Investing in Aotearoa FEBRUARY 2021

Simpson© Simpson Grierson Grierson 2021 Contents

Introduction 01. 02. 03. About Simpson Grierson Introduction to Aotearoa Overseas investment Mergers & New Zealand regulation Acquisitions

04. 05. 06. 07. Competition/ International trade Financial Services Structuring a business Anti-trust Regulation

08. 09. 10. 11. Buying, selling and Use and development Fund Raising and Contract law and leasing property of property Capital Markets Consumer protection

12. 13. 14. 15. Data privacy Workplace relations Intellectual Property Tax

16. 17. 18. Insolvency Economic response Doing business with to climate change Māori organisations This guide introduces you to New Zealand’s business and trading environment, with particular focus on legal and regulatory matters intended to assist with initial enquiries about investing in New Zealand. It is updated regularly.

The information in this guide is necessarily general, and should not be relied upon as a basis for making business decisions. Your business needs and specific circumstances must be considered, and government policy, market conditions and relevant laws may have changed since the guide was last updated.

STUART EVANS MICHAEL POLLARD BARNEY CUMBERLAND Banking & Finance Corporate & Commercial Tax DDI +64 9 977 5321 DDI +64 9 977 5432 DDI +64 9 977 5155 M +64 21 633 422 M +64 21 400 852 M +64 21 497 462 [email protected] [email protected] [email protected] Simpson Grierson is one of the New Zealand’s “Simpson Grierson has one of the largest corporate leading full service firms. practices in New Zealand and is active in major About We have three offices, in , transactions involving private equity, public and and . private M&A, capital markets, business restructuring Simpson Grierson and commercial infrastructure projects. It has niche We have extensive experience in helping offshore expertise in key industry sectors such as dairy, mining, investors with New Zealand investment projects. We help forestry, infrastructure, aged care and insurance, and ‘end to end’ – from evaluating an investment opportunity, advises both SMEs and larger corporates.” assisting in the acquisition process and with integration Legal 500, 2020 issues, through to navigating operational issues that arise day to day. Ultimately, we will help you to maximise the “Simpson Grierson houses a substantial offering of value of your investment. IPO, M&A, private equity and corporate restructuring We have acted on some of the largest offshore knowledge, with experience in high-profile transactions investments made in New Zealand recently (read more across a wide range of industries. Often instructed by here). We deal regularly with the Overseas Investment prominent funds, private equity firms and international Office and other regulatory bodies potentially involved corporates on inbound investment into New Zealand.” in investment transactions in New Zealand. We have Chambers and Partners, 2020 excellent long-standing relationships with New Zealand’s leading corporate finance and accountancy firms, “The service and support we received was first-class,” investment banks and environmental advisors. reports one client, going on to describe the Simpson We have speciality expertise in New Zealand’s planning Grierson team members as “exceptional in terms of and resource management consenting process, employee their availability, flexibility and commerciality.” relations laws and intellectual property matters. Chambers and Partners, 2020 We also have excellent international connections. We are New Zealand’s only member of Lex Mundi, the world’s “Another client describes the as “agile, receptive leading association of independent law firms and we and responsive,” adding: “They offer an innovative are a co-f ounder of the Pacific Rim Advisory Council. approach to problems.”“ Our partners include members of the International Bar Chambers and Partners, 2020 Association and the Inter-Pacific Bar Association. Please get in touch. We would be delighted to talk to you.

Simpson Grierson HOME Investing in New Zealand 1 GEOGRAPHY Aotearoa New Zealand (New Zealand) is a Pacific Auckland SECTION 1 archipelago, made up of two main islands (the North and South Islands), Stewart Island (at the bottom of the South Introduction Island), and many smaller islands. The main centres are Auckland, Hamilton, Tauranga and Tauranga to Aotearoa Wellington in the North Island, and Christchurch and Hamilton Dunedin in the South Island. Most of New Zealand’s New Zealand residents live in these main centres. Outside the main centres, the country is sparsely populated. New Zealand has a temperate climate. The warmest summer months are typically January to March. New Zealand’s time zone is GMT +12 hours.

POPULATION AND CULTURE New Zealand has a population of around 5 million, and Queenstown is a culturally diverse nation. Traditionally, New Zealand Wellington culture has reflected a blend of New Zealand-European (descended from predominantly British settlers arriving from the 1800s onwards) and Māori – New Zealand’s Christchurch indigenous people. New Zealand is also home to large Pasifika, Chinese, Indian, English, South African and Dunedin Korean communities. Nearly one third of the population was born overseas. The official languages are English, Te Reo Māori (the Māori language) and New Zealand Sign Language. English is the principal spoken language. Te Reo Māori is spoken regularly in some local communities and has recently experienced a resurgence. New Zealand has a culture of innovation and New Zealanders are famous for having a ‘can-do’ attitude. 90% of the population are active internet users. New Zealanders generally enjoy a high standard of living.

Simpson Grierson HOME Investing in New Zealand 2 BUSINESS LANDSCAPE (CPTPP) with, among others, Brunei, Canada, Japan, Local government consists of democratically elected Malaysia, Mexico and Singapore. regional councils and territorial authorities, who are New Zealand is regarded as having one of the lowest levels primarily responsible for planning and environmental of corruption in the world. The country was ranked 1st New Zealand is currently negotiating a number of new management, local public services and local transport. out of 187 countries on the Corruption Perceptions Index free trade agreements, including with the UK, the EU, published in January 2020. India and Russia. New Zealand provides state access to education, health services and social welfare. These services, as well as Auckland, Wellington and Christchurch are the main the justice system and national transport infrastructure, centres of business. Auckland – home to around 35% of MONETARY POLICY are all centrally managed. the country’s population – is the largest regional economy, The New Zealand dollar is the unit of currency, freely generating nearly 38% of New Zealand’s GDP. Wellington is floating against all major currencies. the seat of government, and where the New Zealand Stock LEGAL SYSTEM AND COURTS The Reserve Bank of New Zealand is the central bank, Exchange and government sector organisations are based. The legal system is based on the English ‘common law’ and controls monetary policy. Under current policy, Christchurch is the South Island’s main business hub, with system, and many New Zealand laws are based on English the Reserve Bank has a dual mandate: to maintain price a strong focus on agriculture and primary industries. or Australian law. stability by keeping inflation between 1% and 3%, and Tourism is traditionally New Zealand’s biggest export to support full employment. New Zealand’s Official New Zealand’s hierarchical court system is made up of industry, representing about 6% of GDP. Agricultural Cash Rate is currently at 0.25%. the Supreme Court (now the country’s highest court), exports account for approximately 5% GDP. New Zealand the Court of Appeal, the High Court, and various There are no restrictions on the flow of capital or has a thriving innovation and investment community subordinate courts and tribunals. Judges and judicial earnings of a New Zealand business to overseas investors. particularly focused on agri-tech and bio-tech products officers are appointed non-politically and under strict rules Profits, dividends, interest, royalties and management fees and services. to maintain judicial independence. can be moved freely into or out of New Zealand, although New Zealand is a signatory to the Paris Agreement, and some payments to other jurisdictions may be subject to Although New Zealand has a statutory Bill of Rights, steps have been taken towards prompting or requiring non- r esident withholding tax. this does not have constitutional superiority over other businesses to reduce carbon emissions and otherwise statutes, and no court has power to overrule statute. adapt to the challenges presented by climate change GOVERNMENT A unique feature of New Zealand’s legal system is the (discussed more in Section 17). New Zealand is a “Westminster style” parliamentary “no fault” accident compensation scheme. Under this democracy, and constitutional monarchy (similar to scheme, plaintiffs cannot sue for losses arising from INTERNATIONAL TRADE the UK). The government is led by the Prime Minister. personal injury in New Zealand (except in very rare cases). New Zealand’s main trading partners are China, Australia, New Zealand governments are generally centrist, leaning The scheme covers treatment costs for all personal the EU, the United States and Japan. either slightly left or slightly right. General elections are injuries suffered in New Zealand, whether work- related or otherwise, and including injuries suffered by New Zealand is a strong proponent of free trade. It held every three years. non- residents. has bilateral trade agreements with Australia, China, New Zealand has a unitary system of government. Hong Kong, Malaysia, Singapore, South Korea, Taiwan This means that while there is a division of power and Thailand. It is also party to the Comprehensive and between central and local governments, local government Progressive Agreement for Trans-Pacific bodies derive their powers from the central government.

Simpson Grierson HOME Investing in New Zealand 3 OTHER OVERSEAS INVESTMENTS MUST BE NOTIFIED We urge every foreign investor to seek specialised advice before taking any active steps towards an Any overseas investment in New Zealand, regardless of SECTION 2 investment in New Zealand. investment value, that involves: • an ownership or control interest of more than 25%, 50% Overseas investment OVERSEAS INVESTMENTS IN “SENSITIVE” ASSETS or 75% of any entity that controls (directly or indirectly) regulation MUST HAVE CONSENT New Zealand assets; or The basic rule is that an “overseas person” seeking • an acquisition of New Zealand assets representing to acquire either “sensitive land” or “significant more than 25% of the value of the vendor’s assets; business assets” must have consent from the Overseas Must be notified to the OIO, who will assess the Investment Office (OIO) before the investment in question transaction in relation to the national interest. can proceed. Most notified transactions will be cleared within the • The consent process requires the investor to submit OIO’s intended time frame of 10 business days. Those a detailed application, in a prescribed form. The considered to represent higher risk to the national application focuses on whether the overseas person has interest will be subject to conditional direction orders, relevant business experience, is financially committed or be prohibited. and is of good character. If the application concerns sensitive land, the applicant must also demonstrate that the investment will bring a net benefit to New Zealand. TRANSACTIONS CONTRARY TO THE NATIONAL INTEREST • The applicant must pay a filing fee. Filing fees range between NZ$30,000 and NZ$55,000 depending on Consent will be refused, or a notified transaction made the transaction. subject to conditions, if a transaction (that otherwise requires consent or notification) is contrary to the • The processing time for an application depends on the national interest. nature of the application, taking up to nine months for certain land transactions. Prescribed (shorter) statutory The test is largely discretionary but certain factors are time frames for processing applications are expected deemed relevant to the exercise of that discretion, during 2021. including whether the target is a “strategically important business”, or if the investor is owned or controlled by a • Consents are given subject to certain conditions, foreign government. Strategically important businesses which the applicant must ensure are met. A common include businesses involved in ports or airports, power condition is that the investor continues to be of generation, water infrastructure, telecommunications, good character. financial market infrastructure, or media businesses • Penalties for non-compliance include fines of up to with a significant impact. NZ$10 million for businesses and NZ$500,000 for individuals. In cases of serious non-compliance, the OIO is able to seek court orders requiring an investor to dispose of property. Simpson Grierson HOME Investing in New Zealand 4 KEY TERMS • waterways, parks, conservation areas, areas of historic significance The tests for whether a particular investment requires consent are complex. An outline of key terms • residential land is below, but there is more detail that is relevant. Acquisition of 25% or more in an entity that holds Certain exemptions apply in some cases. sensitive land is also considered an acquisition of sensitive land, and requires consent. Overseas Persons • a natural person who is not New Zealand citizen or Significant Business Assets not ordinarily resident in New Zealand • acquiring more than a 25% stake (or increasing • a body corporate incorporated outside New Zealand an existing 25% or more stake) in a New Zealand business or assets for consideration exceeding • a New Zealand body corporate that is more than NZ$100m 25% owned by a body corporate incorporated outside New Zealand • acquiring a 25% stake (or increasing an existing 25% or more stake) in any body corporate that has • a body corporate that is more than 25% owned or NZ assets valued at more than NZ$100m within its controlled by an overseas person (or persons) corporate group (including all entities in which a 25% • unincorporated bodies (including , JVs, or more stake is held) trusts and unit trusts) where certain (equivalent) • acquiring any property (including intangible assets) overseas ownership or control thresholds for more than NZ$100m are exceeded • establishing a business in New Zealand where Associates of overseas persons are also captured. the expenditure expected to be incurred exceeds Sensitive Land NZ$100m Includes freehold land, or a lease of 3 or more years The NZ$100m threshold is increased for over land, that is: some investors: • non-urban land (including rural or farm land) area • NZ$536m for certain Australian non-government of more than 5 hectares investors (subject to GDP adjustment each year) • land on certain islands • NZ$200m for certain countries that have free trade agreements with New Zealand

Simpson Grierson HOME Investing in New Zealand 5 SPECIAL RULES APPLY TO CERTAIN INVESTMENTS

An overseas person seeking to acquire residential land will need OIO consent to do so. Special consent pathways exist for persons looking to acquire residential property to live in. Australian and Singaporean investors (not ordinarily Residential resident in New Zealand) will not need Land OIO consent to acquire residential land, as long as that land is not sensitive for a different reason. Acquisition of forestry rights of more than 1000 hectares in a calendar year is an acquisition of “sensitive land” requiring consent. A special statutory Forestry test applies in the consenting process for forestry assets.

Land comprising the foreshore and/or seabed, certain islands, and land over a certain area comprising a waterway or lake bed is sensitive land. Acquisition of such land by an overseas person Waterways, will require consent. The New Zealand Foreshore or government has a right of first refusal to Seabed acquire land that constitutes waterways, the foreshore or seabed.

If an overseas person wishes to acquire farm land, or shares in a company that owns farm land, the OIO is not able to give its consent unless the land has first been advertised for sale on the open Farm Land market in New Zealand, to New Zealand residents, for a certain period.

Simpson Grierson HOME Investinging in in New New Zealand Zealand 6 OVERVIEW THIRD PARTY INTERESTS IN There are a number of ways in which an overseas NEW ZEALAND ASSETS SECTION 3 investor can acquire a New Zealand business or entity. The investor could aquire the company itself, or just the A properly secured interest of a third party Mergers & business assets. The acquisition structure will depend on over shares or assets will be registered on the various factors, such as whether the target is a private New Zealand Personal Property Securities Register Acquisitions (closely held) or public entity. Whether regulatory (or, in respect of real property, on the title to that approvals are needed – and if so, to what extent – property). The basic rule is that a duly registered could impact tax matters and the accounting treatment security interest has priority over an unregistered of the acquisition. security interest, and priority between registered interests is determined by order of registration. The most common means of acquisition in New Zealand is by private treaty, between vendor and purchaser. These security records are publically available on However, if the target is listed on the New Zealand Stock electronic platforms, enabling overseas investors Exchange, or is a private entity above a certain size, then to obtain an early snapshot of interests registered the acquisition must be done by way of a takeover offer, against particular shares or assets. The New Zealand or through a scheme of arrangement. regime with regard to personal property is similar to that in Australia and Canada. PRIVATE TREATY If the Takeovers Code does not apply (see further below), TAKEOVERS the parties can agree by private treaty the terms on which a company’s shares, or its business assets (as appropriate), If an investor wishes to acquire the shares of a company will be bought and sold. The terms are usually set out listed on the New Zealand Stock Exchange (see further in a sale agreement recording the assets being sold, the below), or the shares of a company above a certain price – including how purchase price is calculated – and all size, that acquisition must be done in accordance other conditions of sale. with New Zealand’s takeovers regime, set out in the Takeovers Code. Overseas investors can generally expect the terms of a sale and purchase agreement in New Zealand, whether The regime applies to any “code company”, being a for shares or assets, to be similar to those of an equivalent company that: transaction conducted in Australia or the UK. Use of • is listed on a New Zealand stock exchange (or has been warranty and indemnity insurance is not unusual. listed in the previous 12 months); or • has 50 or more shareholders holding voting rights and 50 or more share parcels, and is at least “medium sized”.

Simpson Grierson HOME Investing in New Zealand 7 A company will be “medium sized” if, together with its The Takeovers Code specifies the rights and obligations of subsidiaries, it has total assets of at least NZ$30 million both the bidder and the target entity in relation to an offer Schemes of arrangement have become a popular and/or it has total annual revenue of at least made in relation to a code company. Key timetable drivers alternative to conducting a takeover offer under NZ$15 million (including its subsidiaries) based on latest will be how both bidder and target approach the offer the Takeovers Code. There are three general annual accounts. and their respective strategies employed along the way, reasons for this: and whether the transaction requires approval from the The Takeovers Code’s “fundamental rule” prohibits any Lower approval threshold: A resolution of Overseas Investment Office or any other regulator. person and its associates from acquiring more than 20% of shareholders approving a scheme will be passed if the voting rights in a code company, or increasing beyond 75% of votes cast at the relevant scheme meeting 20% of the voting rights. SCHEMES OF ARRANGEMENT vote in favour of it, so long as (in the case of a Code company) this also represents at least 50% There are some exceptions to the fundamental rule A scheme of arrangement is essentially a contract of the total outstanding votes. This can make (set out in the Takeovers Code), including: between the target company and its shareholders and/or creditors to reconstruct the company’s share capital, it easier to acquire 100% of a company, than • a full or partial offer made in accordance with the assets or liabilities. This can include transferring the shares achieving the required 90% acceptance required provisions of the Takeovers Code; to a third party. under a takeover offer to trigger the compulsory acquisition threshold. • an acquisition or allotment approved by an A scheme of arrangement occurs only by virtue of statute, ordinary resolution of shareholders of the code and the process is strictly regulated by the Companies Act Greater certainty of outcome: The outcome of a company in accordance with the provisions of the 1993. A scheme requires complete co-operation between scheme of arrangement can be made more certain Takeovers Code; and bidder and target, as the company involved must create in that the offer is either accepted or rejected by shareholders (meaning the transaction either • an increase, of up to 5% a year, by a person holding the documents setting out the terms of the scheme, call a proceeds or it doesn’t), and the timetable can be between 50% and 90% of the voting rights in a meeting of shareholders to vote on whether to approve more certain. code company. the scheme, and ultimately to apply to the High Court to have the terms of the scheme approved. Transaction There may be greater flexibility Beyond 90% control, the Takeovers Code provides a right Greater flexibility: timelines can be affected by Court timetabling, and in a scheme of arrangement than would otherwise (and obligation at the option of outstanding holders) by whether the transaction requires approval from the apply under the Takeovers Code – eg in relation to acquire the remaining voting control in the target Overseas Investment Office, or any other regulator. to different forms of consideration, and different company compulsorily. treatment of shareholders.

Simpson Grierson HOME Investing in New Zealand 8 A “contract, arrangement or understanding” does not The rules relating to when a transaction will or may need to be a formal, written contract in order to breach SECTION 4 substantially lessen competition are complex. It is the Commerce Act. A “gentlemen’s agreement” or essential for any investor considering a merger or “nod and a wink” may be sufficient. Competition/ collaboration with a competitor business to seek The is the regulator responsible legal advice early in the process. for investigating and enforcing competition law breaches anti-trust in New Zealand. There are significant penalties for engaging in restrictive NEW ZEALAND’S COMPETITION LAW REGIME trade practices. Penalties for an individual can be up to New Zealand’s competition law regime is set out NZ$500,000. Penalties for a company can be up to the in the Commerce Act 1986. The Commerce Act greater of NZ$10 million, three times the value of any prohibits conduct that restricts competition (restrictive commercial gains resulting from the contravention trade practices) and any acquisition that leads to a and 10% of the turnover of the entity (and its group). substantial lessening of competition in the relevant From April 2021, engaging in cartel conduct will be a New Zealand market. criminal offence carrying a prison term for individuals of Restrictive trade practices include: up to 7 years and / or a fine of up to NZ$500,000. • , where two or more competitors cartel conduct MERGERS OR BUSINESS ACQUISITIONS THAT agree not to compete with each other by price fixing, SUBSTANTIALLY LESSEN COMPETITION restricting output or allocating markets. There are some exceptions to the prohibition on cartel conduct The Commerce Act prohibits mergers and acquisitions for legitimate commercial agreements such as that would have, or would be likely to have, the effect of “vertical supply contracts” or “collaborative activities”; substantially lessening competition in a market. • contracts, arrangements or understandings that have The Commerce Commission assesses mergers using the the purpose or likely effect ofsubstantially lessening substantial lessening of competition test. This test competition in a relevant market – examples include asks whether a merger is likely to substantially lessen certain long term exclusive supply contracts, depending competition in a relevant market by comparing the likely on market conditions; state of competition in that market if the merger proceeds with the likely state of competition if the merger does • taking advantage of a substantial degree of power in not proceed. a market for an anti-competitive purpose – this could include conduct designed to drive a competitor out Mergers between competitors are more likely to result in of business or to prevent new competitors from a substantial lessening of competition. starting up; and • resale price maintenance, when a supplier of goods enforces, or tries to enforce, a minimum price at which the reseller must on-sell those goods. Simpson Grierson HOME Investing in New Zealand 9 A merger between competing businesses could These “concentration indicators” are not hard and fast • The clearance process requires the investor to submit substantially lessen competition in a market if, rules, and cannot be entirely relied on when assessing the an application on a prescribed form that sets out the for example: competitive effects of a merger. key competition issues, the rationale for the merger and evidence that the merger will not breach the Commerce • the merger removes a competitor that provided a The relevant “market” is a market in New Zealand for the Act. Current filing fees for a clearance application are competitive constraint, resulting in the ability for the relevant goods and services, as well as other goods or NZ$3,680. merged firm to profitably increase prices; or services that, as a matter of fact and commercial common sense, are substitutable for them. • Businesses contemplating a merger should seek • the merger increases the potential for the merged legal advice. The Commerce Commission encourages firm and all or some of its remaining competitors to The prohibition on anti-competitive mergers applies to all businesses to discuss their plans with it before they file coordinate their behaviour so that output reduces mergers that affect a market in New Zealand. This includes for a clearance, and can provide guidance on potential and/or prices increase across the market. a merger that takes place outside New Zealand involving areas of concern. non-New Zealand firms, provided the merger affects a A merger between firms that are not competitors is less market in New Zealand. • Once an application is filed, the Commerce Commission likely to result in a substantial lessening of competition has 40 working days to make its decision. This timeframe than a merger of competitors. However, a substantial is often extended – typically it takes around three to lessening of competition is still possible if: VOLUNTARY NOTIFICATION REGIME FOR MERGERS AND ACQUISITIONS four months from filing to obtain clearance. • the merger gives the merged firm a greater ability The Commerce Commission can also authorise a merger and/or incentive to engage in conduct that prevents or There is no mandatory requirement to notify the that would result in a substantial lessening of competition, hinders rivals from competing effectively; or Commerce Commission of a proposed merger or acquisition. if the public benefits resulting from the merger are found • the merger increases the likelihood of coordinated to outweigh the competitive harm. Current filing fees for However, if it is uncertain whether a merger would behaviour among firms. an authorisation application are NZ$36,800. substantially lessen competition in a market, parties The Commerce Commission has adopted certain can apply for clearance or authorisation from the Clearance and authorisation applications can only “concentration indicators” to give guidance as to Commerce Commission. be granted before a transaction is completed whether a business acquisition is unlikely to substantially (ie unconditional). It is quite common for acquisition In relation to a clearance: lessen competition in a market. These are where, agreements to be subject to a Commerce Act condition. post- merger, either: • The Commerce Commission must clear any mergers that Proceeding with an anti-competitive merger without the it considers would not be likely to substantially lessen • the three largest firms in the market have a combined necessary clearance or authorisation risks enforcement competition in a market. market share of less than 70%, and the merged entity action, which can result in a lengthy investigation and will have less than 40% of market share; or • If the Commerce Commission grants a clearance, significant penalties (up to NZ$500,000 for an individual • the three largest firms in the market have a combined the merger is protected from legal action under and NZ$5 million for a company), or a Court reversing market share of 70% or more, and the merged entity New Zealand’s competition laws. a merger by ordering divestment of assets or shares. The New Zealand government recently proposed will have less than 20% of market share. • Clearance for an international merger given by offshore increasing penalties for companies to NZ$10 million. anti-trust regulators does not protect the transaction in New Zealand.

Simpson Grierson HOME Investing in New Zealand 10 IMPORTING GOODS INTERNATIONAL SALE OF GOODS Tariffs are New Zealand’s main trade protection New Zealand is a party to the United Nations Convention SECTION 5 mechanism, and are imposed on a range of products. on Contracts for the International Sale of Goods 1980. No import licences are required. Parallel imports of nearly The Convention regulates all aspects of international sales International all goods are permitted. contracts and applies to contracts for the sale of certain goods when: New Zealand is a party to the General Agreement on trade Tariffs and Trade GATT( ). • both parties are from countries that are parties to the Convention; or Other than tariffs, no other charges (including import licences) apply exclusively to imported products. Goods • the party contracting with a New Zealand entity is from and Services Tax (GST) applies universally in New Zealand a country that is not a party to the Convention, but the (discussed further in Section 15), and is generally charged contract is governed by New Zealand law. on all imported goods. Parties can explicitly contract to exclude the United All goods imported into New Zealand (and intended for Nations Convention. sale in New Zealand) must comply with relevant product labelling requirements. There are general requirements that product labelling is not misleading or deceptive. Specific labelling requirements apply in relation to food, food supplements, drugs and animal products (discussed further in Section 1). The Dumping and Countervailing Duties Act 1988 regulates dumping of products on the New Zealand market, protecting domestic manufacturers from unfair competition by overseas suppliers.

Simpson Grierson HOME Investing in New Zealand 11 NEW ZEALAND’S TRADING RELATIONSHIPS Australia Other Bilateral Agreements CER (1983) New Zealand has bilateral agreements with Australia, The Australia and New Zealand Closer Economic China, Hong Kong, Malaysia, Singapore, South Korea, Relations trade agreement (CER) established a single Taiwan and Thailand. economic market between New Zealand and Australia. New Zealand is actively negotiating trading CER Investment Protocol (2013) agreements with the United Kingdom and the This Investment Protocol made it easier for Australians European Union. to undertake large scale investments in New Zealand. The Protocol raised the consent threshold Multi-Lateral Agreements that would otherwise apply under New Zealand’s New Zealand also is a party to the following overseas investment regime (in Section 2), increasing multilateral agreements: the regulatory consent threshold for acquisition by an “Australian non-government investor” of AANZFTA “significant business assets” from NZ$100 million to With Australia, Brunei, Cambodia, Indonesia, Laos, NZ$536 million. Malaysia, Myanmar, The Philippines, Singapore, Thailand and Vietnam. Trans-Tasman Mutual Standards The Trans-Tasman Mutual Recognition Regime allows TPSEP a product produced in, or imported into, and legally With Brunei, Chile and Singapore. sold in Australia to be sold in New Zealand and vice CPTTP versa. The regime applies also to offers of securities. With Australia, Brunei, Canada, Chile, Japan, Malaysia, The Joint Food Standards (2002) allows food products Mexico, Peru, Singapore and Vietnam. to be manufactured in Australia or New Zealand to a single standard.

Simpson Grierson HOME Investing in New Zealand 12 New Zealand has a well-developed financial services The principal elements of New Zealand’s regulatory regulatory regime, with comprehensive licensing and other regime for financial service providers (each discussed SECTION 6 requirements applicable to banks and to all other market further below) are: participants who offer or provide financial products or Financial Services services in New Zealand. Regulation Financial reporting and disclosure Banks, insurers and other financial Requires issuers of regulated service providers financial products, licensed New Zealand’s central bank financial service providers, oversees the regulatory banks, insurers and some other regimes applicable to registered financial institutions and “large” banks, insurers and other financial entities to prepare and register service providers audited financial statements

Anti-money laundering Financial advisers regime and countering financing of Requires all persons who provide terrorism regime financial advice (including banks) Applies to all banks, other financial FINANCIAL to do so through a licensed services providers, casinos SERVICES provider (if to retail clients) and and certain professions, such REGULATION to comply with a range of duties as trust and company service LANDSCAPE (for retail and wholesale clients), providers, lawyers, accountants, and to meet on-going conduct and real estate agents and high value disclosure requirements goods dealers

Offering financial products Financial services providers register Requires compliance with Generally requires all “financial disclosure and governance rules service providers” operating in applying to retail offers of financial New Zealand or with New Zealand products, and containing conduct clients to be registered on a rules applying across all financial central public register products and services (in some cases, including offers made only to wholesale investors) Simpson Grierson HOME Investing in New Zealand 13 BANKS, INSURERS AND OTHER FINANCIAL business in a prudent manner, and have appropriate Non-bank deposit takers standing or repute. Any overseas bank conducting banking SERVICE PROVIDERS A “non-bank deposit taker” (NBDT) is someone who business in New Zealand must have the approval of its takes deposits or offers debt securities to retail investors Central bank home supervisor to do so, and comply with all of its home in New Zealand, or carries on the business of borrowing supervisor’s prudential requirements. New Zealand’s central bank is the Reserve Bank of or lending money, and /or providing financial services. New Zealand (RBNZ). The RBNZ’s role is to: Any financial institution carrying on any activity in NBDTs include finance companies, building societies • formulate and implement monetary policy to New Zealand with a name or title that includes “bank”, and credit unions. NBDTs must be licensed by the RBNZ, maintain price stability; “banker” or “banking” cannot do so (lawfully) without and are subject to on-going governance, disclosure and either registering as a bank, or being separately liquidity requirements. • promote the maintenance of a sound and efficient authorised by the RBNZ to do so. financial system; and Other Regulated Financial Services • meet the public’s currency needs. Insurers Other financial services are subject to certain registration, The RBNZ has responsibility for supervising all banks in Any entity carrying on an insurance or reinsurance licensing, governance, reporting and/or other regulatory New Zealand, and must be able to respond to financial business in New Zealand must, under the Insurance requirements, including: (Prudential Supervision) Act 2010, be licensed to do so by distress or bank failure, where a bank’s financial condition • brokers and custodians; poses a serious threat to New Zealand’s financial system. the RBNZ. Only an entity carrying on licensed insurance business in New Zealand may include “insurance”, • providers of investment management schemes or The RBNZ is also responsible for regulation, licensing “assurance”, “underwriter” or “re-insurance” (or similar services; and oversight of finance companies, insurers, building words) in its name, unless it has a specific exemption • fund managers; societies and credit unions. It operates New Zealand’s from the RBNZ. wholesale payment and settlement systems. The wider • derivatives issuers; bank payment system is operated separately. Entities seeking a licence to conduct insurance business in New Zealand (including overseas insurers) must meet • supervisor trustees; Registered banks all prescribed criteria. Once licensed, the entity must be • crowd funding providers; able to meet on-going obligations (including maintaining Any bank operating in New Zealand must be registered solvency; having an appointed actuary; maintaining and • peer to peer lenders; (under the Reserve Bank of New Zealand Act 1989). disclosing financial strength ratings from an approved • financial product market operators; and There are over 20 registered banks operating in rating agency; and maintaining and complying with ‘fit New Zealand, most of which are overseas owned. and proper’ policies for directors and senior officers). • auditors. Registered banks are subject to full regulatory oversight, The RBNZ is responsible for regulation and oversight of In many cases, compliance requirements are greater and prudential supervision, by the RBNZ. Any financial all licensed insurers, and is empowered to investigate if a product or service is offered to the retail market, institution wishing to become registered as a bank in insurers and take action to manage insurers in and much less (or not applicable) if offered only to the New Zealand must demonstrate an ability to carry on financial distress. wholesale market.

Simpson Grierson HOME Investing in New Zealand 14 FINANCIAL ADVISERS REGIME OFFERING INVESTMENTS IN FINANCIAL PRODUCTS ANTI-MONEY LAUNDERING AND COUNTERING The Financial Markets Authority (the principal regulator Anyone seeking to create, promote and sell financial FINANCING OF TERRORISM REGIME of the financial services sector) is responsible for products in New Zealand must do so in accordance Money laundering and financing terrorism are illegal in granting financial advice provider licences and for with the Financial Markets Conduct Act 2013. Financial New Zealand. The key money laundering and countering supervising licensees. products include four categories: debt securities, equity financing of terrorism rules are set out in the Anti-Money securities, managed investment products and derivatives. Laundering and Countering Financing of Terrorism Act Persons providing financial advice to retail clients must 2009 ( ). Breaches can give rise to both civil be, or be engaged by, a licensed financial advice provider. The principal obligations include: AML/CFT Act and criminal liability. Individuals who are engaged by a licensed financial advice • disclosure rules when making a “regulated offer” of provider must be qualified to do so (which often requires The AML/CFT regime includes customer due diligence, financial products in New Zealand. The obligations are personal registration). Providers and advisers must comply reporting and record-keeping duties, and wide much greater for an offer to retail investors (see further with a range of duties, some for all clients whether surveillance and enforcement powers. The AML/CFT Act in Section 10). retail and wholesale, and some only applying when applies to financial institutions (broadly defined) and advising retail clients. • fair dealing rules prohibiting conduct that is likely to also to casinos, accountants, lawyers and conveyancing mislead or deceive. These rules apply whether the practitioners, trust or company service providers, real FINANCIAL SERVICE PROVIDERS REGISTER financial products are being offered to wholesale estate agents and high value dealers (eg auctioneers and or retail investors. bullion dealers). It also applies to the racing industry. Anyone in the business of providing a “financial service” must, in addition to any other registration or licensing • registration and governance requirements in relation requirements, be registered as a “financial services to managed investment schemes, debt securities and SUPERVISION AND ENFORCEMENT provider” (FSP) on the Financial Service Providers Register superannuation schemes. Responsibility for oversight and enforcement of the (FSPR). Registration is intended to enable the public to • financial reporting requirements (in addition to financial services sector in New Zealand is shared between search the register and find out basic information about company reporting requirements provided for in various regulators. any given FSP. If financial services are provided to a retail the Companies Act) issuers of financial products, The RBNZ has responsibilities in relation to registered client, the provider must also join an approved dispute fund managers, registered banks, insurers and banks, and prudential supervision of insurers. The resolution scheme. certain other licensed entities must prepare audited Financial Markets Authority regulates in relation to the The requirement to register on the FSPR applies primarily financial statements, and register them with the financial services sector generally. NZX Ltd, as operator of to financial service providers who are “ordinarily resident Companies Office. the New Zealand Stock Exchange also has a regulatory and in New Zealand” or who have a place of business in • licences are required and certain rules apply in relation supervisory role in relation to certain on- market matters, New Zealand, but also applies to some others. to any offer of derivatives or discretionary managed and the Takeovers Panel is responsible for oversight and enforcement of the Takeovers Code (each discussed in Registration on the FSPR does not amount to a ‘licence investment services to retail clients, and to peer- to- peer more detail in Section ).3 to operate’ or any endorsement by the Financial lending and crowd-funding platforms. Markets Authority.

Simpson Grierson HOME Investing in New Zealand 15 When either acquiring a business in New Zealand or • The date, place of birth and residential address of creating a new business to be run in New Zealand, investors each proposed director, IRD number and details of the SECTION 7 will need to determine how best to structure the business. proposed company’s ultimate holding company (if any), must be provided to the Companies Office. Structuring a COMMON NEW ZEALAND BUSINESS STRUCTURES • If a proposed director and/or shareholder is based Offshore entities commonly conduct business in overseas, the Companies Office may require additional business New Zealand through: evidence to verify identity and to confirm consent to own and manage the company. • local subsidiary companies; • There is no need for a formal constitution (New Zealand’s • branches of overseas companies; equivalent to articles of association or corporate bylaws). • limited partnerships; or The rights and obligations set out in the Companies Act apply by default. A company is free to adopt a • agency arrangements. constitution modifying certain rules that would otherwise Each of these common structures is outlined briefly below. apply. However, a well drafted constitution is usually desirable to permit a number of corporate actions that ESTABLISHING A LOCAL SUBSIDIARY COMPANY are not otherwise authorised under the Companies Act. Incorporating a company in New Zealand is generally Annual compliance requirements - New Zealand a quick and simple process. It can be completed online, registered company through the New Zealand Companies Office website www.companies.govt.nz (Companies Office). New Zealand registered companies must satisfy certain basic annual compliance requirements (eg. filing annual Once a name has been reserved and appropriate returns confirming basic company details, and holding documents are lodged, incorporation can be confirmed annual meetings of shareholders). within a matter of hours. This process may be delayed if a proposed director and/or shareholder is based overseas – Certain, generally larger, companies must also prepare see further below. audited financial statements, and companies which are more than 25% overseas owned must file them with the Incorporation requirements Companies Office. • The registered office (and address for service) must be Directors and officers of a New Zealand company must in New Zealand. The company does not need to have a comply with New Zealand company law set out in the physical place of business in New Zealand. Companies Act, including meeting the requirements of the various directors’ duties. Directors and officers • The company must have at least one shareholder and must also meet any relevant requirements under the at least one director who lives in New Zealand, or who Financial Markets Conduct Act. lives in Australia and is a director of a company registered in Australia. Every director and each initial shareholder The tax rules that apply to New Zealand-registered must give written consent (in a prescribed form). companies are explained in Section 15.

Simpson Grierson HOME Investing in New Zealand 16 ESTABLISHING A NEW ZEALAND BRANCH OF Annual compliance requirements – overseas company • must have at least one general partner who lives in New Zealand (and, if the general partner is a AN OVERSEAS ENTITY An overseas company carrying on business in New Zealand New Zealand company, then the company must have An overseas entity can conduct its business in must file an annual return with the Companies Office at least one director who lives in New Zealand, or lives New Zealand through a branch office, without confirming certain company particulars. in Australia and is a director of a company registered incorporating a local subsidiary. Certain, generally larger, entities must prepare and file in Australia); An overseas company that is “carrying on business” audited financial statements with the Companies Office. • the general partner is responsible for the day to day in New Zealand must register as an “overseas company” If audited financial statements are required, they must management of the LP, and is liable for all of the LP’s with the Companies Office and meet the compliance be audited by a “qualified auditor” and comply with debts and liabilities, to the extent the LP cannot pay requirements that apply to overseas companies under New Zealand GAAP. These financial statements must those debts and liabilities; the Companies Act (see further below). also include separate financial statements for any large NZ branch. An overseas company may file financial • each limited partner (generally a “silent” investor) There is no “bright line test” for whether an overseas statements prepared in accordance with the financial is liable only to the extent of its capital contribution company is carrying on business in New Zealand. reporting requirements of its country of incorporation, if to the LP; In every case the question will be decided on the the Companies Office is satisfied that: facts, in light of all the surrounding circumstances. • limited partners (who wish to preserve their limited Relevant factors include: • the statements comply with the requirements of the law liability status) must not be involved in the management in force in the country where the overseas company is of the LP, although there are certain specified activities • having a physical place of business in New Zealand; incorporated; and in the Limited Partnerships Act, in which the limited • having employees in New Zealand; partners may participate and still retain their limited • those requirements are substantially the same as liability protection; • maintaining bank accounts in New Zealand; those in New Zealand. • can have an indefinite lifespan (if desired); and • having a degree of regular involvement in transactions The tax rules applicable to overseas companies which in New Zealand; or operate a branch in New Zealand are explained in • “flow through” tax treatment, where the profits and • having some other form of “permanence” Section 15. losses of the LP flow directly through to the partners in New Zealand. in proportion to their capital contribution to the LP ESTABLISHING A LIMITED PARTNERSHIP (so that, in general, the limited partners’ own tax The existence of one of these factors alone may not treatments apply to them, rather than a separate be determinative, but the more factors that exist the New Zealand’s limited partnership regime is based assessment at the LP level). more likely it is that a business is being carried on in on the limited partnership regime operating in the New Zealand. US (Delaware Model). It is governed by the Limited An LP is created upon registration with the Companies Partnerships Act 2008 (Limited Partnerships Act). Office. It must have, and will be governed by, a partnership There is no requirement for an overseas company carrying agreement (which does not need to be filed publicly) on business in New Zealand to have a New Zealand Key features of a limited partnership and by the Limited Partnerships Act. resident director. It must however have a principal place of business in New Zealand and a person authorised to • enjoys separate legal personality; accept service on its behalf in New Zealand. • must have at least one general partner and one limited partner (who cannot be the same person at the same time);

Simpson Grierson HOME Investing in New Zealand 17 Annual Compliance Requirements – Limited Partnership An LP must file an annual return to the Companies Office confirming certain particulars. Larger LPs (or one that “opts in” to compliance) must also prepare audited financial statements and distribute them to each general partner and limited partner within 5 months after balance date. If, as is usually the case, the general partner is a New Zealand registered company, it must meet the compliance requirements applicable to a New Zealand registered company. The tax rules applicable to a New Zealand limited partnership are explained in Section 15.

AGENCY ARRANGEMENTS An entity that conducts only a small amount of business in New Zealand may wish to appoint a local agent rather than establishing a branch, subsidiary company or limited partnership. Agency appointments can be informal or can be recorded in a more comprehensive written agreement between the parties, and in either case are capabale of termination at short notice. New Zealand agency law (the principles of which are largely similar to those applicable in the UK and Australia) will typically govern the relationship unless the parties agree to the contrary. A local agent may benefit from employment rights depending upon the nature of the relationship and the terms of the appointment. Care is required to ensure that any agency arrangement does not, over time, result in the relevant principal being deemed to be carrying on business in New Zealand (in which case the requirement to register in New Zealand would be triggered).

Simpson Grierson HOME Investing in New Zealand 18 PURCHASING LAND IN NEW ZEALAND LEASING There is no restriction on who can own land in Leases of land in New Zealand must be in writing and SECTION 8 New Zealand, subject to any requirement for consent signed by the parties to the leasing arrangement. under New Zealand’s overseas investment regime As a matter of practice in New Zealand, leases are not Buying, selling and (discussed in Section 3). typically registered. Residential land is “sensitive land” under the overseas Generally, the express terms of the lease will govern the leasing property investment regime, which means that ‘overseas persons’ relationship between the parties. Tenants do not have wishing to purchase residential land in New Zealand must statutory rights to prolong the terms of a lease beyond the obtain consent to buy or build a home to live in. Overseas term provided for in the lease (including any renewals). buyers can also obtain consent to buy residential land Further, tenants are not entitled to compensation at the with the intention of developing and selling housing on end of a lease term unless that is provided for expressly that land. in the terms of the lease – and such a term would be unusual in the New Zealand market. Foreign individuals and companies can purchase land without a local partner. SALE OF LAND LAND OWNERSHIP BASED ON REGISTRATION Purchasing land in New Zealand is fairly straight- forward. Many agreements to sell land are recorded on standard Land ownership in New Zealand is based on a centralised form documentation. and electronic land registration system. Central to this system is a publicly searchable register that records The general law of contract applies once a sale and all material facts about any given land title, including purchase agreement has been entered into. Once the ownership, registered mortgages, caveats and easements. parties enter into an agreement to sell and purchase The register is held by Land Information New Zealand land, that agreement becomes legally binding between (or LINZ). Registration is quick (often same day). the parties. The seller cannot (without breaching the contract) then accept a higher offer from another Once information is accepted by LINZ for registration purchaser. However, conditions for the benefit of either against a land title, the validity of information appearing party can be included in an agreement. on that register is guaranteed. A purchaser of land in New Zealand is therefore able to rely on the information No stamp duty is payable on the transfer of land in recorded on that public register. New Zealand. Registration of a property transfer will typically require the purchaser to provide a tax payer identification number (called an IRD number). The process for applying for, and obtaining, an IRD number can take some time and should be started well before the proposed date for transferring ownership.

Simpson Grierson HOME Investing in New Zealand 19 Taxation of gains on disposal of residential property Any gain made by a taxpayer on the disposal of residential property purchased after 28 March 2018 and sold within five years is subject to income tax bright( line test). There are a few significant exemptions from the bright line test, including any property that the taxpayer has used as their main home. A withholding tax (residential land withholding tax or RLWT) applies where the person disposing of the land is an “offshore RLWT person” and is subject to the “bright line” test, unless the person obtains an RLWT certificate of exemption.

COMPULSORY ACQUISITION The government and local authorities in New Zealand have a right to compulsorily acquire property from private owners in certain circumstances. If a property, or portion of a property, is required for certain public works (eg roads, public transport, schools and critical infrastructure), the Public Works Act 1981 gives the Crown (acting through the relevant Government department and local authorities) the right to acquire that property. The acquiring authority will usually seek to negotiate the terms on which the land will be acquired, including the price. If no such agreement can be reached, the local authority has the power to take steps to compulsorily acquire the property. The owner of the property is entitled to “full compensation” for the property being acquired.

Simpson Grierson HOME Investing in New Zealand 20 LAND USE REGIME IN NEW ZEALAND ZONING AND LAND USE REGULATION The use to which land in New Zealand can be put, and the Land use and subdivision of land is controlled by the SECTION 9 extent to which it can be developed, will depend on the zoning and associated planning rules set out in the environmental laws and planning instruments that apply relevant District Plan. to the land in question. Use and Each District Plan divides the relevant district into certain The Resource Management Act 1991 (RMA) is the primary zones (eg Industrial, Residential, Mixed Use), with different development environmental and planning legislation in New Zealand. land use, planning and sub-division rules applicable to each zone. Zoning rules will determine matters such as site The RMA is largely implemented by two tiers of local of property size, site coverage, building density, height requirements authorities, each responsible for making the subordinate and certain minimum building ratios. Any proposed use planning documents applicable to their respective of the land or sub-division that goes outside the rules function and geographic area. Generally, environmental applicable to the relevant zone can only proceed with a matters affecting discharge to air, land and water, and resource consent from the relevant City or District Council. taking and using water, are controlled by Regional Councils (through their regional plans). Land use and subdivision is controlled by City and District Councils ENVIRONMENTAL CONTROLS (through their district plans). Some activities may be A range of environmental matters are controlled, carried out as of right (as a “permitted activity”) and any under the RMA, by the relevant regional plan including: other activities will require approval (by way of a resource • discharge of contaminants to air, land or water; consent) whether from the Regional Council, or City or District Council. • water quality and quantity, including taking and using water; Any construction or alteration of a building must comply with the Building Act 2004 and the associated • soil conservation; Building Code. • natural hazards; • aquatic ecosystems; and • biodiversity. Regional plans include rules relating to matters such as those above (and many other matters), which apply across the region affected by the relevant regional plan. No person may use land, water, air or the coastal marine area in a manner that contravenes a rule in a regional plan without holding a resource consent.

Simpson Grierson HOME Investing in New Zealand 21 RESOURCE CONSENTS be notified of the application, and whether the general BUILDING REGULATIONS public should be notified also. The RMA guides the local Under the relevant regional and district plans, activities Regulation of the construction of buildings and other authority on how to make these decisions. Any person are either “permitted”, or classified into a hierarchy of structures in New Zealand is provided for in the Building who is served a copy, or notified, of the application may activity types for which the assessment of a resource Act and the associated Building Code. The Building Code make submissions in respect of that application. consent application becomes increasingly stringent: deals with, among other things, requirements for buildings “controlled discretional activity”, “discretionary” and An applicant for a resource consent, and anyone who to be earthquake resilient to certain levels. “non- complying”. has made a submission in respect of an application, Any proposed construction of or alteration to any has a right of appeal to the Environment Court from Resource consents can take the form of land use consents, building or structure in New Zealand must be carried a local authority’s decision on a resource consent subdivision consents, water permits, coastal permits, out in accordance with a building consent, issued by the application. Alternatively, an applicant may request that an and discharge permits, depending on the nature of the relevant local authority (in accordance with the Building application proceeds directly to the Environment Court. proposed activity. Act). Buildings or alterations, once completed, must be confirmed as compliant with the building consent and Consents are granted by the relevant local PENALTIES FOR BREACH OF RMA the Building Code by issue (by the local authority) of a authority, either the District Council (for land use Code Compliance Certificate. and subdivision matters) or the Regional Authority A person who breaches the RMA (eg by undertaking an (for environmental matters). activity not permitted by the relevant planning document and without a resource consent) commits an offence. Whether or not a consent is granted is a matter for the relevant local authority to determine, at its discretion. Non-compliance with the RMA is a strict liability offence. The level of discretion that the local authority may A person, if convicted of an offence, can be subject to a exercise, and the stringency of the tests an applicant maximum fine of NZ$300,000 plus NZ$10,000 per day for must meet in order to obtain consent, depends on the continuing offences, and a prison term of no more than nature of the consent sought. The relevant local authority two years. A company, if convicted of an offence, can be also has wide powers to impose conditions on any subject to a maximum fine of NZ$600,000 plus NZ$10,000 resource consent it grants. per day for continuing offences. There is no stated time frame for the completion of the Liability is not limited to the party that actually commits consenting process. Applications can take months and the offence. The RMA extends liability to any party who sometimes (in contested situations) years to conclude. allows the offence to take place. Therefore, if a body corporate, trust, company employee, or contractor is The consenting process starts with an application to the convicted of an offence against the RMA, a director, relevant local authority (in the required form and with all trustee, or any person concerned in the management of necessary supporting information). The local authority will that party can also be held liable for that offence. then decide whether the owners of adjacent land should

Simpson Grierson HOME Investing in New Zealand 22 PRIVATE EQUITY AND VENTURE CAPITAL to ensure that persons in New Zealand cannot accept the offer. The disclosure rules will therefore apply to any New Zealand has an active private equity market. applicable offer of financial products, whether made by SECTION 10 There are several New Zealand-based private equity a New Zealand or offshore-based entity. funds all seeking quality investment opportunities, plus Fund raising and a number of Australian and other offshore funds who A PDS, if required, must include certain prescribed also regularly look for investments in New Zealand. information about the products being offered and the capital markets There is also a growing number of venture capital funds issuer. The rules stipulating the contents of a PDS are (both New Zealand-based and offshore) looking for strict and detailed. There are also restrictions on the quality early stage investment opportunities, and an length, content and format of a PDS. A business seeking active “angel” investment market. to issue debt securities or managed investment products must comply with additional requirements in relation to The New Zealand government actively supports the external governance and licensing. private equity and venture capital industry by co-investing with private investors through New Zealand Growth There are a number of exclusions to the disclosure Capital Partners. requirements, depending on the nature of the investor being targeted, and/or the type of offer being made. More information about the New Zealand private An offer to which an exclusion applies can either be made equity and venture capital market is available from the without disclosure documentation, or with a reduced New Zealand Private Capital website here. level of disclosure.

OFFERING SECURITIES IN NEW ZEALAND Common disclosure exemptions provided by FMC Act Offers of securities (and other financial products) in • Offers to wholesale investors, including: New Zealand are regulated by the Financial Markets Conduct Act (FMC Act), and overseen (and enforced) – A person whose principal business is the business by the Financial Markets Authority. The term “financial of investment. products” extends to debt securities, equity securities, – A person who meets certain investment criteria managed investment products and derivatives. relating to portfolio or trading size. The basic rule is that any securities (or any other financial – Persons who invest in offers with a minimum product) can only be offered to the public in New Zealand NZ$750,000 subscription requirement. if the issuer of the securities has prepared a Product Disclosure Statement (or PDS) that complies with the – A person who is “large” (net assets exceeding requirements of the FMC Act and associated regulations. NZ$5 million or total consolidated turnover exceeding NZ$50 million in the two most recently completed A security will be treated as being “offered” in financial years). New Zealand if the offer is received by a person in New Zealand, unless the issuer took reasonable steps

Simpson Grierson HOME Investing in New Zealand 23 • Offers to close business associates. set of requirements across each of the member countries. MARKET CONDUCT RULES A passport fund established and regulated in the home • Small offers of debt or equity securities to no more New Zealand law prohibits insider trading and market economy can be offered to investors in all other member than 20 investors in a 12 month period, raising less manipulation. New Zealand law also prohibits issuers of economies without the need to go through a full than NZ$2 million. financial products and others from engaging in conduct regulatory approval process. or making statements in relation to financial products • Offers to employees under certain employee that are misleading or deceptive (or likely to mislead share schemes. LISTING ON THE NEW ZEALAND STOCK EXCHANGE and deceive). • Offers to existing shareholders under a rights issue An entity seeking to raise capital through an issue The market conduct rules are set out in the FMC Act. or other entitlement offer, or under a dividend of securities in New Zealand may also wish to list on Breach of these rules carries civil and, in some instances, reinvestment plan. New Zealand’s stock exchange (referred to as ‘NZX’), criminal liability. • Offers made as part of a takeover bid (made under operated by NZX Ltd. Equity and debt securities, and the Takeovers Code) or a court-approved scheme interests in funds, can be traded on the NZX Main Board of arrangement. under the NZX Listing Rules. • The FMA is also able to grant individual exemptions A company can list on the NZX in two ways: from the requirements of the FMC Act. • a “primary listing” – designed for companies that If securities are offered or allotted in breach of the FMC intend to be listed on the NZX and comply with the Act, the issuer may be required to pay compensation or NZX Listing Rules. face pecuniary penalties. In some instances there can • a “foreign exempt listing” – allows companies already be criminal liability. listed on certain recognised overseas exchanges (as their home exchange) to list on an NZX market, MUTUAL RECOGNITION ARRANGEMENTS without needing to comply with the majority of the New Zealand and Australia have a mutual recognition NZX Listing Rules. regime for the offering of financial products. An issuer is The listing process is fairly straightforward. Generally, able to offer certain specified financial products (including the document used to provide the required disclosure for equity securities and managed investment products) in fundraising purposes can also be used for listing purposes. both countries using one disclosure document prepared There are certain market capitalisation and spread in accordance with the regulations of its home jurisdiction. requirements, and timetabling requirements. New Zealand is also a member of the Asia Region Once listed, an issuer must comply with on-going Funds Passport (ARFP) scheme, with Australia, Japan corporate governance, disclosure and reporting and Thailand. This regime seeks to reduce regulatory requirements, set out in the NZX Listing Rules and, duplication for operators of eligible collective investment in relation to financial reporting, the FMC Act. schemes (‘passport funds’) by establishing a standardised

Simpson Grierson HOME Investing in New Zealand 24 CONTRACT LAW • allowing parties tocancel a contract for (in certain circumstances, and There is relatively little regulation of contracting in misrepresentation provided that the terms of the contract do not provide SECTION 11 New Zealand. for their own cancellation regime), and gives the courts New Zealand contract law is based on English common power to grant a wide variety of relief; Contract law law principles, subject to certain statutory parameters. • providing for certain consequences in relation to and consumer Parties are generally free to contract on their own terms, contracts that are frustrated; subject to the law applying to contracts generally and • allowing courts to grant relief in limited circumstances if various mandatory statutory requirements applicable to protection a party can establish that it entered a contract due to a supply of certain goods or services, or certain types of genuine ; and contracts. These include: mistake • stipulating that a contract is generallyunenforceable • certain trade practices requirements irrespective of the (being a person under the age of 18 terms of the contract (discussed further below); against a minor years), but enables the Court to enquire into the fairness • certain consumer protection measures also irrespective and reasonableness of the contract entered into and of the terms of the contract (discussed further below); make orders. • credit contracts with consumers are regulated by the New Zealand contract law applies to overseas-owned Credit Contracts and Consumer Finance Act 2003; entities in the same way it applies to New Zealand • mandatory food labelling requirements, and entities. Other than the requirement to obtain consent minimum standards for certain foods, and also for under the overseas investment regime in some medicines, animal products and food supplements instances, there are no separate requirements for (discussed further below); contracts involving New Zealand entities that are foreign owned. The governing law of a contract between an • certain contracts must be in writing, including overseas- owned entity and a New Zealand entity will be those involving interests in land, employment, and determined by the terms of the contract, interpreted in mortgages; and light of the usual common law “conflict of laws” principles. • the Contract and Commercial Law Act 2017 provides default statutory remedies in specific situations, largely codifying and replacing common law rules. For example:

Simpson Grierson HOME Investing in New Zealand 25 TRADE PRACTICES AND CONSUMER Fair Trading Act Consumer Guarantees Act PROTECTION REGIME The Fair Trading Act’s principal requirements include: The Consumer Guarantees Act sets out a series of New Zealand’s trade practices and consumer protection guarantees which apply to all sales to consumers, of • prohibiting conduct in trade that is misleading or regime is primarily reflected in three statutes: goods or services in New Zealand of a type ordinarily deceptive or likely to mislead or deceive, and misleading acquired for personal or household use. The Act does not • Commerce Act 1986, dealing with competition representations in trade (whether the conduct was apply to commercial products (goods normally bought for law matters. deliberate or accidental); business use, eg manufacturing equipment or work • Fair Trading Act 1986, prohibiting (among other things) • requiring compulsory disclosure of consumer normally carried out for a business). conduct that is misleading and deceptive. information relating to the supply of goods and services The guarantees create a minimum standard of quality and product safety; • Consumer Guarantees Act 1993, requiring certain basic that businesses selling such goods or services must standards in relation to dealings with consumers. • prohibiting unsubstantiated claims made about a meet, including: product or service; There are also minimum standards that apply specifically • being of acceptable quality; to the content and labelling of food products, set out • prohibiting unfair contract terms in standard form • being fit for a particular purpose (when the consumer in the Australia New Zealand Food Standards Code consumer contracts, and terms found to be “unfair” has informed the supplier about that purpose); (Food Standards Code). Similar standards and labelling will not be enforceable; requirements apply to food supplements, medicines and • matching a description; • mandatory product safety standards in relation to medical devices, and animal products. specific products, including baby walkers, children’s • ensuring spare parts are available; The trade practices and consumer protection regime set clothes, cots and bicycles; and • complying with a sample or demonstration model out in the Fair Trading Act and Consumer Guarantees Act, • specific rules concerning employment advertising, (where relevant); and and New Zealand’s food standards and labelling regime pyramid selling schemes, bait advertising, offering gifts are discussed more below. A brief discussion of New • timely delivery. and prizes, and referral selling. Zealand’s competition laws (provided for in the Commerce If goods or services do not meet the statutory guarantees, Businesses dealing with consumers cannot contract Act) is in Section .4 the affected consumer may seek redress from either the out of their obligations to those consumers under the supplier or manufacturer of the goods or services. Fair Trading Act, and the relevant requirements will apply irrespective of any express contract terms saying Suppliers of relevant goods or services cannot contract otherwise. However, businesses providing goods and out of the Consumer Guarantees Act unless the goods or services to other businesses are permitted to dis-apply services are being sold for business purposes. the Fair Trading Act’s requirements in relation to those trading relationships. Failure to comply with these requirements carries the risk of various civil remedies (including fines and court orders) and, in some instances, criminal sanctions.

Simpson Grierson HOME Investing in New Zealand 26 FOOD STANDARDS AND FOOD LABELLING REGULATORS Food products (including supplements and dietary The Commerce Commission is the regulatory supplements) must be labelled correctly, and meet body responsible for administering New Zealand’s relevant content requirements. trade practices and consumer protection regime (ie Commerce Act, Fair Trading Act, Credit Contracts Content and labelling requirements will depend, and Consumer Finance Act). The Commerce Commission in large part, on how the food product is classified actively monitors business conduct in New Zealand (eg sports foods, infant formula, dairy products, to check compliance, and has the power to bring alcoholic beverages etc). proceedings for breach in its own right. Breaches carry A business is free to determine how it wishes to civil and criminal liability. classify a food product (whether manufactured or Regulation and oversight of the food standards and pre-packaged), but must then ensure that their food labelling regime is split between two bodies. The Ministry products, as classified, meet relevant content and of Primary Industries is responsible for enforcing labelling requirements set out in the Food Standards compliance with the Food Standards Code as well as the Code. This Code regulates (amongst other things) levels of Food Act more generally. The Commerce Commission is particular ingredients and prohibited ingredients in a wide responsible for monitoring and enforcing the elements range of product categories. It includes general provisions of the Fair Trading Act that apply to food products applicable to all foods, and individual food standards (misleading and deceptive conduct, efficacy, composition affecting particular types of food. and origin claims). Businesses that sell or manufacture food must also comply with: • the Food Act 2014; • weights and Measures Act and Regulations; • Fair Trading Act 1986 (in particular, in relation to product efficacy and origin claims); • sector-specific requirements (eg dairy, meat, wine etc); and • export requirements.

Simpson Grierson HOME Investing in New Zealand 27 PRIVACY REGIME IN NEW ZEALAND Any “agency” operating in New Zealand, irrespective of home jurisdiction must comply with the information New Zealand law controls the collection, storage privacy principles when dealing with personal information. SECTION 12 and security, accuracy, retention, use and disclosure, The regime is not prescriptive about specific compliance by any person, of “personal information” about requirements. Every agency must determine for itself how Data privacy New Zealand residents. it will comply. The Privacy Act 2020 (Privacy Act) is the primary statute dealing with data privacy in New Zealand. Extra-territorial effect The Privacy Act is mainly concerned with privacy of New Zealand’s data privacy rules apply beyond individuals, focusing on specific personal information, New Zealand’s territorial borders. The Privacy Act will about living individuals. This Act does not deal with apply to all actions taken by a New Zealand agency in broader aspects of privacy, such as any right to be left relation to personal information it collects or holds, alone or freedom from intrusion (eg by the media), whether that agency is acting inside of New Zealand and or with data privacy about legal persons who are regardless of where the information was collected or is not (living) individuals. held, or where the individual concerned is located. The Act will also apply to overseas agencies in relation to KEY ELEMENTS any action taken in the course of carrying on business in Personal information New Zealand.

“Personal information” is the cornerstone of New Privacy Commissioner Zealand’s data privacy regime. Personal information is information about an identifiable individual. The test The Privacy Commissioner has responsibility for oversight for whether a person is identifiable is whether there is a and enforcement of the Privacy Act. Breach of the Privacy reasonable chance that he or she could be identified from Act’s requirements can result in fines (up to a maximum the information in question, on its own or when linked of NZ$10,000), and both civil and criminal liability. with other information. Mandatory data breach reporting “Information” is a broad concept, not statutorily defined. It includes any document (including anything written, If an agency suffers a breach of an information privacy recorded, visual images or electronic information), principle that harms, or is likely to cause serious harm and extends also to CCTV footage and biometric data. to, affected individuals, it must report the breach to the Privacy Commissioner and to the affected Information Privacy Principles individual (unless an exemption applies). ‘Information Privacy Principles’ lie at the heart of New Zealand’s privacy regime. These are a set of 13 principles dealing with the collection, storage and security, accuracy, retention, use and disclosure of personal information. Simpson Grierson HOME Investing in New Zealand 28 IMPACT OF GDPR IN NEW ZEALAND The EU General Data Protection RegulationGDPR ( ) has extra territorial effect so may apply to businesses in New Zealand. GDPR is distinct from and will generally go above and beyond the requirements of New Zealand’s privacy laws, without necessarily dealing with the New Zealand requirements. Businesses operating in New Zealand will be captured by the GDPR if they: • have a branch or subsidiary in the EU; • offer goods or services, paid or free, to data subjects in the EU; • monitor the behaviour of data subjects in the EU (such as using cookies for behavioural-bas ed advertising); • process personal data regarding individuals who are within the EU on behalf of another organisation. A party acquiring a New Zealand entity that does business in the EU should be aware there is significant potential exposure under the GDPR if the target is not GDPR compliant. Businesses operating in New Zealand should be aware that even if they already have GDPR compliant privacy policies in place, there are still specific requirements under New Zealand privacy laws that must be met. Privacy policies must be checked to ensure they are compliant with New Zealand privacy laws.

Simpson Grierson HOME Investing in New Zealand 29 reasons (redundancy or serious misconduct). Employers Anyone considering an investment in New Zealand and employees are both subject to a duty of good faith will need to understand the basic principles of in relation to the employment relationship. SECTION 13 New Zealand’s employee relations laws. Some • There are comprehensive workplace health and safety elements are unique to New Zealand and may obligations on any person who conducts a business. Workplace prevent an entity from proceeding as they would Any workplace accidents are compensated through expect to proceed in their home jurisdiction, New Zealand’s ‘no fault’ accident compensation scheme. relations particularly in an M&A context.

EMPLOYMENT RELATIONSHIPS OVERVIEW OF WORKPLACE RELATIONS IN The ERA covers collective, individual and fixed term NEW ZEALAND employment agreements; collective bargaining and union related issues; flexible working arrangements; and • The Employment Relations Act 2000 ( ) is the ERA personal grievances. Independent contractors are not principal statute governing the employment relationship protected by the ERA, but courts will assess a contractor for all persons employed within New Zealand. Individual arrangement to determine whether the real nature of the employment agreements must be in writing and include relationship is an employment relationship and so covered minimum specified clauses. by the ERA (and other employee-related legislation). • Some workplaces also engage ‘independent contractors’ Some aspects of employment relations set out in the whose terms of engagement are as set out in the ERA, and which are unique to New Zealand, are explained relevant contract. Contractors are not protected by the briefly below. ERA and other legislation intended to provide benefits to employees, but are subject to the privacy, accident Duty of good faith compensation and workplace health and safety rules. The law also recognises ‘triangular’ employment The duty of good faith requires the parties to: relationships where a third party may be joined as • not mislead or deceive each other; a party to claims brought by workers performing work under their direction or control (eg labour hire, • be active and constructive; and secondments, agency temps). • be responsive and communicative in their • The New Zealand workforce is not heavily unionised. employment relationship. Less than 20% of employees belong to unions, An employer proposing to make a decision that will, generally in the government sector, the waterfront, and or may, have an adverse effect on the continuation of manufacturing industries. an employee’s employment (such as a restructure or • Employees are entitled to 4 weeks of paid annual leave sale of the business) must give each affected employee (after 12 months of employment), and also minimum relevant information about the proposal, and an paid sick leave, bereavement and family violence opportunity for that employee to comment on the leave. Termination of employment must be for justified proposal before any decision is made. Simpson Grierson HOME Investing in New Zealand 30 Unions There are special protections for “vulnerable” employees REDUNDANCY COMPENSATION – those providing cleaning, catering, and laundry services. Unions are entitled to represent their members in There is no compulsory redundancy compensation In certain restructuring situations, vulnerable employees relation to any matter involving their collective interests, regime in New Zealand. If an employer is required to pay usually have the right to choose to be transferred to the including negotiating a collective employment agreement compensation if the employee is made redundant, that new employer, on the same terms and conditions of and representing their members’ individual rights (eg at arrangement must be specifically agreed between the employment with continuity of service, including their mediation and in court actions). employee and employer. leave and other entitlements. Union membership is voluntary but, if an employee wants HOLIDAYS AND LEAVE to be party to a collective agreement and to bargain TERMINATING EMPLOYMENT collectively, the employee must be a member of a union. There are minimum statutory leave entitlements As a general rule, employment may only be terminated New employees coming within coverage of a collective provided under the Holidays Act 2003 (Holidays Act), for cause in New Zealand, so employers cannot terminate agreement are covered by it for the first 30 days, and which include: there are certain notice and administrative requirements “at will”. Causes for terminating employment are limited, • public holidays (12 working days through the year); that apply during this period. including poor performance, repeated misconduct, serious misconduct, redundancy and medical incapacity. • four weeks’ annual leave following 12 months’ If an employee is not a member of a union, each Termination of employment outside these grounds has to continuous employment; and employee will negotiate an individual or fixed term be by agreement between employer and employee. employment agreement with their employer. • three days of bereavement leave on the loss of a close Any dismissal must be justifiable, and procedural fairness family member (and one day in other cases). Trial period is an important concept. The ERA stipulates the minimum process steps required. An employee who considers that • sick leave - currently five days per year but propsed to Employers with fewer than 20 employees are able to they have been unjustifiably dismissed or disadvantaged increase to 10 days per year later in 2021. engage new employees on a trial period of up to 90 in their employment is able to bring a ‘personal grievance’ The Holidays Act also allows 10 days of leave a year for calendar days. During this trial period, an employee may claim against the employer. A personal grievance must be victims of family violence or people caring for affected be dismissed with notice and cannot raise a personal raised within 90 days. children. Some employers also provide long service leave, grievance on the grounds of unjustified dismissal. but on a voluntary basis. The employee may, however, raise a personal grievance If the matter proceeds to court (the Employment Relations on other grounds, such as disadvantage, discrimination or Authority initially, and then the Employment Court The Holidays Act is notoriously difficult to interpret harassment. A trial period arrangement must be in writing – who have exclusive jurisdiction to hear employment- and apply. Many workplaces have found that payroll that meets certain form requirements, and signed by related matters), reinstatement of employment is systems do not calculate all leave entitlements correctly, the employee. the primary remedy, but remedies can also include leaving employers in breach of the Act’s requirements. financial compensation. Non- compliance with the Holidays Act is frequently a Employee protection provision material issue arising from legal due diligence in relation All employment agreements must contain an “employee to an M&A transaction. protection provision”, covering what will happen to the employee after a business is sold, another company takes over a contract or workers are moved to a new employer.

Simpson Grierson HOME Investing in New Zealand 31 OTHER LEGISLATION AFFECTING ACCIDENT COMPENSATION EMPLOYEE RELATIONS New Zealand has no workers’ compensation scheme, Other New Zealand legislation relevant to a workforce and there is no ability for a person who suffers an injury and employee relations includes laws regulating privacy in New Zealand (at work or elsewhere, and however it of personal information (discussed further inSection 12), arose) to bring any claim for compensation in respect equal pay, parental leave, minimum wage/wages of that injury. protection, minimum working conditions, human rights Workplace accidents are instead covered by the ACC Act and protection for whistle-blowers. (discussed briefly in Section 1). Personal injury costs are met by the Accident Compensation Corporation (ACC) WORKPLACE HEALTH AND SAFETY and not the employer (except in relation to a workplace Workplace health and safety laws are set out in the Health injury, where the first week of compensation is paid by and Safety at Work Act 2015 (HSW Act). The HSW Act’s the employer). Both employers and employees contribute key focus is on ensuring everyone in the workplace takes towards the costs of the accident compensation scheme responsibility for health and safety at work. through levies. A person conducting a business or undertaking PCBU( ) – usually a business entity, not an individual – has a SUPERANNUATION AND KIWISAVER primary duty of care under the Act. The PCBU must Participation in superannuation schemes is not ensure, so far as is reasonably practicable, the health compulsory in New Zealand. Some employers provide and safety of workers who work for the PCBU, workers superannuation benefits to employees, but usually in the whose activities are influenced or directed by the form of subsidies to a third party superannuation scheme. PCBU, and other persons. Proprietary superannuation schemes are not common in New Zealand, and defined benefit schemes are now rare. Officers of the PCBU have personal liability and must exercise due diligence to ensure the PCBU complies with All employees are eligible to participate in KiwiSaver its duties under the HSW Act. An officer will generally be – a voluntary and work based Government sponsored anyone who is able to direct the conduct of the whole of retirement savings initiative (governed by the the PCBU, such as a director or chief executive. KiwiSaver Act 2006). Participants in KiwiSaver must contribute a minimum of 3% of their gross salary or Regulations accompanying the HSW Act cover areas wages to a superannuation scheme of their choice, such as asbestos, major hazard facilities, geothermal and employers must make a contribution of 3% on operations, mining and quarrying operations, general risk behalf of all participating employees. New employees and workplace management and worker engagement, are automatically enrolled in KiwiSaver, unless participation and representation. limited exceptions apply. An employer must provide information about how employees can opt out.

Simpson Grierson HOME Investing in New Zealand 32 New Zealand has a well developed system of intellectual The Madrid Protocol is in force in New Zealand. property rights, which are governed by statute, case law, This allows entities in other Madrid Protocol countries SECTION 14 and international agreements. to file international trade mark registrations designating New Zealand as a country to which trade mark protection Intellectual OVERVIEW would extend. New Zealanders can also file international registrations designating one or more overseas New Zealand’s intellectual property regime includes Madrid Protocol countries. Property registered and unregistered rights. Trade marks, patents, designs and plant variety rights can be registered with the Intellectual Property Office of New Zealand, COPYRIGHT AND DESIGNS which maintains a register of these rights and interests. New Zealand copyright law protects original works, Copyright is protected by statute, and not able to including original artistic, literary, dramatic, or musical be registered. works (in all their various forms), from being copied. The period of protection for literary, dramatic, musical, New Zealand is also a signatory to a number of and artistic works under New Zealand law is the life of international intellectual property treaties and the author plus 50 years. conventions, including the Paris Convention, the Patent Co-operation Treaty, the Berne Convention, TRIPS Other works, such as sound recordings, films, (Trade Related Aspects of Intellectual Property Rights), communication works, and computer generated works, the Singapore Treaty, and the Madrid Protocol. generally are protected for 50 years from the end of the year in which the work was made or made available to TRADE MARKS the public. Protection for industrially applied works lasts for 16 years (or 25 years in some cases), depending on Trade marks can be registered in 45 classes of goods or the nature of the work. services consistent with the internationally adopted Nice Classification System (11th edition). Registrations are Copyright protection exists under the Copyright Act. held by the Intellectual Property Office of New Zealand There is no form of registration of copyright in (IPONZ). The IPONZ registration database can be New Zealand. searched publicly. The appearance of an article can also be protected by A trade mark registration is valid for a term of 10 years registering a new and original design under the provisions from the date of application. Registration can then be of New Zealand’s design legislation. The maximum period renewed, in perpetuity, for successive 10 year periods. of protection for registered designs is 15 years. A trade mark can be removed from the register for non- use if it is not used for a continuous period of three years.

Simpson Grierson HOME Investing in New Zealand 33 PATENTS OTHER RIGHTS New Zealand patent law (set out in the Patents Act 2013) Other New Zealand legislation provides protection for the is generally in line with international trends, providing a following intellectual property rights: system for the filing, examination, and grant of protection • plant varieties; for patent applications. The period of protection for patents in New Zealand is a maximum of 20 years. • layout designs; To be granted a patent, the proposed invention must: • geographical indicators (although only in relation to wine and spirits); and • be a manner of manufacture; • ambush marketing. • be new; and • involve an inventive step. Patentability is examined in accordance with absolute (or worldwide) novelty. Both inventive step and utility are examined. A patent must be inventive “on the balance of probabilities”. Pre-grant opposition processes are available at any time before grant, and a potential opponent can request re examination both before and after grant.

PASSING OFF AND THE FAIR TRADING ACT The common law tort of “passing off” and provisions of the Fair Trading Act 1986 also provide general protection against misleading conduct in the course of trade. The misleading use of trade marks, get up and other indicia which cause damage to another trader’s reputation or goodwill may give rise to liability. More detail about the Fair Trading Act is in Section 1 .

Simpson Grierson HOME Investing in New Zealand 34 The principal forms of taxation in New Zealand are income “Income” includes most receipts on revenue account as tax (including withholding tax) and goods and services tax. well as some gains that would be classified as capital gains SECTION 15 There is no general capital gains tax and there are no gift, in other jurisdictions. stamp, or estate duties. Tax Income tax rates OVERVIEW OF TAXATION IN NEW ZEALAND Companies (including New Zealand subsidiaries and New Zealand has a “broad base low rate” (BBLR) taxation branches of foreign companies) and other business system with corporate tax rate of 28%, a top personal tax taxpayers are taxed on their net income after allowable rate of 33% (increasing to 39% from 1 April 2021), and a deductions. The company tax rate is 28%. 15% GST rate. Deductions New Zealand is unusual in that it does not have a general capital gains tax or stamp duty (or similar transaction Taxpayers carrying on a business are generally entitled taxes). Further (and like Australia) New Zealand operates a to deductions against assessable income for operating comprehensive dividend imputation (or franking) regime, expenditure and interest incurred in the business, enabling a shareholder to enjoy a credit for underlying subject to thin capitalisation and transfer-pricing corporate tax on dividends received. constraints for foreign-owned businesses (discussed further below). Business taxpayers are also generally New Zealand maintains an orthodox residence and source entitled to depreciation deductions based on the cost approach to income taxation, taxing residents on their of capital assets used in the business. worldwide income, but non-residents only on income with a New Zealand source. Net losses New Zealand’s tax rules are, by international standards, Net losses can generally be carried forward by relatively simple and the local tax authority, Inland non- corporate taxpayers without restriction. Revenue, generally maintains high standards of fairness Under current rules, companies must maintain minimum and probity in administering the tax system. 49% shareholder continuity from the tax year in which the losses are incurred to the future year in which they INCOME TAX – GENERAL are to be offset against net income. However, changes Scope of income tax are currently being implemented which will permit the carrying forward of losses, despite a shareholder New Zealand income tax is imposed on the world continuity breach, provided the company meets a wide income of New Zealand residents. Income of business continuity test. non- residents is also subject to income tax to the extent that income has a New Zealand source (subject to any reduction by operation of an applicable double tax agreement (DTA), below).

Simpson Grierson HOME Investing in New Zealand 35 COMPANY INCOME TAX Credits attached to dividends paid to one company by Branch taxation another can be used to offset the recipient company’s Income tax residence New Zealand branch operations are liable to income tax tax liability and credited to that company’s imputation on branch profits at the rate of 28%, unless New Zealand A company is resident in New Zealand for income credit account for subsequent distribution to the recipient has a DTA with the jurisdiction in which the head office is tax purposes if: company’s shareholders. located, and the New Zealand branch is not a “permanent • it is incorporated in New Zealand; Non-resident withholding tax (NRWT) on dividends paid to establishment” for the purposes of that agreement, • its head office is in New Zealand; a non-resident shareholder by a resident company is zero which would be unlikely. Branches are taxed on their rated to the extent that the dividend is fully imputed, and net income, after allowable deductions. Any loss or • its centre of management is in New Zealand; or the non-resident shareholder has: expenditure deducted must be directly attributable to the branch operations. • New Zealand is the place from which the directors • a 10% or more direct voting interest in the resident exercise control of the company (whether or company; or Income tax paid by branches is a final tax. No withholding not exclusively). tax is payable on subsequent repatriation of the after- tax • less than a 10% direct voting interest in the resident profit overseas. Any tax free capital gains realised by If a company is resident in New Zealand, and also resident company and the DTA limited New Zealand tax rate the branch can be repatriated overseas without any in another country with which New Zealand has a DTA on the dividend is less than 15%. (discussed further below), the “tiebreaker” provision in New Zealand tax cost. that DTA will determine where the company is considered Non-resident shareholders with a less than 10% interest resident for the purpose of applying that DTA. in the resident company receiving an imputed dividend Thin capitalisation may receive a supplementary dividend under the foreign The thin capitalisation rules apply to any non-resident Corporate dual residence is generally undesirable under investor tax credit ( ) regime, providing effective relief FITC company or to a New Zealand resident company if it is New Zealand domestic tax rules. For example, a dual from NRWT on the dividend. resident company that is deemed non-resident in controlled by a single non-resident (or group of associated New Zealand for the purposes of a DTA cannot operate NRWT may apply to non-imputed dividends paid to non-residents) or by a group of non-residents “acting an imputation credit account. non- resident shareholders (eg dividends sourced from together”. A company will be denied a deduction for a capital profit of the New Zealand resident company). interest to the extent that its New Zealand group’s ratio of Imputation System However, most of New Zealand’s DTAs will limit the rate debt to assets exceeds: of NRWT to 15% (the domestic law rate for non-imputed • 60%; and The dividend imputation system allows companies to pass dividends being 30%) and, in some cases, to 5% or 0%. on the benefit of income tax paid at company level as • 110% of its world-wide group debt to asset ratio. credits attached to dividends distributed to shareholders, Inter-company dividends to offset tax on the dividend. “Dividend” is widely defined The rules have recently been tightened, in various and includes most benefits provided by a company to a Dividends paid between New Zealand resident members respects, as part of New Zealand’s response to the OECD’s shareholder or any associate of a shareholder. of a wholly-owned group are generally exempt. Those base erosion and profit shifting (BEPS) project. received by a New Zealand company from a foreign The thin capitalisation rules also apply to non-resident Imputation credits can be used by New Zealand company are generally exempt also. Inter-company individuals, other non-resident entities and New Zealand resident shareholders to offset their income tax dividends are generally taxable. liabilities (including the liability for the dividend paid). trusts controlled by non-residents, which entities may be entitled to interest deductions in relation to New Zealand investments.

Simpson Grierson HOME Investing in New Zealand 36 Transfer pricing Further, for PIEs meeting certain criteria, New Zealand • 15% in respect of interest (capped at 10% in most DTAs tax on foreign sourced income attributable to and, in some cases, 0%) unless the non-resident has a New Zealand has a comprehensive transfer pricing regime non- resident investors is exempt, while tax on certain New Zealand branch, and subject to the approved issuer dealing with cross border transactions between associated New Zealand-sour ced income is imposed at concessionary levy (AIL) regime; and parties. The regime incorporates most OECD mandated rates. A PIE otherwise pays tax at 28% on all income, BEPS measures. • 15% in respect of royalties (subject to 5%, 10%, including foreign sourced income, attributable to or 15% caps, in DTAs). A further “restricted transfer pricing” rule determines non- resident investors in the PIE. the allowable interest rate on inbound related party Non-Resident Financial Arrangement Income tax rules debt. A New Zealand borrower that is determined to be WITHHOLDING TAXES apply to any interest bearing loan between a non-resident at a “high risk of BEPS” will have its credit rating used lender and an associated New Zealand borrower. Those for transfer pricing purposes restricted to a maximum of Resident Withholding Tax (RWT) rules effectively require interest, for which the borrower two notches below its worldwide group’s credit rating. Interest and dividend income paid to a New Zealand is entitled to a deduction, to be paid to the lender Also, any loan features not typically found in third-party resident taxpayer is subject to RWT (unless the recipient (or capitalised, not merely accrued) with NRWT withheld. debt will be disregarded in calculating the allowable holds a valid certificate of exemption, and subject to Where a New Zealand tax resident borrows from a interest rate on related party debt. This rule generally certain other exemptions). non- resident or a non-associated lender, that New Zealand only applies when the New Zealand taxpayer has related RWT is deducted at the following rates: resident may, by completing certain registrations, utilise party borrowings over NZ$10 million. the AIL regime. This reduces NRWT to 0% provided AIL • 10.5%, 17.5%, 30%, or 33% (and 39% on from 1 April equal to 2% of the gross interest is paid instead. UNIT TRUSTS, SUPERANNUATION FUNDS, 2021) on interest paid to individuals, (or 45% if the AND OTHER MANAGED INVESTMENT VEHICLES interest payer does not have the payee’s IRD number – Other Withholdings ‘non-notification rate’); Unit trusts are deemed to be companies for income Various other withholdings are required from payments tax purposes. Widely held superannuation funds are • 28% or 33% on interest paid to companies; and such as directors’ fees, honoraria, salespersons’ generally subject to tax at 28% on their net income. • 33% on all dividends (except to the extent imputed). commission, and non-resident contractors’ fees. Employer contributions to superannuation schemes are subject (with certain exceptions) to a superannuation Non-Resident Withholding Tax (NRWT) THE DTA NETWORK contribution withholding tax. New Zealand sourced dividends, interest, and royalties New Zealand has entered into DTAs with 40 trading Some New Zealand resident widely held unit trusts, paid to non-residents are subject to NRWT. partners and is continuing to develop its treaty network superannuation funds, and other investment vehicles are The rate of NRWT is: by negotiating new DTAs with trading partners, as well as able to elect into the portfolio investment entityPIE ( ) revising existing DTAs. The DTAs are designed to remove tax regime. PIE status has certain tax benefits including • 30% in respect of dividends, other than “fully imputed” the double taxation (ie tax applying in two jurisdictions an ability for the PIE’s income to be taxed by reference dividends, for which (as discussed in section 7.2(a)) in respect of the same income) which would, in their to investors’ marginal tax rates (with a 28% cap) and either the rate is 0% or NRWT is relieved by the FITC absence, be suffered by New Zealand residents investing an exemption from tax on New Zealand and some regime (and the rate is in any event capped at 15% in overseas, and non-residents investing in New Zealand. Australian share trading revenues. most of New Zealand’s DTAs and, in some cases, less);

Simpson Grierson HOME Investing in New Zealand 37 As a member of the OECD, New Zealand has adopted the OTHER BEPS MEASURES GST charged on supplies of goods or services is known OECD Model Convention as the basis of its DTAs, although as “output tax”. A registered person reduces output tax Two further rules are in place as part of New Zealand’s it has made a number of reservations to the model. charged on supplies made in a taxable period by the GST response to the OECD BEPS project. paid by that person in the course of making the supplies New Zealand has an intergovernmental agreement (IGA) Under a BEPs related anti-avoidance rule, a non-resident (input tax). The net amount is paid to Inland Revenue with the United States in relation to FACTA. Domestic entity is deemed to have a permanent establishment in or claimed as a refund. legislation giving effect to the IGA has also been enacted. New Zealand if: Special GST rules apply to offshore suppliers of goods and DTAs have been entered into with Australia, Austria, • it belongs to a global group with at least €750 million services to New Zealand end consumers. Belgium, Canada, Chile, China, the Czech Republic, in annual turnover; and Denmark, Fiji, Finland, France, Germany, Hong Kong, Some supplies – including supplies of financial services – India, Indonesia, Ireland, Italy, Japan, Korea, Malaysia, • a related entity carries out sales related activities for it are exempt from GST (although some supplies of financial Mexico, Netherlands, Norway, Papua New Guinea, in New Zealand under an arrangement with a more than services will be treated as zero rated supplies). In addition, Philippines, Poland, the Russian Federation, Samoa, merely incidental purpose of tax avoidance. certain supplies (including sales of businesses as going Singapore, South Africa, Spain, Sweden, Switzerland, This permanent establishment will be deemed to exist for concerns) are zero rated (ie GST is reduced to 0%). Taiwan, Thailand, Turkey, the United Arab Emirates, the purpose of any applicable DTA. the United Kingdom, the United States of America, and Vietnam. There is also a comprehensive set of rules to reduce the unintended tax advantages that result from hybrid NO CAPITAL GAINS TAX instruments and entities in cross-border arrangements.

There is no general capital gains tax in New Zealand. GOODS AND SERVICES TAX (GST) However, gross (taxable) income includes amounts derived from certain transactions which would be taxed as capital GST is a value added tax imposed on supplies of goods gains in other jurisdictions. These transactions include and services in New Zealand by a GST registered person. the following: The rate of GST is generally 15% of the value of a supply. • profits from the sale of land in certain circumstances, A supplier of goods and/or services must be registered for lease incentives, and surrender payments as well as GST if the annualised value of taxable supplies made by lease transfer payments in certain circumstances; that supplier exceeds or is likely to exceed NZ$60,000 in a • certain royalty payments; and 12-month period. A person may also register voluntarily, provided they carry on a taxable activity (or intend to carry • certain gains in the value of “financial arrangements” on a taxable activity from a specified date). Voluntary under the accruals regime. registration is also available to certain non-residents not carrying on a taxable activity in New Zealand, provided certain requirements are met.

Simpson Grierson HOME Investing in New Zealand 38 OVERVIEW OPTIONS FOR CREDITORS AND DEBTOR COMPANIES New Zealand has a number of insolvency and general If a New Zealand company or other body corporate SECTION 16 company law procedures that can be used either to appears to be suffering financial difficulty, the debtor and restructure a business and its finances or, where that is creditors have a number of formal options to consider. not possible, to maximise realisation for creditors. Insolvency • making an application to the High Court for the debtor Formal corporate insolvency law in New Zealand is to be put into liquidation; governed primarily by the Companies Act and the • a debtor company’s shareholders passing a special Receiverships Act and by common law. Matters of resolution (or, rarely, directors passing a resolution) security and creditor priority are further governed by to put the company into liquidation; the Personal Property Securities Act, Act and Land Transfer Act, as well the common law and • a secured creditor appointingreceivers of numerous regulations. charged assets; The insolvency regime centres on two • entering into a Companies Act creditors’ compromise fundamental principles: with the debtor; • Hierarchy of Creditors: creditors are generally • creditors’ schemes of arrangement; and ranked in a class hierarchy (secured creditors; • a third party administrator being voluntarily appointed preferential unsecured creditors; unsecured creditors; by the debtor’s directors, by a qualifying secured and shareholders); creditor, or by the court. • Pari Passu Principle: distributions to creditors of Very rarely, the government will appoint a statutory a particular class are based on the proportion of manager, by making an Order in Council. This is only likely their debt. to occur where there is some need to protect the wider In addition to formal or court-supervised procedures, public interests. New Zealand is a flexible jurisdiction for consensual A wide range of informal debt restructuring and work restructuring and corporate rescue. Debt for equity out tools are available in New Zealand, which may be used swaps, pre-packaged business transfers and credit as alternatives to, or in combination with, the more formal bidding are all possible tools for restructuring debts or procedures mentioned above. Creditors of distressed other investments. New Zealand businesses may consider: • covenant or debt waivers; • rescheduling debts or making other amendments to terms; • trading in distressed debts; • debt for equity swaps;

Simpson Grierson HOME Investing in New Zealand 39 • pre-packaged business or asset transfers (potentially A liquidator’s powers are far reaching and include: RECEIVERSHIP – RECEIVERSHIPS ACT 1993 breaking up or spinning off profitable parts of a • taking over control of the company and its assets; In New Zealand, receivers are usually appointed under wider business); a contract between a secured creditor and the debtor. • realising the company’s remaining assets, • credit bidding (whether secured or unsecured and Often, the parties will have entered into a General including claims against debtors of the company or whether the debtor is in receivership or not); and Security Agreement ( ), which provides against directors; Security Agreement the creditor with a security interest over the debtor • challenging certain vulnerable antecedent transactions • requesting documentation from, and examining company’s assets and that has wide default provisions. (see the comment about voidable transactions below) under oath, company directors, shareholders, Following an event of default, the creditor can appoint a and potentially pursuing directors or other officeholders lawyers or accountants; receiver over all or some of the company’s assets. (in most cases this would be done through a liquidator or in the company’s name by its receivers). • clawing back voidable transactions made to a The receiver’s primary function is usually to realise creditor within a specified period prior to liquidation the assets secured by the Security Agreement, for the LIQUIDATION – PART 16 COMPANIES ACT (two years for related party creditors, and six months for benefit of the secured creditor. During the course of non- related creditors), where the creditor has received the receivership, receivers stand in the shoes of the If a body corporate, such as a company or limited more than it would have received in the liquidation and debtor company, in that they are typically empowered partnership, is insolvent, a creditor may apply for it to be therefore an undue preference over other creditors; and to do anything the company could do. It is possible for put in liquidation. • issuing proceedings relating to transactions at multiple receivers to be appointed at the same time, Typically the first step towards liquidating a company is an undervalue. under different Security Agreements. It is also possible for to serve a demand on the company under section 289 a company to be in both receivership and liquidation at of the Companies Act (statutory demand). The statutory In the course of the liquidation, the liquidator may the same time. demand requires the debtor company to repay the debt, convene a creditors’ meeting and is obliged to prepare The receivership is at an end once the relevant secured enter into a creditors’ compromise, or otherwise enter and register regular (six monthly) reports. Creditors assets have been realised. The company will then return into an agreement with the creditor in respect of the debt are to file their claims (proofs of debt) to the liquidator to the control of its directors, unless the company is within 15 working days. within the stipulated timeframe and have recourse (by Court application) if they are unhappy with the already in liquidation. If the debtor fails to comply, or does not apply to the liquidator’s decision. High Court to set aside the demand within 10 working CREDITORS’ COMPROMISE – PART 14 days, it is deemed to be unable to pay its debts. On this Once the company’s assets have been realised, the COMPANIES ACT basis, the creditor can apply to the Court for orders: liquidators will make a distribution to unsecured creditors on a rateable (pari passu) basis. Some limited classes of A debtor company wishing to avoid being put into • putting the company into liquidation; and creditors (for example, employees and the Commissioner liquidation may make a repayment proposal to its • appointing a liquidator chosen by the creditor. of Inland Revenue) have preferential status ahead of creditors in accordance with the procedure set out in part unsecured creditors, up to set amounts. 14 of the Companies Act, offering creditors less than the In addition to this more typical procedure, creditors can entire debt owed to them. Creditors then file proofs of apply for appointment of an interim liquidator, although At the conclusion of the liquidation, the company will be debt and a meeting is convened to vote on the proposal. this is less common or a company’s shareholders, removed from the Register of Companies. or directors (if the company’s constitution permits) can themselves resolve to put the company into voluntary liquidation.

Simpson Grierson HOME Investing in New Zealand 40 If more than 50% of the creditors in number representing at least 75% of the value of debt vote in favour of the proposal, the compromise is passed and all creditors are bound by its terms. Creditors can oppose the compromise being binding on them (by Court application) on the basis of undue prejudice. In addition to compromises under part 14 of the Companies Act, part 15 of the Companies Act provides for Court approved arrangements and compromises.

VOLUNTARY ADMINISTRATION – PART 15A COMPANIES ACT A voluntary administration may be appropriate if the debtor company has prospects of recovery. Similar in some ways to a creditors’ compromise under part 14 of the Companies Act, voluntary administration has the additional advantage of an immediate statutory moratorium that prevents unsecured creditors from taking enforcement action while the company is in voluntary administration (with limited exceptions). Typically, the debtor company appoints an administrator and, after an initial creditors’ meeting, a “watershed meeting” is convened within 25 working days. At the watershed meeting, creditors may vote on whether to enter into a Deed of Company Arrangement (DOCA). A DOCA is a contractual compromise reached between the debtor company and its creditors, which often allows the company to continue trading under the supervision of the administrator. Alternatively, creditors can vote to return the company to the control of the directors, or resolve that the company be placed into liquidation. If the DOCA is executed, all affected creditors (including secured creditors who voted in favour of it) are bound by its terms, subject to relief being granted by the High Court.

Simpson Grierson HOME Investing in New Zealand 41 OVERVIEW EMISSIONS TRADING SCHEME New Zealand is a signatory to the Paris Agreement. The ETS puts an economic cost on the emission of SECTION 17 The Climate Change Response Act 2002 provides greenhouse gases across all sectors of the economy. the framework for New Zealand to develop and The ETS requires certain mandatory “participants” to Economic Response implement climate change policies in support of its account for emissions, generally by surrendering Paris Agreement commitments. New Zealand units (NZUs). The ETS also allows persons registering to carry out forestry on post-1989 forestry to Climate Change A range of climate-change related economic initiatives land to receive NZUs for removals of greenhouse gases. are already in place, as part of the Government and industry response, and more measures will inevitably NZUs are created by the Crown and, apart from removals, follow if New Zealand is to meet its Paris Agreement are also supplied by auction (from March 2021), and to emissions reduction targets. emissions intensive trade exposed industry on a reducing scale to assist with the transition to a low-carbon future. New Zealand also has a Climate Change Commission, NZUs are freely tradable in bilateral contracts or on a a body mandated to provide independent advice to number of exchanges. Government on emissions budgets, emissions reduction plans, and national climate change adaptation plans. It is • Forestry: forestry owners can opt-in to the ETS if they also required to provide the related risk assessments are growing a forest species on land that is classified as and recommendations on the Emissions Trading Scheme post-1989 forest land. This means that they can receive (ETS) and policy settings. The Commission is likely to NZUs for carbon removals (but also means they have an have an important influence on the development of obligation to surrender NZUs in some circumstances). Government policies aimed at creating a climate-resilient, Owners of pre-1990 forest land have an obligation to low emissions New Zealand. surrender NZUs for deforestation of their forests. Some Crown funding is available for the planting of forests. • Dairy: dairy farming in New Zealand is a major emitter of biogenic methane and nitrous oxide, both greenhouse gases and so caught within the Paris Agreement emissions targets. Methane and nitrous oxide emissions are excluded from the ETS until 2025 but the industry has until then to agree with Government about how it will manage these emissions.

Simpson Grierson HOME Investing in New Zealand 42 REGULATORY AND POLICY RESPONSE TO MANDATORY CLIMATE-CHANGE REPORTING GOVERNANCE ZERO CARBON TARGET Certain entities with a public function, including certain Awareness of the impact of climate change related The Climate Change Response Act sets a net-zero lifeline utilities, must provide information about their matters is also part of the wider governance landscape emissions target for 2050 in relation to all greenhouse climate- related risk on request of the Government. in New Zealand. gases other than biogenic methane, and a gross From 2023, the Government has confirmed that publicly Directors of New Zealand companies and licensed emissions reduction target for biogenic methane. listed companies and large insurers, banks and investment persons in the financial services sector are subject to This target will inform the settings in the ETS and provide managers will be required to produce climate-related statutory director’s duties, set out in the Companies Act, economic pressure to reduce emissions and adopt financial disclosures in 2023 on a ‘comply-or-explain’ including a requirement to act in the best interests of low- carbon- intensive technologies. basis. Disclosures will be required to align with the the company. The scope of that duty almost certainly The emissions reduction target is expected to drive further recommendations of the Task Force on Climate-related now requires directors, when making decisions on behalf change within carbon-intensive sectors and industries: Financial Disclosures. of the company, to consider the risks and opportunities presented by the physical and transition implications • Agriculture: providing incentives to mitigate on-farm of climate change. greenhouse gas emissions, likely to result in farm RESOURCE MANAGEMENT APPROVALS emissions measurement and compliance requirements, On projects of national significance, local authorities must The RBNZ (New Zealand’s central bank) has also different farming practices, and investment in emissions take account of climate change-related factors when recommended that the governance bodies of registered mitigation technologies such as feeds that result in considering resource management consent applications. banks and insurers explore their internal climate risk less methane output by ruminant animals; strategies, reflecting its concern that the New Zealand From 31 December 2021 local authorities will also financial system’s awareness and management of • Transport fuels and stationary energy: be required to: climate risks is lacking. making alternative technologies more competitive • have regard to emissions reduction plans and national by lifting the price of carbon-based fuels, and adaptation plans when making and amending regional considering introduction of vehicle emissions and fuel and district planning instruments; and efficiency standards; • consider discharges to air of greenhouse gas emissions. • Industrial processes: making traditional energy sources and processes more expense and alternative energy These settings will therefore have an impact on ongoing sources and processes more financially attractive; and new activities on or having an effect on land, water and air. • Waste: providing price incentives to reduce waste; • Forestry: encouraging continuous forestry for carbon sequestration.

Simpson Grierson HOME Investing in New Zealand 43 GROWTH OF THE MĀORI ECONOMY Some of the key tikanga principles applied to business are: Māori have become signficiant players in the New Zealand • Self-determination, authority and independence SECTION 18 economy. As of 2020, the value of the Māori economy is (Tino Rangatiratanga): This is a key principle that estimated to be in the region of NZ$42-$50 billion. empowers Māori to make decisions for themselves. Doing Business with The Government has negotiated agreements with many • Guardianship (Kaitiakitanga): Māori have ancestrally Māori tribal groups (hapu/iwi), settling historical grievances rooted obligations to sustain and maintain balance of Māori Organisations arising from the British Crown’s failure to honour the the environment, while providing for future generations. Treaty of Waitangi (New Zealand’s founding constitutional For some Māori businesses this means retaining document, signed in 1840 between the British Crown ancestral land and control over natural resources, with and a number of Māori chiefs). These settlements have long-term approaches to investment. resulted in many iwi holding significant financial assets and • Kinship, or building and maintaining networks and land, forming a catalyst for growth of the Māori economy. relationships (Whanaungatanga): In practice, this means Traditionally, Māori have focused their portfolios in developing deeper relationships to work harmoniously to primary industries, tourism and commercial property, achieve common goals. It imposes obligations to support but some Māori organisations are now diversifying into wider stakeholders, or iwi members. other private capital investments. Joint ventures between • Welcoming, caring for, and helping one-another Māori organisations, and both domestic and overseas (Manaakitanga): This includes fostering of growth and investors, are common. potenital of a individuals or groups, and building unity through generosity. GUIDING COMMERCIAL VALUES Māori organisations are not established solely for ENGAGING WITH MĀORI BUSINESS short-term profit. Generally, Māori approach business An investor looking to engage with a Māori organisation with a holistic, intergenerational focus, balancing will likely be asked how the proposed business venture financial imperatives with social, cultural and will benefit Māori. For example, whether and how the environmental aspirations. proposed venture: Balancing these ‘quadruple bottom lines’ stems primarily • affirms and develops Māori cultural identity; from Māori cultural values (tikanga Māori), sourced in the Māori world view. • aligns with Māori obligations to the environment; Tikanga Māori is what sets Māori and Māori business • creates economic wellbeing for Māori; and apart from the ‘mainstream’. Tikanga Māori is an • provides employment opportunities for the ethical framework lying at the heart of the Māori Māori community. society, informing everyday decision making, reasoning and behaviour. Anyone engaging with Māori organisations must also take care to observe the appropriate protocols, which carry great significance within Māori culture.

Simpson Grierson HOME Investing in New Zealand 44 TE REO MĀORI – THE MĀORI LANGUAGE TIKANGA MĀORI – MĀORI CUSTOMS AND PROTOCOLS Te reo Māori is an official language of New Zealand, Cultural References and has recently experienced a resurgence in use. Part of It is common for Government and some non-Māori the revitalisation stems from political action and growing organisations to welcome guests (especially for the first The Māori acceptance of New Zealand’s heritage and history. time) by formal ceremonies in accordance with Māori Today, you will see and hear Māori words in everyday customs, or tikanga. public and social settings in New Zealand. Language and • welcoming ceremonies, known as pōwhiri or mihi A visitor to New Zealand is not expected to be competent whakatau, are in some instances a first opportunity for Culture in Māori custom and protocol. But efforts to understand parties to meet face-to-face (kanohi-ki-te-kanohi), and and participate in formalities are welcomed, and in most may be hosted at a marae (a Māori meeting ground), cases, encouraged. or more commonly in an organisation’s workplace. Some basic greetings include: • karakia, or prayer, are used to commence formalities to acknowledge deities (often in a non-secular manner) • kia ora (pronounced ‘key-oar-ah’): and the purpose of the day. Hello / Hi • mihimihi and pepeha – acknowledgments and • tēnā koe (pronounced ‘teh-nah kweh’): introductions – are then an opportunity for Hello to one person parties to express their heritage, relationships and • tēnā kōrua (pronounced ‘teh-nah core-rua’): purpose of meeting. Hello to two people • singing of waiata – song - is also part of Māori custom • tēnā koutou (pronounced ‘teh-nah-ko-toe’): and necessary to support those who are speaking on Hello to three or more people your behalf. For more Māori greetings and phrases, click the linkhere . For general guidelines on tikanga Māori or customs and protocols, please read more at the link available here.

Simpson Grierson HOME Investing in New Zealand 45 simpsongrierson.com

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