companies or to companies with both 50 or more shareholders and 50 or more share parcels.
“Shareholders” will now be interpreted as shareholders with voting rights, so unlisted companies with a widely held class of non-voting preference share on issue will now not be subject to the code if the ordinary voting shares are closely held. 
This will reduce compliance costs for some companies that were previously subject to the code.

Our thanks to Roger Wallis and Radhika Rani for writing this Brief Counsel.  Roger Wallis is a member of the Takeovers Panel, which oversees compliance with the Takeovers Code, and the executive of the LCA.  He wrote the LCA submission on the Bill.  For further information, please contact the lawyers featured.

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Related topics: Corporate & commercial; Mergers & acquisitions; Financial services regulation


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