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Company Law

The Companies Act 1993 provides the framework for the formation and governance of companies.

Securities Law

The Securities Act 1978 applies to securities that are advertised or offered to the public. The Act places restrictions on advertisements for securities and requires a prospectus to be prepared before securities can be offered. It also requires an investment statement, which summarises the key features of the offer, to be distributed to an investor before they subscribe to the securities.

The Act also establishes the Securities Commission, which has powers of investigation and enforcement, as well as the power to issue exemptions from some securities law requirements.

The Securities Markets Act 1988 regulates the operation of securities markets and trading behaviour on those markets. The Act establishes a system for registration of securities exchanges and approval of the rules of securities exchanges and provides for oversight of exchanges by the Securities Commission. It contains prohibitions on insider trading and requires exchanges to have specific rules for continuous disclosure of price-sensitive information. It also requires disclosure of substantial security holdings and directors' and officers' shareholdings.

Both the Securities Act and the Securities Markets Act were amended in October 2006 to overhaul the law on insider trading, introduce new law on ‘market manipulation' and require more effective disclosure by investment advisers and brokers. These changes came into effect on 29 February 2008.

Capital Market Development Taskforce: The Capital Market Development Taskforce was established in July 2008 and released its final report in December 2009. The Taskforce proposed a number of actions the government and the private sector could take to:

  • improve the quality of the products available to retail investors, and the advice they receive;
  • improve businesses' access to the capability and capital they need at each stage of their development; and
  • improve the regulatory and tax environment for capital markets.

The summary and full text of the Taskforce report is available at: http://www.med.govt.nz/templates/MultipageDocumentTOC____42335.aspx.

The government has prepared an Action Plan outlining its response to the proposals in the CMD Taskforce report, which can be accessed at: http://www.med.govt.nz/templates/MultipageDocumentTOC____42528.aspx.

Many of the recommendations will be incorporated in a review of the Securities Act which commenced during 2009.

The Takeovers Act 1993 applies to takeovers of listed companies and those with 50 or more members or shareholders. The Takeovers Code, established under the Act, regulates acquisitions of over 20% of the securities in those companies. The Code seeks to ensure that all shareholders are treated equally and, on the basis of proper disclosure, are able to make an informed decision as to whether to accept or reject an offer made under the Code.

The Financial Advisers Act 2008 regulates financial advisers, regulating who may provide financial advice and what information financial advisers must disclose to potential investors. This Act also makes financial advisers accountable for the advice they provide and includes extensive public enforcement provisions to protect investors, including providing the Securities Commission with the ability to apply to the Court for various orders and seek civil penalties and remedies for a breach of the Act.

Competition Law

The purpose of the Commerce Act 1986, as amended by the Commerce Amendment Act 2008, is to promote competition in markets for the long-term benefit of consumers within New Zealand. Very broadly, the Act prohibits:

  • agreements that have the purpose, effect, or likely effect of substantially lessening competition in a market;
  • the taking advantage of a substantial degree of power in a market to prevent a person entering or engaging in competitive conduct in that or any other market; and
  • business acquisitions that would have, or would be likely to have, the effect of substantially lessening competition in a market.

The Act also provides for:

  • the authorisation of restrictive trade practices or business acquisitions that would substantially lessen competition if the public benefits of allowing such practices or acquisitions to go ahead would be expected to exceed the detriments;
  • the control of goods and services in markets where competition is limited and where it is in the interest of consumers to do so;
  • other kinds of regulatory intervention, including information disclosure and arbitration;
  • information disclosure by the major airports; and
  • a targeted control regime for regulating electricity lines and gas pipelines businesses, where regulated businesses are required to adopt either a default price-quality path set by the regulator or else one customised for the business and sanctioned by the regulator.
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