Home | Databases | WorldLII | Search | Feedback New Zealand Bill of Rights Act Reports

Companies and Limited Partnerships Amendment Bill (Consistent) (Sections 5, 14, 19(1), 25(c)) [2011] NZBORARp 45 (30 September 2011)

Last Updated: 29 April 2019

Companies and Limited Partnerships Amendment Bill

30 September 2011 ATTORNEY-GENERAL

LEGAL ADVICE

CONSISTENCY WITH THE NEW ZEALAND BILL OF RIGHTS ACT 1990:

COMPANIES AND LIMITED PARTNERSHIPS AMENDMENT BILL

1. We have considered whether the Companies and Limited Partnerships Amendment Bill (PCO 15126/2.6) (‘the Bill’) is consistent with the rights and freedoms affirmed in the New Zealand Bill of Rights Act 1990 (‘the Bill of Rights Act’). We understand that the Bill will be considered by the Cabinet Legislation Committee at its meeting on Thursday, 6 October 2011.
2. We have concluded that the Bill appears to be consistent with the rights and freedoms affirmed in the Bill of Rights Act.
   

PURPOSE OF THE BILL

3. The Bill amends the Companies Act 1993 (‘the Companies Act’) and the Limited Partnerships Act 2008 (‘the Limited Partnerships Act’). It aims to strengthen the rules applying to the formation, reconstruction and governance of companies and limited partnerships. Among other things, the Bill will reduce the potential for the misuse of New Zealand-registered companies and limited partnerships for overseas criminal activity.
4. The Bill:
   

• introduces criminal offences for serious breaches of directors’ duties
• requires companies and limited partnerships without a New Zealand based director or general partner to have a local agent resident in New Zealand
• enhances the Registrar of Companies’ (‘the Registrar’) powers to:
  • “flag” on the register of companies or the register of limited partnerships if the Registrar has certain concerns about the company or limited partnership
  • remove companies and limited partnerships from the register of companies or register of limited partnerships, and
• strengthens the reconstruction provisions of the Companies Act to make them consistent with the procedures for changing control of companies under the Takeovers Code.
  

POSSIBLE INCONSISTENCIES WITH THE BILL OF RIGHTS ACT

Section 14 – Freedom of Expression

• Section 14 of the Bill of Rights Act affirms the right to freedom of expression, which includes the freedom to seek, receive, and impart information and opinions of any kind and in any form. The right has been interpreted as including the right not to be compelled to say certain things or to provide certain information. [1]
  
• The Bill contains some provisions that potentially limit the right in s 14 of the Bill of Rights Act, in particular:

• proposed new s 193O of the Companies Act extends to resident agents the

directors’ obligations, in ss 145(1) and 149(1) of the Companies Act, not to use

certain information about the company, and

• proposed new s 193Q of the Companies Act and s 77M of the Limited Partnerships Act require directors or general partners and employees of a company or limited partnership to provide the resident agent with the information necessary for the resident agent to perform their duties.
• Some provisions in the Bill, such as proposed new s 193Q, require certain people to provide information to a resident agent or the Registrar. Other provisions, such as proposed new s 193O, prevent a person from disclosing certain information.
• An important component in determining whether freedom of expression has been infringed is that the communication in question must attempt to express or withhold an idea or meaning. [2] It is questionable whether the information required to be provided or withheld under the above provisions is sufficiently expressive in nature to engage s 14 because it is generally factual.
  
• For completeness, we have also considered whether, if the relevant provisions place a limit on freedom of expression, they are justifiable in terms of s 5 of the Bill of Rights Act.
• Following the guidance of the New Zealand Supreme Court decision of Hansen v R, [3] we consider that, even if the requirements amount to a prima facie infringement of s 14 of the Bill of Rights Act, they appear to be justifiable under s 5 of that Act.
  
• The purpose of the resident agent reforms is to ensure that there is at least one person legally responsible for the affairs of a company who is resident in New Zealand. This will help to uphold the reputation of New Zealand’s company and limited partnerships registration system. The resident agent’s obligations draw on the existing, well-established framework of directors’ duties, including with regard to providing or withholding information. In addition, the role of resident agent is assumed voluntarily and the information that must be provided or withheld is generally likely to be confined to factual material.
  

Section 19 – Freedom from Discrimination

• Section 19(1) of the Bill of Rights Act affirms that everyone has the right to freedom from discrimination on the grounds of discrimination in the Human Rights Act 1993 (‘the Human Rights Act’). The grounds of discrimination under s 21(1)(i) of the Human Rights Act include discrimination based on age (commencing with the age of 16 years old) and disability.
  
• The key questions in assessing whether there is a limit on the right to freedom from discrimination are: [4]
  
  • does the legislation draw a distinction based on one of the prohibited grounds of discrimination, and if so
  • does the distinction involve disadvantage to one or more class(es) of individuals?

Age

• Cls 8, 48 and 50 disqualify a person under 18 years of age from being a registered agent of a company or limited partnership, or a general partner of a limited partnership. These provisions, therefore, give rise to a limit on the right to be free from discrimination on the basis of age.
• We have considered whether these age restrictions are justifiable under s 5 of the Bill of Rights Act. The objective of these clauses is to ensure that resident agents and general partners, who have significant responsibilities, are sufficiently mature to properly understand the nature and consequences of their actions, and to act without undue pressure or influence. There is a rational connection between imposing a minimum age requirement and ensuring companies and limited partnerships comply with their obligations.
  
• We consider the limit imposed by cls 8, 48 and 50 is justified. The age of 18 years has been considered appropriate as a lower age limit for positions involving trust and responsibility in a commercial setting. We also note that these clauses closely reflect the requirements for a director of a company under the Companies Act.
  

Disability

• Clause 58 of the Bill allows a court to order that certain people may not be a general partner, resident agent, or promoter of, or take part in the management of, a limited partnership for up to 10 years. The people who may be subject to an order include “a person who has become of unsound mind”. Clause 58 closely reflects s 383 of the Companies Act, which allows a court to disqualify a person who has become of unsound mind from being a director. Clause 16 of the Bill extends s 383 to resident agents of companies.
  
• The Human Rights Act defines “disability” to include, among other conditions, psychiatric illness, intellectual or psychological disability or impairment and any other loss or abnormality of psychological, physiological, or anatomical structure or function.
  
• In our view cl 58 does not discriminate on the basis of disability. The court’s power under this clause is discretionary and needs to be exercised in accordance with the Bill of Rights Act. We, therefore, do not think that this clause is inconsistent with the Bill of Rights Act.
  

Section 25(c) – Right to be presumed innocent until proved guilty

• Section 25(c) affirms the right to be presumed innocent until proved guilty. This means that an individual must not be convicted where reasonable doubt as to his or her guilt exists. The prosecution in criminal proceedings must therefore prove, beyond reasonable doubt, that the accused is guilty.
  
• Several clauses in the Bill create offences that, on their face, appear to be strict liability offences. A strict liability offence is one where the prosecution is only required to prove that

something has or has not occurred, not that the accused also had a particular state of mind in relation to the act or omission.

• Examples include that:
  
  • a company’s resident agent commits an offence if a director, board or company fails

to comply with certain requirements, (cl 8), and

• a limited partnership’s resident agent commits an offence if a general partner or

limited partnership fails to comply with certain requirements, (cl 50).

• The Bill provides statutory defences to these offences. It is a defence, for example, if a resident agent shows that:
  • the relevant person took all reasonable and proper steps to ensure that the requirements would be complied with, or
  • they took all reasonable and proper steps to ensure that the relevant person complied with the requirements, or
  • in the circumstances, they could not reasonably have been expected to take steps to ensure that the relevant person complied with the requirements.
    

Do the relevant offences impose a limit on section 25(c) of the Bill of Rights Act?

• The offences in cls 8 and 50 of the Bill give rise to a limit on s 25(c) of the Bill of Rights Act because the accused is required to prove, on the balance of probabilities, a defence to escape liability. In other proceedings an accused must merely raise a defence in an effort to create reasonable doubt. Where an accused is unable to prove the defence, he or she could be convicted even though reasonable doubt exists as to his or her guilt.
  
• We consider that the clauses cited above are prima facie inconsistent with s 25(c) of the Bill of Rights Act. It is therefore necessary to consider whether that inconsistency is justifiable under s 5 of that Act.
  

Is the limitation justifiable under s 5 of the Bill of Rights Act?

• We consider the following factors are relevant in assessing whether the strict liability offences can be justified under s 5 of the Bill of Rights Act:
  • the nature and context of the conduct to be regulated
  • the ability of the defendant to exonerate themselves and the risk of conviction of an innocent person, and
  • the penalty level.
• The purpose of requiring companies and limited partnerships to have resident agents is to reduce the potential for misuse of New Zealand registered companies and limited partnerships for overseas criminal activity. This is important in order to maintain and enhance the current reputation of New Zealand as a good place to do business.
• The offences for resident agents are designed to sit alongside the existing offences for directors, boards and companies in the Companies Act to ensure that if all directors (or general partners) are based overseas, it is still possible to hold someone to account for breaches of the law. This should encourage compliance with reporting and record-keeping obligations and reduce the potential for misuse.

• The strict liability offences are, therefore, an important part of the reforms. The type of offences above are common among other commercial law statutes, such as the Securities Act, the Fair Trading Act, the Companies Act, the Insurance (Prudential Supervision) Act and the Reserve Bank of New Zealand Act.
  
• Resident agents and company directors will be well placed to prove the defences, and will be in a much better position than the Registrar to access the relevant company or partnership information. Given that the main function of the resident agent is to ensure that the company or limited partnership meets its obligations, it will not be onerous for the resident agent to show what steps he or she has taken to achieve that. The defences rely on information likely to be peculiarly within the knowledge of the accused. The Bill provides that for breaches relating to the content of notices, resident agents will not be liable unless it is proved that the resident agent knew the content was incorrect.
  
• We have also considered the penalty levels for the offences. The strict liability offences attract fines of up to $5,000 or $10,000. These penalties generally correspond in level to those in the Companies Act. The offences do not attract imprisonment. We have concluded that the penalty levels are proportionate to the aim of upholding the integrity of the

company and partnerships registration system and maintaining New Zealand’s international

reputation.

• We therefore consider that the limits the strict liability offences/positive defence provisions place on s 25(c) of the Bill of Rights Act are justifiable in terms of s 5 of that Act.
  

CONCLUSION

• We have concluded that the Bill appears to be consistent with the rights and freedoms affirmed in the Bill of Rights Act. This advice has been prepared by the Public Law Group and the Office of Legal Counsel.
  

Jeff Orr

Chief Legal Counsel Office of Legal Counsel

Footnotes:

1. RJR-MacDonald Inc v Canada (Attorney-General) [1995] 3 SCR 199. Also see, “The New
Zealand Bill of Rights Act- a commentary” Butler & Butler, Wellington 2005 pp 389-390.

2. R v Keegstra [1990] INSC 224; [1990] 3 SCR 697, 729, 826.

3. Hansen v R [2007] NZSC 7 [123].

4. See, for example, Atkinson v Minister of Health and others [2010] NZHRRT 1; McAlister v Air New Zealand [2009] NZSC 78; and Child Poverty Action Group v Attorney-General [2008] NZHRRT 31.

In addition to the general disclaimer for all documents on this website, please note the following: This advice was prepared to assist the Attorney-General to determine whether a report should be made to Parliament under s 7 of the New Zealand Bill of Rights Act 1990 in relation to the Companies and Limited Partnerships Amendment Bill. It should not be used or acted upon for any other purpose. The advice does no more than assess whether the Bill complies with the minimum guarantees contained in the New Zealand Bill of Rights Act. The release of this advice should not be taken to indicate that the Attorney-General agrees with all aspects of it, nor does its release constitute a general waiver of legal professional privilege in respect of this or any other matter.

Whilst care has been taken to ensure that this document is an accurate reproduction of the advice provided to the Attorney-General, neither the Ministry of Justice nor the Crown Law Office accepts any liability for any errors or omissions.