Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 Contents

1 About Chapman Tripp 19 Taxation within New Zealand 37 Financial services in New Zealand

2 New Zealand at a glance 22 New Zealand’s cross- border tax regime 42 Investing in New Zealand’s capital markets 4 Overseas investment in New Zealand 25 Contract law in New Zealand 44 Fundraising in New Zealand 7 Establishing a business 26 Consumer protections in New Zealand in New Zealand 46 Insolvency in New Zealand

9 Buying and developing real 29 Employment and health and 48 Resolving disputes estate in New Zealand safety law in New Zealand in New Zealand

14 Environment and 32 Anti-trust, competition 50 Emigrating to New Zealand resource management law in New Zealand law in New Zealand

34 Intellectual property 17 New Zealand Māori and in New Zealand the Treaty of Waitangi

We make every effort to ensure the accuracy of the information provided but it should not be relied upon as a basis for making business decisions as circumstances, business conditions, government policy and interpretation of the law may change. About Chapman Tripp

Chapman Tripp is New Zealand’s leading law firm and can offer you a national, full service team. Established in 1876, we have a reputation for excellence and a long track record of delivering innovative, commercial solutions which respond to the individual needs of our clients.

We understand what it takes to We also help you to make sense of We have more than 60 partners and We recommend you speak to us about capitalise successfully on your an unfamiliar regulatory and cultural over 400 staff with offices in Auckland your investment requirements before investment opportunities and, because environment. We represent your (the economic centre of New Zealand making any decisions so that we can we have a national, full-service team, business interests to relevant regulatory and home to more than a third of the provide you with advice that is specific we can advise on all aspects of doing bodies, including the Overseas population), Wellington (the seat of to your needs. business in New Zealand. Investment Office (OIO), guide you government) and Christchurch (the through the resource management South Island’s commercial hub). You can read more about Our advice is clear and commercial. consent process and recommend Chapman Tripp at chapmantripp.com We help you mitigate risk and maximise the best approach for dealing with This guide is designed to provide your investment through all phases Māori law. the prospective investor with an of your business venture – from introduction to New Zealand’s legal evaluating potential investment Chapman Tripp works with an framework. The information is accurate opportunities and acting on acquisitions international client base and has been at the time of publication but is through to advising on the most involved in some of the most high necessarily high level and generic so Large Law Firm efficient way to structure your business, profile OIO applications in recent should not be relied upon as a basis for of the Year the day-to-day operational issues you times. We play a key role in mergers decision-making. New Zealand Law Awards 2019 need to be aware of and, should it and acquisitions, banking, financing, eventuate, how to achieve a successful insolvency, restructuring, procurement New Zealand Dealmaker exit strategy. processes, large scale infrastructure projects and dispute resolution. of the Year Australasian Law Awards 2019 New Zealand Our advice is clear and commercial. We help you Contentious Firm mitigate“ risk and maximise your investment through all of the Year phases of your business venture.” Managing IP Asia-Pacific Awards 2019

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 1 New Zealand Geography Culture Economy New Zealand is situated in the South New Zealand culture values fairness, New Zealand is a safe place to invest at a glance Pacific Ocean, with a land area ingenuity, practicality, modesty, and do business. It is currently ranked equivalent to Japan or Britain. We have restraint and informality. English is first of 189 countries by the World Bank one of the largest exclusive economic the everyday language but Māori and for ease of doing business, starting a zones in the world at 4.1 million sign language are also recognised as new business, registering a property square kilometres. official languages. and getting credit, and second for protecting minority investors. New Zealand consists of two main We aspire to be a multi-cultural society islands – the North Island and the South but accord a special significance to Major exports include dairy products, Island. It has a temperate climate and Māori culture, reflecting that Māori are tourism, meat, timber and minerals. offers a high quality of life with clean air the indigenous people of this land. We also have developing industries and easy access to nature. in export education, boat building, IT, Political and legal system horticulture, wine and film. Population Our stock exchange is the first in the New Zealand currently rates number world to open trading each day – two The resident population is just under 4.8 two by Transparency International hours ahead of Sydney, three hours million people, one third of whom live in for freedom from corruption. We ahead of Tokyo, four hours ahead of Auckland. have a common law legal system Beijing, 12 hours ahead of London and based on the British model, with an 17 hours ahead of New York. New Zealand is a nation of migrants, independent judiciary. with one of the most ethnically diverse The currency is based on the populations in the world and a large New Zealand has a stable parliamentary New Zealand dollar, which is freely “ex-pat” community which provides democracy with a proportional voting floated against all major currencies. important international linkages. system which tends to produce coalition governments. The two major parties, which would generally lead a coalition government, are National at the conservative end of the spectrum and Labour at the liberal end. The British sovereign is the titular Head of State and is represented in New Zealand by a Governor-General.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 2 December 2019 HOME 2 Free trade agreements WANT TO KNOW MORE? Go to: newzealand.com or newzealandnow.govt.nz/ New Zealand supports trade investing-in-nz liberalisation and is party to a large or nzte.govt.nz/en/invest number of free trade agreements, including with Australia, China, Hong Kong, Chinese Taipei, South Korea, ASEAN, Singapore, Thailand, Malaysia, Brunei and Chile. We are also signatories to the Comprehensive and Progressive Trans-Pacific Partnership.

Information on New Zealand’s international trading agreements can be found on the Ministry of Foreign Affairs and Trade website: mfat.govt.nz

New Zealand currently rates number two by Transparency“ International for freedom from corruption.”

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 3 Key points When is consent ALERT Overseas The definition of sensitive land is required? very detailed and requires careful • New Zealand welcomes foreign checking and analysis from qualified investment and recognises investment in Overseas Investment Office (OIO) advisers. In particular, land may the positive economic and consent may be required if the target be “sensitive” if it adjoins certain social contribution it brings to business possesses any of the following: types of land, or is “associated” with New Zealand New Zealanders. other land already controlled by an • New Zealand consistently ranks • significant business assets – where overseas person. highly as an attractive investment the cost of a business acquisition, destination, with various studies or the value of the applicable identifying the ease of doing New Zealand assets, exceeds business, low level of corruption, NZ$100 million. Non-government high quality of regulations, investors from all Comprehensive adherence to the rule of law, and Progressive Agreement significant investor protection for Trans-Pacific Partnership and protection of personal (CPTPP) countries have a higher freedoms accorded to investors in threshold and Australia has a New Zealand. special arrangement under the CER Investment Protocol) • Not all overseas investments into New Zealand require consent. • an interest in sensitive land, or However, like most other countries, • fishing quota. New Zealand does require overseas persons to obtain consent for certain types of investments.

Tessa Baker – Partner T: +64 9 357 9502 M: +64 27 622 3161 E: [email protected]

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 4 December 2019 HOME 4 Residential land Consent criteria Sensitive land To obtain consent, the overseas investor will need to demonstrate that the purchase will bring benefits additional to those which would accrue from continued New Zealand ownership. These benefits are assessed The Overseas Investment Amendment In general, all applicants (including against a variety of economic, social and conservation factors. All Act brought residential property persons with control of the applicant if residential land, including “lifestyle,” is now included in the sensitive (including lifestyle blocks and unit titles) the applicant is an entity) are required land category. into the definition of sensitive land with to meet the investor criteria of business Rural land For non-urban land larger than five hectares, the overseas investor effect from 22 October 2018. The sale experience and acumen, financial will need to show that the benefits to New Zealand arising from the of such properties will be restricted to: commitment and good character. They investment are “substantial and identifiable”, with particular focus must not be ineligible individuals under on economic benefits including employment, new technology and • New Zealand citizens and persons the Immigration Act. business skills, increased exports and processing of primary products and local oversight and participation. The type and level of benefits “ordinarily resident in New Zealand” required have been increased to a level which means it is difficult for (which, in this residential context, The investor criteria do not apply to an overseas investor to obtain consent to buy rural land. means holding a residence residential land (which is not otherwise class visa, being tax resident in sensitive) where the application is made Special land Special land includes the foreshore, seabed, riverbed or lakebed that New Zealand, having resided in on the basis of a commitment to reside forms part of sensitive land. New Zealand for at least a year and in New Zealand or, in respect of large Special land transfers are subject to stricter conditions and the special land must first be offered to the New Zealand government before any having been present in New Zealand apartment developments, where the sale to an overseas person. for at least 183 days in the past purchase will increase the supply of year), and housing available to New Zealanders. Farm land Farm land must be offered on the open market before a sale to an overseas person can be completed. • investors who can demonstrate that Certain investments have additional Exemptions from this requirement can be obtained, but only in special they will be developing the land and criteria that must be met for consent to circumstances and at the discretion of the relevant Minister. adding to New Zealand’s housing be granted (see the following table). We supply or converting it to a non- Residential For transactions involving residential land (which is not otherwise recommend you check with a qualified land sensitive), the overseas investor will need either to satisfy the public residential use which would have adviser on these requirements. benefit to New Zealand criteria or one of four alternative tests: a wider benefits to the country. commitment to reside in New Zealand, increased housing supply, non- residential use or incidental residential use Exemptions are available for Australians and Singaporeans under New Zealand’s Forest land Overseas investors wanting to buy forest land – being land over five hectares devoted principally to forestry – will need to demonstrate that treaty obligations with these the acquisition will lead to increased value-added processing within jurisdictions. New Zealand. The government has extended coverage of the OIA to include forestry rights over 1000 acres per annum.

Strategically Transactions involving strategically important infrastructure important on sensitive land face higher levels of scrutiny, with continued infrastructure New Zealand control being a relevant factor.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 5 Off-shore transactions We recommend that potential investors Class exemptions The Government is undertaking a broad engage New Zealand legal counsel early review of the Act aimed at making Transactions occurring outside The requirements for consent do not in the investment process to assess the regime easier to use and better New Zealand may still require OIO apply to certain situations covered by whether consent is needed and to facilitating productive investment that consent if the target business has class exemptions including: ensure that there are no unnecessary supports New Zealand’s wellbeing. interests in land or other assets in delays. Legislative changes are expected New Zealand. OIO implications for off- • transfers within 95% wholly in 2020. shore transactions should be assessed owned groups Target processing times can be found at early in the transaction process to linz.govt.nz. • where there is no increase in ensure that OIO timeframes do not ultimate overseas ownership cause unnecessary delays. and control ALERT Consent application process • acquisition of redeemable Complex applications can take preference shares The consent application process is longer than the OIO targets. We administered by the OIO and governed can advise you of likely application • security arrangements in the by the Overseas Investment Act 2005 processing times when preparing ordinary course of business that (the Act) and accompanying regulations. specific applications. secure payment or performance of an obligation, and The overall consent decision rests • underwriting of an issue of securities with the relevant Ministers. The OIO Consent conditions in the ordinary course of business, assesses the consent applications, Consent is usually granted subject provided that the position is held and makes recommendations to the to various conditions with which the for less than six months and voting Ministers. For certain applications the applicant must comply. Often the rights are not exercised. OIO itself makes consent decisions conditions will reflect the nature of under delegated authority from the benefits claimed to support the the Ministers. transaction in the consent application.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 6 December 2019 HOME 6 Key points Establishing a ALERT Establishing We can assist and put you in touch New Zealand with providers of professional • Overseas persons can own director and registered office a business in assets and operate businesses in subsidiary company services in New Zealand. New Zealand. A New Zealand company is a separate New Zealand • It is relatively easy and free of legal entity responsible for its own restrictions to set up a company in assets and liabilities. There is no New Zealand. Establishing a limited restriction on the size of a company’s partnership • Overseas entities will need to share capital. There are no residency obtain a New Zealand tax number restrictions on shareholders. and, depending on the volume of The rules governing limited partnerships business, may be required to register Key points to note in New Zealand are similar to those for the Goods and Services Tax. applying in other jurisdictions, including • Every New Zealand company Delaware, Australia and the Channel • Overseas companies and limited requires at least one New Zealand Islands. The distinctive feature of the partnerships which intend to carry resident director or one Australian limited partnership model is that it is on business directly in New Zealand resident director who is also a a separate legal entity but provides need to register with the director of an Australian company. the protections of limited liability to New Zealand Companies Office. As long as this requirement is its members. fulfilled, a New Zealand company may have any number of A limited partnership must have at overseas directors. ALERT least one general partner and one Unlike other countries, the • There is no requirement for a limited partner, who cannot be the Companies Register maintained company to have a company same person. A general partner may by the New Zealand Companies secretary. be an overseas company registered in Office is publicly available, New Zealand with at least one director including information regarding • The Companies Office may who lives in New Zealand or who lives directors and shareholders such require a certified proof of identity in Australia and is a director of an as their residential address and full (e.g. passport) and a certified proof Australian company. A general partner legal name. of residential address (e.g. utilities is jointly and severally liable with the bill) for overseas directors when limited partnership and any other registering a company. general partners for the unpaid debts Tim Tubman – Partner • Every New Zealand company and liabilities of the limited partnership. T: +64 9 357 9076 requires a New Zealand registered M: +64 27 344 2178 office address/address for service. E: [email protected]

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 7 A limited partner has the protection of Branch, subsidiary or limited partnership? limited liability, but must not take any part in the management of the limited There are advantages to each of the three options, depending on the circumstances. partnership. A limited partner can be an overseas person. Branch Subsidiary Limited partnership

Entering a joint venture/ Liability Because the branch is legally the A special purpose subsidiary may The general partner (which may overseas company, there is no help ring-fence liability. But in be a company) manages the general partnership sheltering of liability. practice, unless the subsidiary is business and can be liable for any substantial in its own right, any debts and obligations which the Joint ventures in New Zealand are significant commercial dealings limited partnership itself is unable may need to be guaranteed by the to meet. The limited partners are arrangements entered into by two or overseas parent. passive investors and their liability more parties to invest in a particular is limited to the amount of capital project. They can be carried out by they agree to contribute. a company, a limited partnership or an unincorporated contractual joint Tax The branch will generally be The subsidiary is a New Zealand Limited partners are treated as venture. considered to be non-resident for tax resident and will be subject holding the assets of the limited tax purposes, with the effect that to New Zealand tax on the partnership and personally derive the overseas company will have to subsidiary’s worldwide income. the income and deductions. This A general partnership is not a separate pay any tax obligations incurred in Losses cannot be offset against enables them to distribute capital legal person and each partner is jointly New Zealand but may also be able any income of the overseas gains among themselves tax free and severally liable for the debts of to include the branch activities parent and cannot usually and to pass through tax losses the partnership. Responsibilities and in the tax return filed in the home be claimed in the parent’s (although only to the extent of jurisdiction of the head office. home jurisdiction. that limited partner’s exposure to liabilities can be allocated according the loss). to a partnership deed, but partners do not enjoy the protection of limited liability. For this reason, some investors prefer to pursue joint ventures through a special purpose vehicle company or limited partnership.

An investment in a joint venture may be subject to the Overseas Investment Act (see the Investing in New Zealand section for more detail).

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 8 December 2019 HOME 8 Buying and Key points Registered title system Forms of title

• All titles in New Zealand are New Zealand uses the Torrens land In New Zealand there are three main developing registered at Land Information registration system under which most forms of title. New Zealand. “Freehold” title is parcels of land have their own titles real estate in the most common. Particular care showing dimensions and location, Freehold – this is the most common needs to be taken when dealing with ownership and other interests affecting (and best) form of title available in “leasehold” or “unit title” properties. the land. The government guarantees New Zealand. New Zealand the accuracy of titles, which can • When purchasing property in be searched by the public for a Leasehold – the purchaser of a New Zealand, it is usual to sign a nominal fee. leasehold property acquires the sale and purchase agreement that benefit of a lease of the property (as is conditional upon the purchaser Chapman Tripp provides a full title opposed to the freehold). Leasehold carrying out a due diligence searching service. title is particularly prevalent within the investigation and being satisfied with Auckland waterfront area. The term and the results of that investigation. The primary attraction of the Torrens rental structure of these leases can • Overseas investors need system is that dealings can be vary significantly. Particular care needs government consent under the conducted in reliance on a single title, to be taken when acquiring leasehold Overseas Investment Act to buy rather than on a succession of title property, especially when the lease “sensitive” land (which includes deeds. New Zealand has converted reserves an annual rent that is subject farm land and residential land) almost all titles, plans and instruments to review under the terms of the lease. or any other property where the into an electronic format, allowing consideration is over $100 million. real-time searching and electronic See the Investing in New Zealand registration of all land title and section for more detail. surveying transactions.

Under New Zealand law, buildings and other improvements permanently attached to the land form part of the land itself and pass with ownership of the land, unless the seller and buyer agree otherwise.

Mark Nicholson – Partner Dealings with land are registered T: +64 9 357 9297 M: +64 27 305 9120 electronically against the title. E: [email protected]

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 9 Unit Title – unit titles are similar freehold but it is not uncommon to Act 2010, with a particular focus on to provide the purchaser with a pre- to other forms of title save that find leasehold unit titles within the the management and maintenance of contract disclosure statement which they are limited to a defined part Auckland waterfront area. A purchaser common property (such as lobbies contains information on the unit title of a building or property. They are of a unit title property automatically and lifts) and the structural elements being purchased (including the amount the most common form of title for becomes a member of the “body of the building as well as common of the “levies” payable to the body apartment buildings (with each corporate”. The body corporate building services. Before entering corporate to cover the cost of the individual apartment comprising a effectively governs the building into an agreement to purchase a unit insurance of the building as well as its single unit title). Most unit titles are under the terms of the Unit Titles title property, the vendor is obliged management and maintenance).

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 10 December 2019 HOME 10 Contracts for sale and Where a real estate agent is engaged -- the existence of a building warrant Seismic rating of by a seller to effect a sale, commission of fitness which is required for purchase of land is payable by the seller. There is no most buildings other than stand- commercial buildings stamp duty. alone houses (see section on To be enforceable under New Zealand building works) As a result of the Christchurch law, a contract for the sale and earthquakes of 2010 and 2011, -- any relevant records held by the purchase of land must be in writing Due diligence purchasers of commercial buildings will Council regarding the property and signed by the parties involved or now usually include the seismic rating (for example the existence their authorised agents. Once signed, Due diligence is a fundamental of those buildings as part of their due of any contamination or an agreement for sale and purchase component of the process of acquiring diligence investigation. geotechnical issues or whether becomes legally binding on all parties. property in New Zealand. Depending the building has been identified as on the nature of the property being All new buildings in New Zealand “earthquake prone”) Sale and purchase agreements can be acquired, due diligence commonly are required to be constructed to made subject to conditions which are entails engaging a lawyer to review: -- any rates arrears. 100% of the current building code designed to protect either the seller (often referred to as “New Building or the buyer. Common conditions are • the title to the property and (in the In addition, you will need: Standards” or “NBS”). However, older the buyer raising finance and the buyer case of commercial property) the buildings are unlikely to have been being satisfied with the results of the terms of any leases • a registered valuer to undertake a constructed to 100% of NBS, either due diligence investigation. valuation of the property, and because of the lower building standards • council records for the property in applying at the time the building was the form of a “LIM” report to identify • a building inspector/engineer You should always obtain legal advice constructed or because of poor design the following types of issues: to review the condition of the before entering into a sale and purchase or workmanship. building and identify any defects or agreement. However, particular care -- any enforcement action being maintenance issues (see also the needs to be taken before entering into taken by the council for non- comments about the “seismic rating” an agreement to purchase: compliance with statutory or of commercial buildings). ALERT regulatory requirements An older building with a seismic • a commercial property (which, rating of less than 34% of NBS -- any outstanding code compliance depending on size and value, may is classified as “earthquake certificates in respect of any be subject to fairly significant legal prone” and will be subject to building work undertaken at negotiation), or statutory requirements for seismic the property (see section on strengthening works. Particular care • a residential property that is to be building works) needs to be taken with heritage developed by the vendor (commonly buildings and buildings constructed referred to as buying property “off before 1976 which are more likely to the plans”). be earthquake prone.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 11 Typically, most investors in commercial Residential property The Residential Land Withholding Tax Resource property in New Zealand look for a (RLWT) applies where the seller is an seismic rating of at least 67% of NBS. – tax considerations offshore person and the residential land Management Act A rating of less than 67% can have an is sold within five years of acquisition impact on the value of the property Gains from the sale of residential (for properties acquired after 29 March The Resource Management Act 1991 is and also the ability to attract or retain properties purchased after 29 March 2018) or within two years of acquisition New Zealand’s principal statute relating tenants. Most major corporates in 2018 and held for less than five years (for properties acquired between 1 to the use of land, water, minerals, New Zealand will refuse to lease are taxed at the owner’s standard October 2015 and 28 March 2018). the coast, air and physical resources. property in New Zealand if it has a income tax rate. Gains from the sale The RLWT also applies to sales by The Act has major implications for seismic rating of less than 67%. of residential properties purchased New Zealand entities that are ultimately all property developments, be they between 1 October 2015 and 28 March more than 25% owned or controlled by commercial, industrial or residential There are two main types of report 2018 are taxable if sold within two years. offshore persons. (For more detail, refer in nature, and for infrastructure and issued by engineers to assess the to the section on New Zealand’s cross- utilities. A new development may seismic rating of a building: Exemptions will apply if the property is: border tax regime.) require a number of consents under the Act before it can go ahead. • an “IEP” (or “Initial Evaluation • the seller’s main home Residents must provide an IRD number Process”), a very high level desktop as part of the usual Land Information Controls on property development • inherited from a deceased estate study that is not always accurate and New Zealand transfer process. are administered by local government should be treated with caution, and • sold as part of a Non-residents must also provide a authorities and are expressed through a relationship breakdown. New Zealand IRD number as well as a range of publicly notified plans. These • a “DEE” (or “Detailed Engineering home jurisdiction tax number together include regional plans, district plans, Evaluation”) which is usually more Gain from sale of a property held for with another form of identification – and some national level plans. Plans accurate but will generally cost longer than five years may still be taxed such as a passport. In order to obtain set out rules for activities depending more than an IEP. However, care if the Inland Revenue Department (IRD) an IRD number, a non-resident will on the nature, scale and location – for still needs to be taken to review the considers that the seller acquired the need a fully functional New Zealand most developments above a certain report to identify any limitations property for a purpose or intention of bank account or confirmation from size this includes the requirement to on the scope of the investigations resale, or if one or more of the specific a New Zealand reporting entity that obtain resource consent. At the district undertaken by the engineer. land taxation provisions applies (for customer due diligence has been level, these rules are largely based example, if the seller carried on, or was completed in accordance with on the zoning of the relevant land. If the engineer’s report was obtained associated with someone who carried New Zealand anti-money laundering Parties seeking consent to proceed by the vendor, the purchaser should on, a business of land dealing, land (AML) legislation. with a development must follow the consider requiring either that the development or building at the time of procedures set out in the relevant plan. engineer confirm in writing that the acquiring the property and sells that This may involve public participation in purchaser may rely on the report or property within 10 years). the resource consent process, through that the report be re-addressed to notification of the consent application. the purchaser.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 12 December 2019 HOME 12 Privately owned land may also Following completion of any work Allied to the Building Act is the Building Māori land claims be designated in the applicable pursuant to a building consent, a code Code. This sets criteria to ensure district plan as being required by compliance certificate (or “CCC”) buildings are safe, sanitary, have Land claims by Māori, the indigenous the government or other competent should be obtained. When purchasing adequate means of escape and, in the people of New Zealand, are governed designating authority for a public work a building in New Zealand, a key item case of public buildings, have access by the Treaty of Waitangi Act 1975. (including compulsory acquisition that should be checked during the due and facilities for disabled persons. Under the Act, grievances are heard if necessary). The current market diligence investigation is whether there Existing buildings, which are being by the Waitangi Tribunal which can value of the land would be paid as are any outstanding code compliance altered, may require upgrading in the then make recommendations to the compensation. certificates for building work carried course of the alterations in order to government regarding the resolution of out at the property. This can be verified comply with these criteria as nearly those grievances. For more detail on the Resource by engaging a lawyer to review an up to as is reasonably practicable. Buildings Management Act 1991, refer to date “LIM” report for the property. considered earthquake prone may also Recommendations for the return of the Environment and resource be required to be upgraded. land to Māori are generally applicable management law section. Most types of property (other than only in respect to land owned by stand-alone houses) are also required The Act imposes restrictions upon the government or State-Owned to hold a building warrant of fitness occupation of a building where public Enterprises. Privately owned land is not Building works (or “BWOF”) that is issued annually areas of that building are subject subject to return to Māori ownership confirming that certain building systems to building works for which a code unless the title to the land has been The Building Act 2004 is designed to and services (mostly related to life compliance certificate has not yet specifically endorsed to that effect regulate and control building work and safety, such as sprinklers, lifts and fire been issued. (and, even then, current policy is not to the use of buildings. Every new building alarms) comply with certain Building exercise that right). If it was exercised, and most substantial alterations or Act criteria. The existence of a BWOF the current market value would be paid. additions to existing buildings will should be checked during the due require a building consent. Multiple-use diligence investigation by reviewing For more information on Māori approvals are available for group home an up to date “LIM” report for the rights under the Treaty, refer to our builders who build homes throughout property. New Zealand Māori and the Treaty of New Zealand using the same or Waitangi section. similar plans.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 13 Key points The Resource Applications for resource consent are Environment generally made to the relevant local Management Act authority. Depending on the type of • The Resource Management Act 1991 activity, the application may be heard (RMA) is the primary instrument and resource The Resource Management Act 1991 without public notification, on a publicly of environmental regulation in (RMA) regulates all uses of land, notified basis or with limited notification New Zealand. management water and air, out to the edge of the to affected parties only. • The Exclusive Economic Zone and 12 nautical mile coastal limit. It is largely Continental Shelf (Environmental administered by local government Applicants must provide a law in Effects) Act extends a variant of the through resource consents granted, or comprehensive assessment of the RMA into the sea and seabed 12 to withheld, under statutory and publicly environmental impact of the proposal New Zealand 200 nautical miles offshore from notified district and regional plans, and or use. Rights of appeal can generally New Zealand. some national level documents. be exercised by the applicant, or by anyone who has made a submission • New Zealand’s climate change District plans control the use of land. on the application, to the Environment response is delivered through an Regional plans control the use of water, Court. (In some cases, such as for Emissions Trading Scheme. coastal matters and the discharge nationally significant projects, special of contaminants. processes apply).

These plans classify activities as: The RMA has a range of penalty and enforcement provisions. Directors • permitted (not requiring and senior managers can be found resource consent) personally liable for any acts or omissions by the company. • controlled, discretionary or non- complying (a resource consent Central government can also provide is required and, where granted, national direction through National will often be subject to specific Policy Statements, National Planning conditions designed to mitigate any Standards and National Environmental adverse environmental effects), or Standards. • prohibited (will not be consented).

Catherine Somerville-Frost – Partner T: +64 9 358 9813 M: +64 27 486 3309 E: [email protected]

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 14 December 2019 HOME 14 When the RMA was first passed in The Exclusive Economic Appeal rights are to the High Court Legislative amendments are expected 1991, it placed a very high value on and are limited to points of law. The later this year. Either way, the local decision-making and public Zone and Continental maximum penalty for breach of a Government is currently committed consultation. It still reflects those Shelf (Environmental marine consent is $10 million. It is noted under its coalition agreement with founding values but it has been much that, under the Crown Mineral Act, New Zealand First to allow farmers amended over its history and most of Effects) the current Government will not issue a free allocation equivalent to 95% those amendments have been designed Act 2012 any new permits for offshore oil and of their emission liabilities, in the to streamline RMA processes and gas exploration but is allowing existing initial years. to permit more central government permits to run their course. The Exclusive Economic Zone and intervention with a view to speeding up Emission intensive, trade exposed Continental Shelf (Environmental development. The current Labour-led industries are also allocated a number Effects) Act (EEZ Act) extends a variant Government is “winding back” several The Emissions of free units to off-set their liability. of the RMA to the EEZ and applies to of these changes. The Government has proposed changes activities such as seismic surveying Trading Scheme to phase down this free allocation and and cable laying, seabed mining and Under the RMA, polluters who legislation is expected to be introduced the construction and installation of The Emissions Trading Scheme (ETS), contaminate land can be liable, but later this year. oil and gas rigs. It also anticipates established in 2008, is New Zealand’s owners or occupiers of contaminated possible future uses, including deep primary policy response to climate land can also face enforcement action The government, which includes the sea aquaculture, carbon capture and change and the key mechanism for for that contamination (even if it is Green Party, has made climate change storage, and marine energy generation. delivery of New Zealand’s commitment historic contamination caused by a a policy priority and has introduced to emission reduction. The ETS previous polluter). the Climate Change Response (Zero The permitting authority is the currently covers forestry, electricity Carbon) Amendment Bill, along the lines Environmental Protection Authority production, industrial processes, liquid of the UK model. The Bill is expected to (EPA), which must issue a decision on fossil fuels, synthetic gases and waste. be in force by the end of 2019 and will: publicly notified applications within six months of receiving the application, Although it was designed as an “all • establish a net zero target (allowing or within 60 days of receiving a non- gases, all sectors” scheme, agriculture for forestry offsets) by 2050 for all notified application. is currently required only to report greenhouse gases, except biogenic its emissions. The Government is methane which is to be brought The EEZ Act identifies various factors considering bringing agriculture into the within a range of 24% to 47% below which should drive the EPA’s decision- ETS or an alternative emissions price/ 2017 levels by 2050, and making. Several of these reflect levy rebate scheme by 2025, but may environmental or biodiversity values but bring agriculture into the ETS prior to they also include the economic benefit that. to New Zealand and the efficient use and development of New Zealand’s mineral resource.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 15 • create an independent Climate Minerals regime The annual Block Offer process is now Return to the government is through Change Commission which will limited to onshore Taranaki, and no a royalty regime, although there is be responsible for advising the new offshore exploration permits will provision in the Act for the government Access and rights to prospect, explore Minister on the preparation of five be accepted. also to participate in any given permit and mine New Zealand’s extensive year emissions budgets and on and thus derive a fair financial return petroleum and mineral estate are the quantity of emissions which Evaluation criteria for oil and gas through that avenue. The current policy governed by the Crown Minerals Act will be permitted within each exploration under the allocation is not to exercise this right. 1991 and by the Minerals Programme budget period. system must meet health, safety and and the Minerals Programme for environmental requirements and the All transfers of, or other dealings with, Petroleum issued under it. For more information, go to: applicants must engage with indigenous a permit interest require the consent of climatechange.govt.nz/emissions- communities. Permits can be granted New Zealand Petroleum & Minerals. All petroleum, gold, silver and uranium trading-scheme for up to 15 years and give the holder existing in land (including under the exclusive rights to explore in the For more information, go to: sea) is the property of the Crown designated area. An exploration permit nzpam.govt.nz (government). No person may prospect, does not automatically confer mining explore for, or mine, government-owned rights. These must be applied for minerals without an appropriate permit. separately.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 16 December 2019 HOME 16 Key points • These settlements have helped The Treaty has always been the subject New Zealand to finance the creation of iwi of debate as there are two versions – corporations, some of which are an English version and a Māori version • Māori are the indigenous people now significant players in the – and there are some significant of New Zealand, a status which Māori and New Zealand economy. differences between them. In particular, is recognised in a number of there are interpretation issues around New Zealand statutes, common law • The iwi corporations often look to precisely what is meant by three the Treaty principles and the Treaty of Waitangi maximise returns from settlement key Māori concepts – kāwanatanga 1840 (the Treaty). assets through joint venture (JV) (governorship), rangatiratanga of Waitangi arrangements with overseas • New Zealand has no written (chieftainship) and taonga (treasures). investors. constitution, but the Treaty is a Also, as colonisation advanced and part of the foundational law of there was an increased appetite for The Treaty of Waitangi, signed in 1840 the country. It is, in essence, an land, the principles of the Treaty were by representatives of the British Crown agreement between the British not honoured by settler governments. and Māori, established a partnership Crown and Māori chiefs and imposing on both parties the duty to act establishes a partnership based on Settlement of historical claims for reasonably, honestly and in the utmost mutual duties to act reasonably, breaches of the Treaty must be good faith. The Treaty guaranteed honestly and in the utmost negotiated with the government of to Māori “exclusive and undisturbed good faith. the day. Some iwi and hapū groups possession of their lands, forests, choose to enter straight into these • The British Crown did not honour fisheries and other properties”. direct negotiations. Others choose the Treaty, with the result that to first go through a Waitangi Tribunal Māori collectives (called iwi or Waitangi Day, observed 6 February hearing process. The Waitangi Tribunal hapū) have legitimate grievances. each year, is a public holiday to honour conducts comprehensive inquiries into A political process was developed the signing of the Treaty. Māori claims and can make non-binding in the 1990s to negotiate and settle recommendations to the government.1 historical grievances. The settlement The Report produced by the Tribunal packages include cultural and is then used by claimants as a basis commercial redress. for their direct negotiations with the Crown for settlement of their historical Treaty breach claims. The Tribunal also has jurisdiction to inquire into “contemporary” breaches of the Treaty.

Te Aopare Dewes – Senior Associate T: +64 9 358 9839 M: +64 27 209 0810 E: [email protected] 1 The Waitangi Tribunal can make binding recommendations in very limited circumstances, relating to Crown owned forest land and certain lands previously owned by State-Owned Enterprises.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 17 The Treaty is not enforceable as a Treaty settlement Māori control 50% of New Zealand’s matter of statute law, but its principles fishing quota, and own 40% of became much more relevant in the process forestry. Some of these holdings were contemporary context in the 1980s, established through the “Sealords in part because the government Iwi receive settlement of their historic Deal” in 1992 (the Treaty of Waitangi legislated in 1985 to enable the grievances with the Crown in the settlement relating to Māori fishing Tribunal to investigate breaches dating form of cultural and commercial rights) and the “Treelords Deal” back to 1840 and after the insertion redress. Commercial redress is usually in 2007 (the Treaty of Waitangi into the State Owned Enterprises determined by the negotiation of a settlement under which the Kaingaroa Act 1986 of a provision preventing quantum amount, followed by iwi or Forest was transferred from the Crown the Crown from acting in a manner hapū purchasing Crown lands with that to central North Island iwi). Māori also inconsistent with the Treaty. money. own 30% of both lamb, sheep and beef production and 10% of dairy and Many pieces of legislation also create It may also include valuable rights kiwifruit production. a statutory requirement to consult of first refusal for between 50 to Māori, including the Local Government 170 years (in some cases, longer) Iwi and hapū corporations have Act 2002 and the Resource over surplus Crown lands within sought to maximise the returns Management Act 1991. the traditional area of the iwi or from their asset base through joint hapū. Some iwi and hapū have used ventures and other partnerships with settlement monies to create large, investors who can bring capital, value- asset rich Māori corporates. These added processing and employment are now significant players in the opportunities, and market access. New Zealand economy. China has been a particular focus for these activities.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 18 December 2019 HOME 18 Key points Individuals are regarded as resident Income tax is imposed at 28% on Taxation for income tax purposes if they companies and unit trusts (which have a permanent place of abode are treated as companies under • New Zealand has a broad-based in New Zealand or are present in New Zealand tax law). Individuals (both income and consumption tax within New Zealand for more than 183 resident and non-resident) are taxed system. This includes withholding days within any 12-month period. progressively at between 10.5% and taxes on many cross border New migrants and, in certain cases, 33%. As noted above, non-residents New Zealand payments and a robust general returning New Zealanders who have are taxed only on their New Zealand- anti-avoidance rule. not been resident for tax purposes sourced income. • The primary revenue sources in New Zealand for at least 10 years, are: income/company tax, a can qualify for temporary transitional For individuals, assessable income consumption tax on goods and residence status. A transitional resident includes (among other items) salary services (GST), customs duty and is exempt from New Zealand income and wages, bonuses, other employment local authority rates. tax on their foreign-sourced income benefits or remuneration, partnership other than income from employment or income and investment income. • Capital gains tax, stamp duty, gift the supply of services for a period of For salary and wage earners, tax is duty and death duties are not four years after they meet the test for deducted at source by the employer payable in New Zealand. New Zealand tax residency. through the Pay As You Earn (PAYE) system. The amount of tax deducted Income tax A company is regarded as resident in will depend on the gross salary or New Zealand if it: wage paid to the employee. Non-cash benefits provided to employees are For individuals and companies defined • is incorporated in New Zealand subject to fringe benefit tax which is as “resident” in New Zealand, income payable by the employer. tax is generally imposed on worldwide • has its head office in New Zealand income. Non-resident individuals • has its “centre of management” in For companies, net taxable income and companies are taxed only on New Zealand, or generally corresponds with accounting New Zealand-sourced income, and profit or loss. However, adjustments are their tax liability may be reduced by • is controlled by its directors in commonly required in relation to: the provisions of an applicable Double New Zealand. Tax Agreement. • the timing of income and expenditure recognition

• bad debts Bevan Miles – Partner • capital receipts and depreciation T: +64 9 357 8986 M: +64 21 240 7387 rates, and E: [email protected] • various provisions and reserves.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 19 New Zealand does not currently have a Gain from sale of a property held for Treatment of tax losses To avoid the double payment of broad based capital gains tax. In certain longer than five years may still be taxed tax on the same income (i.e. by the If a resident company or a New Zealand circumstances, however, capital gains if the Inland Revenue Department (IRD) company and the shareholder when the branch of a non-resident company are taxed. In particular, the proceeds considers that the seller acquired the company’s income is distributed as a incurs a tax loss, that loss can generally from the sale of real or personal property for a purpose or intention of dividend), imputation credits may be be carried forward indefinitely to offset property (including shares) may be resale, or if one or more of the specific attached to dividends paid by resident future New Zealand net income and subject to income tax (for example, land taxation provisions applies (for companies (to both residents and non- shared between group companies, where the dominant purpose of the example, if the seller carried on, or was residents). Imputation credits received provided a certain level of shareholder initial purchase was to resell the asset associated with someone who carried by resident shareholders (companies continuity (or in the case of group at a profit). on, a business of land dealing, land and individuals) are offset against any companies, common ownership) is development or building at the time of tax payable on their income, including maintained. Special provisions apply to residential acquiring the property and sells that tax on dividends received. properties other than the person’s property within 10 years). Individuals and trusts can also carry main home. A dividend paid by a resident company forward tax losses, but these losses The Residential Land Withholding Tax to a resident is generally subject to a cannot be shared with other entities. Gains from the sale of residential (RLWT) applies where the seller is an 33% withholding tax. If the dividend is From the start of the 2019-20 income properties purchased after 29 March offshore person and the residential land fully imputed (i.e. imputation credits year, new rules apply to “ring-fence” 2018 and held for less than five years is sold within five years of acquisition are attached at the maximum rate) losses from residential property, which are taxed at the owner’s standard (for properties acquired after 29 March only a residual 5% withholding tax will will only be available to offset future income tax rate. Gains from the sale 2018), or within two years of acquisition be imposed (i.e. the 33% tax liability is income from residential property of residential properties purchased (for properties acquired between 1 reduced to 5% by the 28% tax paid by (including a taxable gain on sale). The between 1 October 2015 and 28 March October 2015 and 28 March 2018). the company). rule is designed to prevent property 2018 are taxable if sold within two years. The RLWT also applies to sales by investors from using excess deductions New Zealand entities that are ultimately Portfolio Investments Entities (PIEs) to reduce tax on other income. Exemptions will apply if the property is: more than 25% owned or controlled by Investment entities which are tax offshore persons. (For more detail, refer Taxation of dividends paid by resident in New Zealand can take • the seller’s main home to the section on New Zealand’s cross- resident companies to residents advantage of New Zealand’s PIE tax border tax regime.) • inherited from a deceased estate regime. Broadly speaking, to qualify Dividends paid by resident companies as a PIE, they must be widely held (or • sold as part of a to resident shareholders are, in most owned by widely held vehicles) with no relationship breakdown. instances, taxable to the shareholder. investor holding more than 20% of any However, dividends paid between investor class, and the PIE not holding New Zealand resident companies that more than 20% of any company or unit are part of the same wholly-owned trust it invests into (subject to some group are generally exempt (subject to exceptions). certain other requirements).

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 20 December 2019 HOME 20 A PIE is exempt from tax on gains from From 1 December 2019, foreign the sale of shares in New Zealand Goods and Services suppliers of goods valued at NZ$1,000 Local government rates resident companies, and in Australian Tax (GST) or less will be required to register companies that are listed on certain for New Zealand GST if total sales Rates are the main source of local approved indices of the Australian to New Zealand residents (excluding government revenue. These are GST is a value-added tax charged at stock exchange. GST-registered businesses) exceed calculated as a percentage of the value 15% on the supply of most goods and the NZ$60,000 threshold. Electronic of land and/or capital improvements. services in New Zealand. PIEs are not taxed like companies. marketplaces will be required to Instead their income is taxed only register for GST (rather than the actual New Zealand suppliers of goods and once – either to the PIE if the investor supplier) if the applicable goods are services are required to register for is an individual or trustee (other than supplied through the marketplace to GST if they carry on a taxable activity a trustee of a unit trust or charitable New Zealand customers. through which they will make taxable trust) or to the investor (if the investor supplies of more than NZ$60,000 per is a company or another PIE). For Certain supplies of goods and services year. A person carrying on a taxable individuals, the PIE pays tax at more can be either exempt from GST (e.g. activity can voluntarily register for or less the investor’s marginal tax rate, financial services) or zero-rated (e.g. GST even if under this NZ$60,000 with a cap of 28%. certain “exported” services and supplies threshold. wholly or partly consisting of land). Non-resident investors in certain PIEs Foreign suppliers may also be required bear no New Zealand tax on foreign- to register for GST if they make sourced income. supplies of services to New Zealand residents (excluding GST-registered businesses) which exceed NZ$60,000 per year.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 21 Key points Taxation of overseas FIF New Zealand’s investments by The New Zealand resident shareholder • New Zealand’s cross border New Zealand residents will be taxed each income year on cross-border tax regime seeks to ensure income attributed from a FIF calculated that tax on income which is using one of five calculation methods. taxable in New Zealand is paid The taxation of equity investments These methods are: tax regime in New Zealand while avoiding by New Zealand residents in non- situations where income is subject New Zealand companies is governed • fair dividend rate method to double taxation. by the Controlled Foreign Company • cost method (CFC) and Foreign Investment Fund • The regime is orthodox in (FIF) regimes. • comparative value method international terms. • deemed rate of return, and • New Zealand is party to 40 tax Subject to certain exceptions, a treaties or double tax agreements New Zealand resident investor is taxed • attributable FIF income method. (DTAs). on income attributed from a CFC or FIF, even though that income may Income from FIFs is generally calculated not be received by the New Zealand either using the fair dividend rate DTAs resident investor. method or the comparative value method. The fair dividend rate method New Zealand has entered into 40 DTAs CFC taxes the shareholder each income year to reduce the incidence of double on deemed income of 5% of the value Subject to a number of exceptions, taxation and to provide more certainty of the investment at the start of the the New Zealand investor will be taxed for taxpayers operating in more than year. The comparative value method each income year on its proportionate one jurisdiction. For the full list of DTAs, taxes appreciation during the year plus attributed share of all net passive refer taxpolicy.ird.govt.nz/tax-treaties distributions. There are exemptions income of the CFC in that year. Net from both the CFC and FIF regimes passive CFC income broadly comprises Foreign tax credits are generally for investment in certain Australian rent, royalties, certain income related to available to New Zealand residents for companies. telecommunications services, income foreign income tax on income derived from offshore insurance businesses, life from countries or territories outside insurance policies, disposals of revenue New Zealand. The availability and account property, base company quantum of the foreign tax credit is services income, certain dividends subject to certain limitations, but does and interest, less related expenses. not depend on New Zealand having David Patterson – Partner Attributed CFC income does not +64 4 498 6330 entered into a DTA with the particular T: include “active” income. No attribution M: +64 27 610 2031 country or territory concerned. E: [email protected] of passive income is required if the CFC’s passive income is less than 5% of Doing business in New Zealand its total income. CHAPMAN TRIPP GUIDE FOR INVESTORS 22 December 2019 HOME 22 Taxation of payments to non-residents In the case of interest paid to non- In respect of interest payments made associated persons, dividends, and by an approved New Zealand borrower certain royalty payments, NRWT is (Approved Issuer) to a non-associated Payments of dividends, interest and royalties to individuals or companies not generally a final tax for New Zealand non-resident lender, the NRWT rate resident in New Zealand are generally subject to non-resident withholding tax tax purposes. can be reduced to 0%, provided certain (NRWT). The rate of NRWT imposed depends upon the type of payment and conditions and registration formalities whether a double tax agreement is in place: The Foreign Investor Tax Credit (FITC) are satisfied. Approved Issuers must regime supplements the NRWT regime. generally pay a levy (Approved Issuer It effectively eliminates the monetary Levy or AIL) equivalent to 2% of the effect of NRWT on imputed dividends interest payment. ​ Double tax agreement Other countries​ countries​ paid to a non-resident shareholder who holds a direct voting interest in a Interest paid on certain qualifying Dividends​* 0-15%​ 0-30% New Zealand company of less than 10% widely held bonds may be eligible for where the post-treaty tax rate (the rate a 0% rate of NRWT without the payer Interest​** 10-15%​ 15%*** after taking into account any applicable having to pay AIL. DTA) for the initial dividend is 15% or Royalties​ 5-15%​ 15%​ more. Withholding payments are deducted at the rate of 15% from non-resident *A 0% rate of NRWT applies to fully imputed dividends paid to a non-resident shareholder holding a 10% or more direct voting interest in a New Zealand company or holding less than 10% but whose post- The FITC regime achieves this contractors for certain work or treaty rate is less than 15%. A 0% rate of NRWT also applies to a fully imputed non-cash dividend. To the by providing a tax credit to the services performed in New Zealand extent the dividend is not fully imputed, NRWT will be required to be withheld at 30% (reduced to 15% New Zealand resident company, which (this rate increases to 20% where the for countries New Zealand has a double tax agreement with; and to lower rates under some treaties for substantial shareholdings). the resident company must use to fund non-resident contractor is a company **In some cases, NRWT applies at the rate of 0%. an additional “supplementary dividend” and does not provide a prescribed to the non-resident (which is equal to withholding declaration to the payer ***Where interest is paid to a non-resident and a resident (jointly) the applicable rate of NRWT will be higher than 15%. the NRWT payable where the dividend prior to the payment being made). An is fully imputed). This ensures that the exemption certificate removing the non-resident shareholder is in a no less need for the withholding deduction beneficial position than a New Zealand can be granted by the IRD in certain resident shareholder receiving the same circumstances. This is not considered dividend. a minimum or final tax. It is credited against any final income tax liability the non-resident contractor may have in New Zealand, and is refundable to the extent of any excess.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 23 Residential Land Transfer pricing and Import duties OECD BEPS Project Withholding Tax thin capitalisation Import licensing, once a common New Zealand has followed many of means of sheltering New Zealand the recommendations resulting from The sale of residential property New Zealand’s transfer pricing regime producers, no longer exists in the OECD’s Base Erosion and Profit in New Zealand acquired after 29 seeks to protect the New Zealand tax New Zealand, with tariffs now the Shifting (BEPS) work. This includes March 2018 by offshore persons, or base by ensuring that cross-border principal form of protection. changes made or proposed to by New Zealand entities ultimately transactions are priced (at least for New Zealand’s DTAs and domestic tax more than 25% owned or controlled tax purposes) on an arm’s length Over recent years, there has been law (including rules dealing with transfer by offshore persons, is subject to basis. Recently enacted rules can a steady reduction of tariff rates for pricing, thin capitalisation, permanent Residential Land Withholding Tax require adjustments to credit ratings goods imported into New Zealand. establishments and hybrid instruments/ (RLWT) if sold within five years of when determining pricing of related Tariff rates vary from item to item and entities). acquisition, or within two years of party lending. depend upon the country of origin, acquisition where the residential with preferential rates being applied to The OECD and the Government have property was acquired between 1 New Zealand also has thin capitalisation Australia, Canada, “least-developed sought public comment on a number October 2015 and 28 March 2018. rules which, broadly speaking, disallow countries”, “less-developed countries” of alternative proposals to address certain interest deductions for a and Pacific Forum countries. Items the growing challenges of taxing the RLWT is generally withheld by the foreign owned New Zealand group (if that are outside the scope of local digital economy. In particular, work is seller’s conveyancing agent on the their debt to asset ratio exceeds 60%) manufacturing are generally duty free, underway seeking global consensus lower of 33% of the seller’s gain (28% or for New Zealand residents with or may qualify for a duty concession. on fundamental changes to profit where the seller is a company) or 10% of an income interest in a CFC or who allocation and nexus rules to expand the total purchase price. control a resident company with such Where New Zealand is party to a free taxing rights to jurisdictions where an interest (if their debt to asset ratio trade agreement (FTA), the FTA will digital services are consumed. The RLWT is not a final tax – the seller exceeds 75%). address in detail the tariffs applicable Government is closely watching these is required to file a New Zealand between the two countries. OECD developments and has signalled tax return and can claim a credit for its intention to consider and implement RLWT withheld against tax payable. GST is also charged on any goods that recommendations as consensus Certificates of exemption are available are imported into New Zealand. An develops including considering for developers, dealers and builders input tax credit can be claimed for this taking unilateral action if the OECD and for sellers who have used the GST (meaning no net cost arises) where process is not swift enough. Given property as their main home for the the importer is GST-registered and is the Government’s comprehensive majority of the ownership period. (Refer acquiring the imported goods for the implementation of the OECD’s BEPS also to the section on Buying and purpose of making supplies which are recommendations and general public developing real estate in New Zealand.) subject to GST. sentiment, we expect changes to New Zealand’s rules are on the horizon.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 24 December 2019 HOME 24 Key points Contract and Commercial • the courts may grant relief, Contract Law Act 2017 including to cancel the contract, vary the contract or make orders • New Zealand contract law is light The Contract and Commercial Law Act for compensation in limited handed, allowing contracting 2017 (CCLA) provides that: law in circumstances where a party can parties to contract on commercially establish it entered into the contract agreed terms. • various terms are read into contracts as a result of a genuine mistake of New Zealand for the sale of commercial goods • Most contracts can be concluded fact or law (but not a mistake in unless the parties clearly intended orally. Contracts involving land, interpretation of a contract). otherwise, including terms relating mortgages, guarantees, extended to when title and risk will pass, and consumer warranties, credit New Zealand does not have any implied guarantees of fitness for contract disclosures or employment separate laws or regulations purpose and merchantable quality agreements must be written. for contracts involving foreign- • contracts with a person under owned entities. the age of 18 cannot be enforced Relevant laws against that person, subject to The CCLA also gives electronic certain specific exceptions and the signatures the same status as paper While New Zealand’s contract law court’s discretion signatures provided the technology is primarily based on common used to produce the signature meets • a party may cancel a contract law principles, various statutory certain statutory criteria as to reliability, for breach, repudiation or pre- overlays apply. traceability and tamper-detection. contractual misrepresentations Powers of Attorney, wills and other (if prescribed criteria are satisfied), Consumer protection legislation testamentary instruments, negotiable and/or recover damages. The courts instruments and bills of lading cannot If one party to a contract is a consumer, also have the power to grant other be made or signed electronically. certain consumer protections will apply types of relief under the CCLA regardless of the terms of the contract • contracts which are illegal at law (see the Consumer Protections in or equity will be of no effect and New Zealand section for details). the courts have the power to make a variety of orders, including Credit contracts with consumers varying the contract. Unreasonable are subject to the Credit Contracts restraints of trade and penalties are and Consumer Finance Act 2003 examples of illegal contracts at law. (see the Consumer Protections in This is broadly consistent with other New Zealand section). Kelly McFadzien – Partner jurisdictions that share an English T: +64 9 357 9278 M: +64 27 473 2230 common law heritage, and E: [email protected]

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 25 The principal pieces of consumer These prohibitions apply whether the • orders for payment of the equivalent Consumer legislation are: activity is intentional or not. revenue or commercial gain earned from certain offending • the Fair Trading Act 1986 The Fair Trading Act sets information • corrective advertising orders protections in and safety standards for some types of • the Consumer Guarantees Act 1993 products, including children’s nightwear, • contract rectification, and • the Credit Contracts and Consumer baby walkers and bicycles. It also New Zealand • compensation payments to Finance Act 2003, and deals with miscellaneous consumer affected parties. protection matters such as layby sales, • the Privacy Act 1993. direct (door-to-door or telephone) sales, extended warranty agreements, Consumer Guarantees Fair Trading Act 1986 auctions, and product recalls. It prohibits various types of unethical Act 1993 commercial behaviour including The Fair Trading Act applies to anyone falsely applying trademarks, falsely The Consumer Guarantees Act: “in trade”. It prohibits: offering prizes, bait advertising, and pyramid selling. • provides consumers with certain • engaging in conduct that is likely to minimum guarantees in relation to mislead or deceive The Fair Trading Act is enforced by the quality, suitability and other • engaging in conduct that is the Commerce Commission and gives aspects of goods and services, liable to mislead as to the consumers and businesses direct and a basic guarantee as to title nature, manufacturing process, rights of action. Suppliers of goods to goods characteristics, suitability for and services to consumers cannot • where goods or services fail to purpose, or quantity of goods contract out of the Fair Trading Act, comply with one or more of those or services and business-to-business contracts guarantees, gives consumer can only exclude the Fair Trading Act in • engaging in misleading conduct in remedies against suppliers and specific circumstances. relation to employment that is or (in the case of goods) against the may be offered to a person original manufacturer. Breaching the Fair Trading Act can • making false, misleading or attract both civil and criminal penalties. unsubstantiated representations in Penalties include: respect of goods or services, and • fines of up to $200,000 per offence • including or enforcing any terms in for an individual and $600,000 per a standard form consumer contract Kelly McFadzien – Partner offence for a company T: +64 9 357 9278 that have been declared unfair by a M: +64 27 473 2230 court, in accordance with the Fair E: [email protected] Trading Act.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 26 December 2019 HOME 26 The Act defines a consumer as a The Consumer Guarantees Act does not ALERT • when collecting personal person who “acquires goods or contain offence provisions. However, Lenders are required to exercise information, unless defined services of a kind ordinarily acquired it is an offence under s13(i) of the Fair care, diligence and skill in dealing exceptions apply, an agency must for personal, domestic or household Trading Act for suppliers of goods and with consumers and to comply collect the information directly use or consumption” and who does not services to attempt to contract out of with certain specific lender from the individual, and must take hold him or herself out as acquiring the the Consumer Guarantees Act. responsibilities. The responsible reasonable steps to ensure the goods or service for the purpose of lending code provides guidance on individual is made aware of the resupplying them in trade, using them how lenders can comply with these collection and provided with certain in a manufacturing process or repairing Credit Contracts principles. details about who is collecting the the goods in trade. and Consumer information and for what purpose • an agency must not collect personal This means that in many cases the Act Finance Act 2003 information by unlawful means, or may apply to business-to-business Privacy Act 1993 by means that are unfair or intrude transactions involving consumer Providing credit at the consumer level to an unreasonable extent upon goods and services. Contracting out through credit contracts and hire The Privacy Act 1993 governs the personal affairs is permitted for business-to-business purchase agreements is regulated by collection, use, storage and disclosure transactions, but only where certain the Credit Contracts and Consumer of “personal information”, which • an agency holding personal statutory criteria are met. Finance Act (CCCFA). The CCCFA includes any kind of information about information must ensure that sets out disclosure requirements for an identifiable individual. This is not the information is protected by Breach of the statutory guarantees contracts, allows debtors to have limited to information that is inherently reasonable security safeguards in the Act may give rise to a right to the terms of a contract changed for private or sensitive, such as health against loss, unauthorised access/ damages, including for consequential hardship reasons and allows the courts or financial information. The Act use/modification/disclosure, and losses sustained as a result of the to re-open and vary “oppressive” applies to public agencies and private other misuse breach of guarantee, and the right to contracts. The CCCFA requires enterprises alike. • individuals have certain rights to cancel a contract and be refunded any repossession agents to be licensed and know what personal information amounts paid. prohibits lenders taking security over The Act centres on a set of “Information an agency holds about them, certain “essential” goods or particular Privacy Principles”, which are similar and to request correction of that A consumer must first request the types of documents. to those in equivalent Australian information supplier or manufacturer to rectify any legislation. Summarising broadly, key breach of the statutory guarantees. principles include that: • before using personal information, If the supplier or manufacturer does an agency must take reasonable not satisfactorily remedy the defect, • an agency must not collect personal steps to ensure the information is the consumer may bring a claim to the information except for a lawful accurate, up to date, complete, Disputes Tribunal, or the High Court or purpose, and then only where relevant, and not misleading District Court, depending on the value necessary for that purpose of the claim.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 27 • an agency must not keep personal The Privacy Act is due to be amended, Retail regulation Other regulations information for longer than is with changes likely to come into force in required for the purposes for which the first half of 2020. The current draft Many other laws and regulations New Zealand law regulates a number the information may lawfully be of the Privacy Bill includes: affect the operation of retail of other activities, goods and services used, and businesses, including: available to the public including: • mandatory requirements for • an agency must not use or disclose notification of data breaches personal information except on • smoke free legislation • gambling, prize draws and that have, or are likely to cause the specific grounds defined in the promotions, which must be serious harm • restrictions on the sale of alcohol Act, for example, where the use or authorised by the Gambling Act disclosure is one of the purposes • higher penalties, with fines of up • restrictions on shop trading days 2003. You should seek specialist for which the information was to NZ$ 10,000 for offences under advice if you plan to provide any • weights and measures standards collected, or where the agency the Bill kind of gambling activity or games of believes on reasonable grounds • food safety and labelling legislation, chance as a primary or ancillary part • restrictions on the transfer that the individual has given his or and of your proposed business or where of personal information from her authorisation. you offer prizes in exchange for the New Zealand to jurisdictions with • restrictions on sending commercial purchase of goods or services, and less than comparable safeguards to or advertising/promotional A breach of the Information Privacy New Zealand privacy law, and messages by email, text (SMS), fax • the supply of medicines and medical Principles does not automatically give or other electronic means. devices, which must be registered rise to a right to damages or other • confirmation that the Bill applies with Medsafe, a division of the mandatory or injunctive remedies for to New Zealand agencies, and Ministry of Health. affected individuals. These remedies any overseas agency in the are available only from the Human course of carrying on business in Rights Review Tribunal, and only where New Zealand. the breach constitutes an “interference with privacy”.

Complaints are investigated in the first instance by the Privacy Commissioner, and may be referred to the Director of Human Rights Proceedings if the Commissioner is unable to facilitate a settlement. An individual may bring proceedings in his or her own name only if the Commissioner or Director has considered the matter and declined to pursue it further.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 28 December 2019 HOME 28 Key points Agreements under the Employment Sale of a business/contracting out Relations Act must be in writing, Employment When engaging in a sale, merger or and may be individual (between an • The Employment Relations Act contracting out arrangement, as well individual employee and the employer) 2000 is the primary piece of as complying with the good faith/ and health or collective (between one or more legislation regulating the workplace consultation requirements described unions and one or more employers). in New Zealand. above, an employer must negotiate with Employers must hold a signed copy of and safety the proposed purchaser/new employer • Fewer than 20% of employees employment agreements. in relation to the employees. Such belong to unions. Unionism is negotiations must include discussion law in strongest in the public sector, the Union membership is not compulsory about who will be offered employment meat industry and the waterfront. but all collective agreements must be with the new employer, and on what New Zealand Strike action is not common and negotiated and concluded with a union. terms and conditions. tends to be localised. Good faith • New Zealand has 11 public holidays The Act also provides that “vulnerable and employees are entitled to four The parties to an employment employees” (primarily cleaning and food weeks’ paid annual leave a year, relationship must not do anything to catering workers) are entitled to transfer after 12 months’ employment. mislead or deceive each other. They to the new employer as of right and to must be “active and constructive” and bargain for redundancy payments with “responsive and communicative” in their the new employer if their services are The Employment dealings with each other. not required. Relations Act Bargaining must be conducted in good Termination faith. Employers and employees/ All employment relationships are Most individual employment unions must, at a minimum, come to the governed by the Employment Relations agreements are indefinite (i.e. they bargaining table, listen and respond to Act 2000 (including senior and continue until terminated) but the law what the other party puts forward. executive employee relationships). also recognises casual and fixed term Independent contractors are not employment arrangements. Fixed term Employers proposing to act in a way governed by the Act, but the Courts agreements are lawful, but subject to that may have an “adverse effect” on and the Inland Revenue Department certain restrictions. their employees, such as a proposal to can examine the “true nature” of the disestablish the employee’s role, must relationship to determine whether the provide information about the decision person is a contractor or an employee. and consult with their employees in Marie Wisker – Partner good faith before the decision is made T: +64 9 358 9845 (subject to genuine although strict M: +64 27 559 8571 confidentiality exceptions). E: [email protected]

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 29 The employee can end an indefinite Dispute resolution Unions • The Holidays Act 2003 provides all employment arrangement by giving the employees with up to 11 statutory The Act encourages mediation as the Only a small proportion of New Zealand specified notice period. However, an holidays a year (if the day is primary means of settling employment businesses have a union presence. employer can terminate an employee’s otherwise a working day for the disputes. If mediation is unsuccessful, However, unions may try to recruit employment only after following a employee), time and a half for the parties may have their dispute members at work and are entitled prescribed legal process and only working on a public holiday, four decided by the Employment Relations to enter workplaces for union- for genuine substantive reasons weeks’ paid annual leave after 12 Authority, an investigative body. If related purposes. such as redundancy, misconduct, months employment and, after six still unsatisfied, parties have a right of poor performance, abandonment or months’ employment, five days’ sick appeal to the Employment Court. Where there is a collective agreement incapacity. An employee has 90 days leave per year, bereavement leave in place, or collective bargaining has following any termination to raise of three days on the death of close Very often, employment disputes are been initiated, the union does not need a personal grievance claim against relatives and one day on the death solved in mediation and do not proceed to seek the employer’s consent before the employer. of any other person, and 10 days to litigation. entering the worksite. Unions must family violence leave. exercise these access rights reasonably, An exception to these termination Strikes and lockouts and employers cannot unreasonably • The Parental Leave and Employment provisions is available for businesses refuse entry. Protection Act 1987 provides for with fewer than 20 employees. They can The only lawful strikes or lockouts are both parents to take specified take new employees on for a 90 day those that relate either to bargaining for periods of parental leave (unpaid) trial period, provided this is agreed in a collective agreement or to health and Working conditions on the birth or adoption of a child. writing between the parties at the time safety issues. Primary caregivers are entitled to of hiring. There are strict requirements Every employee in New Zealand is up to 22 weeks’ government-funded regarding trial period clauses (for When a strike occurs, an employer can entitled to a number of basic rights. paid parental leave to a maximum example, agreements with trial clauses only use existing employees to perform amount (which is reviewed regularly) must be signed before the employee the work of the striking employees, • The Minimum Wage Act 1983 or to 100% of the parent’s previous starts work). and then only if the existing employees prescribes statutory minimum wages weekly earnings, whichever is agree to perform the work. External for adult employees, employees who the lower. The scheme allows the There is no statutory right to workers may only be employed when are starting out (under 20 years of mother of the child to claim the paid redundancy compensation in the work is necessary for public health age and meeting specific criteria) leave or transfer the payment to the New Zealand and, other than in very and safety reasons. and employees who are training (20 child’s other parent, including same limited circumstances, compensation is years and over and attending an sex partners. The duration of the only payable if it is provided for in the approved training course). These payments will increase to 26 weeks employment agreement. rates are reviewed annually. in July 2020.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 30 December 2019 HOME 30 • KiwiSaver is the New Zealand Payroll tax The PCBU is required to ensure the Compensation for injuries can take the government’s superannuation health and safety of all who work for it form of payments for loss of earnings, scheme. Employers are required or could be put at risk by that work. This health care treatment, rehabilitation, an In addition to KiwiSaver contributions to contribute 3% of employees’ requires that it put in place processes independence allowance for disability, and Accident Compensation gross earnings to an employee’s to eliminate or – if elimination is not funeral expenses and death benefits Corporation (ACC) levies, employers chosen KiwiSaver scheme. All new possible – minimise safety risks so far for dependents. The scheme is funded in New Zealand are required to deduct employees must be automatically as is reasonably practicable. from a number of sources, including “Pay As You Earn” payroll tax (PAYE). enrolled in KiwiSaver but they can levies on employers (linked to the Deductions are made on a fortnightly choose to opt out in the first six All PCBUs have the right to amount of wages paid, with levy rates or monthly basis. The Inland Revenue weeks. Existing employees can appoint workers’ health and safety determined on the basis of injury rates Department may also require other choose to join KiwiSaver at any time. representatives and/or health and in the relevant industry), levies on deductions such as payments towards Total remuneration approaches safety committees. PCBUs employing employees, taxes on vehicle registration student loans or child support. (where employer contributions are more than 20 employees or with a and taxes on petrol. deducted from the employee’s moderate or higher risk profile are salary) are generally permitted. Health and safety required to do this at the request of the Another option is the ACC’s accredited workforce. For smaller businesses in low employer programme under which Discrimination risk industries, it is optional. employers can elect to pay a reduced The Health and Safety at Work levy in return for funding all or a share Under the Human Rights Act, Act assigns responsibility for of any compensation entitlements discrimination in employment on the workplace safety to “officers” and Accident compensation incurred at their workplace. To be basis of an employee’s (or prospective employing entities. accepted for the programme, the employee’s) sex, marital status, religious The Accident Compensation Act 2001 employer must satisfy a number of beliefs, ethical beliefs, colour, race, Officers are directors and very senior provides a statutory no-fault scheme criteria, including a minimum level of ethnic or national origin, disability, managers which, in the majority of under which cover is available to those safety expertise and financial solvency. age, political opinions, employment cases is likely to be just the Chief suffering personal injury, and legal status, family status, sexual orientation Executive. They have a positive duty claims are prohibited. Accident compensation benefits, but or union involvement is subject to of due diligence to “take all reasonable not earnings-related compensation, legal sanction. steps” to ensure that the entity (defined Coverage is broad based and includes are available to non-residents who are as the Person Conducting a Business most physical injuries, regardless of injured while in New Zealand. or Undertaking, PCBU) is fulfilling its whether they occur in the workplace obligations under the law. or elsewhere. Unless sustained as the victim of a crime, pure mental injury is not covered by the scheme.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 31 Competition and anti-trust law in • taking advantage of a substantial The Commerce Commission has the Anti-trust, New Zealand is administered through degree of market power for the power to conduct market studies in the Commerce Act 1986. This: purpose of restricting entry into the public interest – for example, a market, deterring competitive where there is reason to suspect competition • prohibits restrictive trade practices conduct, or eliminating a competitor market failure. from a market. • regulates business acquisitions, and law in Business acquisitions • allows price controls to be imposed Engaging in a prohibited practice may in certain industries. result in a penalty of: New Zealand Part 3 of the Commerce Act prohibits The Commerce Commission is the • up to NZ$500,000 for individuals, the purchase of shares in or assets government agency charged with and of a business where the acquisition administering the Commerce Act. would have (or would be likely to have) • for a body corporate, the greater of the effect of substantially lessening NZ$10 million or either three times competition in a market. Restrictive trade the value of any commercial gain resulting from the contravention (if it Parties to an acquisition which may practices can be easily ascertained) or 10% of raise competition concerns may the turnover of the body corporate seek pre-transaction clearance from Part 2 of the Commerce Act and all its related bodies corporate. the Commission. Clearance, which prohibits certain restrictive trade if granted, immunises the deal from practices including: The Commerce Act allows an exemption challenge by the Commission or for collaborative conduct between third parties. The clearance regime is • contracts, arrangements or competitors which is reasonably voluntary and it is common for mergers understandings which have the necessary and has not been entered to proceed on a non-notified basis. purpose, effect, or likely effect of into with the dominant purpose of substantially lessening competition reducing competition. The Commission aims to decide in a market merger clearance applications within It also provides for a clearance process • price-fixing, restricting output and 40 working days of the application under which an entity can apply to market-sharing arrangements among being registered. However, depending the Commerce Commission to test competitors on the scale and complexity of the whether the collaborative activity transaction, this timeframe can increase • resale price maintenance exemption applies. significantly up to six months or more. arrangements by which suppliers of Neil Anderson – Partner goods set and enforce sale prices to There is also the ability to seek T: +64 4 498 6313 be charged by re-sellers, and authorisation, on public benefit M: +64 27 278 9494 grounds, of arrangements that might E: [email protected] otherwise be unlawful.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 32 December 2019 HOME 32 ALERT • the three largest firms in the market An order may also be made requiring Businesses should seek advice have a combined market share of divestment of specified assets or on the likely timing of a clearance less than 70% and the merged entity shares (which can potentially include application process and the has a market share of less than 40%, unwinding the merger). potential implications of this or prior to entering into the formal • the three largest firms in the market clearance regime. Price control have a combined market share of more than 70% and the merged Part 4 of the Commerce Act contains a entity has a market share of less In assessing whether a merger is likely mechanism to impose price control on than 20%. to substantially lessen competition, the the providers of particular goods and Commission will analyse the merged services in circumstances where there firms’ ability to raise prices and/or is limited competition. There are no reduce product quality or service, ALERT restrictions on the industries to which Before relying on these “indicators”, relative to what would have occurred Part 4 may apply. it is wise to seek specific advice without the acquisition. Relevant to and carefully consider the relevant this enquiry are the market share of The industries currently subject market definitions and dynamics. the merged entity, the market shares of to Part 4 regulation are airports, It is also worth noting that they are other participants, the likelihood of new electricity lines services and gas only a starting point for the analysis entry, the merged entity’s relationship pipeline businesses. and that falling outside them will not with suppliers and purchasers, and necessarily mean that an acquisition whether there are features of the Specific legislation regulating will be judged to lessen competition. market which are suggestive of the competition in particular industries For example, market shares may be potential for collusion and discipline. applies in the case of: high but the conditions of entry or expansion may be benign. The Commission’s guidance is that • telecommunications a merger or acquisition is unlikely to (Telecommunications Act 2001) raise Commerce Act concerns if, after Maximum penalties for an acquisition in • dairy (Dairy Industry Restructuring the acquisition: breach of the Commerce Act are: Act 2001).

• NZ$500,000 for individuals; and/or • NZ$5 million for companies.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 33 Key points Copyright New Zealand is in the process of a Intellectual copyright review in which officials are considering root and branch reform. • New Zealand’s intellectual property The Copyright Act grants exclusive laws are derived from English rights to: property in The copyright in literary, dramatic, legislation and common law. musical and artistic works generally • copy a work New Zealand • They reflect international lasts for the life of the author plus norms, the TRIPS Agreement • issue copies of the work to the 50 years. The term for communication and New Zealand’s World Trade public works, films, sound recordings and Organisation obligations. typographical works is 50 years. • play, perform or show certain works • Principal statutes are the Copyright in public Public performances of various Act 1994, the Patents Act 2013 and • “communicate” the work kinds may also be the subject of the Trade Marks Act 2002. separate protection given in certain • make an adaptation of the work, and circumstances to performers (but not in • authorise any of these activities. the performance of sporting activities). In addition, the Copyright Act protects Works that can be subject to copyright “moral rights” which, (depending on the include: literary works, computer circumstances) may include: a right to programmes, dramatic works, artistic be identified as the author, a right to works (which may include drawings, object to derogatory treatment of a moulds, dyes etc. for utilitarian items work, and a right against being falsely such as machinery or clothing), musical attributed as the author of a work. works, sound recordings, films and broadcasts, including over the Internet. Under New Zealand law, moral rights are not assignable. They can, however, To qualify for protection, a work must be waived. be “original”.

In accordance with the Berne Patents Convention (to which New Zealand is a signatory) copyright exists as soon as Protection under the Patents Act the work is created. A work does not 2013 allows the owner of a patented need to be registered to gain protection invention to prevent others from Matt Sumpter – Partner in New Zealand (and we have no exploiting – e.g. making, using or selling T: +64 9 357 9075 M: +64 27 531 3919 Copyright Register). it – for 20 years from the date of E: [email protected] the patent.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 34 December 2019 HOME 34 A patent will be granted where the Registered designs Trade marks Company names Commissioner of Patents is satisfied “on the balance of probabilities” New and original industrial designs are Registration of a trade mark under A company name will not be approved that the application meets the registrable under the Designs Act 1953 the Trade Marks Act 2002 gives the if it is identical (or nearly identical) to requirements under the legislation. The if their shape, configuration, pattern, or proprietor the exclusive right to use the an existing company name. Registering most important of these are that the ornamentation has visual appeal. The trade mark in relation to the goods and/ a company or reserving a company invention meets a universal or absolute period of protection is for an initial five or services for which it was registered. name gives no right to use the name as novelty test and involves an inventive years, with rights of renewal for two a trade mark, and provides no defence step (meaning that it is not “obvious”). further five-year periods. The Act permits comparative to infringement of third party trade mark advertising involving registered rights. (This is also the case in respect Certain things are excluded from Because the Copyright Act protects trademarks, except where the of domain names.) patentability, including methods of industrially applied artistic works and advertisements are “unfair” to the medical treatment of human beings useful articles in New Zealand, some reputation of the mark. The Act also by surgery or therapy, a method of businesses are content to rely on contains “anti-dilution” provisions Domain names diagnosis practised on human beings, copyright law only (although there are to prevent unfair use of well-known and inventions the commercial advantages to gaining registration under registered marks in relation to goods Regional domain names, such as “.co. exploitation of which would be contrary the Designs Act). and services which are dissimilar to nz” and “.govt.nz”, are registrable in to public order or morality. those for which the mark is registered. New Zealand. New Zealand courts Marks involving Māori language or have protected businesses against “Embedded software” may be patented. symbols must be referred to a special “cybersquatting” in some instances. “Swiss-type” patent claims in the committee for consideration before There is also now a dispute resolution pharmaceutical area are possible. they are eligible for registration. service operated by the Domain Name Commission, similar to the UK Various procedures are open to The Madrid Protocol allows for a multi- Nominet service. third parties wishing to object to or country trade mark application process. oppose a patent, both before and after grant. These include asking for a re‑examination.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 35 Passing off Confidential information

The law of passing off may also be New Zealand law protects confidential invoked to protect business goodwill information relating to trade secrets, and is frequently used for the such as business methods and protection of trade marks (whether or industrial processes. As with passing not registered), names, logos, packaging off, the principles are similar to those designs and shapes. The principles that have been developed in English are similar to those that have been and Australian law. Non-disclosure developed in English and Australian agreements (NDAs) are useful for common law. This law is augmented by providing contractual rights to prevent a consumer protection statute, the Fair disclosure of confidential information Trading Act 1986, which may capture and can be used to supplement misleading conduct in trade involving common law rights. trade marks (see the Consumer Protections in New Zealand section).

Parallel importation

Importers can import lawfully made goods from foreign countries in commercial quantities without infringing the copyright of the “official” distributor in New Zealand, or of the overseas manufacturer. However, the prohibition against importing pirated goods, made without the copyright owner’s consent, remains in force.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 36 December 2019 HOME 36 Key points ALERT Foreign financial service providers who Financial Financial services providers must provide financial services solely to register on the Financial Service wholesale clients (such as investment • New Zealand has a highly developed Providers Register. Those who businesses, fund managers, large financial services regulatory services in provide retail services need companies, government entities and regime, with comprehensive to join an approved dispute certain eligible investors) are relieved licensing requirements. New Zealand resolution scheme. from registration requirements. • New Zealand is favourably regarded for its “ease of doing business” A financial institution which is engaged compared to most other countries. Financial advisers and DIMS providers in certain financial activities in who provide personalised services New Zealand must comply with the • New Zealand operates an open to retail clients in relation to more requirements of New Zealand’s anti- foreign exchange system. complex products (not, for example, money laundering and countering bank deposits) must be authorised. financing of terrorism legislation. Overview of The Financial Services Legislation Amendment Act 2019 (FSLAA) will licensing, registration come into force on a transitional and compliance basis from June 2020. FSLAA will require financial advice providers to requirements be licensed, to meet new disclosure obligations and to comply with a Code Licensing is required for registered of Professional Conduct. banks, insurers, non-bank deposit- takers, fund managers and derivatives Fund managers and other financial issuers (in respect of products offered product providers, financial advisers, to retail investors), certain supervisor DIMS providers, derivatives issuers, trustees, discretionary investment supervisor trustees, brokers and management service (DIMS) providers custodians must also comply who offer retail services on a class with a range of money handling, basis, providers of crowd funding financial reporting and other and peer-to-peer lending services, conduct obligations. operators of financial product markets (such as a stock exchange) and auditors. Penny Sheerin – Partner T: +64 9 358 9817 M: +64 27 556 6516 E: [email protected]

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 37 Bank registration Overseas banks must have the approval • obtaining, publishing and disclosing • disclosure requirements when of, and comply with, the prudential to New Zealand policy holders and making a regulated offer of requirements of their home supervisor the Reserve Bank current financial financial products to investors Any financial institution that carries to conduct banking business in strength ratings (i.e. a credit rating) in New Zealand (refer to the on any activity directly or indirectly in New Zealand. from an approved rating agency, and Investing in New Zealand’s capital New Zealand with a name or title that markets section) includes “Bank”, “Banker” or “Banking” • establishing and complying with “fit must be authorised to use that name Non-bank deposit takers and proper” policies for directors • fair dealing rules which prohibit in New Zealand by the Reserve Bank. and senior officers. disclosure in New Zealand that Overseas banks may use restricted is likely to mislead or deceive Anyone who takes deposits or offers words when carrying on activities in Life insurers must maintain at least the public in relation to financial debt securities to retail investors New Zealand only if they register as one statutory fund that relates products or services. The fair and carries on the business of registered banks or are authorised by solely to the insurer’s life insurance dealing rules apply to conduct in borrowing and lending money must the Reserve Bank (but only to the extent business and is available to meet life New Zealand in relation to financial be licensed as a non-bank deposit of the authorisation). The Reserve Bank insurance liabilities. products whether related to retail or taker by the Reserve Bank. Relief can has published guidance notes on the wholesale offers be obtained for overseas banks in use of restricted words by overseas Generally, an overseas entity carrying some circumstances. • registration and governance banks, and a class authorisation for on business in New Zealand will not be requirements for managed overseas banks undertaking banking able to use a name or title including Non-bank deposit takers must comply investment schemes, debt and lending, financial advisory services, the words “insurance”, “assurance”, with a range of prudential obligations securities, KiwiSaver and capital and debt market issuances, and “underwriter” or “reinsurance” (or similar under the applicable legislation. superannuation schemes foreign exchange and derivative market words), without an exemption from the activities for wholesale customers. Reserve Bank. • financial reporting obligations for Insurers issuers, fund managers, registered Registered banks are subject to the banks, insurers and other licensed full regulatory oversight (including Offering investments All insurers and reinsurers carrying on entities. Each reporting entity must prudential supervision) of the Reserve insurance business in New Zealand in New Zealand prepare audited financial statements Bank. Only financial institutions that must be licensed by the Reserve Bank. (or group financial statements, if it can demonstrate an ability to carry on Licence obligations include: Various obligations apply to how has any subsidiaries) and register their business in a prudent manner, and financial products are created, these with the New Zealand which have appropriate standing and • maintaining solvency and file promoted and sold to both retail and Companies Office, and repute, are permitted to be registered solvency statements, in accordance wholesale investors in New Zealand. as banks in New Zealand. The Reserve • investor money handling rules for with standards prescribed by the These include: Bank takes into account both qualitative offers of derivatives to both retail Reserve Bank (the applicant’s financial standing and and wholesale investors. ability to manage its business prudently) • having an appointed actuary and quantitative criteria (key prudential requirements).

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 38 December 2019 HOME 38 Managed/collective The Asia Regional Funds Passport Foreign FSPs who reside outside When it comes into force on a allows offerors from New Zealand, New Zealand and provide financial transitional basis from June 2020, the investment schemes Australia, Japan and Thailand to services in New Zealand will generally FSLAA will replace the FSP test with a offer products to investors in each not need to register (provided they requirement that FSPs register if they If a managed investment scheme other’s countries. To qualify, various are not offering financial advice in are in the business of providing financial is offered to retail investors in criteria must be met, including that New Zealand). services to retail clients in New Zealand New Zealand, it will need to be the fund must have US$500 million (or provide wholesale services from registered in New Zealand under under management and US$1 million Registration on the FSPR is not a New Zealand, or are required to be New Zealand law. Registered managed of equity, and the offering document licence or an endorsement by the licensed or registered under any other investment schemes are highly must be compliant with the laws of the Financial Markets Authority. Act). regulated and must comply with home country. Other requirements specific registration, disclosure and include that the fund manager must be Depending on the nature of the To prevent misuse of the FSPR, the governance requirements. The manager licensed in their home jurisdiction and financial services offered by the new Act provides that registration of the scheme must be licensed and comply with New Zealand disclosure registered entity in New Zealand, it may will not be permitted in certain an independent licensed supervisor requirements, and the FMA must also need to be authorised or obtain a circumstances, including: (trustee) must be appointed. provide sign-off to confirm compliance market services licence. with the passport rules. • merely because the FSP’s financial If the scheme is marketed solely to If financial services are provided to services are accessible by (and not wholesale investors in New Zealand, it retail clients, the FSP must also join an provided to) persons in New Zealand will not need to be registered. Financial Service approved dispute resolution scheme. • if the FSP has wholesale clients only Providers Register and does not have a New Zealand The Trans-Tasman mutual recognition Registered providers can be place of business, or regime allows Australian offerors deregistered if their registration Anyone who carries out financial to use their Product Disclosure is likely to be misleading as to the • if the services provided to persons services in New Zealand must be Statement (PDS) and prospectuses in extent financial services are provided in New Zealand are below the registered as a financial services New Zealand, without requiring that the in New Zealand or from a place of threshold specified in regulations. provider (FSP) on the Financial Service manager be licensed. business in New Zealand, the provider Providers Register (FSPR). This includes is regulated by New Zealand law or In addition: financial advisers, banks, securities the registration would damage the issuers, fund managers, custodians, integrity or reputation of New Zealand • FSPs will be required to give specific money managers, credit contract financial markets. warnings and information in relation providers, credit card providers, to their registration, non-compliance travellers cheque providers, currency with which requirements will be a exchanges, insurers, trustees, listed ground for deregistration, and companies, issuers of derivatives to the public and foreign exchange dealers.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 39 • the FSPR Registrar will have Financial advisers • be a member of an approved • comply with the Code of powers to require the provision dispute resolution scheme. Professional Conduct for Financial of information to assess whether and discretionary Advice Services, which comprises the registration requirements are, investment managers Any person who makes investment of nine standards relating to ethical and continue to be, met and to management decisions on behalf of behaviour, conduct and client deregister FSPs for failure to provide another under an authority is subject care, and competence, knowledge Any person who advises on financial that information. to certain conduct and disclosure and skill. products or provides an investment obligations, and needs to be licensed if planning service is subject to the services are non-personalised. Distinctions between types of financial certain disclosure requirements and products, personalised and class advice conduct obligations. Reduced requirements apply in relation and categories of financial products, to services provided to wholesale will be removed. The requirements apply to FSPs clients (such as investment businesses, resident overseas, if the service is fund managers, large companies, provided in New Zealand. government entities and certain eligible investors) or only on a class basis. Persons providing services on a personalised basis relating to more As a result of the FSLAA, FSPs providing complex products will generally also advice to retail clients must: have to become authorised by the Financial Markets Authority and meet • obtain a licence from the Financial certain standards. This will require Markets Authority them to: • comply with new legislative duties • meet certain authorisation criteria and obligations when giving and have certain prescribed regulated financial advice qualifications (which generally are • comply with new disclosure available only in New Zealand) requirements prescribed in • provide certain prescribed regulations, and disclosures to their clients

• meet certain conduct obligations relating to ethical, client care, competence, knowledge, skills and continuous training standards, and

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 40 December 2019 HOME 40 Brokers and custodians Foreign exchange market Anti-money laundering Other regulations legislation Brokers and custodians who carry There are no restrictions on the buying New Zealand has also rules regarding: on the business of receiving and and selling of foreign currencies. The The New Zealand anti-money holding, paying or transferring client New Zealand banking system offers a • registration as an overseas company laundering and countering financing of money or client property must comply full range of foreign exchange services when a foreign company is carrying terrorism (AML/CFT) regime requires with certain broker disclosure and including spot, forwards, futures, on business in New Zealand overseas entities engaged in certain conduct obligations. options and the more sophisticated financial activities in the ordinary • compliance with FATCA (Foreign derivative products. course of business in New Zealand to: Account Tax Compliance Act), AEOI These obligations apply whether or (Automatic Exchange of Information) not the business is the provider’s only New Zealand operates a very open • carry out various levels of customer and Common Reporting Standards business or the provider’s principal regime. Borrowers may raise finance monitoring and due diligence, (CRS) business and regardless of whether the on and off-shore and in the currency identity verification and suspicious service is provided from overseas or in of choice. Banks are actively engaged • registration and establishment of activity reporting in accordance with New Zealand. in the provision of short and medium- limited partnerships. the AML/CFT legislation to-long term debt to the consumer, Fewer conduct obligations apply to commercial and corporate sectors. • undertake and prepare a written brokers providing broking services Market forces determine the level of risk assessment of the risk of money ALERT only to certain wholesale clients than interest rates. laundering and the financing of This summary is necessarily apply to those providing services to terrorism that it may reasonably generalised. There may be retail clients. expect to face in the course of its exceptions depending on your Repatriation of funds business, and particular circumstances. We suggest you seek advice before • establish, implement and maintain an There is no restriction on the proceeding with any proposal. AML/CFT compliance programme repatriation of capital or earnings of under the administration of a a New Zealand business to overseas dedicated compliance officer. investors. This includes the remitting of dividends, profits, interest, royalties, management fees, etc. In many cases, however, non-resident withholding tax will be required to be deducted from the amount of those payments. For more information on New Zealand tax, please refer to the section on New Zealand’s cross border tax regime.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 41 Key points Capital markets in Takeovers Code and Investing in New Zealand Overseas Investment Act • New Zealand has a stock exchange which comprises two main securities New Zealand’s NZX operates the two main capital All listed companies are subject to the markets – the NZX Main Board and markets in New Zealand: New Zealand Takeovers Code, which the NZX Debt Market operated regulates changes in the voting rights of capital by NZX. • the NZX Main Board, New Zealand’s “code companies”. • The Takeovers Code restricts principal market for equity markets investors and their associates securities, with around 175 issuers, from holding or controlling more which allows investors to trade in ALERT than 20% of the voting rights in a some of New Zealand’s largest and A code company is any New Zealand “code company”, which includes most well-known companies, and company that is listed or which has listed companies. 50 or more shareholders and 50 or • the NZX Debt Market, which more share parcels. • The Overseas Investment Act allows investors to trade in a wide also applies to investments in variety of debt securities, including New Zealand listed companies. New Zealand government bonds.

• There are laws against insider trading NZX also operates the NZX Derivatives and market manipulation, which Market, which includes the Global Dairy are enforced by the New Zealand Futures and Options Market and the Financial Markets Authority. Equity Derivatives Market.

New Zealand’s capital markets are well regulated, with developed and comprehensive rules applying to issuers and market participants. NZX is primarily responsible for regulating the markets and is a member of the World Federation of Exchanges. The New Zealand Financial Markets Authority, the government regulatory agency, also regulates the markets Rachel Dunne – Partner operated by NZX and NZX itself, as the T: +64 9 357 9626 licensed market operator. M: +64 27 553 4924 E: [email protected]

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 42 December 2019 HOME 42 The Takeovers Code restricts a The Takeovers Code permits a Insider trading and New Zealand has a general prohibition person, together with its associates, person, together with its associates, against market manipulation, which from holding or controlling more than to hold or control voting rights market manipulation captures a range of behaviours such 20% of the voting rights in a code above the 20% threshold in certain as publishing a false or misleading company or increasing a holding or circumstances, including a full or New Zealand has insider trading statement that is likely to affect control that is already above 20%. partial takeover offer. The procedure laws that prohibit investors trading trading in quoted securities or doing for undertaking a takeover offer is where they hold information that is something that creates a false or detailed in the Takeovers Code and not generally available and which a misleading appearance of trading. includes a number of specific timing reasonable person would expect to and disclosure requirements. The have a material effect on the price of A breach of the insider trading or Takeovers Panel is the regulatory the quoted securities, regardless of market manipulation laws can result body responsible for administering the the source of that information. in civil or criminal liability for the Takeovers Code. person responsible, as well as possible Passing on such information to accessory liability for others involved In addition, the Overseas Investment another person or advising a person to in the contravention. Act may apply to investments in hold or trade securities while holding New Zealand’s capital markets. See the such information, known as “tipping”, Overseas Investment in New Zealand can also breach New Zealand insider section for further details. trading laws.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 43 Key points Making an offer in Exclusions and Fundraising in New Zealand exemptions • Issuers are required to prepare and register a “Product Disclosure New Zealand New Zealand’s securities laws are set There are a number of exclusions Statement” in order to offer financial out in the Financial Markets Conduct under the Financial Markets Conduct products unless an exclusion or Act, which is enforced by the Financial Act, including bright line tests that exemption is available (such as for Markets Authority. provide clarity as to when New Zealand offers to wholesale investors). investors are eligible to be offered • Listing on one of the markets Generally, issuers are required to financial products without any operated by NZX may be prepare and register a Product disclosure documentation, or with undertaken in conjunction with a Disclosure Statement or “PDS” limited disclosure – e.g. offers to fundraising offer, generally using the before offering financial products in wholesale investors and dividend same document. New Zealand. The PDS sets out key reinvestment plans (subject to information for retail investors about certain conditions). the financial products on offer and has strict content requirements that depend Another exclusion is for crowdfunding, on the type of financial product being which allows issuers to raise up to offered. For offers of debt securities NZ$2 million in a 12 month period and managed investment products, through a crowdfunding offer with external supervisor and licensing reduced disclosure requirements. obligations also apply. These offers have to be made through a licensed crowdfunding Outside the heavily regulated Product platform, of which there are a number Disclosure Statement, the advertising currently operating. regime is flexible and does not place any specific content restrictions upon If an investor wishes to make an advertisements, other than requiring the offer in New Zealand but is unable inclusion of certain disclaimers. to fit within one of the exclusions or class exemptions, it is possible to apply for a bespoke exemption from the New Zealand Financial Markets Authority.

Rachel Dunne – Partner New Zealand and Australia have a mutual T: +64 9 357 9626 M: +64 27 553 4924 recognition regime for the offering of E: [email protected] financial products, which enables an offer made in one country to be easily Doing business in New Zealand extended to the other country. CHAPMAN TRIPP GUIDE FOR INVESTORS 44 December 2019 HOME 44 Fair dealing and other Listing potential liabilities In conjunction with capital raising, an The key requirements when seeking issuer may wish to list on one of the a listing on the NZX Main Board The Financial Markets Conduct Act markets operated by NZX (see the are to have an anticipated market prohibits issuers and others engaging Investing in New Zealand’s capital capitalisation of at least $10 million in conduct or making statements that markets section for more details). and a spread of at least 20% of are misleading or deceptive in relation Generally, the document used for the class of equity securities to be to financial products. This has a broad fundraising can also be used for listing quoted held by at least 100 persons application, although attracts civil purposes. Otherwise, a separate not affiliated with certain company liability only. compliance listing document can insiders (or an appropriate spread to be prepared. ensure a sufficiently liquid market). Issuers, and their directors, undertaking a regulated fundraising The process to apply for listing There are no spread requirements for offer are subject to potential is relatively straightforward, the NZX Debt Market but the nominal criminal liability for serious although there are certain timetable amount of securities to be quoted misconduct and civil liability requirements that must be borne must be at least $10 million. for less serious misconduct. in mind.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 45 Insolvency in Key points Liquidation Receiverships • Whether you are starting a new A liquidator is usually appointed to a A receiver recovers the company’s New Zealand business in New Zealand, investing in company by either its shareholders assets in order to repay the secured an existing business, or dealing with (usually a 75% majority is needed), creditor. They have power to manage other New Zealand-based parties – or the Court, on the application of the company and deal with its assets. there’s always a risk that an involved a creditor. A receiver owes only limited duties party will become insolvent. to other parties, such as unsecured The principal duty of a liquidator is to creditors. Typically, receivers are • Receiverships, liquidation and take possession of, protect, realise appointed by a creditor with security voluntary administration are the and distribute company assets (or the over all a company’s assets, although most commonly used formal proceeds from the sale of those assets) appointments can be over an individual insolvency procedures for to the company’s creditors. Liquidators asset. A contractual right to appoint companies in New Zealand. in New Zealand have a statutory right to receivers is necessary. Shareholders or • The ability of a creditor to use the claw back preferential payments made directors of a company cannot appoint various insolvency regimes will by the company in the two-year period a receiver, but may ask a secured depend on the nature of the debt preceding liquidation, or payments creditor to appoint a receiver. owing, for instance whether it is at undervalue. The liquidator then secured or unsecured. Broadly, distributes those realisations to the Receivers are not agents of the New Zealand is a secured creditor creditors. Employees and the Inland creditors who appointed them. Rather, friendly jurisdiction. Revenue Department (for some taxes) except in liquidated companies, they are paid before unsecured creditors. are agents of the company. Receivers’ reports are available online. Liquidation does not prevent secured creditors from exercising their rights over secured assets, although employees and the Inland Revenue Department are paid before general secured creditors from proceeds of inventory and receivables.

Liquidators’ reports are publicly available through the online Michael Arthur – Partner Companies Register. T: +64 9 357 9296 M: +64 27 209 4999 E: [email protected]

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 46 December 2019 HOME 46 Voluntary administration Compromise A key feature of the PPSA is that its Personal insolvency application is not affected by a secured party having title to the security – bankruptcy Voluntary administration provides a In addition to the above formal collateral. A debtor with rights in mechanism for the administration of procedures, it is routine in New Zealand personal property can grant a security Bankruptcy proceedings are governed the business, property and affairs of an for companies facing difficulties interest in that property even though by the Insolvency Act 2006. Bankruptcy insolvent company or a company that to seek to compromise with their it has no title to the property (such affects an individual’s legal status. Its may become insolvent in the future. The creditors. Those compromises can as where the property is subject to a consequences include; vesting the objective of voluntary administration be informal – i.e. created by a simple retention of title clause or held under bankrupt’s property in the Official is to maximise the chances of the contract – or they may be more formal. a lease). Assignee, the bankrupt being limited company, or as much as possible of its The Companies Act has procedures in the business activities he or she can business, continuing in existence or, by which all creditors can be bound The PPSA determines the priority undertake and the Official Assignee where that is not possible, to produce to a compromise if a majority of of any security interest taken over being entitled to recover assets that a better return for the company’s creditors vote in favour of it. Again, personal property. In general, a the bankrupt has transferred before creditors and shareholders than would 50% by number and 75% by value perfected security interest has priority the bankruptcy. A corporation, result from the immediate liquidation of (of those voting) must vote in favour for over an unperfected security interest. association or company incorporated the company. a majority. Perfection is usually achieved by or registered under any Act may not be registration on the Personal Property adjudicated bankrupt. Voluntary Administration imposes a Securities Register (an online register). moratorium period, generally of around Personal Properties Priority between perfected security five weeks but it can be extended. Securities Act (PPSA) interests is determined by which Regulation of insolvency During this time, the enforcement secured party is first to either register, of charges is prevented as are practitioners New Zealand’s PPSA regulates all or take possession of the collateral. taking possession of property, court securities interests in personal There are important exceptions to the proceedings, enforcement proceedings At present, New Zealand has no property. “Security interests” include order of priority, however. or the making of demands under regulation of insolvency practitioners. traditional securities interests a guarantee. A Bill to address this is now before (mortgages, fixed and floating charges, Failure to register a security does not Parliament and is expected to pass pledges and liens) as well as in- invalidate that security, but it may The moratorium gives the voluntary this year. substance security interests (such as prejudice its priority position. administrator an opportunity to conditional sale agreements, retention develop a rescue plan which must of title provisions and leases of 12 then be adopted at a meeting of months or more). creditors. A majority of creditors is 50% by number and 75% by value (of those voting).

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 47 Resolving Key points Legal system Hierarchy of courts • New Zealand has a New Zealand’s common law system The District Court is the court of first disputes in common law system and an is similar to that in England and has instance for most criminal prosecutions independent judiciary. familiarity with most international legal and many civil cases. In criminal structures – especially in the finance cases, whether the District Court has • New Zealand has a hierarchy of New Zealand and corporate law areas. New Zealand jurisdiction often depends upon the courts running from the District has a single legal profession in which nature and seriousness of the alleged Court to the High Court, the Court most members hold a practising offence. In civil cases, the District of Appeal and the Supreme Court. certificate as barrister and solicitor. Court will have jurisdiction if the amount • Civil disputes are often solved by in dispute is NZ$350,000 or less. negotiation or mediation between Judges are appointed by the Governor- Above that amount, the claim must be the parties. General on the advice of the Attorney- advanced in the High Court. The High General and have a strong tradition Court also has exclusive jurisdiction in of judicial independence. Their certain matters as directed by statute, appointments are open-ended. e.g. under the Companies Act 1993.

There is generally one right of appeal – from the District Court to the High Court or from the High Court to the Court of Appeal. Second appeals require the leave of either the court appealed from or the court appealed to. All appeals to the Supreme Court require the leave of that court.

Daniel Kalderimis – Partner T: +64 4 498 2409 M: +64 27 599 5839 E: [email protected]

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 48 December 2019 HOME 48 The Supreme Court does not entertain In New Zealand, Prosecution Guidelines Alternative dispute International dispute appeals for the sole purpose of error do not permit a prosecutor to initiate or correction, and will generally not grant to invite a “plea bargain” in any criminal resolution for resolution leave unless the appeal involves: proceeding. However, it is permissible civil disputes for a defendant to propose an New Zealand is a strong advocate • a matter of general or public arrangement under which a guilty plea for free trade and is a signatory to Civil disputes are often resolved by importance will be entered either to some existing a number of trade and investment negotiation directly between the parties or amended charges, on the basis treaties. Many of those agreements • a substantial miscarriage of or by mediation. Such resolution may that other charges will be withdrawn include investor-state dispute justice, or occur at any time, whether before or or reduced. settlement mechanisms, including after judgment in any proceeding, but • matters of general the recently-signed Comprehensive most often resolution occurs before commercial significance. and Progressive Trans‑Pacific trial (or, in some cases, shortly after a Partnership Agreement. trial has begun). The Court of Appeal is therefore the final appellate court for most cases. Chapman Tripp advises on all aspects It is a requirement for many civil of international trade and investment proceedings in the District Court Outside the general court structure agreements, including resolving that the parties first attend a judicial are a range of specialist courts disputes through the architecture settlement conference before a trial and tribunals. These include the provided by those agreements. is allocated. Employment Relations Authority and the Employment Court, the In the private sphere, companies Civil disputes may also be resolved Environment Court and the Taxation increasingly prefer international by private arbitration, pursuant to the Review Authority. commercial arbitration as the Arbitration Act 1996 (which is based mechanism to resolve contractual on the Model Law on International disputes. Chapman Tripp can Commercial Arbitration adopted assist in drafting arbitration clauses by the United Nations Commission and regularly acts in international on International Trade Law). Some commercial arbitrations. contracts provide for arbitration in the event of a dispute, but parties may also agree to arbitrate after a dispute has arisen.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS December 2019 HOME 49 New Zealand has a reasonably open New Zealand residence ALERT Emigrating to door immigration policy, particularly for Only solicitors and licensed skilled migrants and for entrepreneurs immigration advisers are legally The main paths to New Zealand with the resources and capital to able to give immigration advice in residence are through the New Zealand contribute to the economy by setting New Zealand. It is important that following categories: up a business in New Zealand. you establish the credentials of your adviser as Immigration will not • Skilled Migrant Visas generally accept applications where • Work to Residence the advice has come from someone either unlicensed or not specifically • Investor If you are not a New Zealand or an exempted from holding a licence. Australian national, you will need a • Entrepreneur This requirement applies also to visa to work in New Zealand unless advice given from off-shore. • Family. you are on a short visa for business meetings only. Citizenship Visa types include:

To qualify for citizenship, the applicant • Work Visa (temporary) must have been resident for at least five • Work to Residence Visa years, be free of any convictions and have been present in New Zealand for • Study to Work Visa at least: • Visitor Visa (Business or Tourist) • 1,350 days during the five years • Highly Skilled Visa (Silver Fern) immediately preceding the • Entrepreneur Work Visa (Business) application, and • Residence Visa • 240 days in each of these five years. • Working Holiday Visa For more information go to the • Student Visa. Immigration New Zealand website at: immigration.govt.nz Applicants for any visa must be of good character, have an acceptable standard of health and hold a valid passport which expires later than three months after your proposed date of departure.

Doing business in New Zealand CHAPMAN TRIPP GUIDE FOR INVESTORS 50 December 2019 HOME 50

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