Commercial Legislation and Regulations Affecting Business
Set out below are details of some of the most significant legislation affecting businesses in New Zealand.
Accident Compensation Act 2001
This Act is a continuation of the “no fault” compensation scheme for accidental injuries, whether in the workplace or at home.
Negligence suits in respect of personal injury for accidents are not possible in New Zealand and instead compensation must be sought from a governmental authority. In addition, it means that except in exceptional circumstances employers may not be sued by their employees if they are accidentally injured at work, however the employer may be prosecuted under the Health and Safety at Work Act 2015. The Act provides that each employer is liable to pay an Accident Compensation levy in respect of each employee.
The levels of compensation provided under the legislation are subject to major limitations and are generally perceived to be less than adequate.
Commerce Act 1986
One of the primary objectives of the Commerce Act 1986 is to provide the framework for effective competition in New Zealand. The Commerce Act prohibits any company or individual carrying on certain anti-competitive practices and also prohibits the acquiring or strengthening of a dominant market position. The prior clearance or authorisation of merger or takeover proposals by the Commerce Commission is only necessary if the participants in the transaction believe that the transaction could result in a person acquiring a dominant position in a market or strengthening a dominant position in a market. The fines for failure to obtain clearance or authorisation where this is the case are substantial.
Companies Act 1993
The Companies Act 1993 codifies the law relating to companies and lays down a wide range of rules.
The Companies Act covers such matters as choice of company name, procedures for incorporation of companies, the powers of the company and its officers, the duties of directors, the conduct of meetings, the raising of money for the company, the issue of shares and shareholders and their rights as well as other matters.
Consumer Guarantees Act 1993 and Contract and Commercial Law Act 2017
The Consumer Guarantees Act 1993 creates statutory guarantees to protect the consumer purchasing goods and services. The Act applies to the supply of goods or services by persons in trade (including manufacturers, importers and distributors) to a consumer.
A consumer is defined in the Act as a person who buys goods or services of a kind ordinarily bought for their personal, domestic or household use, but not for resale, use in production or in the case of goods, repair to goods or fixtures on land.
The Contract and Commercial Law Act 2017 (CCL Act) came into force on 1st September 2017. The purpose was to modernise New Zealand statistics relating to
- The sale of goods
- Electronic transactions
- The carriage of goods; and
- Various other commercial matters including mercantile agents and bills of loading.
The CCL Act has direct relevance to many commercial transactions in New Zealand and the term needs to be considered in complete contrast and in contract interpretation.
Credit Contracts and Consumer Finance Act 2003
The Credit Contracts and Consumer Finance Act 2003 creates a statutory regime that is designed to offer consumers more protection against unfair credit practices and loan sharks – for example, inadequate disclosure of financial information and excessive lending fees. The Act applies to credit contracts entered into by persons primarily for personal, domestic or household purposes and also covers consumer leases in some circumstances. The Act does not apply to leases in the course of trade.
The Act requires the lender or supplier under a contract to undertake continuous disclosure and is primarily designed to provide flexible and fair rules relating to fees and interest charges on credit contracts. It allows the lender to impose any fee as long as it is not unreasonable, and it regulates the manner in which interest can be charged.
The Act also provides for the modification of consumer contracts where the consumer is suffering hardship and, in a situation where it is determined that the credit contract may be oppressive, the Act provides for the credit contract to be modified.
Employment Relations Act 2000
The Employment Relations Act 2000 creates a statutory regime that is designed to regulate the relationship between employers and employees in New Zealand.
Underpinning the Act is the obligation on all parties to employment relationships to deal with each other in good faith. Simply, they must not mislead or deceive each other.
The Act sets out the minimum terms and conditions of employment and regulates matters relating to both individual employment agreements and collective employment agreements.
The Act has established the Employment Relations Authority which is intended to function as an informal but efficient forum for the determining of legal issues relating to employment matters. It has very wide powers and the intention is to enable problems to be dealt with at the lowest possible level at the first instance, and as quickly as possible.
The operation of the Act is overseen by the Ministry of Business Innovation and Employment which also offers mediation services between employers and employees
Fair Trading Act 1986
The Fair Trading Act 1986 is intended to ensure that consumers are given full and accurate information about goods and services. Its main operative provision states that “no person, in trade, shall engage in conduct which is misleading or deceptive”. This legislation provides a significant degree of consumer protection which has been further expanded by the Consumer Guarantees Act 1993.
Financial Reporting Act 1993
The Financial Reporting Act 1993 creates a statutory regime that is designed to protect the public in relation to matters pertaining to the issue of securities in the marketplace.
All companies and issuers (entities which issue securities to the public) are obliged to complete financial statements in accordance with the requirements of the Act.
The Act established the Accounting Standards Review Board. The primary function of this Board is to review and approve financial reporting standards which are the standards that prescribe the content of financial statements.
Under the Act all companies are either “reporting entities” or “exempt companies”.
Reporting entities are:
- Overseas companies;
- Subsidiary companies;
- Companies that have one or more subsidiaries;
- Companies with assets valued at more than $450,000.00;
- Companies with a turnover in excess of $1 million.
Every reporting entity must have a balance date in each calendar year. There are regulations clearly stipulating the basis upon which reporting entities must prepare and report their financial statements and requiring that its financial statements be audited.
Exempt entities are all companies, other than reporting entities.
The requirement for exempt entities are similar to those of reporting entities, however, the degree of oversight and audit is slightly less.
As stated at the outset, the overall intent of the Act is to ensure that those offering securities to the public are preparing accounts that are to a minimum set standard, that are audited and that are registered and available for review. Their aim is to ensure that the public are protected against misleading prospectuses and other issue documents.
Privacy Act 2020
This Act governs how organisations can, collect, store, use and share personal information. There privacy codes what have privacy rules for personal information in specific areas such as health, telecommunications and credit reporting.
The Privacy Act 2020 came into force on 1 December 2020 replacing the Privacy Act 1993 and has 13 privacy principles that govern how businesses collect, handle and use personal information.
Health and Safety at Work Act 2015
The primary purpose of this law is to encourage employers to take responsibility for the management of health and safety in the workplace. There is a general duty on employers to take all practical steps in this regard and to proactively identify and manage work place risks. These steps include providing and maintaining a safe work environment, maintaining facilities for the safety of employees, ensuring machinery and equipment is designed and set up to be safe for employees to operate, ensuring that employees are not exposed to hazards, and developing and implementing procedures for dealing with emergencies. Employers must ensure that employees are capable of operating machinery or plant which they may be required to use as part of their employment. Employers are required to investigate and record any accident at work, preserve the accident scene where practicable, and notify WorkSafe New Zealand as soon as possible after the accident has occurred. A breach of the Act may result in significant penalties.
Takeovers Act 1993
The Takeovers Act 1993 and its regulations provide minimum standards which must be complied with if an offeror is attempting to acquire shares in a company in New Zealand.
The Act established the “Takeovers Code” and also implemented the “Takeovers Panel” which sits in deliberation on takeover offers.
The Takeovers Panel has both a policy role in that it reviews legislation relating to takeovers and the application of the legislation to specified companies and then based on those reviews, the Takeovers Panel makes recommendations to the Government in respect of proposed amendments to legislation in New Zealand.
The Takeovers Panel also has the responsibility for enforcing the provisions of the Takeovers Code. The Takeovers Panel has quite wide-reaching powers of investigation and enforcement when it suspects a breach of, or intended breach, of the Takeovers Code.
The Takeovers Panel also has the ability to grant exemptions from the provisions of the Takeovers Code. The Takeovers Panel may grant exemptions from compliance with any provision of the Takeovers Code. Exemptions may be granted to any person or any class of persons or class of transaction or class of offer, and may be made subject to terms and conditions.
Resource Management Act 1991
The Resource Management Act 1991 in general terms deals with managing the land, air and water of New Zealand in a manner that is sustainable. It deals not only with planning approvals but generally with the effects of developments and creates responsibilities for dealing with these effects.
Each investment proposal needs to be separately considered in light of both this legislation and the regional and district plans adopted by territorial authorise under it.
Personal Property Securities Act 1999
This Act established a regime for the recognition and registration of security interests in all personal (non real estate) property. It is modelled on Article 9 of the American Uniform Commercial Code in various Personal Property Security Acts enacted in the Canadian provinces.
Financial Markets Conduct Act 2013
The Financial Markets Conduct Act 2013 (FMC Act) and its regulations provide minimum standards which must be complied with if shares or other investment securities are to be offered to the public. Certain minimum standards fixed by the FMC Act must be followed in respect of registered prospectuses and authorised advertisements to ensure that fair and accurate information is supplied to the public. There are a number of exemptions available from the disclosure requirements which can be applied in specific circumstances.