The Regulator Report lists recent changes, decisions and developments at the main New Zealand and Australian corporate, commercial and competition regulatory bodies. This edition of the Regulator Report covers the period from 11 March 2009 to 1 April 2009. For further details on any matter in this report, just click on the hyperlinks in each item.
Government to simplify overseas investment rules
The government is reviewing the overseas investment rules to "make foreign investment in New Zealand simpler and more attractive, while at the same time protecting sensitive land, assets and resources".
There are three broad parts to the overseas investment review, which will be led by the Minister for Land Information, Dr Richard Worth:
A Technical Reference Group has been established to advise officials on the practicality of any amendments to the Overseas Investment Act and to provide suggestions on other improvements that can be made to the Act. Cabinet will consider recommendations from the review by 30 June 2009 and changes to the Overseas Investment Act will be open to public submissions through the select committee process.
Click here for more information
Click here to read the press release and the terms of reference for the review
Bell Gully Partner Andrew Petersen has been appointed as a member of the Technical Reference Group
Wholesale Guarantee Scheme fees reduced
Treasury Secretary John Whitehead has announced a drop in fees for the Wholesale Funding Guarantee Scheme, effective 26 March 2009.
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Wholesale Funding Guarantee Facility - Kiwibank Limited
The Crown has signed a wholesale funding guarantee deed in respect of Kiwibank Limited.
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March 2009 Reserve Bank Bulletin released
The Reserve Bank has released the March 2009 issue of the Reserve Bank of New Zealand Bulletin. This issue includes articles on:
Finance company failures - observations of the Registrar of Companies
The 2007/08 financial review of the MED (dated 19 March 2009) incorporates a report from the Registrar of Companies regarding the collapse of finance companies between 2006 and 2008 (including the Blue Chip property investment group of companies because Blue Chip's business model and subsequent collapse shared some of the same characteristics as the finance companies). The report summarises the registrar's observations on the supervisory framework and notes where the registrar believes it was inadequate, or where it failed to address the risks inherent in the business model adopted by these companies. In relation to the actions of the failed companies, particular mention is made of the quality of corporate governance, the concentration of loan risk and the use by some companies of new investments to repay maturing loans of existing investors. The report also comments on:
Securities Act review to include corporate trustees
Commerce Minister Simon Power has advised that the issues raised in a recent report about the role of corporate trustees in failed finance companies are to be addressed as part of a review into the Securities Act (see the item "Finance company failures - observations of the Registrar of Companies" above for further details). One option the minister is considering is fast-tracking the development of a trustee supervisory model. This model was suggested by the Review of Financial Products and Providers and would see the Securities Commission playing a stronger role in the supervision of trustees. The role of corporate trustees is also likely to be considered by the Capital Market Development Taskforce which is due to report to the minister later this year.
Click here for the press release
Click here for further details on MED's Securities Act review
Ministerial review of electricity market
The Energy and Resources Minister, Gerry Brownlee, announced on 1 April that a ministerial review of the electricity sector will start work immediately. The objective of the review is "to improve the performance of the electricity market and its institutions and governance arrangements in order to better achieve the government's objectives for the electricity sector". Mr Brownlee says "the government has concerns about security of supply, the affordability of electricity, and duplication of electricity sector governance".
Six experts have been appointed to the Technical Advisory Group established for the review: Brent Layton, David Russell, Lewis Evans, Stephen Franks, Toby Stevenson, and Miriam Dean. The Technical Advisory Group will be supported by the MED and is broadly modelled on the advisory group structure used in the first phase of the reforms to the Resource Management Act. There are two components to the review. The first phase will look at regulatory and governance issues, while the second phase will address issues of electricity market performance. The terms of reference for the review include a consideration of whether the Electricity Commission has too many roles, and roles that potentially conflict. The review does not extend to:
An indicative timetable included in the terms of reference is as follows:
Evaluation of options, liaison with minister(s)
April - May 2009
|Cabinet approves early implementation options||June 2009 and then separate fast track process (including legislation if required)|
|Cabinet approval to release discussion paper||June 2009|
|Public consultation on discussion paper||July 2009|
|Analysis of submissions, development of final recommendations||August - September 2009|
|Cabinet agreement||October 2009|
|Preparation of legislation||November 2009 - January 2010|
|Legislation introduced||February 2010|
|Select Committee||March 2010 - May 2010|
|Introduction of changes||June 2010|
Electricity Governance (Security of Supply) Amendment Regulations 2009 (SR 2009/40)
These regulations, which come into force on 9 April 2009, amend the Electricity Governance (Security of Supply) Regulations 2008. The 2008 regulations provide for the management and co-ordination of outages for security of electricity supply purposes under section 172D(1)(14) of the Electricity Act 1992. The amendments enable the Electricity Commission to require certain electricity industry participants (namely, electricity distributors, electricity retailers, line owners, and persons who use electricity directly from the grid) to prepare participant outage plans that will supplement the commission's security of supply outage plan. They also remove the offence for failing to comply with commission directions (previously in regulation 12). Instead, new regulation 16 provides that breaches of the Security of Supply Regulations are enforceable under the Electricity Governance Regulations 2003 in the same way as breaches of electricity governance rules.
Government releases broadband investment proposal
Communications and Information Technology Minister Steven Joyce is seeking feedback on the government's proposed model for investment in ultra fast broadband. The government is proposing to establish a Crown-owned investment company ("Crown Fibre Investment Co" or CFIC) to drive the government's investment. Under the proposal, CFIC will invest alongside private sector co-investors in regional fibre companies that will deploy and provide access to fibre optic network infrastructure in the 25 towns and cities covered by the initiative. The proposal is set out in a consultation document which can be found here: New Zealand Government Broadband Investment Initiative Proposal 31 March 2009. Submissions close on 27 April 2009.
Click here for the press release
Click here for information on the MED website
Submissions called for on the Insolvency Amendment Bill
Public submissions are now being invited on the Insolvency Amendment Bill which was introduced to Parliament on 9 March 2009. The closing date for submissions is Thursday 16 April 2009. The bill proposes to make some amendments to the Insolvency Act 2006 on the following:
Australia-New Zealand insolvency law programme
Following a meeting in Canberra on 18 March, Senator Nick Sherry, Australian Minister for Superannuation and Corporate Law and the Hon Simon Power, New Zealand Minister of Commerce issued a joint media statement announcing that both countries would immediately commence an examination of the trans-Tasman cross-border insolvency arrangements. This will cover all aspects of both countries' insolvency regimes, including:
This agreement follows the passage by the Australian government of the Cross-Border Insolvency Act 2008 and New Zealand's earlier legislation, Insolvency (Cross-border) Act 2006, both of which implemented the United Nations Commission on International Trade Law's Model Law on Cross-Border Insolvency.
Click here to read the full press release
Government to amend section 92A of the Copyright Act
Prime Minister John Key announced at a post-cabinet press conference on 23 March that Cabinet had agreed that section 92A of the Copyright Act was not going to come into force as originally written. (See Copyright (New Technologies) Amendment Act 2008 Commencement Amendment Order (No 2) 2009). Section 92A would have required internet service providers (ISPs) to have a policy to terminate the internet account of repeat copyright infringers in appropriate circumstances. Cabinet acknowledged the need for legislation in this area but has decided to re-examine the legislation to address concerns of stakeholders and the government.
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New member of the Capital Market Development Taskforce
Investment writer and commentator Mary Holm has joined the Capital Market Development (CMD) Taskforce. The CMD Taskforce is currently working on a plan for developing New Zealand's capital markets.
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Click here for more information on the CMD Taskforce
Minister releases report of Royal Commission into Auckland Governance
On 27 March, Local Government Minister Rodney Hide released the Report of the Royal Commission into Auckland Governance. The commission proposes the dissolution of the Auckland Regional Council and all seven territorial authorities existing in Auckland, and the creation of a new single unitary authority called the Auckland Council. In addition to the elected governing body of the Auckland Council, local democracy will be maintained through six elected local councils operating within the unitary Auckland Council. Local councils will oversee the delivery of services by Auckland Council staff and will undertake local engagement in four urban and two rural districts.
The Auckland Council will be led by a mayor who is elected by all Aucklanders. The Mayor of Auckland will have greater executive powers than currently provided under the Local Government Act 2002, although these additional powers will still be more modest than in many international models of mayoralty. The Auckland Council will comprise 23 councillors, 10 of whom will be elected regionally by all Aucklanders. Eight councillors will be elected in four urban wards. Two will be elected in two rural wards. Provision has also been made for the election to the Auckland Council of two councillors by voters on the Maori electoral roll; and one councillor appointed by mana whenua through a mechanism specified by the commission in its report. The commission expects that the Auckland Council functions will centre on regional policy, investment, and planning; regional infrastructure and networks; and service delivery. The Auckland Council will also provide administrative services for itself and local councils for all back-office functions, including setting and collecting rates, accounting, treasury, asset management and other financial functions, human resources, payroll, and computer systems.
Prime Minister John Key has noted that the government is working on the commission's report as a matter of urgency because preparations need to be underway within weeks if the Auckland region is to be operating under a new governance structure in time for local body elections in 2010.
Click here to read the press release
Click here to access all information on the Royal Commission including an executive summary, the commission's full report, media releases, background information and useful links
Retrieve PPSR Financing Statement PINs online
The PPSR will soon provide clients with the ability to retrieve their Financing Statement (FS) PINs online. The new online service will enable Secured Party Groups who have misplaced their FS PINs to be emailed a list of their FS numbers along with their corresponding PINs.
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New business industry description and code search available online
The Companies Office is introducing a search engine that will allow clients to search using keywords for their Business Industry Description and corresponding Business Industry Code.
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Commission finds disclosure in financial reporting 'satisfactory'
The Securities Commission has released its report on Cycle 8 of its Financial Reporting Surveillance Programme. The commission reviewed reports of 40 issuers which included a mix of listed and unlisted entities. All of the reports were prepared under the New Zealand Equivalents to International Financial Reporting Standards. The commission wrote to 35 issuers to seek clarification on a range of matters. The main areas identified where disclosure needed improving were:
Commission reviewing corporate governance disclosure
The Securities Commission has announced that is now reviewing reporting by issuers on their corporate governance as part of its ongoing financial reporting surveillance programme. The review involves assessing annual report and website disclosures of selected issuers against nine principles covering the core elements of good corporate governance. The principles are set out in a corporate governance handbook for directors, executives and advisers, published by the Securities Commission in 2004. The commission will publicly report on the findings from this review and write to issuers in cases where disclosure can be improved.
Click here to read the news release
New Zealand's capital markets and the global financial crisis
Jane Diplock AO Chairman, Securities Commission New Zealand and Executive Committee, IOSCO gave a presentation to the Institute of Finance Professionals New Zealand Finance & Treasury Forum in Auckland on 17 March in which she outlined issues relating to the global crisis and its effects on New Zealand's capital markets. The presentation also mentions the initiatives being taken in New Zealand to improve access to capital for businesses and to reduce the costs of raising capital arising from the Capital Markets Development Taskforce interim report released in November 2008. Diplock notes that the commission decided in February 2009 to extend the scope of its current share purchase exemption (the Securities Act (NZX - Share and Unit Purchase Plans) Exemption Notice 2005) by increasing the amount that can be raised from existing shareholders, but final details for this are still being settled. She also noted that changes to the NZX Listing Rules were submitted to the Minister of Commerce in late February. The commission is advising the minister on public interest issues arising from the proposed listing rule changes on an urgent basis.
Click here for the transcript of the speech
Click here for Bell Gull commentary on the Securities Commission's proposed changes for share purchase exemptions
Click here for Bell Gully commentary on proposed changes to the Listing Rules
The following Securities Act Exemption Notices have been published for this period:
Securities Act (ING (NZ) Administration Pty Limited) Exemption Amendment Notice 2009
This notice, which came into force on 19 March 2009, amends the Securities Act (ING (NZ) Administration Pty Limited) Exemption Notice 2008 (the principal notice). The principal notice exempts ING (NZ) Administration Pty Limited (ING), from clause 4(1)(a) of Schedule 7 of the Securities Regulations 1983. This means that ING did not have to hold an annual meeting on or before 31 December 2008 to consider the financial statements of the ING Diversified Yield Fund and the ING Regular Income Fund (the schemes) for the year ending 30 June 2008. The conditions of the exemption require ING to summon a meeting to consider those financial statements on or before 31 March 2009. This notice:
Securities Act (Short Form Prospectus) Exemption Notice 2009 (2009/50)
This notice (the 2009 Exemption), which came into force on 23 March, replaces with amendments the Securities Act (Short Form Prospectus) Exemption Notice 2002. The 2009 Exemption retains the existing exemptions in the 2002 notice on the existing conditions. The principal differences between the 2002 notice and the 2009 Exemption are:
Securities Act (General Electric Company) Exemption Notice 2009
This notice exempts General Electric Company (General Electric) and its subsidiaries, and holders or offerors of previously allotted securities, (subject to conditions) in relation to securities offered to employees and directors of General Electric and its subsidiaries under an employee share purchase scheme. The exemption is from the prospectus and investment statement requirements of the Securities Act 1978 (but not the requirement for offers to be made in an authorised advertisement), the obligation to appoint a statutory supervisor and enter into a deed of participation, and certain other requirements of the Securities Act 1978 and the Securities Regulations 1983 (except regulation 8).
The following Takeovers Code Exemption Notices have been published for this period:
Takeovers Code (Cynotech Holdings Limited) Exemption Notice 2009
This notice applies to acts or omissions occurring on or after 2 December 2008 and expires on 31 December 2011. Cynotech Holdings Limited (Cynotech) is a code company. The Takeovers Panel has granted retrospective exemptions to:
Takeovers Code (Speirs Group Limited) Exemption Notice 2009
Between June 2002 and August 2008 a number of transactions occurred that resulted in members of the Speirs family increasing their control percentage in Speirs Group Limited. These transactions included the acquisition of voting securities on-market, the transfer of voting securities from individuals to a family trust, and intra-family transfers. It is accepted that there are grounds on which it could be asserted that one or more of the Speirs family members involved in the transactions were associates of each other for the purposes of the Takeovers Code at the time of the transactions. This notice exempts retrospectively from rule 6(1) of the Code, certain members of the Speirs family in respect of those transactions. It is a condition of the exemption that enforceable undertakings given by members of the family to dispose of a number of securities equivalent to the total number acquired by the exempted persons in apparent breach of the Code are complied with.
Takeovers Code (BLIS Technologies Limited) Exemption Notice 2009
This notice relates to a pro rata renounceable rights issue proposed by BLIS Technologies Limited (BLIS). It applies to acts or omissions occurring on or after 13 March 2009 and expires on 31 May 2012. The Takeovers Panel has granted exemptions for:
Action on golden handshakes
On 18 March 2009, Treasurer Wayne Swan, and Minister for Superannuation and Corporate Law Senator Nick Sherry announced reforms aimed at curbing excessive "golden handshakes" - or termination payments - paid to company executives. The government will amend the Corporations Act to significantly lower the threshold at which termination payments must be approved by shareholders. The current threshold is up to seven times total annual remuneration. Under the government's reform, approval will be required for any termination payment exceeding one year's base salary. The government will also legislate to extend the range of executives whose termination payments can be subject to shareholder approval and broaden the definition of "termination benefit" to catch all types of payment and rewards given at termination.
Click here for the full press release
Regulation of director and executive remuneration in Australia
In addition to the reforms aimed at curbing excessive "golden handshakes" noted above, the Australian Government has referred the broader issue of executive remuneration to the Productivity Commission. The commission has been asked to undertake a public inquiry into the regulatory framework around remuneration of directors and executives of companies regulated under the Corporations Act. Specifically, the commission will consider:
The final report will be submitted to the Australian Government by 18 December 2009.
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Corporate governance and financial performance in an Australian context
The Treasury has released a Working Paper that examines the relationship between a company's adoption of the Australian Securities Exchange Corporate Governance Council's Principles of Good Corporate Governance and Best Practice Recommendations (ASX Corporate Governance Principles) and its financial performance in the areas of shareholder performance, operating performance and one year sales growth for the top 300 Australian listed companies. The paper includes the following sections:
The paper concludes that the study found companies with better corporate governance outperform poorly governed companies, particularly in relation to earnings per share and return on assets. The results also indicate that companies may find it beneficial to focus their efforts on improving corporate governance in the areas of board composition, remuneration, the formation of committees (that is, board, audit and remuneration committees), and those principles related to the structure of the company. However, data limitations prevented any causal inferences from being made.
Click here to read the full report
The NZCC has issued the following media releases:
Industry regulation and regulatory control
Mergers and acquisitions
The ACCC has issued the following media releases:
Mergers and acquisitions
The Bell Gully Regulator Report is designed to highlight certain New Zealand and Australian corporate, commercial and competition regulatory developments. The Bell Gully Regulator Report is not designed to be comprehensive and is necessarily brief and general in nature and is not intended to provide legal advice. You should seek professional legal advice before taking any action in relation to the matters dealt with in this publication. Bell Gully is not the author of any information received by clicking on the hypertext links and therefore is not responsible for their accuracy.