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forms of business
The
three main forms of business in New Zealand are sole traders,
partnerships and companies.
A sole trader owns all the assets of the business and is solely
responsible for al the business’s risks, obligations and
debts.
If you want to operate a business with other people in New
Zealand, you can establish an ordinary or special partnership
under the guidelines established by the Partnership Act 1908.
The Companies Act 1993 provides the basic rules for established
and operating a company in New Zealand. Any person may, either
alone or together with another person, apply for registration of
a company.
What constitutes a company?
 A company must have:
- A registered name.
- One or more shares.
- One or more shareholders with
limited or unlimited liability for the obligations of the
company.
- One or more Directors.
A company may have a constitution
and, in certain circumstances, a constitution can be adopted to
alter the Act’s rules to suit a company’s individual
requirements. A company is a legal entity in its own right,
separate from its shareholders, and continues in existence until
it is removed from the Companies Register.
A company may enter into contracts with its shareholders and
under the Financial Reporting Act 1993 only companies that are ‘reporting entities’ need to prepare and register
financial statements. Reporting entities are companies that issue
shares, overseas companies, subsidiary companies or companies
with at least one subsidiary. Companies with assets valued at
$450,000 or with a turnover of $1 million must also file
financial statements.
Companies that offer securities, including shares, to the public,
and overseas-owned or overseas-controlled companies, must be
independently audited and unless otherwise agreed, contracts
entered into by the company do not impose liability on individual
members.
A company has access to the Australian market under CER
(Australia New Zealand Closer Economic Relations Trade
Agreement).
Business Conduct
 Business in New Zealand is not strictly controlled. However, all
businesses have to follow some standard principles. Business
conduct is overseen by three government agencies - the
Commerce Commission, Securities Commission and Takeovers Panel.
The following summarizes the principal functions of these and
other agencies and identifies key aspects of the legislation they
operate under.
Commerce Commission
The Commission is an independent organization charged with
promoting market efficiency by fostering healthy competition,
informed consumer choice and sound economic regulation. It is
responsible for ensuring that businesses meet the provisions of a
number of regulatory Acts, including the Commerce Act 1986, the
Fair Trading Act 1986 and the Electricity Industry Reform Act
1998. The Commission undertakes a range of activities including:
- Investigating and acting on
breaches of the Commerce Act, the Fair Trading Act and
the Electricity Reform Act.
- Prosecuting traders found to
be operating in contravention of these Acts.
- Adjudicating on proposed
business acquisitions that are subject to a clearance or
authorization application.
- Regulating competition in the
telecommunications and electricity industries.
The Commerce Act 1986
 The Commerce Act promotes competition in markets within New
Zealand by:
- Prohibiting conduct that
restricts competition (restrictive trade practices).
- Prohibiting the purchase of a
business’s shares or assets if that purchase leads
to the lessening of competition in a market.
- Allowing the Commerce
Commission to authorize proposed restrictive trade
practices and business acquisitions that lead to the
lessening of competition in a market on public benefits
grounds.
- Allowing the Commerce
Commission to recommend to the Minister of Commerce that
the price of specific goods and services be controlled.
The Fair Trading Act 1986
The Fair Trading Act was developed with the Commerce Act to
encourage competition and protect the public from misleading and
deceptive conduct and unfair trading practices. The Act applies
to all aspects of the promotion of goods and services - from
advertising and price to sales techniques and finance agreements.
The Act prohibits:
- Misleading or deceptive
conduct generally.
- False or misleading
representations about employment and goods and services
generally.
- False claims about the price,
standard, quality, history or origin of particular goods
and services.
- False claims about particular
uses or benefits or particular endorsements or approvals.
- Unfair trading practices.
The Act also provides for consumer
information and safety standards.
The Consumer Guarantees Act 1993
 The Consumer Guarantees Act makes traders responsible for
guaranteeing the quality of the goods and services they provide.
The Act describes certain standards and obligations manufacturers
and retailers must meet to protect customers against poor
quality. It also covers such issues as prices, parts and
representations.
Business and Consumer Complaints
Suspected instances of anti-competitive business practices, or
unfair or misleading trading practices, can be reported to the
Commerce Commission Contact Centre. The Centre provides advice
and investigates if necessary. A range of handy booklets on
business and consumer topics is also available. There is no
charge for these services.
Securities Commission
An independent body established under the Securities Act 1978,
the Commission promotes more efficient and cost-effective
management and regulatory practices within the capital investment
market. The Securities Commission also regulates how securities
are offered for public subscription. It has extensive powers to
investigate cases of insider trading and can recommend the reform
of existing securities laws and practices.
The Health and Safety in Employment Act 1992
This legislation aims to prevent harm to employees while they are
at work. It requires employers to ensure that employees work in a
safe and healthy environment.
Employment Relations Service
 Run by the Department of Labour, the Employment Relations Service
provides up-to-date information on all aspects of
employer/employee responsibilities under the Employment Relations
Act 2000.
The service provides comprehensive information about all aspects
of employer/employee relationships. It provides a handy series of
booklets in English and other languages, dealing with the concept
of good faith relationships and explaining how the various
provisions of the Employment Relations Act 2000 influence
employer/employee responsibilities. If problems arise in an
employment relationship, employers can get help from the
Employment Relations Infoline.
The Employment Relations Act
The Employment Relations Act 2000 recognizes that good employment
relationships are built on good faith behavior. It promotes
collective bargaining through unions, but also protects the
rights of individuals who choose not to join a union and who wish
to negotiate their own individual Employment Agreement.
Resource Management
If your business activity either uses or affects a natural
resource, you may need to apply for resource consent from your
local authority.
Application forms are available from your local council and you
will need to provide an assessment of the effects your business
activity will have on the local environment. Land use consents
are dealt with by city and district councils and consents for the
use of air, water or coastal areas are managed by regional
councils.
The Resource Management Act 1991
Provides for the sustainable management of New Zealand’s
natural resources and establishes compliance standards for both
private and business activities.
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