Reforming transparency

The Companies Act 1993 (Companies Act) has required directors’ residential addresses to be made available to the public for many years. 

This requirement was driven by a desire to encourage transparency and the accountability of directors. However, it gives rise to obvious privacy and safety concerns for directors, some of whom may face very real threats of physical or mental harm. 

There are currently very limited circumstances in which a director can have their details withheld. As there are more than 650,000 directors on the New Zealand Companies Register, this represents a significant issue and has been the topic of two recent legislative developments.

The Companies (Address Information)
Amendment Bill

The Companies (Address Information) Amendment Bill (Bill) aims to provide a solution for directors who may be exposed to stalking, harassment or other acts of violence. It is a Member’s Bill in the name of Hon Dr Deborah Russell.

The Bill proposes to amend the Companies Act to provide a mechanism for directors who have serious concerns for their personal safety, or that of a person they live with, to have their residential address substituted with an alternative address.  

The Bill passed its first reading in the House and was referred to the Economic Development, Science and Innovation Committee (Committee) in March 2024. There was split support for the Bill’s first reading with Labour, the Green Party, ACT and Te Pāti Māori voting in support, and National and New Zealand First voting in opposition. The final report issued by the Committee on 18 September 2024 is supported by a majority of the members, with New Zealand First not supporting the Bill.

The Bill does not yet have a time scheduled for its second reading – in which the House will debate and vote on the Bill and any changes suggested by the Committee – so actual change could be some time off.

The Committee has recommended several amendments to the Bill which seem consistent with its purposes, and help it to better achieve those purposes. The material amendments to the Bill as proposed by the Committee are summarised below:

1. The Registrar will be responsible for taking additional reasonable steps to remove the public availability of a director’s residential address. For example, this responsibility will extend to removing public availability of:

• • A director’s residential address in documents relating to the company, such as consent forms and annual returns.
  • The residential address of a director in their capacity as a shareholder of the company.
  • A shareholder’s residential address where that shareholder resides with a director who uses an alternative address. 

2. Directors and shareholders will only be able to nominate one alternative address at a time. That alternative address must not be the company’s registered office or a postal centre, but could be the offices of a firm of accountants or solicitors.

3. A director’s alternative address will be an option for serving legal and other documents on that director.

4. Applications for the use of an alternative address will be able to be filed by people other than the director personally, such as a lawyer or accountant on behalf of that person. 

5. Prospective directors or shareholders and proposed companies will also be able to utilise the alternative address provisions. 

6. The application for use of an alternative address will be in a prescribed form and will require the director to give a statutory declaration verifying that public availability of the director’s residential address is likely to result in physical or mental harm.

7. The Bill will not limit other provisions of the Companies Act requiring directors and shareholders to provide their residential address to the Registrar, or the Official Information Act 1982. 

If the Bill receives Royal assent, it would come into force by Order in Council, but no later than one year after receiving Royal assent. This is to allow sufficient time to complete public consultation, make any resulting changes and to operationalise them in the Companies Office.

Modernising the Companies Act and director duties

Separately from the Bill, the Government has signalled its intention to progress a raft of more comprehensive reforms to the Companies Act, with a view to beginning the project in the first half of 2025. 

The first phase of reforms aims to reduce compliance costs and complexity, in turn reducing the administrative burden for companies and individuals, allowing them to focus on practices and policies that are important to them. In parallel to this phase one work, starting next year the Law Commission is also set to carry out a review of directors’ duties liability and enforcement. 

Among other changes, the reforms include a proposal to remove the requirement to make residential addresses of directors and shareholders publicly available. Directors and shareholders would instead be given a unique identifier and the ability to nominate an address for service. 

We consider it is timely that the Companies Act is brought up to speed with the modern environment in which companies are operating in New Zealand. A more comprehensive approach to reforms would address the safety concerns of directors and shareholders but also more effectively utilise available technology to save time and cost on compliance activities of the company.   

You can read more about the reforms at Dentons Insights.