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Corporate Reporter
6 NOVEMBER 2018
IN BRIEF
WELCOME
Items in this issue include:
to Issue No. 55 of
• Select Committee reports back on the Trusts Bill,
Corporate Reporter, Bell
• RBNZ and FMA release report on bank conduct and culture,
Gully's regular round-up of
• Changes to the Commerce Act in force,
corporate and general
• New NZX Listing Rules in place for 1 January 2019
commercial matters,
implementation,
designed to keep you
• Second phase of overseas investment reform announced,
informed on regulatory
• New Zealand ratifies the CPTPP, and
developments, legislation
• The latest media releases from the New Zealand Commerce
and cases of interest. Commission and the Australian Competition and Consumer
Commission.
CONTENTS CAPITAL MARKETS • Select committee reports back on the Trusts Bill • RBNZ and FMA release report on bank conduct and culture • Consultation on draft Code of Conduct for financial advisers • Submissions on supporting regulations for new financial advisers’ regime released • Asian Region Funds Passport to be launched early next year • New class exemption to allow English and te reo Māori dual language PDSs • Guidance on what constitutes a ‘business’ for preparing PDS financial information • FMA information sheet on the AML class exemption for managing intermediaries • FMA releases its 2018 Annual Report • FMA releases its 2018 KiwiSaver Report • New NZX Listing Rules in place for 1 January 2019 • NZX consults on four guidance notes for its updated listing rules • NXT and NZAX markets to be scrapped on 1 July 2019 • Updated fee schedule for revised NZX market structure and rules • NZX signs MoU with Nasdaq • Amendments made to NZX Participant Rules • Consultation begins on Phase 2 of the Reserve Bank Act review MERGERS & ACQUISITIONS • Second phase of overseas investment reform announced • New designation and delegation letter for Overseas Investment Office • Further regulations for overseas investment reforms • Technical amendments to the Takeovers Code in force • Takeovers Panel releases updated guidance and a new CodeWord COMMERCIAL • Timing for credit unions’ incorporation released • Consultation on operational governance of trans-Tasman e-Invoicing • New Zealand ratifies the CPTPP • Copyright (Marrakesh Treaty Implementation) Amendment Bill COMPETITION AND CONSUMER LAW • Changes to the Commerce Act in force • Further CCCFA reforms in the pipeline • The latest media releases from the New Zealand Commerce Commission • The latest media releases from the Australian Competition and Consumer Commission NEED MORE INFORMATION? For more information on any of the items in the Corporate Reporter, please contact your usual Bell Gully adviser or any member of Bell Gully’s Capital Markets, Commercial, M&A or Competition teams. Alternatively, you can contact the editor Diane Graham by email or call her on 64 9 916 8849. Disclaimer This publication is intended to merely highlight issues and not to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. You should take legal advice before applying the information contained in this publication to specific issues or transactions. © Bell Gully 2018 CORPORATE REPORTER – 6 NOVEMBER 2018 2
CAPITAL MARKETS
Legislative developments
Select Committee reports back on the Trusts Bill
Last week the Justice Select Committee reported back to Parliament on the Trusts Bill (following a series of
extensions on the original 5 June 2018 reporting date), with a number of recommended amendments to the Bill. A
copy of the committee’s report is available here. The Bill will replace the out-dated Trustee Act 1956 and the
Perpetuities Act 1964.
One of the core objectives of the Trusts Bill is to restate New Zealand’s trust law so that it is clear and more
accessible. Some key changes in the Bill, compared to the current Trustee Act, are to:
• identify mandatory and default trustee duties,
• specify requirements for managing trust information and disclosing it to beneficiaries,
• restrict trustees' indemnity and exemption clauses,
• allow the removal and appointment of trustees without having to go to court, and
• state rules for the termination and variation of trusts at the request of beneficiaries.
Application to capital markets trust structures
The Trusts Bill applies to all express trusts governed by New Zealand law. This includes trusts used in a broad
range of capital markets transactions, such as trading trusts, commercial trusts and security trusts, as well as
retail and wholesale investment funds, securitisation trusts, and bond trusts.
Certain managed investment schemes (constituted as trusts) and trusts constituted under a trust deed for a debt
security that are subject to the Financial Markets Conduct Act 2013 (FMC Act) are exempted from some
requirements of the new statute in Part 9 of the Bill. These provisions have undergone further refinement through
the select committee process, including:
• allowing for regulations to disapply provisions of the new statute to trusts that would be regulated by the FMC
Act if they had not been excluded under Schedule 1 of that Act; and
• extending the Financial Markets Authority’s power under the FMC Act to grant exemptions from provisions in
the new statute when it is otherwise granting exemptions from requirements of the FMC Act.
In addition, the Justice Select Committee has recommended excluding further provisions in the new statute from
applying to broking trusts governed by the Financial Advisers Act 2008.
The Trusts Bill also provides that certain limited provisions will not apply to legacy 'specified commercial trusts',
and may be contracted out of (or modified) in respect of future 'specified commercial trusts'. The term 'specified
commercial trusts' includes qualifying commercial / trading trusts, wholesale trusts, and security trusts.
The Justice Select Committee is recommending several amendments be made to the 'specified commercial
trusts' provisions in Schedule 3 of the Bill to extend the scope of the definition of wholesale trusts and clarify other
aspects of the definitions in that schedule. The committee has also extended the scope of legacy ‘specified
commercial trusts’ to capture trusts that are created under terms agreed to (and in effect) before the
commencement of the Schedule 3 provisions rather than just existing trusts.
CORPORATE REPORTER – 6 NOVEMBER 2018 3Timing
The Justice Committee has recommended that the Trusts Bill retains an 18-month commencement period
following its enactment, despite calls for this to be increased. However to provide more leeway, the committee
has recommended that the transitional regulations to facilitate an orderly transition to the new statute may be
made, or continue in force, for three years after the Bill comes into force, rather than the two years in the Bill as
introduced.
In the meantime there has been no official update on the expected timing for the completion of the Parliamentary
process for the Bill. It is currently before Parliament for a second reading. It is possible for further amendments to
the Bill to be introduced during the Committee of the whole House stage.
RBNZ and FMA release report on bank conduct and culture
In response to the Australian Royal Commission into misconduct in the Banking, Superannuation and Financial
Services Industry established in December 2017, the Reserve Bank of New Zealand (RBNZ) and the Financial
Markets Authority (FMA) initiated a joint review in May this year to address public questions and speculation
about whether there are also systemic conduct and culture issues present in New Zealand’s 11 largest retail
banks. The findings from that review have now been released here.
The review was based on interviews with bank staff and directors, and documents supplied by the banks, as well
as insights from other banking industry stakeholders and a consumer survey of 2,000 banks customers.
The review has found that conduct and culture issues do not appear to be widespread in banks in New Zealand at
this point in time. However, the regulators did identify weaknesses in the governance and management of
conduct risks, and significant gaps in the measurement and reporting of customer outcomes that leave
New Zealand banks vulnerable to misconduct and to the issues seen in Australia and other jurisdictions.
The RBNZ and the FMA will now be providing specific detailed findings to individual banks. Each bank will need
to develop a plan to address this feedback and report their progress by the end of March 2019. Any remediation
issues that warrant further investigation and potential enforcement action will be considered by the FMA, RBNZ or
the Commerce Commission, depending on who is responsible for the legislation relevant to the issue.
The regulators are also recommending that the Government consider addressing some regulatory gaps, which
include:
• establishing basic legal duties on banks to protect or enhance customer interests and outcomes;
• requiring banks to have adequate systems and controls to govern, manage and remediate conduct risk;
• providing regulators with sufficient supervision and enforcement powers and resources to ensure banks meet
these obligations, including requiring better information on conduct issues or risks and the option of penalties
to incentivise appropriate behaviour;
• clarifying accountability and individual responsibility for management of conduct, including the potential for
direct liability for senior managers.
CORPORATE REPORTER – 6 NOVEMBER 2018 4Consultation on draft Code of Conduct for financial advisers
The Financial Advice Code Working Group is consulting on a draft Code of Professional Conduct for Financial
Advice Services (Code), which will be a central part of the new financial advisers’ regime being introduced
through the Financial Services Legislation Amendment Bill. Details of the consultation are available here.
The Code sets 12 minimum standards (with supporting commentary) of ethical behaviour, conduct and client
care, and competence, knowledge and skill that will cover all regulated financial advice given to a retail client.
The accompanying consultation paper also sets out the latest expected timeline for the finalisation of the Code
and the implementation of the Financial Services Legislation Amendment Bill as follows:
Late 2018 – early 2019 Reworking the draft Code based on feedback. Further
consultation on specific parts of the Code may be
undertaken.
Early 2019 Submission of the draft Code to the Minister of
Commerce and Consumer Affairs for approval.
Within three months of the Minister receiving Code of Professional Conduct for Financial Advice
the Code Services approved and published.
Approximately three months after the Code Financial Markets Authority commences transitional
is approved and published licensing of existing industry participants.
At least nine months after the Code is New regime takes effect. New licensing requirements,
approved and published duties and Code of Conduct for financial advice will be
in force. Industry participants who do not meet the new
Code of Conduct standards by this time will be
protected by a "competency safe harbour".
Submissions on the draft Code close on 9 November 2018.
Submissions on supporting regulations for new financial advisers’ regime
released
The Ministry of Business, Innovation and Employment (MBIE) has released the submissions received for two
recent consultations on regulations to support the Financial Services Legislation Amendment Bill.
The submissions on a discussion paper relating to the new disclosure requirements for financial advice are
available here, and on the discussion paper relating to misuse of the Financial Service Providers Register here.
Asian Region Funds Passport to be launched early next year
At a recent meeting of the Asian Region Funds Passport Joint Committee it was decided that the Asian Region
Funds Passport (ARF Passport) will launch on 1 February 2019.
The ARF Passport is a multilaterally agreed framework to facilitate the cross-border offering of managed funds
across participating Asia-Pacific Economic Cooperation (APEC) economies. To date, New Zealand, Australia,
CORPORATE REPORTER – 6 NOVEMBER 2018 5Japan, Korea and Thailand are the only signatories to the ARF Passport’s Memorandum of Cooperation (MoC)
(which took effect on 30 June 2016), but the MoC allows other eligible APEC forum economies to join.
The ARF Passport is not expected to be an overnight success, but it is expected to bring potentially significant
benefits for New Zealand over time if a sufficient number of APEC forum economies join, fund managers opt to
use the process, and investors choose to invest. The benefits include:
• a greater range of investment opportunities for investors from a better developed domestic funds sector due
to increased competition between fund managers;
• an increased ability for New Zealand fund managers to access much larger markets to offer their managed
funds to; and
• increased capital flows into New Zealand.
A similar passport initiative in Europe, known as Undertakings for Collective Investment in Transferable Securities
or ‘UCITS’, has been a European success story since its creation three decades ago.
The MoC sets out the agreed rules and cooperation mechanisms of the ARF Passport. Eligible fund managers
wanting to offer funds in New Zealand under the ARF Passport and New Zealand fund managers wanting to offer
funds to other participating APEC members, will need to apply to their home regulator to be assessed for
registration as a Passport Fund. To be “eligible” the fund manager must meet a number of conditions, including
being of significant scale (e.g. together with its related parties, it must be responsible for at least US$500 million in
funds under management), and a track record of having offered funds for at least five years. A Passport Fund is
only permitted to include highly diversified, vanilla investments.
Japan, Thailand and Australia have completed preparations for the implementation of the ARF Passport. In
New Zealand, the rules and arrangements will be implemented under the Financial Markets Conduct Act regime.
The Ministry of Business, Innovation and Employment (MBIE) circulated draft Financial Markets Conduct
amendment regulations with some interested parties in September 2018 for feedback. Implementation will also
require the Financial Markets Authority to make a number of exemptions and produce new guidance for
managers and supervisors of ARF Passport funds.
Further information is available on MBIE’s website here and on the ARF Passport’s website here.
Financial Markets Authority (FMA)
New class exemption to allow English and te reo Māori dual language
PDSs
Following a consultation earlier in the year, the FMA has granted a class exemption which facilitates dual-
language product disclosure statements (PDSs) in both te reo Māori and English for offers of financial products.
The exemption came into effect on 1 November 2018.
Under the Financial Markets Conduct (Product Disclosure Statements in Te Reo Māori and English) Exemption
Notice 2018 a dual-language PDS is exempt from certain requirements in the Financial Markets Conduct
Regulations 2014 (FMC Regulations) including:
• the PDS and key information summary length restrictions;
CORPORATE REPORTER – 6 NOVEMBER 2018 6• any provision in the FMC Regulations to the extent that the provision prevents or restricts a Māori translation
of English text in a PDS from being interposed among the corresponding English text, or included before,
after, or alongside the corresponding English text;
• any provision of the Regulations to the extent that the provision requires a statement to be included in a PDS
in a specified form or using prescribed wording.
The FMA consulted on whether it should enable dual-language PDSs for languages other than te reo Māori and
English, but found there is no current demand for this.
Guidance on what constitutes a ‘business’ for preparing PDS financial
information
Under the Financial Markets Conduct Regulations 2014 issuers making regulated offers of debt and equity
securities are required to provide investors with a Product Disclosure Statement (PDS) that contains selected
financial information for recent or proposed business acquisitions. This often gives rise to questions on whether
an issuer has in fact acquired a business, rather than a collection of assets. In answer to that question the FMA
has released guidance (here) setting out its view of what constitutes a ‘business’ as opposed to an asset. It also
sets outs additional information issuers should consider disclosing for asset acquisitions.
FMA information sheet on the AML class exemption for managing
intermediaries
The FMA has published an information sheet which explains the conditions for reporting entities whose customers
include managing intermediaries and customers of managing intermediaries to be able to rely on the Anti-Money
Laundering and Countering Financing of Terrorism (Class Exemptions) Notice 2018.
FMA releases its 2018 Annual Report
The FMA’s latest annual report reiterates the FMA’s role in governing market conduct. In response to widespread
misconduct within financial services in Australia, the FMA has had a busy year with the launch of the joint
FMA/RBNZ Conduct and Culture Review to determine whether the same issues are occurring in New Zealand.
The report on the findings from the review was released this week.
The report also makes note of the FMA’s concerns with:
• the quality of corporate governance and disclosure by New Zealand listed companies;
• practices in the insurance industry that do not align with promoting customer interests;
• the need for significant improvement from Registered Financial Advisers and Qualifying Financial Entities, in
order for advisers to be ready to operate under the new statutory conduct standards proposed in the reform
of the financial advisers’ regime.
CORPORATE REPORTER – 6 NOVEMBER 2018 7FMA releases its 2018 KiwiSaver Report The FMA is required to report each year on its main KiwiSaver activities. FMA’s programme of work this year included work on raising awareness of fees; monitoring KiwiSaver documentation; and working with IRD to manage the registering and deregistering of schemes. The report also contains a summary of the statistical returns that must be lodged by KiwiSaver schemes as at 31 March 2018. The full report is available here. NZX Limited (NZX) New NZX Listing Rules in place for 1 January 2019 NZX has released the final version of its updated NZX Listing Rules which take effect on 1 January 2019, subject to a six-month transition period which ends on 30 June 2019. This is the first holistic rewrite of the Main Board/Debt Market Listing Rules since their introduction in 2003. NZX has provided guidance for Main Board and Debt Market issuers on transitioning to the new rule regime here. During the transition period, issuers are able to opt-in at any time (but they must give one week’s notice to the market identifying their transition date before doing so). Various class waivers will be put in place to facilitate the transition process, including to extend the time by which issuers will need to update their constitutions and other governing documents. This will relieve issuers from bearing the cost and inconvenience of convening a special meeting to address any required updates where their annual meetings fall after 30 June 2019. NZX has also granted a class ruling to clarify an issuer’s periodic reporting obligations that fall immediately before, or during, the opt-in period, or will have reporting obligations immediately before, or during, the opt-in period. To assist issuers to navigate the rule changes, NZX has published a range of supporting material. This includes an accompanying explanatory paper on the updated rules and two “Finder Tables”. One lists the current Main Board/Debt Market Listing Rules (the 2017 Rules) with the equivalent updated rules here, and the other lists the updated rules with the equivalent 2017 Rules here. For further details on the updated rules refer to our earlier update here. Still to come NZX will be releasing new guidance and practice notes on certain aspects of the NZX Rules by the end of November 2018. The new rules will also be supported by updated templates and other compliance tools to help manage compliance costs and ensure more effective delivery of information to investors and other end users. Listing before 1 January 2019 For those considering a listing prior to 1 January 2019, NZX has indicated that the eligibility criteria set out in Section 1 of the updated rules will be treated as applying to all applications received by NZX Regulation. NZX is also recommending that fund issuers and debt issuers that intend to list this year should consider whether they would benefit from bridging waivers to put them in the same position under the existing Main Board rules as they will be under the updated rules. NZX consults on four guidance notes for its updated listing rules NZX is consulting on the following updated guidance notes which address new aspects that will be introduced under NZX’s updated listing rules: • Spread CORPORATE REPORTER – 6 NOVEMBER 2018 8
• Backdoor and Reverse Listing Transactions • Continuous Disclosure. NZX is also consulting on a new Governance guidance note to assist issuers to comply with their governance obligations. Submissions on all four guidance notes close on 13 November 2018. A further Guidance Note relating to major and related party transactions is expected to be released for consultation this month. NXT and NZAX markets to be scrapped on 1 July 2019 As previously announced, the introduction of the updated NZX Listing Rules also mark the end of the NXT and NZAX markets which are being consolidated under a single equity market with NZX’s Main Board issuers. NZX has provided guidance for NXT and NZAX issuers migrating to the Main Board here. All issuers will need to complete their migration to the Main Board by 30 June 2019. Updated fee schedule for revised NZX market structure and rules NZX has updated its fee schedule with effect from 1 January 2019 for all new equity, fund and debt listings. The next annual listing fees for existing NZX issuers that have already paid their annual listing fees will also be calculated in accordance with the new fee schedule. The updated fee schedule is available here. The fee schedule has been designed to accommodate the introduction of new products, including funds and wholesale debt and for the consolidation of the three equity boards (with lower thresholds and lower fees applicable for smaller issuers). NZX signs MoU with Nasdaq In September, NZX entered into a Memorandum of Understanding (MoU) with Nasdaq. Under the MoU, the exchanges will explore opportunities to promote dual listings, depository receipts, exchange traded funds, and broader market development initiatives. NZX Regulation has also approved Nasdaq as a recognised stock exchange for equity listings. Further details are available in NZX’s announcement here. Amendments made to NZX Participant Rules The NZX Participant Rules (and supporting Participant Procedures) were amended with effect on 8 October 2018. The amendments support changes NZX made to its trading and clearing pricing structure (announced earlier this year) as well as some technology changes. A marked copy of the amended Rules dated 8 October 2018, showing changes from the existing Rules, can be found here. CORPORATE REPORTER – 6 NOVEMBER 2018 9
Reserve Bank of New Zealand (RBNZ) Consultation begins on Phase 2 of the Reserve Bank Act review The Reserve Bank and Treasury have begun consulting on issues that fall within Phase 2 of the Government’s review of the Reserve Bank of New Zealand Act (RBNZ Act). Phase 1 of the review, which focused on the monetary policy framework, is largely complete. The RBNZ Act has stood the test of time for almost 30 years, with accretive changes over that period but no substantial overhaul. The terms of reference of the Phase 2 review are sufficiently broad that a substantial overhaul is now possible. Phase 2 will involve three rounds of consultation. Five main issues are up for discussion in this first round: • The high-level financial policy objectives of the Reserve Bank. • The ‘regulatory perimeter’ of the Reserve Bank. • The need for depositor protection. • Whether the Reserve Bank’s central bank and prudential regulation functions should be separated. • How the Reserve Bank should be governed. Of these issues, the need for depositor protection, and the potential separation of central bank and prudential regulation functions, are particularly likely to generate debate. Several consultation documents have been released for this round. These include a main consultation document as well as a summary booklet (which provides for shorter feedback on the issues). The documents are available on Treasury’s website here. Submissions on this consultation round close on 25 January 2019. MERGERS & ACQUISITIONS Overseas investment Second phase of overseas investment reform announced The Government has announced that the Treasury will lead a review of the Overseas Investment Act 2005 (the Act) and the associated Overseas Investment Regulations 2005. Billed as the ‘second phase’ of the overseas investment reforms, the review will have two parts: a focus on reducing complexity, and the likely introduction of a broad “but rarely used” discretion to decline approval for significant foreign investment, such as infrastructure assets with monopoly characteristics. While the potential for a new discretionary power in the national interest will draw public attention, the move to cut red tape to “ensure New Zealand remains an attractive destination for beneficial, long-term foreign direct investment” is a welcome development. The first phase of the reforms came into force on 22 October 2018 under the Overseas Investment Amendment Act 2018. The reforms included making residential land ‘sensitive’, effectively banning certain foreigners from buying houses here, except in limited circumstances. Foreigners also now require consent to acquire forestry CORPORATE REPORTER – 6 NOVEMBER 2018 10
rights (over 1000 hectares in a calendar year) and certain profits-à-prendre (the right to take resources or crops
from land). Further details on the first phase are available in our earlier update here and on the Overseas
Investment Office’s website here.
The terms of reference for the second phase of reforms are available here. It is expected that the Government will
commence consultation on options to amend the Act in the first quarter of 2019, with a view to legislating reforms
by the middle of 2020.
New designation and delegation letter for Overseas Investment Office
The Minister of Finance, the Minister for Land Information and the Minister of Fisheries have issued a new
Designation and Delegations Letter that took effect on 22 October 2018 (revoking the 2009 letter). The letter
outlines which powers and functions the Ministers have delegated to the Overseas Investment Office for sensitive
land, significant business assets and fishing quota applications.
Further information is available here.
Further regulations for overseas investment reforms
The Overseas Investment Amendment Regulations 2018 were amended by the Overseas Investment
Amendment Regulations (No 2) 2018 (on 22 October 2018) to clarify when fees must be paid for standing
consents in respect of residential land and forestry.
The Overseas Investment Amendment Regulations 2018 amended the Overseas Investment Regulations 2005 to
give effect to the changes introduced under the Overseas Investment Amendment Act 2018 relating to forestry
activities, regulated profits-à-prendre, and residential land. This includes the regulations for the new “special”
benefit test relating to forestry activities. They also clarified and extended several of the existing class exemptions
from consent requirements for certain transactions. Two of particular note are updates to the:
• corporate restructuring exemption which provides more flexibility in relation to corporate restructurings,
particularly where the investment is held jointly by different overseas persons or by overseas and New
Zealand persons;
• shareholding creep exemption where the changes bring a welcome extension to allow overseas persons to
acquire up to an additional 10% of the total number of shares initially consented to, provided such further
acquisitions do not exceed the “control limits” in the regulations (being 25%, 50%, 75% and 90%).
Takeovers
Technical amendments to the Takeovers Code in force
The Takeovers Code Approval Amendment Regulations 2018 came into force on 29 October 2018, and with them
a name change for the Takeovers Code Approval Order 2000 which is now known as the Takeovers Regulations
2000.
CORPORATE REPORTER – 6 NOVEMBER 2018 11The amendments are based on a number of technical amendments to the Takeovers Code recommended by the
Takeovers Panel in 2017. They include:
• changing references to “days” in the Code to “working days” and amending various time periods in the Code
to reflect this, so that the number of days within which things must or must not occur effectively remains the
same as previously;
• alterations to facilitate the electronic communication by offerors under a takeover, and by the Code company,
with shareholders for Code-regulated transactions; and
• introducing a requirement that an offer document disclose the identity of the person or persons controlling the
offeror.
A new Part 2 has also been inserted into the 2000 regulations. This replaces the Takeovers (Fees) Regulations
2001, which have been revoked. The fees have been carried over without change, except that the fees are
expressed as being exclusive of goods and services tax rather than inclusive
The changes made by these regulations do not apply to certain matters started before commencement of the
regulations.
Consequential amendments have also been made to the Unsolicited Electronic Messages Regulations 2007 by
the Unsolicited Electronic Messages Amendment Regulations 2018 to exclude certain messages relating to the
Takeovers Code from being caught by the Unsolicited Electronic Messages Act 2007 as unsolicited messages.
Takeovers Panel releases updated guidance and a new CodeWord
Guidance note on Costs Recovery
The Takeovers Panel has updated its guidance on the recoverability of takeover expenses. The guidance note
now includes the Panel’s views on the principles put forward in a recent High Court case Abano Healthcare Group
Limited v Healthcare Partners Holdings Limited [2018] NZHC 817 in considering the meaning of “properly
incurred” expenses (see our update on that case here). Importantly, the Takeovers Panel has acknowledged that
the structure of a fee does not, in and of itself, determine whether or not a fee is recoverable. It is the
reasonableness of the fee that is relevant, and when considering the nature of a fee, the Takeovers Panel will
look to its substance rather than its form. Accordingly, legal and advisory fees may be structured in a number of
ways (for example, as success fees, contingency fees or outcome-based fees) and may still be recoverable
where the reasonableness and proximity thresholds are met.
A copy of the guidance note is available here.
Guides for directors and shareholders
The Takeovers Panel has also updated its guides for directors and shareholders on how takeovers and other
kinds of transactions are regulated by the Takeovers Code in New Zealand.
The guide for directors of Code companies sets out:
• their obligations to shareholders under the Code when a change of control occurs; and
• the Code’s rules when a person wants to increase their level of ownership of the company, for example, by
making a takeover offer or by acquiring control of the company with shareholder approval.
CORPORATE REPORTER – 6 NOVEMBER 2018 12The guide for shareholders sets out:
• how the Code protects their rights;
• what happens when a person increases their level of ownership of a Code company; and
• the Code company’s obligations to shareholders when a change of control occurs.
CodeWord Issue 47
The Panel’s latest CodeWord (here) includes commentary on the technical amendments to the Takeovers Code
discussed above, as well as:
• The Panel’s interpretation of Rule 42A regarding the information to be included in class notices required to be
given by target companies after receiving a takeover notice;
• The Panel’s interpretation of the term “share parcels” (used in the definition of Code company); and
• A reminder to market participants of their obligations in the Takeovers Act 1993 relating to disclosure of
information to the Panel.
COMMERCIAL
Legislative developments
Timing for credit unions’ incorporation released
The Friendly Societies and Credit Unions (Regulatory Improvements) Amendment Act 2018 which comes into
force on 1 April 2019 (under the Friendly Societies and Credit Unions (Regulatory Improvements) Amendment Act
2018 Commencement Order 2018) will amend the Friendly Societies and Credit Unions Act 1982. One of the key
amendments made to the 1982 Act are new provisions allowing credit unions to be incorporated. Dates for the
incorporation-related transitional provisions that apply to credit unions in existence when the Amendment Act
comes into force are as follows:
• All existing credit unions must submit an application for incorporation to the Registrar of Friendly Societies
and Credit Unions (the Registrar) on or before 30 September 2019 (which is the date that is six months
beginning with the commencement date of the Amendment Act);
• If the Registrar approves an application, the date of incorporation will be 1 January 2020 (which is the
specified date set out in the Friendly Societies and Credit Unions (Specified Date) Order 2018);
• If the application is approved by the Registrar on or after 1 January 2020, the date of incorporation will be the
date immediately after the date on which the certificate is issued.
Consultation on operational governance of trans-Tasman e-Invoicing
As part of the Single Economic Market agenda, designed to create a seamless trans-Tasman business
environment, the Australian and New Zealand (A-NZ) governments have agreed to adopt a joint trans-Tasman
approach to electronic invoicing (e-Invoicing). Research estimates that this could result in benefits to the
Australian and New Zealand economies potentially in excess of $30 billion over ten years.
CORPORATE REPORTER – 6 NOVEMBER 2018 13The A-NZ governments are now consulting on both sides of the Tasman to determine and establish an operational governance framework for trans-Tasman e-Invoicing. Submissions close on 16 November 2018. A copy of the consultation paper is available here. New Zealand ratifies the CPTPP Following the passage of the Trans-Pacific Partnership Agreement (CPTPP) Amendment Act 2018 last month, New Zealand joins Australia, Canada, Japan, Mexico and Singapore in ratifying the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The CPTPP, a revised version of the Trans-Pacific Partnership Agreement (TPP) signed on 8 March 2018 after the withdrawal of the United States from the TPP, takes effect 60 days after at least six of the 11 partner countries file their notices of ratification with New Zealand (which acts as the depository country overseeing the CPTPP’s implementation). With this threshold having now been met, the trade deal will come into effect on 30 December 2018. The other signatories (Brunei Darussalam, Chile, Malaysia, Peru, and Viet Nam) are still completing their respective domestic processes and are not expected to ratify in time for the deal’s initial implementation. For commentary on the key areas of the CPTPP and its implications for New Zealand refer to our earlier update here. Trans-Pacific Partnership Agreement (CPTPP) Amendment Act 2018 The Trans-Pacific Partnership Agreement (CPTPP) Amendment Act 2018 (the 2018 Act) amends the Trans- Pacific Partnership Agreement Amendment Act 2016 (the 2016 Act) which was passed to align New Zealand’s domestic laws and regulations with its obligations under the CPTPP’s predecessor, the TPP. The 2016 Act (as amended) will make amendments to the Copyright Act 1994, the Customs and Excise Act 1996, the Dairy Industry Restructuring Act 2001, the Hazardous Substances and New Organisms Act 1996, the Legislation Act 2012, the Overseas Investment Act 2005, the Patents Act 2013, the Tariff Act 1988 and the Tariff, the Trade Marks Act 2002, and the Wine Regulations 2006 for the CPTPP and the TPP (but only to the extent that either of these agreements enter into force for New Zealand). The 2018 Act also changes the name of the 2016 Act to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership Amendment Act 2018. The amendments which will be made to the Overseas Investment Act introduce a power to make regulations to implement higher investment screening thresholds for overseas investments in significant business assets in order to meet the requirements in the Investment Chapter of the CPTPP, and other related existing international agreements. Under the CPTPP and existing Most Favoured Nation obligations, the screening threshold for certain non-government investors will increase from $100 million to $200 million. This will not apply to Australia as it is currently subject to a $516 million screening threshold for non-government investors. For further details on the CPTPP visit the Ministry of Foreign Affairs and Trade website here. Copyright (Marrakesh Treaty Implementation) Amendment Bill The Government has introduced a Bill to amend the Copyright Act 1994 in order to allow New Zealand to accede to the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired, or Otherwise Print Disabled (the Marrakesh Treaty). CORPORATE REPORTER – 6 NOVEMBER 2018 14
The Marrakesh Treaty is a multilateral treaty that was negotiated by members of the World Intellectual Property Organization. The objective of the Marrakesh Treaty is to provide an international framework for the production and dissemination of copies of books and other literary works in formats that are accessible to persons with a print disability. These accessible formats include Braille, large print, and audio books. A copy of the Bill is available here. COMPETITION AND CONSUMER LAW Legislative developments Changes to the Commerce Act in force The Commerce Amendment Act 2018 came into force on 26 October 2018. The Act amends the Commerce Act 1986 by: • providing the Commerce Commission (the NZCC) with market studies powers; • strengthening the regulatory regime for airports; • repealing the cease-and-desist regime; and • introducing an enforceable undertakings regime. Further changes to the Commerce Act are also being introduced under the Commerce (Criminalisation of Cartels) Amendment Bill, which is currently at the Committee of the whole House stage of the Parliamentary process. This reintroduces a proposal to criminalise cartel conduct that had been scrapped by the previous government in 2015. The Bill proposes a penalty of imprisonment for up to seven years for individuals that intentionally enter into or give effect to a cartel provision (which includes price fixing, restricting output, or allocating markets). Introduction of a market study regime The most significant change introduced by the Commerce Amendment Act 2018 allows the NZCC to carry out competition studies (commonly referred to as “market studies”) if it considers it to be in the public interest to do so. A competition study can be initiated by the NZCC or the Minister of Commerce and Consumer Affairs. A competition study is a study of any factors that may affect competition for the supply or acquisition of goods or services. Prime Minister Jacinda Ardern has already announced that she will nominate the retail fuel industry as a “priority area” for the first competition study. Regulation of airports Since 2010, “specified airport services” of New Zealand’s three major international airports (Auckland, Wellington and Christchurch International Airports) have been regulated under Part 4 of the Commerce Act. The Commerce Amendment Act does not change how airports are currently regulated, but introduces a new inquiry process for investigating the need to impose additional regulation on regulated airports. The Act has also clarified that changes to the type of regulation for a regulated airport can be made through an Order in Council process rather than legislative amendment. CORPORATE REPORTER – 6 NOVEMBER 2018 15
Enforceable undertakings
The Commerce Amendment Act has repealed the pre-existing cease and desist regime and instead allows the
NZCC to accept a written undertaking given by a person in connection with any matter of Commerce Act
enforcement. The NZCC can apply to the High Court for an enforcement order if it considers that a person has
breached an undertaking.
Such undertakings, known as enforceable undertakings, are common in other jurisdictions such as Australia and
the US, and will give the NZCC greater power to compel compliance with settlement agreements.
Further CCCFA reforms in the pipeline
The Government has announced that further changes will be made to the Credit Contracts and Consumer
Finance Act 2003 (CCCFA), with effect from 2020 (subject to Parliamentary time-frames). This follows on from a
recent review on the effectiveness of the responsible lending reforms made under the CCCFA in 2015.
The proposed measures will include:
• limiting interest and fees on high-cost loans to 100% of the amount borrowed (the loan principal);
• requiring directors and chief executives of lenders offering consumer credit contracts to pass a 'fit and proper
person' test in order to register as a Financial Service Provider;
• requiring mobile traders (e.g., truck shops ) to pass a ‘fit and proper person’ test, and register on the
Financial Service Providers Register;
• tougher penalties for irresponsible lending, including increased financial penalties, statutory damages, and
banning orders.
Public consultation on the amendments to the CCCFA will be available after an amendment Bill has been
introduced, during the select committee phase of Parliamentary process.
Further information is on the Ministry of Business, Innovation and Employment’s website here.
New Zealand Commerce Commission (NZCC)
Media releases
The NZCC has issued the following media releases:
Industry regulation and regulatory control
NZCC broadly satisfied with Christchurch Airport but concerns remain with Auckland Airport’s targeted
profitability
The NZCC has released its final reports on Christchurch and Auckland Airports’ pricing decisions for the period
1 July 2017 to 30 June 2022. Deputy Chair Sue Begg said the NZCC’s view remains that the returns targeted by
Christchurch Airport are generally acceptable, but that Auckland’s targeted returns are not fully justified. Copies of
the final reports for each of Christchurch Airport and Auckland Airport can be found here.
Read more
Final report on review of Fonterra’s 2017/18 base milk price calculation
The NZCC has released its final report on Fonterra’s base milk price calculation for the 2017/18 dairy season.
The base milk price is the average price that Fonterra pays farmers for raw milk, which was set at $6.69 per
kilogram of milk solids for the 2017/18 dairy season.
Read more
CORPORATE REPORTER – 6 NOVEMBER 2018 16NZCC to file proceedings against Aurora Energy for breaching quality standards The NZCC has decided to file court proceedings against Dunedin-based electricity lines company Aurora Energy for breaching its regulated quality standards in 2016 and 2017. Read more NZCC files proceedings against Vector for excessive level of power outages The NZCC has filed civil proceedings in the High Court at Auckland seeking financial penalties against electricity lines company Vector for breaching its network quality standards. Quality is measured in the duration and frequency of power outages. Read more Electricity lines companies disclose their investments in emerging tech The NZCC has released information on the type and level of investment lines companies are making in emerging technologies. New technologies that will benefit consumers such as electric vehicle chargers, network batteries, smart meters and solar photovoltaics are expected to present opportunities and challenges for the electricity sector in upcoming years. Read more Transpower’s Wellington conductor replacement approved The NZCC has formally approved $23.5 million for Transpower to replace the conductors and strengthen the structures of a 9.5km section of its high voltage direct current transmission network in Wellington. Read more NZCC releases draft report on Fonterra’s 2018/19 Milk Price Manual The NZCC has released its draft report on its annual review of Fonterra’s Milk Price Manual for the 2018/19 dairy season. The final report will be published by 14 December 2018. Read more NZCC seeks early views on proposed approach for setting Transpower’s price-quality path The NZCC is seeking early views on its proposed process, framework and approach for setting national grid operator Transpower’s next price-quality path. Further information on the NZCC’s process paper, including submission timeframes, can be found on its website. Read more Mergers and acquisitions Ingenico granted clearance to acquire Paymark The NZCC has granted clearance to Ingenico Group SA to acquire 100% of the shares of Paymark Limited. Ingenico and Paymark provide services that allow merchants to accept electronic payments. Read more Letter of issues for proposed Thales / Gemalto acquisition The NZCC has sent a letter of issues to Thales S.A. in relation to its proposed acquisition of Gemalto N.V. Read more Statement of Preliminary Issues released for Tennex/San-i-pak The NZCC has published a statement of preliminary issues relating to the proposed acquisition of the medical and quarantine waste collection and treatment assets of San-i-pak Limited by Tennex Capital Limited. Read more CORPORATE REPORTER – 6 NOVEMBER 2018 17
Investigation opened into Datix’s proposed acquisition of RL Solutions The NZCC has opened an investigation into Datix’s proposed acquisition of RL Solutions. The parties have not applied for clearance for the acquisition. Read more NZCC welcomes Court of Appeal ruling on NZME/Fairfax merger The Court of Appeal has dismissed NZME and Fairfax’s long-running appeal against the NZCC’s decision to decline their media merger. Read more Statement of Preliminary Issues released for DLF/PGW Seeds merger The NZCC has received a clearance application from DLF Seeds A/S to acquire 100% of the shares of PGG Wrightson Seeds Holdings Limited from PGG Wrightson Limited. The NZCC has published a statement of preliminary issues relating to the proposed acquisition. Read more NZCC closes investigation into Fulton Hogan’s acquisition of Stevenson’s construction materials business The NZCC has closed its investigation into Fulton Hogan’s acquisition of Stevenson Group Limited’s construction materials business as its concerns with the transaction have been addressed by way of divestment. Read more NZCC opens investigation into wool scouring acquisition The NZCC has opened an investigation into David Ferrier’s acquisition through a holding company of a 70% equity interest in wool scourer Cavalier Wool Holdings Limited. Read more Siemens seeks clearance to combine Siemens’ rail mobility business with Alstom The NZCC has received a clearance application from Siemens A.G. to combine its rail mobility business with Alstom S.A. The proposed merger is global and relates to the rail mobility industry, which involves the supply of a wide range of rail products and project services including rolling stock and signalling systems. Read more Consumer issues Clothing supplier pleads guilty over kids’ garments labelling Clothing supplier Goodwear Limited has pleaded guilty to 16 charges relating to missing or incorrect fire warning and other labelling on children’s clothing. Read more Fraud charge over fire extinguisher service claims The NZCC has filed charges under the Crimes Act 1961 and the Fair Trading Act 1986 against the owner of a company which supplies and services fire extinguishers. Read more NZSALE sentenced for unsafe children’s nightwear Online and store retailer NZSALE was fined $74,000 in the North Shore District Court after pleading guilty to four charges brought by the NZCC for selling nightwear that failed to meet the applicable safety standard. Read more CORPORATE REPORTER – 6 NOVEMBER 2018 18
PB Tech fined for extensive failings with customers’ extended warranties PB Technologies Ltd has been fined $77,000 in the Auckland District Court after pleading guilty to 14 charges brought by the NZCC for selling non-compliant extended warranties. PB Tech markets itself as New Zealand’s largest computing and IT retailer. Read more HRV fined over water filter claims HRV Clean Water Limited has been fined $440,000 after pleading guilty to making unsubstantiated claims about the benefits of its water filters and for making misleading claims about the quality of New Zealand’s home water supply. Read more NZCC warning on responsible lending requirements The NZCC has issued a warning to Rapid Loans NZ Limited about a loan it issued to a vulnerable borrower on the grounds that Rapid Loans is likely to have failed to comply with the lender responsibility principles set out in the Credit Contracts and Consumer Finance Act 2003. Read more Car dealership and owner fined for CGA misrepresentations An Auckland car dealership and its owner have been fined a total of $12,000 on 16 charges under the Fair Trading Act. $1 Reserve Cars Limited was fined $8,000 and Adam Cooper was fined $4,000. Read more Steel & Tube fined $1.885 million for misleading representations about steel mesh Steel & Tube Holdings Limited has been fined a record $1.885 million for breaching the Fair Trading Act by making false and misleading representations about its steel mesh products which are used in construction to provide strength and stability in the event of an earthquake. This is the highest fine to date under the Fair Trading Act for a single company. Read more WORLD accepts breach of law likely for inaccurate NZ made clothing labelling Designer and retailer WORLD has entered into enforceable undertakings with the NZCC after accepting the NZCC’s view that labelling on some imported clothing was liable to mislead consumers about the place of origin of the clothing. Read more Telecommunications Draft decision on contributions to $50 million telecommunications development levy The NZCC has released its draft determination on how much 17 telecommunications providers will each pay towards the Government’s $50 million Telecommunications Development Levy for 2017/18. A copy of the draft determination can be found on its website. Read more CORPORATE REPORTER – 6 NOVEMBER 2018 19
Australian Competition and Consumer Commission (ACCC) Selected ACCC media releases The ACCC has issued the following media releases: Industry regulation and regulatory control Peering criteria increase transparency in the internet interconnection market The ACCC says recent developments in the wholesale market for internet interconnection services will boost competition in the supply of internet connectivity and hosted services to corporate and government customers and lead to a better online experience for end-users. The ACCC considered internet interconnection arrangements as part of its 2018 communications market sector study. Read more Mergers and acquisitions ACCC won’t oppose Arrow and Apotex merger The ACCC has decided not to oppose the merger of generic pharmaceutical companies Arrow and Apotex. Arrow and Apotex both import and distribute generic prescription and over-the-counter pharmaceuticals. Read more Market behaviour ACCC commences market study into wine grape industry The wine grape industry will be the focus of a new ACCC market study. The study will examine competition, contracting practices, transparency, and risk allocation issues in the wine grape supply chain. Read more Consumer issues Telstra refunds $9.3m to 72,000 customers Telstra has refunded $9.3 million to 72,000 customers it misled in relation to its ‘Premium Direct Billing’ third-party billing service, according to a report it provided to the ACCC. In April 2018, the Federal Court ordered Telstra to pay penalties of $10 million for making false or misleading representations about charges for digital content. Read more Equifax (formerly Veda) to pay $3.5 million in penalties The Federal Court has ordered that Equifax Australia Information Services and Solutions Pty Ltd pay penalties totalling $3.5 million for misleading and deceptive conduct and unconscionable conduct in relation to credit report services. Read more EGR to pay $6m penalty for exclusive dealing EGR has been ordered to pay $6.35 million in penalties for being knowingly concerned in exclusive dealing conduct with the purpose of substantially lessening competition. EGR manufactures polycarbonate roofing material. The Federal Court recently imposed penalties of $3.5 million against Palram Australia and $2.1 million against Ampelite Australia in respect of the same matter. Read more CORPORATE REPORTER – 6 NOVEMBER 2018 20
AUCKLAND WELLINGTON VERO CENTRE, 48 SHORTLAND STREET 171 FEATHERSTON STREET PO BOX 4199, AUCKLAND 1140, NEW ZEALAND PO BOX 1291, WELLINGTON 6140, NEW ZEALAND DX CP20509 DX SX11164 TEL +64 9 916 880 FAX +64 9 916 8801 TEL +64 9 916 880 FAX +64 9 916 8801 CORPORATE REPORTER – 6 NOVEMBER 2018 21
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