[ESTABLISHING A BUSINESS ENTITY IN NEW ZEALAND] 358
ESTABLISHING A BUSINESS ENTITY IN NEW ZEALAND
TYPES OF BUSINESS ENTITIES There are various entities available in New Zealand from which a business can be operated. The most commonly adopted entities are: 1. Limited Liability Company (including Incorporated Joint Venture (JVC)) 2. Partnership 3. Limited Partnership (LP) 4. Unincorporated Joint Venture (JV) 5. Trading Trust Each has its advantages and disadvantages, and each pose different obligations and requirements, both from a regulatory perspective and an internal perspective. The following summarises the general characteristics, obligations and requirements of each. COMPANY A limited liability company is the most common form of business entity adopted in New Zealand. The key characteristics and appealing aspects of a company that contribute to its popularity are: • its separate legal identity from its shareholders and directors; and • the limited liability status for shareholders. The formation, management and operation of companies in New Zealand are governed by the Companies Act 1993 (‘Companies Act’), the Financial Reporting Act 2013 (‘FRA Act’) and the company’s constitution (if adopted). It is optional for a company to adopt a constitution. Where there are numerous shareholders, it is also common for a shareholders’ agreement to be implemented.
The Companies Act applies to all companies. It contains mandatory, default and optional provisions. Mandatory provisions cannot be contracted out of, and include provisions relating to minority protection, major transactions and directors’ duties. Default provisions, however, can be contracted out through the company’s constitution, and apply by default where the company has not adopted a constitution or are not otherwise dealt with in the constitution. The regulatory body is the Companies Office. The process to incorporate a company is completed online through the Companies Office website. The basic requirements for incorporation of a company are: 1. The company must have at least 1 eligible director and at least 1 shareholder, and at least 1 director must either be a NZ resident or a director of an Australian company who is living in Australia; 2. A registered office and address for service in New Zealand; 3. A name; 4. A minimum of 1 share. There are no capitalisation or minimum share value requirements; and 5. Registration with the Companies Office. The online process for registration with the Companies Office is relatively fast and simple. The process is effectively two-part. The process and information required to be disclosed is simplified as follows: 1. Step 1 – Reserve the company name. This is completed online
ILN Corporate Group – Establishing a Business Entity Series
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