Corporate Reporter

CORPORATE REPORTER

10 November 2020

ITEMS IN THIS ISSUE INCLUDE:

• Changes for the proposed COFI regime recommended

• RBNZ relaunches review of IPSA

• Progress made on Phase 2 of the Reserve Bank Act review

• NZX makes listing rule changes for direct listings and issues new guidance notes

• The FMA consults on fees guidance for KiwiSaver schemes

• COVID-19 relief measures extended • New case law on directors’ duties and shareholder’s rights

• Update on changes to the consumer credit contract regime

• The latest media releases from the New Zealand Commerce Commission and the Australian Competition and Consumer Commission

WELCOME to issue No.65 of Corporate Reporter, Bell Gully’s regular round-up of corporate and general commercial matters, designed to keep you informed on regulatory developments, legislation and cases of interest.

For more information on any of the cases, articles and features in Corporate Reporter, please email [email protected] or call on +64 9 916 8849

CONTENTS CORPORATE REPORTER

CONTENTS PAGE

Capital Markets – general developments 4

Select Committee recommends changes to proposed COFI regime CoFR updates timing on regulatory initiatives affecting the financial sector Review of the Insurance (Prudential Supervision) Act Review of Insurance Insolvency Standards Government policy for mandatory climate risk reporting announced RBNZ consults on cyber risk management guidance for the financial sector Progress made on Phase 2 of the Review of the Reserve Bank Act Select Committee reports back on the Financial Market Infrastructures Bill The FMA’s standard conditions for a full Financial Advice Provider licence finalised FMA consults on proposed guidance for managers and supervisors of KiwiSaver schemes KiwiSaver default provider tender process opens FMA expresses its concerns in its Supervision Insight Report KiwiSaver Annual Report for 2020 Report on active and passive KiwiSaver funds FMA modifies the “Recognised Exchanges” class exemption notice FMA consults on recognising Australian financial advisers under New Zealand’s new regime FMA extends some current relief measures until new financial advice regime is in force Financial Markets Conduct (US Futures Commission Merchants) Exemption Notice 2020 NZX Listing Rules modified for direct listing disclosure requirements Lessons for New Zealand financial institutions in light of Australian AML penalty settlement AML/CFT Supervisors release updated CDD guidance Infrastructure Funding and Financing Act 2020

Capital Markets – COVID-19 temporary measures 11

FMA COVID-19 response insights NZX extends COVID-19 support package to assist issuers’ access to equity capital Takeovers Panel extends temporary COVID-19 exemptions to facilitate capital raising

Mergers & Acquisitions 13

Emergency notification process for overseas investors extended New class exemption for voting agreements in Schemes of Arrangement New Takeovers Panel CodeWord

Commercial 14

Climate Change Commission posts proposed timetable COVID-19 extension of modification relating to powers of attorney in security deeds COVID-19 UK test case on business interruption insurance ASIC takes enforcement action for cyber-security failings – implications for NZ institutions Consultation on new ‘safe harbour’ regulations for Privacy Act 2020 New online privacy breach reporting tool launched EU decision on international data transfer has implications for New Zealand

Corporate Law 16

Supreme Court reverses Court of Appeal decision in directors’ duties case Court of Appeal delivers significant decision on shareholder rights Temporary safe harbour for directors has ended COVID-19 related corporate relief measures extended Companies Act (Overseas Incorporated Companies—Australian Wholly-owned Entities) Exemption Notice 2020

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Māori business identifier is being built into the NZBN

Competition and Consumer Law 18

Commerce Commission commits to international cooperation on competition enforcement Responsible lending law in Australia and New Zealand Dates for the remaining 2019 amendments to the CCCFA finalised Regulations supporting the amendments to the CCCFA enacted Addendum to Responsible Lending Code extended to 31 March 2021 The latest media releases from the New Zealand Commerce Commission The latest media releases from the Australian Competition and Consumer Commission.

Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any further action in relation to the matters dealt with in this publication.

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- general developments

Select Committee recommends changes to proposed COFI regime

The Finance and Expenditure Select Committee’s report on the regulation of financial institutions' conduct in the Financial Markets (Conduct of Institutions) Bill, commonly referred to as COFI, recommends a number of changes, many of which reflect concerns raised by the industry. The recommendations include greater detail of the fair conduct principle and fair conduct programme; more limited requirements to publish fair conduct programmes; simplified regulation of intermediaries; greater constraints on regulating incentives; a longer transition period; and a five-year statutory review. For our commentary on the committee’s recommendations click here. The Financial Markets (Conduct of Institutions) Bill is expected to have its second reading when Parliament resumes.

CoFR updates timing on regulatory initiatives affecting the financial sector

In April this year the Council of Financial Regulators (CoFR) released a table of deferred regulatory initiatives for the financial sector resulting from the COVID-19 pandemic. This has now been updated with details of a “forward plan”. Amongst others, the forward plan indicates that the MBIE will consult on: • regulations for the Financial Markets (Conduct of Institutions) Bill before the end of 2020, and • the draft legislation for the insurance contract law review to take place in the first quarter of 2021.

Review of the Insurance (Prudential Supervision) Act

The Reserve Bank - Te Pūtea Matua (RBNZ) has relaunched the review of the Insurance (Prudential Supervision) Act. The review began in 2017 with industry consultation and was set to resume in March this year. However, it was delayed to free up market participants to address the challenges created by COVID-19. Over the next twelve months, the RBNZ will consult on the scope of the legislation - looking at which organisations and products should be captured, how ‘insurance’ is defined, the treatment of overseas insurers, statutory funds and the solvency regime. This will build on the 2017 issues paper and feedback, and take into account more recent developments which promote a more active supervisory approach, such as: • The International Monetary Fund’s Financial Sector Assessment Program review of New Zealand’s Financial Sector, • The report by John Trowbridge and Mary Scholtens on a review of the Reserve Bank’s supervision of CBL (in liquidation), and • The FMA/RBNZ Thematic Review of Life Insurer Conduct and Culture. Other recent developments which will also provide input include: • A thematic review of the appointed actuary regime for insurers. • A review of insurance contract law being conducted by MBIE. • The publication of new insurance accounting standards (IFRS 17) by the International Accounting Standards Board. • Recent reviews relating to seismic risk – Treasury’s review of property insurance availability and affordability, and the upcoming review of the Earthquake Commission Act 1993. An initial substantive consultation paper - on the scope of the Act and its treatment of overseas insurers - is expected to be issued this month. For further details on the scope of the review, and an anticipated timeline for the project, see the Insurance (Prudential Supervision) Act launch paper.

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The legislative process is expected to occur in the second half of 2023 at the earliest.

Review of Insurance Insolvency Standards

The RBNZ is also reviewing the Insurer Solvency Standards issued under the Insurance (Prudential Supervision) Act. These standards govern the minimum amount of capital that insurers are required to hold. RBNZ currently has several solvency standards on issue, the principal ones being the Solvency Standard for Life Insurance Business 2014 and the Solvency Standard for Non-Life Insurance Business 2014. RBNZ is seeking feedback by 12 November 2020 on a set of principles to guide the Solvency Standards Review and a timeline for the review set out in its Insurance Solvency Standards review paper. A second, substantive consultation paper outlining RBNZ’s response to a set of financial reporting standards known as IFRS 17, which represent a radical overhaul of the way insurance contracts are accounted for, and the structure of solvency standards is expected to be issued in December 2020.

Government policy for mandatory climate risk reporting announced

If approved by Parliament, financial entities could be required to report on climate risks as soon as 2023. The announcement was made in September by the then Minister for Climate Change, James Shaw (who has retained this role under the new government). The new regime is expected to follow the Task Force on Climate-related Financial Disclosures framework, which is widely acknowledged as international best practice. Financial sector entities covered by the requirements would be required to disclose on climate-related risks and opportunities associated with their organisation's governance, strategy and risk management, and the metrics and targets they are using to monitor and assess climate-related risks and opportunities. While New Zealand would be the first country to introduce mandatory climate-related risk reporting for the financial sector, a number of other countries and jurisdictions are also working towards some form of climate-risk reporting for companies. This includes Australia, Canada, the United Kingdom, France, Japan and the European Union. For more details refer to our article: Mandatory climate-risk reporting set to capture 90% of assets under management in New Zealand

RBNZ consults on cyber risk management guidance for the financial sector

Following on from the announcement made by RBNZ last year that it was going to be more proactive in promoting cyber resilience in New Zealand’s financial sector, RBNZ has released a consultation paper which seeks feedback on a draft of risk management guidance on cyber resilience. The consultation paper also discusses: • the basic rationale for regulatory interventions to help promote cyber resilience, • the RBNZ’s policy approach relative to a range of international cyber resilience frameworks, including the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions Guidance on cyber resilience for financial market infrastructures, Guideline and standards published by National Institute of Standards and Technology, and The International Organization for Standardization guidelines for cybersecurity, and • the RBNZ’s views on a collaborative approach to information gathering and sharing. The draft cyber risk management guidance applies to all regulated entities of the RBNZ, including registered banks, licensed non-bank deposit takers, licensed insurers and designated financial market infrastructures. The consultation closes on 29 January 2021. RBNZ expects to publish final guidance on cyber resilience in March-April 2021. It is also developing a detailed framework for information gathering and sharing, and expects to consult stakeholders on that framework in mid-2021.

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Progress made on Phase 2 of the Review of the Reserve Bank Act

The Reserve Bank of New Zealand Bill has been introduced to Parliament. It is anticipated the Bill will be progressed to the Finance and Expenditure Select Committee before the end of this year. Stakeholders will have the opportunity to make a submission on the Bill at the select committee stage. The Bill is the first part of the Phase 2 reforms to be legislated, arising from the Review of the Reserve Bank of New Zealand Act 1989. The focus of the Bill is on reforming the overall governance and accountability arrangements of the Reserve Bank while retaining the Phase 1 reforms made through the Reserve Bank of New Zealand (Monetary Policy) Amendment Act 2018, which introduced maximum sustainable employment as an objective of monetary policy alongside price stability, and created the monetary policy committee. The Bill repeals and replaces the parts of the 1989 Act that provide for the institutional form, governance and accountability arrangements, and central bank powers of the Reserve Bank. The remainder of the 1989 Act, which creates a framework for the registration and supervision of banks, remains in force but will be renamed the Banking (Prudential Supervision) Act 1989. Other parts of the Phase 2 reforms, including the government’s in-principle decisions in relation to the regulation of banks and other deposit takers, and the introduction of a deposit insurance scheme, will be progressed through a separate Deposit Takers Act. Consultation on this work closed on 23 October 2020, following a six months extension from the original deadline for submissions in light of the challenges presented by COVID-19 to New Zealand’s financial system. The Treasury and RBNZ have indicated that an exposure draft of the Deposit Takers Bill will be released for consultation in the fourth quarter of 2021.

Select Committee reports back on the Financial Market Infrastructures Bill

The Finance and Expenditure Committee reported back on the Financial Market Infrastructures Bill in August, just before Parliament was dissolved for the general election. The Bill, which will replace Parts 5B and 5C of the Reserve Bank of New Zealand Act 1989, establishes a new regulatory regime for financial market infrastructures (FMIs), those multilateral systems which provide trading, clearing, settlement and reporting services in relation to payments, securities, derivatives, and other financial transactions. It also provides certain FMIs with legal protections concerning settlement finality, netting, and the enforceability of their rules. The Committee preserved the overall structure of the Bill, but has recommended a few modest changes. These include: • requiring the regulator to recognise the diversity of FMIs, and to take into account the circumstances of particular FMIs, when exercising their powers, or considering doing so, • a more streamlined transition process for the five settlement systems that have already been designated under the Reserve Bank of New Zealand Act 1989, • the removal of the requirement for the regulator to obtain ministerial consent before issuing a notice requiring an FMI to change its rules, and • a change to the restriction on the exercise of close-out netting and collateral enforcement rights by a derivatives counterparty against an FMI in statutory management. The Bill lapsed when Parliament was dissolved, but will be reinstated when Parliament resumes later this month. Once the FMI Bill is enacted, there will be a transition period during which “systemically important" FMIs will be identified and will need to be designated. The Reserve Bank has indicated this period is likely to be 12 months. The FMA and the Reserve Bank have indicated that there will be a consultation on the “proposed standards” for designated FMIs under the Bill in the first quarter of 2021. For background information on the Bill refer to our previous articles here and here.

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The FMA’s standard conditions for a full Financial Advice Provider licence finalised

The Financial Markets Authority (FMA) has released its standard conditions for a full Financial Advice Provider licence and has confirmed three licence classes for financial advice providers under the new regulatory regime for financial advice commencing on 15 March 2021. Applicants for a financial advice provider full licence will be asked to select the licence class that accommodates the type of financial advice business they, and each of their authorised bodies, plan to provide. The three licence classes (Class 1, Class 2 and Class 3), which were outlined in an earlier consultation paper here as Classes A, B and C, apply to the manner in which regulated financial advice may be provided but do not limit the types of financial advice that may be provided under the licence, as the latter is addressed by the competency requirements in the new Code of Professional Conduct for Financial Advice Services. Licence classes are incremental from 1 to 3 where: • Class 1 covers the service of the licence holder providing regulated financial advice to retail clients: o on the licence holder’s own account; and/or o through a sole adviser practice structure, • Class 2 covers the service of a financial advice provider (whether the licence holder or any authorised body) providing regulated financial advice to retail clients: o on the financial advice provider’s own account; and/or o through one or more financial advisers, • Class 3 covers all of the services covered by a Class 1 and Class 2 licence, and permits the licence holder and any authorised bodies to engage any number of nominated representatives, along with any other type of structure permitted by the Financial Markets Conduct Act and not covered by licence Class 1 or 2. If a licence holder or any authorised body wishes to provide a type of service not covered by their current licence, the licence holder will need to apply for a new class of licence. There are seven standard conditions which all financial advice provider full licence holders and each of their authorised bodies will need to comply with. These relate to record keeping, internal complaints processes, regulatory returns, outsourcing, business continuity and technology systems, ongoing eligibility and notification of material changes. All of the standard conditions apply to each licence class equally. The FMA has decided not to follow its earlier proposal to include as a standard condition a requirement to have adequate professional indemnity cover in place, in light of industry’s feedback on the costs of professional indemnity insurance, likely benefits for consumers and the availability of cover. For further information see the FMA’s media release here.

FMA consults on proposed guidance for managers and supervisors of KiwiSaver schemes

The FMA is seeking input on the regulatory approach to the statutory requirement that KiwiSaver fees must not be unreasonable and the related overarching statutory duties. The feedback will be used to help the FMA refine its proposed guidance for managers and supervisors of KiwiSaver schemes relating to their ongoing obligation not to charge unreasonable fees and their statutory duties that relate to fees and value for money. The guidance will clarify: • the statutory duties of managers and supervisors in relation to fees and value for money, • what factors should be considered when assessing whether fees are unreasonable and whether KiwiSaver fees are providing value for money, • examples of when fees may be unreasonable, and • the FMA’s role and enforcement options. Submissions on the consultation paper close on 14 December 2020.

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KiwiSaver default provider tender process opens

The government has released a Request for Proposals (RFP) to appoint the next set of KiwiSaver default providers. The RFP closes on 18 December 2020. The tender process will help determine the next set of default providers to be in place by December 2021. The nine current default providers (appointed in 2014) are AMP, ANZ, ASB, BNZ, Westpac, Fisher Funds, Booster, Kiwi Wealth (KiwiBank) and Mercer. The government changed the default provider settings following consultation earlier in the year (see the Cabinet paper on those changes). These have been reflected in the RFP criteria that applicants must meet, and include: • switching default fund settings from a ‘conservative’ investment mandate to a ‘balanced’ investment mandate, • imposing member engagement obligations, • using the procurement process to reduce fees for default members, • imposing responsible investment obligations on providers, including sector exclusions (such as illegal weapons and fossil fuel production), environmental, social and governance (ESG) obligations, and disclosure requirements. A decision on the default scheme appointments is expected to be made in late April 2021 for providers and government agencies to prepare for the change.

FMA expresses its concerns in its Supervision Insight Report

The FMA has released its latest Supervision Insight Report which provides an overview of the FMA’s supervision activities from July 2019 to June 2020. The FMA's focus remains on “governance and culture" and it makes it clear that it expects regulated entities to have the same focus. As set out in the FMA’s Statement of Intent for 2020-2024, the FMA expects that: “…financial service providers demonstrate an appropriate customer-centric culture and improvements in governance, incentive structures, sales and advice processes and systems to mitigate conduct risk.” For our commentary on this report see our article: FMA’s Supervision Insights: how you can best meet the regulator’s expectations

KiwiSaver Annual Report for 2020

The FMA’s annual report on KiwiSaver for the year ended March 2020 has found that total funds under management increased by 8.7% to $62 billion, despite the market losses in March 2020 caused by COVID- 19. Nearly a quarter (690,000) of KiwiSaver members remain in default, conservative funds, and approximately 380,000 of these members have not made an active choice to stay there. For a copy of the report click here and the FMA’s media release is available here.

Report on active and passive KiwiSaver funds

The FMA has released a report it commissioned by MyFiduciary to test how active or passive each KiwiSaver provider is, and to examine whether investment management fees differ between active and passive approaches. The report found that most but not all KiwiSaver schemes are ‘true to label’ in terms of the style they deliver. It is also found that there is no significant relationship between the level of active management employed by providers and the fees they charge. To read the full report click here.

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FMA modifies the “Recognised Exchanges” class exemption notice

The FMA has amended the Financial Markets Conduct (Recognised Exchanges) Exemption Notice 2016 so that it applies to both issuers and offerors, in line with its predecessor under the Securities Act regime. As enacted, the 2016 notice exempted issuers (but not offerors) from the disclosure and governance requirements in Parts 3 and 4 of the Financial Markets Conduct Act 2013 for offers of financial products that are or will be listed on the London Stock Exchange, the Nasdaq Stock Market, or the New York Stock Exchange. The 2020 amendments are temporary to see if extending the exemptions to offerors provides a reason for renewing the 2016 notice (which is due to expire in November 2021). The 2016 notice has not been relied on to date, and the FMA has indicated that it does not intend to renew the notice unless there is evidence that it is relevant. The Financial Markets Conduct (Recognised Exchanges) Exemption Amendment Notice 2020 came into force on 15 October 2020.

FMA consults on recognising Australian financial advisers under New Zealand’s new regime

The FMA is seeking feedback on whether it should recognise that individual Australian advisers (if they hold certain Australian adviser qualifications) demonstrate the competence, knowledge and skill standards set by the new Code of Professional Conduct for Financial Advice Services. The Code will apply to all persons who give regulated financial advice to retail clients under the new financial advisers’ regime which comes into force on 15 March 2021. Australian advisers will still need to comply with all other requirements under the Code and the financial markets legislation applicable to financial advice services and giving financial advice (including being licensed or operating under someone else’s licence). Submissions close on 20 November 2020.

FMA extends some current relief measures until new financial advice regime is in force

The FMA has extended three exemption notices until the new regulatory regime for financial advice comes into effect on 15 March 2021. These are the: • Financial Advisers (NZX Brokers—Client Money and Client Property) Exemption Notice 2020 - which continues the exemptions in the Financial Advisers (NZX Brokers – Client Money and Client Property) Exemption Notice 2015 and comes into effect on 1 December 2020. The notice applies to a broker who is a Market Participant Accepting Client Assets (or any equivalent replacement designation) within the meaning of the NZX Participant Rules (an NZX broker). The notice grants two exemptions: firstly, to permit the operation of gateway accounts (which are accounts used specifically for transacting with particular settlement systems) and, secondly, to permit a buffer of firm money to be kept in those accounts. • Financial Advisers (Non-NZX Brokers – Client Money) Exemption Amendment Notice 2020 – which extends the 2017 principal notice until 15 March 2021, and extends the dates required for providing an auditor’s report under the 2017 notice. The 2017 notice exempts non-NZX brokers from the requirement in section 77P(1A) of the Financial Advisers Act 2008 to keep client money and client property separate from their own money and property. The exemption is subject to certain conditions, including a requirement to provide an auditor’s report about their compliance with the 2017 notice. Previously, an April 2020 amendment to the 2017 notice extended the timeframe for providing those reports by two months for brokers with a relevant reporting date between 31 December 2019 and 1 July 2020. However, because of the continuing effects of COVID-19, this longer time frame has been extended to cover brokers whose relevant reporting date is in July 2020. • Financial Markets Conduct (Offers of Financial Products Through Authorised Financial Advisers Supplying Personalised DIMS) Exemption Notice 2020 – which continues the 2015 exemptions provided for offers of financial products through authorised financial advisers (AFAs) under the

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Financial Advisers Act 2008 who are providing discretionary investment management services (DIMS) that are personalised DIMS. The notice exempts persons making those offers from compliance with the disclosure requirements in Part 3 of the Financial Markets Conduct Act 2013 (FMC Act). It also provides that such offers are not “regulated offers” under that Act, which means that other requirements of the FMC Act, or other Acts, that apply to regulated offers (such as the governance and financial reporting requirements) will not apply to the offer. This puts offers made through AFAs providing personalised DIMS in the same position as offers made through persons who are licensed under Part 6 of the FMC Act to provide DIMS. The notice will be revoked when the new financial advisers’ regime comes into force on 15 March 2021. At that time all DIMS will be covered by the FMC Act, so the exemption granted by this notice for personalised DIMS will no longer be required.

Financial Markets Conduct (US Futures Commission Merchants) Exemption Notice 2020

This notice continues the exemptions in the Financial Markets Conduct (US Futures Commission Merchants) Exemption Notice 2015 (which has been revoked) with no material changes until 30 March 2021. The exemptions provide relief to accredited NZX derivatives participants that are domiciled in the US and registered as futures commodity merchants (FCMs) with the Commodity Futures Trading Commission from various provisions of the Financial Markets Conduct Regulations 2014, which impose requirements relating to the holding of derivatives investor money and derivatives investor property. The exemptions are conditional upon FCMs instead holding investor money and property in accordance with applicable US law requirements.

NZX Listing Rules modified for direct listing disclosure requirements

NZX has updated its 1 January 2020 Listing Rules. Under the NZX Listing Rules, an applicant seeking a listing on the NZX Main Board through a direct listing must prepare a profile that contains the same information as an offer document for a regulated offer under the Financial Markets Conduct Act 2013, unless NZX determines otherwise. The new Listing Rules (which came into effect on 3 November 2020): • remove the requirement for prospective financial information to be included in a profile (new Listing Rule 7.4.1A(a)), and • introduce a framework for NZX Foreign Exempt Issuer applicants, to allow NZX to prescribe the nature and content of profiles for such applicants, through templates designed on a jurisdictional basis (new Listing Rule 7.4.1A(b)). NZX has released an updated Practice Note – Listing and Quotation of Equity Securities and an updated Guidance Note on Backdoor and Reverse Listings in respect of the changes. In addition, NZX has published the following documents in support of the new framework for NZX Foreign Exempt Issuer applicants: • Practice Note relating to direct listing applications from ASX issuers for Foreign Exempt Issuer status. • Template - Application Form for Listing as a NZX Foreign Exempt Issuer. • Template - Profile for Listing as an NZX Foreign Exempt Issuer.

NZX updates its Continuous Disclosure Guidance Note

NZX’s new Continuous Disclosure Guidance Note provides more detailed guidance on an issuer's continuous disclosure obligations in relation to earnings guidance and correcting market expectations. You can read our commentary on those changes here. The previous Continuous Disclosure Guidance Note otherwise remains unchanged.

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Lessons for New Zealand financial institutions in light of Australian AML penalty settlement

Money laundering is a key focus for regulators in New Zealand, and is a constant subject of major enforcement action by regulators worldwide. On 24 September 2020, Westpac Banking Corporation agreed to pay AU$1.3 billion in penalties for admitted breaches of Australia’s anti-money laundering legislation in a proposed settlement with the Australian Transaction Reports and Analysis Centre (AUSTRAC). The proposed settlement and penalty, awarded to reflect “the serious and systemic nature of Westpac's non-compliance", is subject to approval by the Federal Court of Australia. If approved, the penalty will become the highest civil penalty ever awarded in Australia, almost doubling the AU$700 million civil penalty imposed on the Commonwealth Bank of Australia for AML non-compliance in 2018. The case is a reminder for all New Zealand financial institutions to ensure that their AML controls – particularly those in relation to correspondent banking, transaction reporting, and customer due diligence – are up to date, well understood, and implemented effectively. Read more here.

AML/CFT Supervisors release updated CDD guidance

The AML/CFT Supervisors have updated the Enhanced Customer Due Diligence Guideline. This clarifies when source of wealth or source of funds identification and verification must be carried out, as well as some other small wording changes.

Infrastructure Funding and Financing Act 2020

The Infrastructure Funding and Financing Act 2020, which introduces a new funding and financing model to support the provision of infrastructure for housing and urban development, came into effect on 7 August 2020. The core of the new funding model involves the setting of a multi-year levy (enabled by legislation) for a local infrastructure project, which is paid by beneficiaries of the projects to a Special Purpose Vehicle (SPV). This levy will be collected by local authorities via their normal rates collection mechanisms, on behalf of the SPV, and used to service the financing raised to pay for the infrastructure. Typically, a levy will last between 25 to 50 years. Once constructed, the infrastructure will transfer to the relevant local authority who will have ongoing responsibility for operating and maintaining the asset. The Act aims to create flexibility in the infrastructure financing system so that economically viable projects can go ahead, without being burdened by a local authority’s financing constraints. Crucially, the Act separates the financing decisions of the infrastructure project from a local authority’s usual financing processes and constraints by ring-fencing debt away from a local authority’s balance sheet. There are no changes to the statutory processes local authorities are obliged to follow when planning and consenting infrastructure. The Infrastructure Funding and Financing (Monitor and Recommender) Order 2020 appointed the Ministry of Housing and Urban Development as the monitor and recommender for the purposes of the Act.

- COVID-19 temporary measures

FMA COVID-19 response insights

The FMA has released an information sheet summarising the FMA’s actions to manage the impacts of the COVID-19 crisis up until 31 August. The information sheet is available here.

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NZX extends COVID-19 support package to assist issuers’ access to equity capital

NZX has extended most of its March 2020 measures aimed at ensuring NZX listed issuers are able to access sufficient equity capital urgently should the need arise, in addition to any existing debt facilities. These measures will now remain in place until 30 November 2020, subject to some changes to the conditions that apply in order for issuers to avail themselves of the class relief. The measures still covered under the updated class waiver granted on 30 September 2020 include: • Placements – that increase the percentage of additional shares that can be issued in any 12-month period without having to obtain shareholder approval from 15 per cent to 25 per cent. • Share Purchase Plans (SPP) – that allow all shareholders to purchase up to NZ$50,000 worth of new shares in any 12-month period (rather than the current cap of NZ$15,000) and increasing the threshold at which shareholder approval is required for an SPP from 5 per cent of the shares already on issue to 30 per cent. The shortened offer period introduced for rights issues as part of the March 2020 measures was not retained. The key changes to the remaining measures include: • a requirement that an issuer using the extra placement capacity must also undertake either (i) a pro rata offer, or (ii) a share purchase plan (priced no greater than the placement), • when launching an offer using the extra placement capacity, the issuer must notify the market of its reliance on the class waiver and explain the purposes for which the issuer is seeking to raise capital and how they relate to the COVID-19 pandemic and/or its economic impact, and • confirmation that the NZX does not object to the placement being launched in reliance on the waiver. The March 2020 class waiver and ruling that was granted to permit issuers to utilise a structure commonly referred to as an ‘ANREO’ (Accelerated Non-Renounceable Entitlement Offer), and to allow both ANREOs and AREOs (accelerated renounceable entitlement offers) to include differentiated pricing in any retail entitlement offer has also been extended to 30 November 2020. As for placements, the NZX must confirm non-objection to the ANREO being launched in reliance on the new waiver, and the issuer must notify the market of its reliance on the class waiver and explain the purposes for which the issuer is seeking to raise capital and how they relate to the COVID-19 pandemic and/or its economic impact. NZX has stated that it does not anticipate further amendments or extensions to these relief measures, unless significant new unforeseen developments occur. For further details see:

• NZX Class Waiver and Ruling for Capital Raising (30 September 2020) • NZX Class Waiver and Ruling in relation to Rule 4.1 and 4.4 -ANREO (30 September 2020)

Takeovers Panel extends temporary COVID-19 exemptions to facilitate capital raising

The Takeovers Panel has extended a suite of temporary COVID-19 class exemptions from the Takeovers Code that it granted in April 2020 to facilitate major shareholders to participate in equity offers above their pro-rata entitlement, including through acting as sub-underwriters. The principal class exemption (as amended by the Takeovers Code (Facilitation of Capital Raising in Response to COVID-19) Exemption Amendment Notice 2020) now applies to certain allotments of voting securities conducted on or before 31 December 2020 (extended from the initial closing date of 31 October 2020). In summary, the class exemption provides: • An exemption which permits increases in voting control of up to 10 per cent in addition to that which would be able to be acquired under the Takeovers Code. • A series of exemptions for allotments of voting securities pursuant to pro rata offers (which provide further relief over and above what is provided under the Takeovers Code (Class Exemptions) Notice (No 2) 2001). • An exemption for persons who underwrite pro rata offers (this is not limited to professional underwriters).

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• An exemption for professional underwriters (which provides further relief over and above what is provided under the Takeovers Code (Professional Underwriters) Exemption Notice 2004). There are no exemptions for acquisitions of voting securities.

Emergency notification process for overseas investors extended

In June, the government made urgent changes to the Overseas Investment Act 2005 to protect New Zealand business assets amidst the economic fallout of the COVID-19 pandemic. This reflected similar moves in other jurisdictions, including Australia. These changes have been extended subject to a further review due on 28 November 2020. The changes, which came into force under the Overseas Investment (Urgent Measures) Amendment Act 2020, introduced a temporary requirement to notify the Overseas Investment Office (OIO) of all overseas investments resulting in more than 25 per cent overseas ownership of a New Zealand business or its assets, or an increase to an existing holding beyond 50, 75 or 100 per cent being acquired, irrespective of the value of the transaction. This is in addition to the current consent regime, that in general terms only applies to acquisitions of sensitive land, or shares or assets worth at least $100 million. By the end of August, the OIO had received 102 notifications, with three being called in by the Associate Minister of Finance for further assessment. The requirement to notify such transactions is reviewed every 90 days by the government. The first review was completed on 30 August 2020, with the relevant ministers concluding that the effects of the COVID- 19 pandemic justify the notification regime continuing for a further 90 days until the next statutory review, due on 28 November 2020. The emergency notification regime will be replaced by a more limited call-in power no later than 2 June 2022.This will only apply to investments in strategically important business, such as military technology and critical national infrastructure, which do not normally require consent under the Overseas Investment Act. For full details of the notification requirements click here.

New class exemption for voting agreements in Schemes of Arrangement

The Takeovers Panel has granted the Takeovers Code (Voting Agreements for Schemes of Arrangement) Exemption Notice 2020 which, subject to various conditions, permits shareholders who wish to commit to voting for or against a scheme to do so, even where this results in a person enforcing the voting commitment to have control of more than 20% of the voting rights in the Code company (in breach of Rule 6(1) of the Takeovers Code). This notice came into force on 21 September, and will enable scheme participants to enter into enforceable obligations that provide certainty about the success or otherwise of the scheme equivalent to the certainty that is provided by lock-up agreements in respect of takeover offers. It should also remove the need for the current practice of shareholders providing statements of intention.

New Takeovers Panel CodeWord

In the latest issue of the Takeovers Panel’s newsletter CodeWord the Panel covers its update of several guidance notes and the new class exemption noted above. The issue also includes: • a new worked-example to illustrate situations where a breach of the Code rules on associates could arise when you hold shares through different entities, and • its updated payment policy which outlines that the Panel no longer accepts cheques as a method of payment for its fees (including application fees).

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Climate Change Commission posts proposed timetable

The Climate Change Commission has announced that its first package of advice will be open for consultation from 1 February to 16 March 2021 and will outline what climate action could look like in New Zealand. This first package of advice contains four discrete pieces of work: 1. The country’s first three emissions budgets covering the period until 2035. 2. Advice that will form New Zealand’s first emissions reduction plan to show how the emissions budgets can be achieved. 3. Advice on what potential reductions in biogenic methane might be needed in the future. 4. A review of New Zealand’s first Nationally Determined Contribution under the Paris Agreement. This advice will be provided to the Minister for Climate Change in May 2021. Further details are available on the Commission’s website here.

COVID-19 extension of modification relating to powers of attorney in security deeds

The Contract and Commercial Law (COVID-19 - Extension of Modification Relating to Powers of Attorney) Order 2020 comes into force on 15 November 2020, to extend the application of the new section 218A(1) of the Contract and Commercial Law Act 2017 (CCLA) by six months, to the close of 15 May 2021. That section was introduced under COVID-19 legislation to temporarily apply subpart 3 of Part 4 of the CCLA to deeds that create powers of attorney in connection with security interests. This allows secured lenders and borrowers to execute by electronic means security deeds which contain a power of attorney clause.

Court of Appeal rules on aggregation clauses in insurance policies

The Court of Appeal in Moore v IAG New Zealand Limited [2020] NZCA 319 has ruled that losses arising from two earthquakes were not a “series of losses” under an aggregation clause in an insurance policy, and that the clause therefore did not apply. The Court's decision will provide guidance to both insurers and insureds in interpreting aggregation clauses, which are common in many insurance policies. You can read our commentary on this decision here.

COVID-19 UK test case on business interruption insurance

A recent UK test case on business interruption insurance coverage in the context of the COVID-19 pandemic provides useful guidance for the New Zealand market. The UK Financial Conduct Authority (FCA) brought the test case before the English High Court in June 2020, in an attempt to achieve clarity for policyholders and insurers on whether certain business interruption policies and wordings respond to the Covid-19 pandemic. The proceedings were extremely quick. The hearing of the test case took place in July 2020 and the ruling, which upheld many of the arguments made by the FCA on behalf of policyholders, was published on 15 September. The test case served to determine issues of principle in relation to policy coverage under various specimen wordings underwritten by the eight insurance companies who had agreed to be part of the test case in respect of business interruption insurance in the context of the COVID-19 pandemic and the advice of and restrictions imposed by the UK Government in consequence. Although the decision is being appealed by some of the insurance companies and is not binding in New Zealand, there are four key issues arising from the case that insurers and insureds should consider when assessing cover under business interruption policies in New Zealand. You can read our commentary on those issues here.

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The appeal in the UK Supreme Court will be heard from 16 November 2020 and is expected to last for four days. For further information on the latest developments for the UK test case, visit the FCA’s website.

ASIC takes enforcement action for cyber-security failings – implications for New Zealand institutions

In August, the Australian Securities and Investments Commission (ASIC) commenced enforcement proceedings in the Federal Court of Australia against a financial advice provider for failing to have adequate cyber security systems in place. The Financial Markets Authority and financial institutions will be following this case with interest, as it highlights the potential for general regulatory requirements in New Zealand to be applied in a cyber- security context. The case is also a reminder for all New Zealand market participants to ensure that they are using a recognised cyber-security framework to assist cyber resilience. This is particularly timely with the NZX Main Board and Debt markets being suspended recently in response to a series of apparent distributed denial of service attacks. For more information click here.

Consultation on new ‘safe harbour’ regulations for Privacy Act 2020

The Privacy Act 2020 is set to come into force on 1 December this year. One of the key changes under the new Act is a new Information Privacy Principle 12 (IPP12), which provides stronger protections for the transfer of personal information to a foreign person or entity. New regulations will prescribe 'safe harbour' jurisdictions for the purposes of the IPP12. The Ministry of Justice has announced that it is consulting on these regulations and indicated that the initial regulations will not be available until early 2022. Countries will be prioritised for assessment by the Office of the Privacy Commissioner. This will be approached with an annual prioritisation and assessment process, with an anticipated rate of 1-2 countries prescribed annually. Consultation is open until 4 December 2020 on which countries should be prioritised for assessment. For further details visit the Ministry of Justice’s website. The Office of the Privacy Commissioner (OPC) has also produced step-by-step guidance to help organisations and businesses understand and respond to the new principle 12 obligations. The OPC’s guidance materials, model contract clauses and example agreements are available here. For further commentary see our update Privacy Act 2020 – model clauses released but 'safe harbour' regulations not expected until 2022.

New online privacy breach reporting tool launched

The Office of the Privacy Commissioner (OPC) has launched NotifyUs - a new online tool enabling businesses and organisations to easily assess whether a privacy breach is notifiable. Under the Privacy Act 2020, which comes into effect on 1 December, it will be mandatory for organisations to notify the OPC if a privacy breach has caused, or is likely to cause, serious harm. Businesses and organisations which fail to report a notifiable privacy breach to OPC may receive fines of up to $10,000. More information is available on the OPC’s website. Bell Gully’s Guide to the Privacy Act 2020 includes a practical checklist to ensure that you are prepared. The firm has also launched a Privacy Breach Chatbot.

EU decision on international data transfer has implications for New Zealand

The requirements for transferring data to non-European Union (EU) countries for entities captured by the EU's General Data Protection Regulation (GDPR) has changed with the Court of Justice of the European Union's ('Court') decision in Data Protection Commissioner v Facebook Ireland Limited, Maximillian Schrems (Case C-311/18, “Schrems II").

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The “Schrems II" decision requires businesses sending information to countries that are not subject to the GDPR to ensure data subjects' rights are adequately protected in the destination country, and will have a major impact on how transfers of information about EU data-subjects to non-EU countries are handled. It will impact both New Zealand businesses subject to the GDPR and those receiving data that is subject to the GDPR. The decision also increases the advantage offered by New Zealand's current position as one of just 11 non- EU countries with data “adequacy" status, which means this country is treated as an EU country for the purposes of data transfer. However, a review of that status (expected to take place soon) could change all that – and will test whether the Privacy Act 2020 puts to rest earlier fears that the valuable designation would be lost. Read more on the Schrems II decision here.

Supreme Court reverses Court of Appeal decision in directors’ duties case

In a significant new decision (Madsen-Ries v Cooper) the Supreme Court addresses a number of key issues relating to directors' duties and the difficult decisions directors face about when and how to continue to trade if a company is in financial difficulties. In this case, the sole director (Mr Cooper) of a residential property developer (Debut Homes) decided to complete four property developments that Debut Homes was working on prior to winding down Debut Homes’ operations, on the belief that the company (and its creditors) would be better off if the company completed the outstanding properties. At the time he made that decision, November 2012, the company was in real financial difficulty and it was forecasted that there would be a deficit of at least NZ$300,000 in goods and services tax (GST) once the wind-down was completed. The properties were completed and sold and most of the money was paid to the secured creditors including a related party. However, no GST was paid on the sales. Debut Homes was then put into liquidation in March 2014 on the Inland Revenue’s application, and proceedings were brought by the liquidators against Mr Cooper in his capacity as a director. The Supreme Court in reversing the Court of Appeal’s decision (and restoring the High Court’s orders) found that Mr Cooper was personally liable for continuing to complete the four properties. In particular, they found that: • Mr Cooper was in breach of his duties under section 135 of the Companies Act for continuing to trade when it was clear that continued trading would result in a serious risk of substantial loss to Debut Homes’ creditors and in particular to Inland Revenue, • Mr Cooper was in breach of his duties under section 136 of the Companies Act for agreeing to debts being incurred (including the GST obligations) where there were no reasonable grounds to believe Debut Homes would be able to perform its obligations when they fell due, and • Mr Cooper was in breach of his duty under section 131 of the Companies Act to act in the best interests of the company by failing to consider the interests of all creditors when the company was in an insolvency or near insolvency situation. The stark differences between the approaches of the Court of Appeal (which viewed Mr Cooper’s decision to complete the properties as a “perfectly sensible business decision") and the Supreme Court in this case show the genuine challenges for directors of a near-insolvent company when making a decision as to whether to continue trading. For our full commentary on the Supreme Court’s decision click here.

Court of Appeal delivers significant decision on shareholder rights

The Court of Appeal has affirmed the right of minority shareholders to advance their own interests at the expense of other shareholders.

The Court’s decision in Dold v Murphy [2020] NZCA 313 contains important guidance on the duties that shareholders owe one another and demonstrates the importance of having an appropriate shareholders'

CORPORATE REPORTER agreement in place. In the absence of such an agreement, broader legal concepts such as fiduciary duties and duress may not provide the necessary degree of protection. You can read more on this decision here.

Temporary safe harbour for directors has ended

The temporary ‘safe harbour’ from sections 135 and 136 of the Companies Act 1993 (providing relief to company directors facing significant liquidity problems as a result of COVID-19) expired on 30 September 2020 as planned. The measure was introduced under the COVID-19 Response (Further Management Measures) Legislation Act 2020 as an amendment (in a new Schedule 12 of the Companies Act 1993) to the two directors' duties that apply specifically to insolvency scenarios: • the duty not to trade recklessly (section 135), and • the duty not to allow the company to incur obligations without a reasonable belief that they will be met when due (section 136). The amendments provided that directors' decisions to continue to trade, and to incur new obligations, between 3 April 2020 and 30 September 2020 would not breach those duties if the directors could establish: • No prior issues: The company was either: o able to pay its debts as they fell due on 31 December 2019, or o formed between 1 January 2020 and 3 April 2020, • COVID-19 is causing liquidity problems: In the good faith opinion of the directors, the company was facing or was likely to face significant liquidity problems in the next six months as a result of the effects of COVID-19 on the company, their creditors, or their debtors, and • The company will be solvent by 30 September 2021: The directors, in good faith, consider that it is more likely than not that the company would be able to pay its debts as they fall due by 30 September 2021 (for example, because trading conditions will improve or they will reach a compromise with creditors). Although this measure has ended, the legislation enables the government to reinstate a new safe harbour period if required.

COVID-19 related corporate relief measures extended

The government has extended various measures introduced under the COVID-19 Response (Requirements For Entities — Modifications and Exemptions) Act 2020 until 31 March 2021 to enable entities to continue to govern themselves during any lockdowns with confidence that their decisions will not be compromised by any procedural adjustments made reasonably necessary by the outbreak of COVID-19. Previously these were to end on 30 November 2020. The measures include: • Exemptions from compliance obligations: allowing the Registrar of Companies (and other responsible Registrars or authorities) to grant exemptions from a range of statutory obligations for companies and other entities, including auditing, assurance, and financial reporting requirements. • Modifications to constitutions or rules: allowing an entity to modify certain provisions in its rules if a majority of its governing officers believe in good faith that it is not reasonably practicable to comply with those provisions as a result of COVID-19 (see details of the relevant notification requirements for these modification provisions here). • Using electronic means otherwise not permitted: allowing entities to carry our specified tasks by electronic means (such as calling or holding meetings, recording information and signing any instrument) provided the majority of the entity’s governing officers believe in good faith that it is not reasonably practicable to carry out the task by non-electronic means. Details on how to provide the responsible Registrar with notification that this relief measure has been relied on are available here.

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Companies Act (Overseas Incorporated Companies—Australian Wholly-owned Entities) Exemption Notice 2020

The Registrar of Companies has renewed the exemption that allows overseas companies incorporated in Australia, which are wholly-owned subsidiaries that have been granted relief under the ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 (ASIC Instrument), to provide the consolidated financial statements that they are required to prepare under financial reporting requirements in Australia. The exemption addresses the particular difficulties experienced by Australian incorporated companies that carry on business in New Zealand, and that have been granted relief under the ASIC Instrument from the requirement to prepare stand-alone financial statements for the overseas company in Australia. A copy of the exemption is available here.

Māori business identifier is being built into the NZBN

The government has announced that there will be a new option for Māori enterprises who are part of the New Zealand Business Number register at the Companies Office (NZBN). Once developed, the NZBN will have the option to record data that identifies a business as a Māori business, alongside details like its trading name and email address and phone number. Existing and new businesses will be invited to update or register their information when it becomes available. Factors that might influence their decision to identify as a Māori business could include ownership and directorship, staff members, philosophy and tikanga, management practices, branding and marketing, tangible assets such as land or fishing rights, or intangible assets like kaupapa Māori or cultural property. The change will allow for more accurate measurement of Māori economic activity, make it easier for investment or collaboration with Māori businesses, and better measure the effectiveness of government policies for Māori economic development.

For more information about the New Zealand Business Number, visit the NZBN website.

Commerce Commission commits to international cooperation on competition enforcement

In September this year, the competition regulatory bodies of New Zealand (Commerce Commission), Australia (Australian Competition and Consumer Commission), the United States (Department of Justice/Federal Trade Commission), the United Kingdom (Competition and Markets Authority), and Canada (Competition Bureau) signed the Multilateral Mutual Assistance and Co-operation Framework for Competition Authorities (MMAC). The MMAC includes a memorandum of understanding that enables the signatories to share intelligence and experiences to better coordinate investigations across international borders and to collaborate on joint projects. It also contains a model agreement that can be signed by two or more of the regulatory bodies as the foundation for enhanced information-sharing and investigative assistance agreements. The type of assistance contemplated includes taking testimony and statements from persons of interest, obtaining documentary productions and executing searches and seizures. The model agreement is drafted to contemplate that laws “in relation to cartels and other anti‑competitive agreements, unilateral conduct or monopolistic practices, and merger control” would be with its scope.

Responsible lending law in Australia and New Zealand

Australia has announced major regulatory changes to its current consumer credit framework which are due to take effect early next year. The proposed Australian changes (outlined here) are intended to address various defects with the current framework under the National Consumer Credit Protection Act 2009. Specifically, the changes are aimed

CORPORATE REPORTER at easing the application of the “responsible lending obligations", which require creditors to make inquiries as to the suitability and affordability of loan products before extending credit. In this article, we look at those changes in more detail and discuss their relevance for New Zealand's consumer credit law. Commerce Commission Chair Anna Rawlings said “The Commission is pleased to be strengthening its relationships with these agencies and enhancing its ability to identify and investigate conduct affecting markets in New Zealand in an increasingly digital and global economy”.

Dates for the remaining 2019 amendments to the CCCFA finalised

The full implementation of the Credit Contracts Legislation Amendment Act 2019 (CCLAA) has been impacted by COVID-19, with a number of measures being deferred from 1 April 2021 to 1 October 2021. Under the Credit Contracts Legislation Amendment Act Commencement Order 2020 the following changes to the Credit Contracts and Consumer Finance Act (CCCFA) will come into force on 1 October 2021: • The introduction of duties on directors and senior managers to exercise due diligence to ensure that the lender under a consumer credit contract complies with its duties and obligations under the CCCFA and penalties for failing to comply. • The requirement for lenders (except for those that are exempt) and mobile traders to be certified by the Commerce Commission that their directors and senior managers are fit and proper persons to hold their respective positions (with provisions enabling applications for certifications commencing on 1 June 2021). • The new obligations on lenders to: o keep records demonstrating compliance with their obligation to undertake affordability and suitability assessments, o take reasonable steps to provide information about the loan to borrowers in the same language as they advertise in, o provide an annual report to the Commission containing specified information, o make disclosure about dispute resolution schemes and financial mentoring services, o keep records about how credit and default fees have been calculated and how they are reasonable, o review their fees if there is a material change that is likely to affect the reasonableness of the fee.

Regulations supporting the amendments to the CCCFA enacted

The Credit Contracts and Consumer Finance Amendment Regulations 2020 have been made in support of some of the changes being made to the Credit Contracts and Consumer Finance Act (CCCFA) by the Credit Contracts Legislation Amendment Act 2019. These new regulations relate to: • responsible advertising standards for lenders, • the information to be disclosed at the start of debt collection, • disclosure of information about dispute resolution services and financial mentoring services, • disclosure requirements when a consumer credit contract is varied, and • other provisions that relate to securitisation or covered bond arrangements or similar arrangements and how the new duties on directors and senior managers apply in those circumstances (which include requiring the directors and senior managers of a contract manager to exercise due diligence to ensure that a creditor complies with its duties under the CCCFA). The remaining regulations relating to the new affordability and suitability assessments are expected to be finalised by the end of the year. The new regulations will come into force on 1 October 2021.

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Addendum to Responsible Lending Code extended to 31 March 2021

MBIE guidance that was issued in June 2020 to be read as an addendum to the responsible lending principles set out in the Credit Contracts and Consumer Finance Act has been extended from 30 November 2020 to 31 March 2021. This guidance covers situations where an existing consumer credit contract is varied or replaced for the purpose of reducing a borrower’s financial difficulties brought on by the economic or health impacts of COVID-19.

Industry regulation and regulatory control

NZCC consults on draft report on Fonterra’s 2020/21 Milk Price Manual The NZCC released its draft report on its annual review of Fonterra’s Farmgate Milk Price Manual for the 2020/21 dairy season. This year’s review focused on the changes Fonterra has made to the Manual. These include amending the requirement for an independent reviewer to assess certain aspects of the milk price calculation, and the introduction of the ability to apply the outcome of a ‘Within-Period Review’ to the year in which the review is undertaken. The final report will be published by 15 December 2020. NZCC releases draft report on Fonterra's milk price The base milk price is the average price Fonterra sets for raw milk supplied by farmers which is currently forecast to be between $7.10 - $7.20 per kilogram of milk solids for the 2019/20 dairy season. The NZCC’s review revealed no new areas of concern, the NZCC noting that it was satisfied Fonterra’s calculation is largely consistent with both the efficiency and contestability purposes. Draft decision to reduce Wellington Electricity’s allowable revenue as it transitions to a default price- quality path The NZCC has released a draft decision on how it proposes to move Wellington Electricity Lines Limited from a customised price-quality path (CPP) to a default price-quality path from 1 April 2021. Wellington Electricity has been on a CPP since April 2018. This has enabled it to spend $31 million to improve its network’s resilience to a major earthquake. The NZCC proposes to set a new revenue allowance for the regulatory period from 1 April 2021, to better reflect Wellington Electricity’s expected future costs. NZCC approves Transpower’s $143m voltage stability project in the Waikato and Upper North Island region Transpower submitted a major capital expenditure proposal to the NZCC in December 2019 for the first stage of a two-stage project related to the anticipated closure of major generation plants in the Waikato region. These closures could cause voltage management issues in Auckland and Waikato, particularly as the population grows and peak electricity demand increases. The NZCC agreed that without this investment there would be an unacceptable risk to customers and the power system if faults occurred in the region during periods of high demand. This underpinned the NZCC’s draft decision in June to approve the proposal and was echoed by stakeholders in their submissions.

Mergers and Acquisitions

Statement of Issues released for Pact/Flight clearance application The NZCC has published a Statement of Issues relating to an application from Pact Group Holdings Limited to acquire the assets and business of Flight Plastics Limited in New Zealand and the packaging-related assets of Flight Extruded Plastics LP in Adelaide. In New Zealand, the two firms compete to supply rigid plastic packaging. The Statement of Preliminary Issues and a public version of the application can be found on the NZCC’s case register. Statement of Preliminary Issues released for Aon/Willis Towers Watson The NZCC has published a statement of preliminary issues relating to an application from Aon plc seeking clearance to acquire Willis Towers Watson Public Limited Company as part of a global transaction. Aon and Willis Towers Watson both provide a range of insurance brokerage services, including for commercial insurance, reinsurance, group health and welfare benefits, and personal and life insurance. In addition, both firms provide investment consulting services to institutional investors. The Statement of Preliminary Issues and a public version of the application can be found on the NZCC’s case register.

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Investigation opened into Beijer’s acquisition of Heatcraft NZ and acquisition of rights to apply for HFC import permits The NZCC has opened an investigation into Beijer Ref AB’s 2018 acquisition of Heatcraft New Zealand Limited and its 2019 acquisition of a “grandparented” right to import hydrofluorocarbons (HFCs) into New Zealand. Beijer (through its subsidiaries Realcold and Patton) and Reece are major suppliers of refrigeration and air conditioning equipment in New Zealand. The NZCC will consider whether competition is likely to have been substantially lessened in any relevant market in breach of sections 47 and/or 27 of the Commerce Act. Beijer did not apply for clearance for either acquisition. Wilson Parking agrees to divest car parks in settlement agreement with NZCC In a settlement agreement with the NZCC, Wilson Parking has agreed to divest the leases of three car parking facilities it currently operates in central Wellington. In June 2016, Wilson Parking acquired the long-term lease to operate the Capital car park (50-60 Boulcott Street), which comprised 659 parking bays available to the public. It did not apply for clearance from the NZCC to acquire the lease. The NZCC filed proceedings in the High Court in 2018 alleging Wilson Parking substantially lessened competition for the supply of car parking in the Boulcott Street area when it acquired the rights to operate the Capital car park. To resolve the proceedings, Wilson Parking provided court enforceable undertakings to the NZCC, committing to divest the leases to three car parking facilities. Statement of Preliminary Issues released for NEP acquisition of Sky’s outside broadcasting assets The NZCC has published a statement of preliminary issues relating to an application from NEP Broadcast Services New Zealand Limited seeking clearance to acquire from Sky Network Television Limited the assets of its outside broadcasting business, Outside Broadcasting Limited. In New Zealand, both parties provide outside broadcasting and production services largely in relation to sporting and entertainment events. The Statement of Preliminary Issues and a public version of the application can be found on the NZCC’s case register. NZCC clears proposed Heyden / Henergy / Rasmusens egg merger The NZCC has granted clearance to Heyden Farms Limited, Henergy Cage-Free Limited and Rasmusens Poultry Farms Limited to merge their respective egg production operations. All three parties are producers and suppliers of eggs. In reaching its decision, the NZCC considered the potential impact of the proposed merger on competition in the North Island markets for the production and wholesale supply of cage and colony eggs, barn laid eggs and free range eggs. The NZCC’s investigation found a significant number of competing egg producers in each of the relevant markets, including some that are expanding their operations, particularly in the production of barn laid and free range eggs. The NZCC considered that these competitors are likely to constrain the ability of the merged entity to raise prices, reduce service quality, or coordinate their behaviour. NZCC grants clearance for Mylan and Upjohn to merge subject to a divestment The NZCC has granted clearance for Mylan N.V. and Upjohn Inc. (a wholly owned subsidiary of Pfizer Inc) to merge their global pharmaceutical businesses. In New Zealand, both parties compete to supply off- patent prescription medicines. The NZCC considered the proposed merger would be likely to result in a substantial lessening of competition in four product markets. The NZCC granted clearance subject to the divestment of the four products offered by the parties, noting that the divestment will allow another firm to become a credible competitor in the four markets where it had competition concerns. A public version of the written reasons will be available on the NZCC’s case register in due course. NZCC clears AJ Park’s acquisition of Baldwins The NZCC has granted clearance for AJ Park IP Limited to acquire the assets of Baldwins Intellectual Property (and related entities). The NZCC focussed on the potential effect of the proposed acquisition on competition in the markets for the provision of professional services relating to patents and other forms of intellectual property such as trade marks, registered designs, copyright and plant variety rights. The NZCC considered that the presence of competing suppliers in the relevant markets, alongside the increasing presence of Australian firms, is likely to constrain AJ Park’s ability to profitably raise prices or reduce service quality. A public version of the written reasons will be available on the NZCC’s case register in due course. Investigation opened into acquisition of Wallace's North Island rendering assets The NZCC has opened an investigation into the acquisition of the North Island animal rendering assets of Wallace Group GP Limited by interests associated with Glenninburg Holdings Limited. Glenninburg and Wallace both have interests in companies that render animal materials into finished products such as meat and bone meal and tallow. The investigation will focus on the competition lost as a result of the acquisition and the constraints on the merged entity’s ability to raise prices or lower the quality of its services. The investigation will also examine what would likely have happened to Wallace’s North Island animal rendering assets in the absence of the acquisition.

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Market behaviour

Settlement reached in equine air freight price-fixing proceeding A settlement has been reached with the International Racehorse Transport New Zealand Partnership (IRT Partnership) in a price fixing case arising from an arrangement between IRT Partnership and a competitor for the provision of domestic and trans-Tasman equine airfreight services. The High Court released its judgment granting the declarations sought by the NZCC, recording that IRT Partnership’s conduct breached the Act. A copy of the judgment is available on the NZCC’s case register. Hamilton real estate agencies to pay $4 million for price fixing The Auckland High Court has ordered Hamilton-based Lodge Real Estate Limited to pay $2.1 million and Monarch Real Estate Limited to pay $1.9 million for engaging in price-fixing in breach of the Commerce Act. Lodge and Monarch have been penalised for their roles in coordinating the Hamilton regional response to Trade Me’s pricing decision. The High Court did not require a director of Lodge and a director of Monarch to pay a penalty despite the Court of Appeal finding they did engage in unlawful conduct, which was upheld in the Supreme Court. A copy of the judgment is available on the NZCC’s case register.

Consumer issues

PAK’nSAVE Mangere fined $78,000 for price discrepancies Kennedy’s Foodcentre (2003) Limited trading as PAK’nSAVE Mangere has been fined $78,000 for discrepancies between the promotional price displayed or advertised and the price charged at the till. It had earlier pleaded guilty to six charges of making false and/or misleading representations about price, under the Fair Trading Act 1986 (FTA). The charges arose after NZCC staff conducted mystery shops to check advertised prices against those charged at the till. Heat pump servicing company Ocean Contracting fined $75,000 for making false or misleading representations Ocean Contracting Limited has plead guilty to 10 charges under the FTA. The offending conduct involved the company approaching customers offering to service their heat pumps. During the service inspections the company’s technician would advise customers that their heat pumps were leaking refrigerant gas, that it would cost between $180 and $400 to “top up” the refrigerant gas, and that the heat pump would stop functioning correctly if a “top up” was not performed. All heat pumps were in fact fully functional and none required a refrigerant top-up. Ocean Contracting was held liable for the representations made by its employee because its technician made the false or misleading representations within the scope of his employment and as a representative of the company. Kiwibank admits system failures and agrees to pay customers $5.2 million Kiwibank has entered into a settlement agreement with the NZCC after reporting that it failed to have in place robust home loan variation disclosure policies, procedures and systems. Kiwibank admitted that it had failed to act with the care, diligence and skill of a responsible lender and agreed to make remediation payments to over 48,000 borrowers, totalling $5.2 million. More toy safety fines – Judge says “substantially higher penalties” justified Two importers (SDL Trading Limited and Greenstar Holdings Limited) have been fined a total of $118,000 on toy safety charges, and a District Court Judge has said that “substantially higher penalties” are justified in such cases. Greenstar pleaded guilty to four representative charges relating to the supply of 217 units of four different toy animal sets. SDL pleaded guilty to one representative charge under the FTA relating to a fire engine toy it supplied to retailers throughout New Zealand. Kitset home business director fined $80,000 for breaching the Fair Trading Act Emma Gestro, the director of now defunct Get Design and Sales Limited, has been fined $80,000 for breaching the FTA by taking payment for goods not delivered. Ms Gestro pleaded guilty to breaching the FTA by demanding or accepting payment for kitset buildings sold by Get Design, when she did not have reasonable grounds to believe that delivery could occur within the period agreed, or within a reasonable time. Finance company warned over repossession documentation and post-repossession charges Financial Holdings Limited (FHL) has been warned by the NZCC that its repossession documentation and post-repossession charges likely breached the FTA and Credit Contracts and Consumer Finance Act 2003 (CCCFA). FHL provides personal and commercial finance, focusing on personal loans for the purchase of second-hand motor vehicles. The NZCC investigated whether FHL was collecting or claiming interest and fees after the repossession and sale of secured property, and issuing repossession notices that did not comply with the CCCFA.

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Telecommunications

Proposed approach to fibre regulation released The NZCC released its first paper for fibre price-quality and information disclosure regulation. This paper sets out the proposed process and approach to regulating telecommunications companies that provide fibre access services in New Zealand. A copy of the paper can be found on the NZCC website. NZCC moves to address rising telecommunications sector complaints The NZCC is asking for views on what telecommunications providers could be doing better to address increasing complaints about the sector. To get a more fullsome picture, the NZCC is asking for views on the key pain points being experienced by consumers and what needs to be done to address them. Draft decision on allocation of $10 million Telecommunications Development Levy The NZCC has released its draft determination on the allocation of payments for the Government’s $10 million Telecommunications Development Levy (TDL) for 2019/20. The TDL is paid by providers earning more than $10 million per year from telecommunications services, including internet, mobile, and data services. The Government uses the funds collected by this levy to pay for telecommunications infrastructure and services that are not commercially viable. The draft determination proposes that Spark, Vodafone, Chorus, and 2degrees collectively pay approximately 90% of the $10 million levy. The remainder of the levy is divided among other liable providers. NZCC completes input methodologies by finalising approach to valuing fibre providers’ financial loss The NZCC has released its final decision on its approach to determining the value of the financial loss asset for fibre service providers under the new fibre regulatory regime. The financial loss asset captures the unrecovered returns of Chorus and the local fibre companies (Enable Networks, Northpower and Ultrafast Fibre) during the initial period of operating Ultra-Fast Broadband networks before demand met supply. More information on the NZCC’s approach to valuing the financial loss asset and the legal determinations that give effect to its input methodology decisions can be found here. NZCC releases rules to safeguard consumers of fibre broadband The NZCC has published its first set of final decisions on the input methodologies that will apply to fibre fixed line access services. As with other regulated sectors, the input methodologies are designed to give fibre providers upfront certainty on the regulatory rules, processes and requirements that will be applied to their businesses, while also counterbalancing their incentives to maximise profits at the expense of consumers. A copy of the final decisions can be found here. NZCC confirms its approach to monitoring and enforcing non-discrimination and equivalence obligations The NZCC has released guidance about how it will monitor and enforce obligations on telecommunication network operators to offer fibre and other wholesale services to retailers on an equivalent and non- discriminatory basis. The guidance is the product of extensive consultation and will help industry understand the NZCC’s approach to these obligations when exercising its monitoring and enforcement powers. The final guidance document is available on the NZCC’s website. Mobile operators should improve consumer choice through easier comparisons The NZCC has told New Zealand’s three mobile network operators that they should provide more meaningful comparison information and guard against overspending by mobile phone consumers. The open letter sent to Spark, Vodafone and 2degrees outlined the NZCC’s review of nearly 80,000 consumer mobile bills, which followed on from its 2019 study into the state of competition in the mobile market. Mobile Termination Access Services to remain regulated for now The NZCC issued its final decision against deregulating Mobile Termination Access Services (MTAS) at this time. MTAS is price regulated under the Telecommunications Act by the NZCC to ensure consumers can access affordable calling and texting regardless of their choice of provider. The final decision and more information about MTAS can be found here. Latest broadband tests reveal 10% drop in performance of high-speed fibre plans The NZCC’s latest Measuring Broadband New Zealand report, from independent testing partner SamKnows, reveals a 10% drop in the peak time broadband speeds of high-speed Fibre Max plans since the last report. With the exception of Fibre Max, testing shows that overall internet performance has remained stable, despite changes in broadband use as a result of COVID-19. MyRepublic penalised for failing to meet levy requirements The NZCC has penalised internet provider MyRepublic for breaching its statutory obligations under the Telecommunications Development Levy. MyRepublic failed to provide the required information by the due date and only did so after being pursued by the NZCC for several months. MyRepublic was issued with a written warning for a similar breach in 2018.

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Mergers and acquisitions

London Stock Exchange Group’s acquisition of Refinitiv not opposed The ACCC will not oppose the proposed acquisition of Refinitiv Parent Limited (Refinitiv) by the London Stock Exchange Group plc (LSEG). LSEG and Refinitiv are global companies supplying financial markets infrastructure products and services to financial industry professionals. In Australia, LSEG primarily supplies clearing services for over-the-counter interest rate derivatives, venue data generated by trading activity on its European trading venues and platforms, and licensing of fixed income and cash equities indices. Refinitiv primarily distributes venue data and indices via consolidated data feeds and desktop terminals, licenses the WM/Reuters foreign exchange benchmark rates, and supplies trading services for over-the-counter interest rate derivatives and foreign exchange derivatives. Metcash's acquisition of Total Tools majority stake not opposed The ACCC will not oppose Metcash Limited’s (ASX:MTS) acquisition of a 70 per cent majority interest in Total Tools Holdings, the franchisor of the Total Tools network. Metcash is a wholesaler and retailer of hardware and home improvement products through its Independent Hardware Group (IHG) division. IHG’s retail stores include Mitre 10, Home Timber & Hardware, Thrifty-Link Hardware, True Value Hardware and Hardings. Total Tools is a specialist retail supplier of tools and equipment. The ACCC considers that IHG stores compete more closely with multi-category hardware stores, such as Bunnings, while Total Tools competes more closely with other tool specialists such as Sydney Tools, as well as Bunnings.

Market behaviour

Mobile apps market under scrutiny The ACCC will be examining the experiences of Australian consumers, developers, suppliers and others in a new report scrutinising mobile app stores. Issues to be examined include the use and sharing of data by apps, the extent of competition between Google and Apple’s app stores, and whether more pricing transparency is needed in Australia’s mobile apps market. The work is part of a five-year ACCC inquiry which will produce reports every six months examining markets for the supply of digital platform services in Australia.

FE Sports allegedly engaged in resale price maintenance The ACCC has instituted proceedings in the Federal Court against B & K Holdings (QLD) Pty Ltd, trading as FE Sports, alleging that it engaged in resale price maintenance for the wholesale supply of cycling and sporting products in Australia. It is alleged that between February 2017 and June 2019, FE Sports provided 328 dealer agreements to existing or prospective dealers containing terms that prohibited the dealer from advertising or promoting the products of certain brands on the dealer’s website for less than the recommended retail price set by FE Sports. The ACCC is seeking declarations, injunctions, pecuniary penalties, an order for corrective notices, a compliance program, and costs.

Consumer issues

Amaysim and Lycamobile pay penalties over ads for ‘unlimited’ mobile plans Amaysim Australia Ltd (ASX: AYS) and Lycamobile Pty Ltd have paid penalties totalling AU$126,000 and AU$12,600 respectively after the ACCC issued each of these mobile services providers with an infringement notice for alleged false or misleading representations about their mobile phone plans. The ACCC alleges that each business separately misrepresented that their mobile phone plans were ‘unlimited’ in advertisements on social media designed to entice new customers, when in fact the plans had a maximum data allowance.

Trivago loses appeal after misleading consumers over hotel ads The Full Federal Court has dismissed an appeal by hotel comparison site Trivago against an earlier decision which found Trivago had breached the Australian Consumer Law by making misleading representations about hotel room rates on its website and television advertising. In January 2020, the Federal Court had ruled that Trivago had misled consumers by representing its website would quickly and easily help users identify the cheapest rates available for a given hotel. The judge at first instance had found that Trivago did not sufficiently disclose to users that its website used an algorithm that gave

CORPORATE REPORTER prominence to accommodation providers paying Trivago a higher payment fee (cost per click), meaning that the most prominent offers were often not the cheapest offers for consumers. The matter will now return to the primary judge, who will consider the orders sought by the ACCC against Trivago at a later date. The ACCC is seeking orders for declarations, injunctions, penalties and costs.

CORPORATE REPORTER