Country Q&A
MULTI-JURISDICTIONAL GUIDE 2014/15
ESTABLISHING A BUSINESS IN…
Establishing a business in New Zealand
Michael Dickie, Tim Brown, Peter van Keulen and Nicola Appleton
Cavell Leitch
LEGAL SYSTEM
1.
limited liability. In addition, LPs provide certain tax benefits,
making them a popular vehicle for foreign investors in New
Zealand. However, limited partners cannot generally take part
in the management of the LP.
What is the legal system in your jurisdiction based on (for
example, civil law, common law or a mixture of both)?
•
Sole traders. A sole trader is an individual operating a business
on his own. Sole traders are usually small businesses (for
example, takeaway food outlets, convenience stores and so on.
The advantages of operating as a sole trader are the simplicity
and cost-effectiveness in running the business. For example, a
sole trader can make all business decisions himself, without
holding meetings and voting on such decisions. A disadvantage
is the risk for the sole trader to lose his personal assets if the
business fails.
•
Trusts. A trust generally involves a trustee (usually an
individual) holding some assets on behalf of one or more
beneficiaries until they are entitled to claim ownership. Some
businesses also use trading trusts as their business vehicle. A
trading trust is normally structured using a limited liability
company that acts as trustee; the directors of that company
perform the duties of the trustee. A trading trust is one of the
most complex business structures. Persons considering using a
trading trust should seek accounting and legal advice regarding
the suitability of this structure for their particular circumstances.
New Zealand is a common law jurisdiction.
BUSINESS VEHICLES
2.
What are the main forms of business vehicle used in your
jurisdiction? What are the advantages and disadvantages
of each vehicle?
The common business vehicles used in New Zealand include:
•
Private or public companies. The advantages of companies
include the:
-
ease and cost-effectiveness of formation and operation, for
private companies;
-
greater options available for raising finance, particularly for
public companies; and
-
liability of investors limited to the amount invested in the
share capital of the company.
The main disadvantage of public companies is that they are subject
to more compliance and disclosure requirements, which can be
time consuming and costly.
•
•
Partnerships. A partnership is composed of two partners
working together to achieve a common goal. Partnerships allow
greater flexibility in the way the business is managed as
partners can determine the content of the partnership deed,
which governs the partnership. A disadvantage is that partners
have unlimited liability for the partnership debts. Partnerships
can also be administratively cumbersome. For example, as
partnerships are not separate legal entities, the partners' names
must appear on the certificates of title and ownership
documents regarding the partnership's land and other assets.
Additionally, the partnership is deemed to be dissolved, and a
new one is formed, each time a partner leaves or joins the
partnership.
Limited partnerships (LPs). A LP is a separate legal entity that
is similar to a company in many ways. For example, a LP must
have at least:
-
-
•
one general partner who is responsible for the management
of the LP (similar to a company's director or board of
director); and
one limited partner who invests funds into the LP but does
not take part in the management of the LP (similar to most
of a company's shareholders).
A person cannot be both a general partner and a limited
partner. One advantage of LPs is that limited partners have
© Thomson Reuters 2015
This article was first published in the Establishing a Business in… Multi-jurisdictional Guide 2014/15
and is reproduced with the permission of the publisher, Thomson Reuters.
The law is stated as at 1 January 2015.
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Private companies and sole traders are the most common forms of
business structure used. Partnerships are less common.
ESTABLISHING A PRESENCE FROM ABROAD
3.
What are the most common options for foreign companies
establishing a business presence in your jurisdiction?
The most common options for foreign companies establishing a
business presence in New Zealand are to:
•
Register on the Overseas Register with the New Zealand
Companies Office.
•
Establish a New Zealand registered subsidiary company.
Overseas companies wishing to carry on business in New Zealand
must register on the Overseas Register with the New Zealand
Companies Office. The registration system is designed to enable
New Zealand creditors to sue an overseas company in New
Zealand, rather than in the company's home jurisdiction. This
avoids the possible costs, delays, language problems and
uncertainties of bringing a claim under a different legal system. All
registered overseas companies must file financial statements
under the Financial Reporting Act 2013.
Establishing a New Zealand registered subsidiary may involve
more administrative work, for example, filing annual returns (see
Question 9). However, local businesses and customers may be
more confident in dealing with a New Zealand registered
subsidiary than with an overseas company. From July 2015, all New
Zealand registered companies will be required to have at least one
New Zealand resident director.
Country Q&A
4.
How can an overseas company trade directly in your
jurisdiction?
Overseas companies can undertake transactions in New Zealand
without establishing a business presence (see Question 3).
However, the following issues should be considered:
•
The law that governs the contract.
•
The jurisdiction in which disputes will be heard and settled.
•
Taxation (to avoid double taxation).
•
The protection of intellectual property rights.
•
Protection against exchange rate fluctuations.
It is common for overseas companies, to trade directly through a:
•
Branch office.
•
Agent.
•
Distributor (particularly for overseas companies in the
manufacturing sector).
5.
What are the formalities for setting up a partnership?
Partnership
Partnerships are governed by:
•
A partnership deed, which gives the partners flexibility in
choosing how to operate the partnership.
•
The Partnership Act 1908.
company in which the two joint venturers typically hold 50% of the
shares and equal board representation. An unincorporated JV is
purely contractual, with two unrelated parties agreeing to work
together to achieve a common goal.
In either case, a JV agreement is crucial and is common in most
JVs. The JV agreement should detail the rights and obligations of
the joint venturers, including provisions on:
•
Capital contributions.
•
Profit share.
•
Exit strategy.
•
Dispute resolution.
•
Deadlock.
7.
Trusts are available in New Zealand. Trusts are formed by the
relevant parties executing a trust deed. One or more trustees hold
the business assets and carry on the business on behalf of the
beneficiaries. A trust can be registered as a charitable trust under
the Charitable Trusts Act 1957 if it meets certain charitable
requirements.
The answers to the following questions relate to private limited
liability companies (or their equivalent).
FORMING A PRIVATE COMPANY
8.
A partnership is formed on the execution of the partnership deed
by the partners. There is no formal registration process.
Partners have joint and several unlimited liability. A partnership
does not have a separate legal personality. Partners are
individually taxed on their share of the partnership profit.
Are trusts available in your jurisdiction?
How is a private limited liability company or equivalent
corporate vehicle most commonly used by foreign
companies to establish a business in your jurisdiction
formed?
Regulatory framework
The main legislation regulating companies in New Zealand is the
Companies Act 1993. Other key legislation include the:
Limited partnership (LP)
•
Financial Reporting Act 2013.
LPs are separate legal entities. LPs are regulated by:
•
Financial Markets Conduct Act 2013, which regulates securities
and investment.
•
Income Tax Act 2007.
•
Takeovers Act 1993.
•
The Limited Partnerships Act 2008.
•
A written partnership agreement, which is compulsory.
A LP is registered by the Registrar of the Companies Office on
receipt of a completed application for registration. LPs are
structured and governed like companies and consist of:
•
•
Limited partners that invest funds but take no part in the
management of the business (similar to a company's
shareholders).
A general partner responsible for the overall management of
the LP (like a company's board of directors).
Limited partners have limited liability for the debts and liabilities of
the LP. General partners have unlimited liability for the debts and
liabilities of the LP. However, general partners are only liable to the
extent that the LP is unable to pay.
LPs benefit from specific tax advantages, making them an
attractive vehicle for offshore investors in New Zealand.
6.
What are the formalities for setting up a joint venture?
Joint ventures (JVs) can be either incorporated or unincorporated.
An incorporated JV usually involves the creation of a new JV
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Sector specific legislation can also apply to certain companies.
Publicly listed companies are governed by the Listing Rules of the
applicable New Zealand Exchange (NZX) market.
Companies can also adopt a company constitution and/or
shareholder agreements that supplement or alter the default
provisions of the Companies Act 1993 (see below, Company
constitution).
Companies are registered by the Companies Office.
For more information on the Companies Office see box: The
regulatory authorities.
Tailor-made or shelf company
Companies can be easily and quickly incorporated in New Zealand
(registration generally takes place within one business day). This
means that shelf companies are no longer used.
Country Q&A
Formation process
TRADING DISCLOSURE
Companies can be formed by anyone through a simple online
process with the New Zealand Companies Office (see box, The
regulatory authorities). The process includes the following steps:
10. What are the statutory trading disclosure and publication
requirements for private companies?
•
•
Reserve a company name. The fee for reserving a company
name is NZ$10.22. The name must not:
-
be identical or almost identical to another company name in
use or reserved;
-
contravene any legislation; and
-
be offensive.
Company application. This requires providing certain
information about the company (for example, the number of
directors, shareholders and shares). The fee for applying to
incorporate a company is NZ$150.
•
Consent forms. Each director and each shareholder must
complete and sign a consent form to show that they consent to
become a director or shareholder of the company.
•
Registration of a constitution. This is optional and can be
done at any stage after incorporation.
•
Tax registration. This is optional at this stage.
All company names must end with the word "Limited" or the words
"Tapui (Limited)" if the liability of the company's shareholders is
limited.
A company must ensure that its company name is clearly stated in
every:
•
Written communication sent by, or on behalf of, the company.
•
Document issued or signed by, or on behalf of, the company
that evidences or creates a legal obligation of the company.
11.
How do companies execute contracts or deeds?
A deed can be entered into on behalf of a company in writing and
signed in the name of the company by either:
•
Two or more directors of the company.
Fees are paid to the Companies Office and can be charged to the
applicant's direct debit account or paid by credit or debit card.
•
The only director of the company, whose signature must be
witnessed.
The Companies Office will send an e-mail notification of
registration, along with a certificate of incorporation.
•
If the constitution of the company allows it, a director or other
person or class of persons whose signatures or signatures must
be witnessed.
•
One or more attorneys appointed by the company.
Company constitution
Many companies choose to adopt a constitution, although this is
optional. There are no specific requirements on the form and
content of constitutions. A company can include any provision it
wishes in its constitution.
Some organisations (such as the Auckland District Law Society)
produce model constitutions that companies can adopt for a small
fee. Law firms generally have their own template constitutions that
can be tailored to the specific requirements of the company.
Separate shareholder agreements are sometimes used in addition
to, or in place of, a constitution. Unlike constitutions, which must
be registered with the Companies Office and are publicly
accessible, shareholder agreements need not be registered, and
can retain a more private and confidential nature.
FINANCIAL REPORTING
9.
What financial reports must the company submit each
year?
All overseas registered companies must file financial statements
under the Financial Reporting Act 1993.
The financial statements that must be filed each year include:
•
Overseas company accounts.
•
New Zealand branch accounts.
•
Group accounts (only for overseas company with one or more
New Zealand registered subsidiaries).
These accounts must comply with the requirements of the
Financial Reporting Act 1993. They may also need to comply with
the relevant laws of the overseas jurisdiction.
A contract can be entered into on behalf of the company by a
person acting under the company's express or implied authority
(for example a CEO or other manager).
MEMBERSHIP
12. Are there any restrictions on the minimum and maximum
number of members?
Companies must have at least one shareholder holding at least one
share. Sole shareholder companies are relatively common. There
are no specific requirements that apply to sole shareholder
companies. There is no maximum number of shareholders
prescribed by law, but a company's constitution or shareholder
agreement can impose a maximum number.
MINIMUM CAPITAL REQUIREMENTS
13. Is there a minimum investment amount or minimum share
capital requirement for company formation?
There are no minimum share capital requirements for company
formation, provided that some form of share capital is invested. A
company must have at least one share at all times. For example,
share capital of NZ$1 is sufficient.
14. Are there restrictions on the transfer of shares in private
companies?
There are no statutory restrictions on the transfer of existing
shares. However, a company's board can refuse or delay the
registration of a transfer if the holder of the shares failed to pay any
amount due in respect of those shares to the company.
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Country Q&A
Many companies choose to impose restrictions on the transfer of
shares in their constitutions or shareholder agreements. Preemption rights on the transfer of shares are relatively common.
These allow existing shareholders the opportunity to purchase the
selling shareholder's shares on a pro rata basis. Pre-emption rights
are often excluded for the transfer of shares to a family member,
family trust or other related party.
SHAREHOLDERS AND VOTING RIGHTS
15. What protections are there for minority shareholders under
local law? Can additional protections be given?
The Companies Act 1993 provides certain rights for minority
shareholders, including the following:
•
The liability of shareholders is limited to the value of their
investment in the company's share capital.
•
Shareholders that hold together not less than 5% of the voting
rights can request a special meeting of shareholders. The board
must call a meeting as requested.
•
A shareholder or shareholders holding together more than 25%
of the voting rights in the company can block certain major
transactions or decisions that require approval by a special
resolution of shareholders under the Companies Act 1993
and/or the company's constitution (see Question 17).
•
The Companies Act 1993 contains minority buy-out rights. A
shareholder entitled to vote on a major decision (see Question
17), and that has cast all its votes against that decision, can
require the company to purchase its shares at a fair and
reasonable price if the decision is adopted by the required
majority.
•
Approving a major transaction (for example, the acquisition or
disposal of assets the value of which exceeds half of the
company's assets value.)
•
Approving an amalgamation of the company.
•
Putting the company into liquidation.
Additional significant transactions or decisions can be specified in a
company's constitution or shareholder agreement.
All other decisions can be approved by an ordinary resolution of
shareholders, requiring a simple majority vote.
18. Can voting majorities required by law be disapplied to
protect a minority shareholder (for example, through class
rights or weighted voting)?
The voting majority required for a shareholders' special resolution
cannot be reduced below 75%. Similarly, the threshold for an
ordinary resolution cannot be reduced below a simple majority vote
(see Question 17).
SECTORAL RESTRICTIONS
19. What are the conditions or restrictions on establishing a
business in specific industry sectors? Are there industry
sectors in which it is not permitted to establish a business?
Various licences and consents are required for companies
operating in certain sectors, including:
•
16. Are there any statutory restrictions on quorum or voting
requirements at shareholder meetings? Do quorum or
voting rights need to be proportionate to shareholdings?
A company's constitution generally determines quorum and voting
rights. If there is no constitution, or if the matter is not dealt with in
the constitution, the Companies Act 1993 provides that there is a
quorum if shareholders (or their proxies) present at the meeting
can between themselves exercise a majority of the votes to be cast
(or have cast postal votes) on the business to be transacted at the
meeting.
Voting rights are generally set out in either the:
•
Company's constitution.
•
Shareholder agreement (if any).
•
Terms on which the relevant shares were issued.
17. Are specific voting majorities required by law for any
corporate actions (for example, increasing share capital,
changing the company's constitution, appointing and
removing directors, and so on)?
Banking. For example, all banks operating in New Zealand
must be registered with the Reserve Bank of New Zealand.
Other entities providing financial services may:
-
have to register as financial services providers; and/or
-
require a licence to operate as "non-bank deposit takers".
•
Mining. For example, various licences are required for
exploration and mining.
•
Energy.
FOREIGN INVESTMENT RESTRICTIONS
20. Are there any restrictions on foreign shareholders?
Overseas investors should be aware of the restrictions imposed by
the Overseas Investment Act 2005. This Act establishes a regime
for overseas investment controls that require overseas investors to
seek approval before investing in:
•
Significant business assets (see below).
•
Certain types of sensitive New Zealand land (including
farmland) (see Question 22).
•
Fishing quotas.
A transaction involves significant business assets if an overseas
person plans to either:
Certain significant transactions or decisions require approval by
special resolution of shareholders under the Companies Act 1993
and/or the company's constitution. A special resolution requires
75% or a higher majority of votes.
•
Acquire 25% or more control or ownership in a business.
•
Increase its interest in a business, where it already owns or
control 25% or more of this business.
The Companies Act 1993 provides that the following must be
approved by special resolution of shareholders:
•
Establish a business or purchase assets where the value of the
securities or consideration provided, or the gross value of the
assets, exceed NZ$100 million.
•
Adopting, altering or revoking the constitution.
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•
The directors of the company, whose number is not less than
the required quorum (see Question 16), acting together as a
board of directors.
•
If the company has only one director, that director.
There are no restrictions on buying and selling foreign currencies.
22. Are there restrictions on foreign ownership or occupation of
real estate, or on foreign guarantees or security for
ownership or occupation?
The Overseas Investment Act 2005 imposes restrictions on the
purchase by overseas persons of certain sensitive land in New
Zealand. Sensitive land includes:
Number of directors or members
The Companies Act 1993 provides that a company must have at
least one director at all times. Provided that requirement is
satisfied, a company's constitution or shareholder agreement (if
any) can specify minimum and maximum numbers of directors.
Employees' representation
Employees have no statutory right to board representation.
•
Non-urban land exceeding five hectares.
•
Foreshore or seabed.
•
Lakebed.
•
Conservation land.
•
Land used as a reserve, public park, open space or for recreation
purposes.
•
Islands.
To become a publicly listed company, a company must comply
with:
•
Historic land or wahi tapu (sacred Maori land sites).
•
•
Land adjoining foreshore or other types of sensitive land that
exceed certain minimum size thresholds.
The Listing Rules of the relevant New Zealand Exchange (NZX)
market.
•
The Companies Act 1993.
•
Other applicable and sector specific legislation, for example:
DIRECTORS
REREGISTERING AS A PUBLIC COMPANY
25. What are the requirements for a business to reregister as a
public company?
Membership
23. Are there any general restrictions or requirements on the
appointment of directors?
A director must be a natural person who is not:
•
Under 18 years of age.
•
An undischarged bankrupt.
•
Otherwise prohibited from being a director or being concerned
or taking part in the management of a company under the
Companies Act 1993 or other relevant legislation.
Takeovers Act 1993; and
-
Financial Reporting Act 1993.
To list on the NZX Main Board, a company must have (among other
things):
•
A company's constitution and/or shareholder agreement can
contain further restrictions on the appointment of directors.
From July 2015, all New Zealand registered companies will be
required to have at least one New Zealand resident director.
-
•
An appropriately qualified board of directors. For example,
public companies must have at least:
-
three directors;
-
two directors who are ordinarily resident in New Zealand;
and
-
two independent directors (that is, directors who are not
executive officers of the company).
At least 500 shareholders who hold at least 25% of the class of
securities between them.
It is recommended that companies to be listed on the NZX Main
Board have annual revenue of at least NZ$50 million.
Directors must comply with the directors' duties set out in the
Companies Act 1993 and other obligations set out in applicable
legislation or the company's constitution.
Share capital
Directors' names and residential addresses must be filed with the
Companies Office and are publicly available.
There is no minimum requirement for share capital (for example, a
share capital of NZ$1 is sufficient).
BOARD COMPOSITION
TAX
24. What are the legal requirements for the composition of a
company's board of directors?
26. What main taxes are businesses subject to in your
jurisdiction?
Structure
The main taxes affecting businesses in New Zealand are outlined
below.
There is only one board of directors in New Zealand companies. All
directors have the same rights, powers and obligations, unless
altered by the company's constitution or shareholder agreement.
Under the Companies Act 1993, the business and affairs of a
company must be managed by, or under the direction or
supervision of, the board of the company.
Income tax
New Zealand residents must pay tax on their worldwide income.
Non-residents are only taxed on their New Zealand source income,
subject to any applicable double taxation agreements.
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Country Q&A
The Companies Act 1993 defines "board of directors" as either:
21. Are there any exchange control or currency regulations?
Country Q&A
The rate of income tax is progressive and dependent on the level of
income. The current rates are:
•
10.5%, for income up to NZ$14,000 a year.
•
33%, for income exceeding NZ$70,000 a year.
Employers must deduct tax from their employees wages through
the Pay As You Earn (PAYE) system.
While non-residents cannot use imputation credits, the amount of
non-resident withholding tax payable is in some cases reduced
(usually to nil) where imputation credits are attached to dividends
(see Question 28).
27. What are the circumstances under which a business
becomes liable to pay tax in your jurisdiction?
Corporate tax
Companies are taxed on their net income less permissible
deductions. The current rate of corporate tax is 28%. New Zealand
has an imputation tax system that allows domestic shareholders a
tax credit for tax paid by their company (see Question 28).
Goods and services tax (GST)
GST applies to the supply of goods and services made by a GSTregistered taxpayer. It operates in a similar way to value added tax
(VAT) in the United Kingdom and other European jurisdictions.
Tax resident
A company is tax resident in New Zealand if:
•
It is incorporated in New Zealand.
•
Its head office or centre of management is in New Zealand.
•
Directors exercise control of the company from New Zealand.
New Zealand residents are taxed on their worldwide income.
GST is payable at a rate of 15% of the value of the supply, unless
the supply is exempt (for example, financial services) or zero-rated.
A supplier's ability to claim a refund of GST (or input tax credit)
depends on the nature of the supply. For example, suppliers of
exempt supplies cannot claim a refund.
Non-tax resident
A supplier of goods or services must register for GST if:
28. What is the tax position when profits are remitted abroad?
•
It carries on a taxable activity (for example, a business).
•
The annual value of its taxable supplies exceeds NZ$60,000.
A supplier can also voluntarily register for GST.
GST is also payable on any goods imported into New Zealand. A
refund of GST can be claimed where the importer is registered for
GST and is acquiring the goods for the purposes of making taxable
supplies.
Accident compensation levies (ACC)
New Zealand operates a no-fault accident compensation system.
Persons who suffer accidental injuries are not required to prove
fault to obtain compensation.
ACC is funded from levies payable by employers, self-employed
persons and employees. The levy rate depends on the nature of the
employer's or self-employed person's business activity.
Fringe benefit tax (FBT)
Non-residents are only taxed on New Zealand source income,
subject to the terms of any double taxation agreement.
New Zealand operates an imputation tax system, to avoid tax
being paid twice on the same income (by the company on its profits
and a shareholder on dividends received). For each dollar of tax
paid, a company receives a corresponding imputation credit.
Imputation credits attach to dividends paid by the company. The
maximum ratio of credits to cash dividend is 28:72. Companies
must allocate the same ratio of imputation credits to dividends
paid to non-resident and resident shareholders. Imputation credits
can be offset by New Zealand resident shareholders against their
New Zealand tax. The credits are not refundable, but can be carried
forward.
For dividends paid to a non-resident shareholder, the non-resident
withholding tax payable is reduced to nil if both:
•
The dividend is fully imputed.
•
The non-resident shareholder:
FBT is payable by employers on the value of non-cash benefits
provided to their employees. The applicable rate of taxation usually
depends on the marginal rate of income tax payable by the
employee (see above, Income tax).
Import duties
Imports to New Zealand may be subject to a tariff. These vary
depending on the item and jurisdiction from which the item is
imported.
-
has a 10% or more voting interest in the resident subsidiary;
or
-
has less than a 10% direct voting interest in the resident
company and the tax rate of the dividend under the
applicable double tax treaty is less than 15%.
29. What thin-capitalisation rules and transfer pricing rules
apply?
Withholding taxes
Interest and dividend income payable to a New Zealand resident is
subject to resident withholding tax (subject to certain exceptions).
Thin capitalisation rules exist, which:
•
Prevent a New Zealand-resident subsidiary from deducting
interest where the New Zealand group's ratio of debt to assets
exceed 60% (however, a subsidiary's debt can exceed 60%
where it is a member of a group with a worldwide group debt to
asset ratio exceeding 60).
•
Prevent certain interest deductions for New Zealand residents
with an income interest in a controlled foreign company (CFC),
where the funding assists with the generation of active income
that is not taxed under CFC rules.
Dividends, interest and royalties payable to non-residents are
subject to non-resident withholding tax, subject to the terms of any
applicable double taxation treaty, at the following rates:
•
30% for dividends, depending on whether the dividend is fully
imputed (see below and Question 28).
•
15% for interest, unless the non-resident has a New Zealand
branch.
•
15% for royalties.
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There is also a transfer pricing regime preventing New Zealand tax
paying entities from increasing deductions and reducing their
•
Not dismissing an employee unjustifiably (see below,
Unjustified dismissal and unjustified disadvantage).
GRANTS AND TAX INCENTIVES
•
30. Are grants or tax incentives available for companies
establishing a business in your jurisdiction?
Not acting in an unjustified way that causes a disadvantage to a
term or condition of an employee's employment (see below,
Unjustified dismissal and unjustified disadvantage).
Equal Pay Act 1972
There are generally no specific incentives available for persons
investing in New Zealand. There are no free trade zones in New
Zealand.
EMPLOYMENT
31. What are the
relationships?
main
laws
regulating
employment
Employment relationships in New Zealand are regulated by:
This Act aims to remove and prevent discrimination based on an
employee's gender and pay rates, and is supported by the Human
Rights Act 1993.
It is unlawful for an employer, based on the employee's gender, to
offer different terms of employment, conditions of work, benefits,
training, promotion and transfers to those of an employee with
similar qualifications and employed to do similar work in similar
circumstances.
The Minimum Wage Act 1983
Employees aged 16 years and over must be paid the minimum
wage rate (currently NZ$14.25 per hour).
•
Legislation.
The Holidays Act 2003
•
Employment agreements.
•
Case law.
Annual leave. All employees must receive at least four weeks' paid
annual leave after 12 months of continuous employment with the
same employer. Employers can instruct employees to take leave at
certain times provided they are given at least seven days' notice of
this.
The key employment legislation in New Zealand includes the:
•
Employment Relations Act 2000.
•
Equal Pay Act 2003.
•
Minimum Wage Act 1983.
•
Holidays Act 2003.
Public holidays. There are 12 public statutory holidays each year.
These are governed by the Holidays Act, except for Anzac Day and
Waitangi Day which are governed by their own separate legislation.
An employee who works on a public statutory holiday that would
normally be a working day for him is entitled to both:
•
Wages Protection Act 1983.
•
Time and a half payment for hours worked on the public
holiday.
•
Another paid day off as an alternative holiday.
These acts contain mandatory employment rules and apply to all
employees working in New Zealand, regardless of any choice of law
clause in an employment agreement.
The main laws regulating employment relationships are outlined
below.
The Employment Relations Act 2000
This Act specifically recognises that employment relationships
must be built on good faith. It acknowledges and addresses the
inherent inequality of bargaining power in employment
relationships by promoting collective bargaining and protecting
the integrity of individual choice.
Sick leave. After six months of employment, the employee is
entitled to a minimum of five days' sick leave in each 12 month
period. This can be accumulated up to 20 days' entitlement in any
year. The employer must pay for each day of sick leave an amount
equivalent to the relevant daily pay for the ordinary hours that
should have been worked.
Bereavement leave. After six months of employment, the
employee is entitled to bereavement leave of:
•
Three days, for bereavement caused by the death of a close
family member.
•
One day, for bereavement caused by the death of a person in a
wider or agreed category of connection.
The key obligations of employers include:
•
•
•
•
The duty of good faith. Employers must deal with employees
fairly, reasonably and in an honest and open manner (that is, be
constructive and communicative). This is a reciprocal duty also
imposed on employees.
Providing a written and signed employment agreement for each
employee (see below, Employment agreements).
Recognising employees' freedom to be members of a union.
Employers must:
-
not confer any preference on any person by virtue of their
membership or non-membership of a union;
-
allow a union's representative to enter into the workplace for
purposes relating to employment; and
-
allow employees to attend two meetings of two hours of
their unions in every calendar year, provided they give 14
days' notice.
Keeping written wages and time records.
Penalties for breach. Employers that breach any of the above
rules and therefore commit an offence under the Act are liable to a
penalty not exceeding:
•
NZ$5,000 for individual employers.
•
NZ$10,000 for company employers.
Wages Protection Act 1983
An employer must pay the entire amount of wages to the employee
when these become payable, unless the exceptions outlined in the
Wages Protection Act apply. One exception is where the employee
gives written consent to the employer to make deductions from its
wages.
Any employer, or any person on that employer's behalf, that fails to
comply with the provisions of the Wages Protection Act is liable, at
the suit of the worker or of a Labour Inspector designated under
section 223 of the Employment Relations Act 2000, to a penalty
imposed by the Employment Relations Authority. This is one of the
most common grounds for imposing penalties.
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income via cross-border transactions that are not made on an
arms-length basis.
Country Q&A
KiwiSaver scheme
The KiwiSaver scheme is a voluntary long-term savings scheme,
designed primarily for retirement savings. It is governed by the
KiwiSaver Act 2006.
Anyone under the age of 64 years who is entitled to live in New
Zealand can elect to join KiwiSaver. Employees who participate in
KiwiSaver can elect to contribute 3%, 4%, or 8% of their gross pay
into their KiwiSaver account (employers will then make the
deduction and send it to the Inland Revenue). Employers must
contribute at least 3% of the employee's gross pay into the relevant
account for every participating employee.
Employment agreements
Employment agreements must be in writing and include, among
other things:
causes a disadvantage to a term or condition of an employee's
employment.
Unjustified dismissal or disadvantage arise in circumstances where
an employer either or both:
•
Does not have a good or valid reason for its action.
•
Failed to follow a fair process in coming to the decision to take
its action.
Redundancy
Redundancy occurs when an employer terminates an employee's
employment because the position is superfluous to the business'
needs.
An employer must:
•
Have a genuine commercial reason for any redundancy.
•
An employment agreement can be either a collective agreement
(through a union) or an individual agreement. Every employer must
keep a copy of the signed agreement.
Act reasonably and fairly in carrying out the redundancy. This
means an employer must consult with affected employees
about any proposal to restructure and make employees
redundant. Consultation carries onerous requirements,
including:
Employees benefit from a number of minimum entitlements (see
-
providing relevant information to employees; and
-
considering any feedback or response to the proposal before
deciding to proceed with the redundancy.
•
A description of the position.
•
Procedures for resolving employment relations issues.
above) regardless of the contractual provisions.
Personal grievances
The Employment Relations Act 2000 (see above, Employment
Relations Act 2000) gives all employees the right to pursue a
personal grievance for any of the following complaints:
•
•
Unjustified dismissal (see below, Unjustified dismissal and
unjustified disadvantage).
Transfer of a business
If a business is sold or outsourced, employees attached to that
business only transfer to the new owner or service provider if either:
•
The workers are protected under Part 6A of the Employment
Relations Act 2000 (that is, vulnerable workers, which covers
workers providing cleaning services and catering services).
•
There is an agreement between parties to the transfer that
employees will continue to be employed on the same terms and
conditions, with continuity of service recognised for benefit
purposes (such as holiday entitlements).
Unjustified disadvantage (see below, Unjustified dismissal and
unjustified disadvantage).
•
Discrimination.
•
Sexual harassment by:
-
someone in authority; or
Workplace health and safety
-
co-workers.
The Health and Safety in Employment Act 1992 (H&S Act) places
an obligation on employers to prevent harm to all employees and
workers and other people in, or in the vicinity of, a place of work.
Employees and other workers also have responsibilities to
themselves and others.
•
Racial harassment.
•
Duress over membership of a union or other employee
organisation.
Personal grievances must be raised by employees within 90 days of
the event giving rise to the grievance.
An employer must take all practicable steps to ensure the safety of
employees while at work. This includes:
Parties are encouraged to attend mediation if they cannot resolve
the personal grievance between themselves.
•
Providing and maintaining a safe working environment.
•
Providing and maintaining facilities for the safety and health of
employees at work.
•
Ensuring that machinery and equipment in the workplace is safe
for employees.
•
Ensuring that systems of work do not lead to employees being
exposed to hazards in or around their place of work.
•
Identifying all hazards and eliminating them, or if elimination is
not possible, isolating or minimising the hazard.
•
Developing procedures for dealing with emergencies that can
arise while employees are at work.
If a personal grievance (or any other employment relationship
problem) cannot be resolved, an employee can issue a claim before
the Employment Relations Authority within two years of the
personal grievance.
The Employment Relations Authority is an independent institution.
Its role is inquisitorial. It looks into the facts of any employment
relationship problem (primarily personal grievances) and makes a
determination based on the merits of the case. Determinations are
legally binding decisions and can include awards of damages and
penalties.
Unjustified dismissal and unjustified disadvantage
Unjustified dismissal and unjustified disadvantage are the two
most common personal grievances (see above, Personal
grievances).
An employer must ensure it acts as a fair and reasonable employer
would act in the circumstances in deciding to dismiss an employee.
In addition, an employer must not act in an unjustified way that
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Employers convicted of breaching health and safety laws can be
prosecuted and fined. Offences occur where a person:
•
Takes any action, knowing it is reasonably likely to cause serious
harm to any person.
•
Fails to take any action required by the H&S Act, knowing that
failure is reasonably likely to cause serious harm to any person.
PROPOSALS FOR REFORM
Other offences relate to situations where a person either fails to
comply with provisions of the H&S Act or regulations made under
the Act. On conviction, the penalty is a fine of up to NZ$250,000 if
the failure causes death or serious harm.
33. Are there any impending developments or proposals for
reform?
For breaches relating to a failure to warn about hazards, the
penalty is a fine of up to NZ$10,000.
Health and safety law is currently under reform (see Question 33).
32. What prior approvals (for example, work permits, visas,
and/or residency permits) do foreign nationals require to
work in your jurisdiction?
Foreign nationals require an appropriate work or residence visa to
start working in New Zealand. Failure to obtain the appropriate
visa can result in:
•
A NZ$50,000 fine for the employer.
•
The employee being deported from New Zealand.
In most cases, to obtain an appropriate work visa, the employer
must demonstrate that there are no New Zealand citizens or
residents available for the role. The employee must also prove that
the foreign national meets the relevant skill requirements and
necessary health and good character requirements.
The Health and Safety at Work Act 2014 introduces new provisions
that regulate how businesses and workers should conduct
themselves to keep workers and others safe.
The Health and Safety at Work Act 2014 will comprehensively
modify the duties of directors in relation to health and safety
issues. It will impose positive responsibilities on directors, including
a responsibility of due diligence. This is a significant change that
will modify the way directors view and act on health and safety
matters. Directors will need to:
•
Acquire and keep their knowledge of health and safety up-todate.
•
Gain an understanding of the risks and hazards associated with
the conduct of the business.
•
Ensure the business has appropriate resources and processes to
minimise or eliminate risks to health and safety.
•
Ensure the business has resources and processes for responding
to information regarding incidents and hazards.
•
Ensure the business has and implements processes for
complying with its health and safety obligations.
The Act is not in its final form yet, but it is very likely that proposed
amendments to directors and officers responsibilities will be
implemented.
THE REGULATORY AUTHORITIES
Companies Office
Main activities. Responsible for company administration, including incorporating companies and maintaining the register.
W www.business.govt.nz/companies
Immigration New Zealand
Main activities. Processes visas for foreign nationals to work in New Zealand.
W www.immigration.govt.nz
ONLINE RESOURCES
Immigration New Zealand
W www.immigration.govt.nz
Description. Official website for the New Zealand immigration authorities.
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Country Q&A
The penalty for these offences is a fine not exceeding NZ$500,000
or imprisonment for up to two years, or both.
Country Q&A
Practical Law Contributor profiles
Michael Dickie, Partner
Tim Brown, Senior Associate
Cavell Leitch
Cavell Leitch
T +64 3 339 5623
E [email protected]
W www.cavell.co.nz
T +64 3 339 5608
E [email protected]
W www.cavell.co.nz
Professional qualifications. New Zealand, Solicitor, 1986; England
and Wales, Solicitor, 1991
Areas of practice. Investment (securities) law; commercial and
corporate law; mergers and acquisitions; banking and finance;
insolvency.
Non-professional qualifications.
Wellington, New Zealand, 1985
LLB,
Victoria
University,
Professional qualifications. New Zealand, Solicitor, 2004
Areas of practice. Investment (securities) law; commercial and
corporate law; mergers and acquisitions.
Non-professional qualifications.
University of Otago, New Zealand
LLB,
BCom
(Economics),
Peter van Keulen, Partner
Nicola Appleton, Senior Associate
Cavell Leitch
Cavell Leitch
T +64 3 339 5636
E [email protected]
W www.cavell.co.nz
Professional qualifications. New Zealand, Solicitor, 1995
Areas of practice. Employment agreements; workplace systems;
managing employees; employee claims; commercial transactions;
restructuring and redundancy; social media and technology;
workplace health and safety.
Non-professional qualifications. LLB, University of Canterbury,
1995
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T +64 3 335 3480
E [email protected]
W www.cavell.co.nz
Professional qualifications. New Zealand, Solicitor, 2000;
England and Wales, Solicitor, 2003
Areas of practice. Business immigration; general immigration;
immigration and protection tribunal appeals.
Non-professional qualifications. LLB and BA, University of
Canterbury, 2000