Company Registration in New Zealand - Offshore Business Starting & Setup

The legal system of New Zealand is based on English common law.

There is no codified Constitution in New Zealand, but there are some constitution acts.

Companies in New Zealand are governed by Companies Act 1993.

The principal forms of business organization in New Zealand are:

• Sole trader;
• Partnership;
• Limited Partnership;
• Private Company;
• Public Company;
• Trust.

The most common structure is the private limited liability company.

There is a range of requirements to the company name in New Zealand:

1. The last word in the company name must be either Limited or Tapui (Limited).
2. It cannot be identical or almost identical to another company name. Certain words and phrases can be disregarded when determining whether names are identical or almost identical. The words and phrases are: the definite article ("the") when it is the first word in a name; certain words appearing at the end of a name: 'Limited', 'Tapui (Limited)', 'Unlimited'; the following abbreviations whenever they appear in a name: '&' for 'and'; 'no' for 'number'; 'co' or 'coy' for 'company'; 'N.Z.' or 'NZ' for 'New Zealand'; 'Bros' for 'Brothers'; the typeface and case (upper or lower) of letters, accents, spaces between letters and punctuation marks. 'Almost identical' is more difficult to define but the Registrar’s policy is that it means a name in which the key words and/or the order in which they appear make that name virtually indistinguishable from another. Each name reservation will be considered in light of its own individual circumstances. In general, a year marker - for example, '(2010)'; a number - for example, 'No. 1' or geographic marker - for example, '(Nelson)' is sufficient to distinguish one name from another. For the purposes of determining whether two names are almost identical, names containing a marker will not be almost identical to those without. For example, 'Clothing Company Limited' and 'Clothing Company (2010) Limited' are not almost identical.
3. It cannot be offensive or contain certain words that are restricted or protected by other legislation. For example, company names which include words or phrases protected by the Flags, Emblems and Name Protection Act 1981 or by any other enactment will not be approved. These include names having royal, national, international, commercial or other significance.
4. The only symbols that may be used in a company name are those that are used in the proper context – for example, The USD 2 Shop Limited. Numbers that are used in a name are likely to be accepted where they act as a year marker or a numerical marker. For example, XYZ No. 1 Limited and XYZ No. 2 Limited or XYZ (2202) Limited and XYZ (2009) Limited.
5. Plurals, that is adding the letter 's' to the end of a word, is not enough to make a name significantly different.

The following steps are required to incorporate a GmbH in New Zealand:

• To reserve a company name online (www.business.govt.nz/companies) for application fee of NZD 10.22. The reserved name is available for registration for 20 working days. You can extend your name reservation for a further 20 working days. If the name is not used or withdrawn within 20 working days, the name will be forfeited and you will need to reapply and pay another NZD 10.22 application fee.
• Go back online and apply for the company to be registered by completing forms on company details (such as names of shareholders and directors and company addresses and address of communication) and pay the registration fee. When the application is processed, the founder will receive a notification by email along with the appropriate director and shareholder consent forms, which are generated by the Companies Office. The applicant must then fax the signed director and shareholder consent forms within 20 working days, after which the application will expire. The certificate of incorporation will be issued via email in a few minutes when the last consent form is accepted.
• You can apply online for a company IRD (Inland Revenue Department) number and register for GST (Good and Service Tax) at the same time as incorporating a company online with the New Zealand Companies Office.

The formation of a new company in New Zealand takes 1 day.

Each company in New Zealand must have a registered office, an address for service, and an address for communication. The address of the registered office and the address for service must be physical addresses in New Zealand. That is, a street address, not a Post Office Box or DX address. The address for communication may be a postal or physical address (but not a DX) and must include an email address.

The companies office requires the following to be stored at the registered office:

• Constitution of the company (optional);
• Minutes of all meetings and resolutions of shareholders;
• Share register and the register of Director's interests;
• Minutes of all meetings and resolutions of directors and directors committees;
• Certificates given by directors under Companies Act;
• Full names and addresses of the current directors;
• All written communications to all shareholders, including annual reports;
• Copies of all financial statements and group financial statements (these must be in English);
• Accounting records for the current accounting period.

All records must be held and updated regularly for the past seven years.

There are no statutory requirements for a company in New Zealand to have a seal.

The redomiciliation of companies to or from New Zealand is permitted.

Every company in New Zealand must have at least one director. A director must be a natural person. There are no requirements to the residency of directors. A person cannot be a director of a company if they are:

• under 18 years of age;
• an undischarged bankrupt;
• otherwise prohibited from directing, promoting, participating in the management of a company under any statutory provisions.

However, from 1 May 2015, New Zealand companies must also have at least one director who lives in New Zealand or who lives in an enforcement country (currently Australia only) and is a director of a company in that country.

Directors’ information appears on public record.

A meeting of the board may be held either by a number of the directors who constitute a quorum, being assembled together at the place, date, and time appointed for the meeting; or by means of audio, or audio and visual, communication by which all directors participating and constituting a quorum can simultaneously hear each other throughout the meeting.

New Zealand companies are not required to appoint a company secretary.

Each company in New Zealand must have at least one shareholder. There is no restriction on the nationality or residency of the shareholders. The shareholders can be individuals and/or legal persons.

Each shareholder is on public record.

The board of a company must call an annual meeting of shareholders. A company does not have to hold its first annual meeting in the calendar year of its reregistration but must hold that meeting within 18 months of its registration. The following meetings should be held not later than 15 months after the previous annual meeting. Meetings may be held in or outside of New Zealand.

The details of the beneficial owner are not available on public record.

There is no specific minimum capital requirement. The usual minimum authorized capital is NZD 100. The minimum issued capital may be one share without par value. Issued shares must be fully paid. Registered shares, preference shares, redeemable shares and shares with or without voting rights are permitted.

Shares must not have a nominal or par value. Bearer shares are prohibited.

A trust is a legally binding arrangement whereby a person (the "settlor") transfers assets to another person (the "trustee") who is entrusted with legal title to the trust assets, not for the trustee's own benefit, but for the benefit of other persons (the "beneficiaries").

The instructions from the settlor to the trustee as to the distribution of trust assets will normally be contained in a document called the trust deed. The trust deed will usually provide that the trustee has the power to manage and distribute the trust assets in accordance with the terms of the trust deed and the high standards of prudence imposed on trustees under NZ law.

It is also common for a settlor to express to the trustee his wishes as to the management and distribution of the trust fund in a less formal manner. This expression is often contained in a letter of wishes which, although not legally binding, will generally be considered by the trustee to be of persuasive effect when performing the duties of trusteeship which include the distribution of the trust fund to beneficiaries.

Among the most common types of trust are the following:

The discretionary trust provides maximum flexibility and is the most widely used and, often, the most effective solution for both settlor and beneficiaries. Under the terms of a discretionary trust the trustee is given wide discretionary powers as to when, how much and to which beneficiaries the income and capital of the trust should be distributed. Such a form of trust is useful where at the time of creation of the trust the future needs of beneficiaries cannot accurately be determined and are likely to change over time. The beneficiaries are not regarded as having any direct legal rights over any particular portion of the trust fund but only a right to be considered to benefit when the trustee exercises his discretion.

Under a fixed interest trust a named beneficiary will normally be granted a vested interest in the income of the trust fund for life. For example, the trust deed may specify that the trustee is required to distribute all of the income of the trust fund to a particular individual during that person's lifetime and subsequently to distribute the capital of the trust fund in fixed proportions to named beneficiaries (such as the settlor's children).

An accumulation and maintenance trust is one where no beneficiary has a fixed entitlement to the benefits accruing to the trust for a certain period, during which time income is accumulated and becomes part of the capital. The beneficiaries may therefore benefit from the accumulation of capital. The trust deed may give the trustee a discretionary power to make distributions amongst the beneficiaries up to a specific age for their education, maintenance and benefit and to provide thereafter for a designated share of the trust fund to be distributed to each of them on attaining a specified age. An accumulation and maintenance trust may be particularly appropriate where the settlor wishes to benefit a group of children, for example, grandchildren wishing to study at university.

Although for tax and other reasons it is generally desirable for a trust to be constituted as an irrevocable settlement, in certain circumstances the settlor may require the additional comfort of retaining the power to revoke the trust and enforce the return of the trust fund.

Generally, in order for a trust to be valid there must be identifiable beneficiaries who can enforce the duties against the trustees. An exception to this general rule has permitted trusts to be established in favour of charitable purposes. Charitable trusts are often used to further the objectives of philanthropists and not for profit organizations.

It is usual for a trust to be created by the execution of a formal written deed. Trusts created in writing may be either by a settlement of trust signed by both the settlor and the trustee, or by a declaration of trust signed by the trustee alone. Following execution of the trust deed a trust will come into existence upon settlement of the initial property, which may be supplemented later.

The trust relationship is comprised of a number of important components, some of which are essential and others not.

Once a trust is created the settlor will no longer be the legal owner of the trust assets. The settlor may be a beneficiary and he may also act as a co-trustee or protector and, in such capacity, retain a degree of control over the trust, such as the power to approve distributions, the power to appoint and remove trustees and the power to revoke the trust.

However, a settlor may reserve to himself certain powers or grant such powers to a protector. These may include the powers to revoke, vary or amend the terms of a trust, to distribute income or capital, to appoint or remove any trustee or beneficiary, and to change the governing law of the trust.

Legal title to the trust assets is vested in the trustee under the obligations imposed by the trust deed and from then on the trustee is responsible for the management of the trust. A trustee must exercise his powers solely for the benefit of the beneficiaries and the trust assets do not form any part of the trustee's own estate or property available to any creditors of the trustee.

The beneficiaries are the persons entitled to benefit from the assets held on trust by the trustee. The settlor may be one of the beneficiaries. An express power for the addition of further persons to the class of beneficiaries may be included in the trust deed. The beneficiaries may enjoy equal or unequal benefits, as specified in the trust deed, or, in the case of a discretionary trust, as the trustee may determine. It is also possible to include in the trust deed a power to exclude certain people from benefiting under the trust.

There are no restrictions on the type of assets which may be held in trust and further assets may be added from time to time. It is normal to establish a trust with a nominal initial amount and subsequently to add further assets such as real property, shares or other forms of investment.

NZ trust law recognises and permits the use of a protector to counterbalance the wide discretionary powers conferred on a trustee. Often the settlor will fulfil this role or appoint a trusted friend or professional advisor to act as a protector of the trust. In such cases the consent of the protector will generally be required before the trustee may exercise certain important powers under the trust deed.

NZ trust law permits family advisors, settlors and beneficiaries to influence the exercise of powers by the trustees by the use of a mechanism which separates powers between custodian trustees, managing trustees and advisory trustees.

These provisions are invaluable tools for the international wealth planner to cut across time zones and appease settlors unwilling to cede complete control to foreign trustees.

For example, a NZ resident custodian trustee could hold the assets whilst discretionary investment management could be delegated to an investment firm in Zurich. Meanwhile, a trusted family advisor resident in the jurisdiction in which the settlor resides could hold office as advisory trustee. The management and administration of the trust could be exercised by a managing trustee based in Jersey or under a delegated administration agreement. All transactions would be implemented by the NZ resident custodian trustee which would also retain the power to review directions given.

The range of uses to which a trust may be employed is widespread and constantly evolving but flexibility and confidentiality are the principal advantages which a trust has over other legal forms designed to hold, preserve and transfer wealth. The trust concept has proved to be enormously adaptable and is widely used in financial planning including:

• Preservation of wealth;
• Succession planning;
• Asset protection;
• Asset protection –divorce issues;
• Creditor protection.

Aside from use in structuring personal and family wealth NZ trusts can also be used for the following commercial purposes:

• collective investment of capital;
• off-balance sheet transactions;
• inter-creditor agreements;
• asset securitization schemes;
• employee share option and executive incentive schemes; and
• private equity investment arrangements.

Where the settlor of the trust is resident outside NZ the trust will be exempt from assessment in respect of NZ tax on income and capital gains arising outside of NZ. Accordingly, the trustee may make distributions out of a trust fund established in NZ without any withholding or deduction for NZ income or capital gains tax. There are no inheritance, wealth or capital gains taxes levied in NZ nor is there any gift duty, stamp duty, value added tax or equivalent forms of indirect taxation charged on the creation or transfer of assets to a trust by a non-resident of NZ.

There are minimal reporting requirements to the Inland Revenue.