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Owner's Expectations Manual

8.4 Overseas expansion (including offshore investments)

  • Overall, shareholding Ministers have the following preferences for overseas expansions and investments (and expansions generally):
    • The SOE should not lose focus of its core business.
    • Expansion should not significantly increase the risk profile of the SOE and/or the Crown.
    • Expansion strategies should tend to develop and leverage from domestic activities rather than developing entirely new products and services for international markets.
    • Overseas expansion should not put at risk the SOE's New Zealand operations or assets.
    • The SOE should have some level of non-Crown private sector debt for expansion and should not seek total funding by the Crown (eg, through withholding dividends).
    • Overseas expansion should not create a risk that the New Zealand Government may be associated with and held accountable for poor company actions and behaviour overseas.

8.5 Subsidiaries

  • In relation to subsidiaries, shareholding Ministers expect that:
    • the parent company will comply with any restrictions in its SCI relating to the acquisition or formation of subsidiaries
    • the powers and functions of each subsidiary will be treated in practice as if it is subject to the same statutory limitations as the parent company
    • in establishing the governance arrangements for the subsidiary, the parent company will act in accordance with any relevant provisions of its SCI and accepted best practice in the identification and appointment of directors
    • the parent company will be accountable to the Minister for SOEs (or the relevant responsible Minister) for the subsidiary's activities and performance and will have appropriate financial controls, business planning and monitoring procedures in place, and
    • public accountability documents for the parent company (SCIs, financial statements and annual reports) will include information on the subsidiary's activities and performance.

8.6 Joint ventures

  • While shareholding Ministers are supportive of SOEs entering into joint venture (JV) arrangements as a way of leveraging expertise and capital, they expect to be informed at an early stage of any JV formation, particularly where the JV involves another New Zealand government entity or where it includes a foreign government or sovereign wealth fund.
  • Boards of SOEs should only seek partnering solutions that allow them to retain substantive control over their business activities. In general, shareholding Ministers will not support JVs that result in Crown-owned assets and capabilities being transferred or diluted.
  • This concern about dilution of control also extends to financial and budgetary controls. Shareholding Ministers expect that any JVs entered into by the board would be subject to at least the same level of financial budgeting and monitoring control as that which applies to SOEs and their subsidiaries.
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