Who can be a shareholder or a director of a company?

There are three types of New Zealand companies:

1. Limited liability companies

A limited liability company has full responsibility for all of its legal and financial obligations. It’s the liability of the shareholders that’s limited.

Shareholders are only liable for:

money owing on their shares

personal guarantees they have given to lenders or creditors, such as banks or suppliers.

limited liability companies are incorporated under the Companies Act 1993.

2. Co-operative companies

A co-operative company is a specific type of limited liability company. Its purpose is to serve the common needs of its members (shareholders), by providing them with commercial services. Co-ops must be under the majority control of members (at least 60 per cent of voting rights) who are actively trading with the co-op. The structure of co-ops is very broad, their members can be suppliers, customers or employees.

Co-operative companies operate across a range of sectors including agriculture, horticulture, manufacturing, financial services, utilities, education, health, community services, wholesale and retail.

They often have the word 'co-operative' in their company name. Co-ops:

have transacting shareholders — this means shareholders who:

supply goods or services to the company

buy the company’s goods or services, or

enter into commercial transactions with the company

have member representation on the board of directors

must have at least 60 per cent of voting rights held by transacting shareholders

have a constitution that includes a description of the co-op's activities — this must be filed with us

typically return a portion of their profits to shareholders as rebates or as shares instead of rebates.

3. Unlimited companies

The shareholders of an unlimited company have ultimate liability meaning they must pay any debts the company can’t pay. This liability is included in the company’s constitution. Unlimited companies are used to meet very particular, often foreign, legal requirements.

All companies incorporated in New Zealand have the same basic elements:

a company name.

at least one share, one shareholder and one director.

contact addresses.

Choosing a company name

Before you set up a company, you need to reserve its name on the Companies Register. There are firm guidelines to follow when choosing and reserving a company name. Once you've reserved a name and it's been approved, no other company can incorporate with an identical or almost identical name.

Company directors

Directors are responsible for managing the company’s day-to-day business and may also be shareholders. They have duties to the company, its shareholders and others dealing with the company.

What is a director?

A director is someone elected or appointed to manage a company’s business and affairs. Every registered company must have at least one director. Who your directors are, and key information about them, is recorded on the Companies Register.

Duties as a director can include:

determining and implementing policies and making decisions.

preparing and filing statutory documents with the Companies Office or other agencies.

calling meetings, including an annual meeting of shareholders.

maintaining and keeping records.

binding the company to contracts with suppliers, lenders and others dealing with the company.

Your company constitution, if you have one, may set out additional duties and responsibilities.

Who can be a director?

Some people aren't allowed to be company director. There are strict requirements governing who can be a director of a New Zealand company.

Where directors live?

All New Zealand companies must have at least one director who lives in:

New Zealand, or

Australia, and who is a director of a company incorporated in Australia.

If you're unsure whether a proposed director meets this requirement, seek legal advice before commencing the process of incorporating your company or registering a director.

In most cases if you have been present in New Zealand for a total of more than 183 days in a 12-month period the Registrar will consider that you satisfy the lives in New Zealand rule.

If you're not present in New Zealand for the required period, the Registrar may still consider your application. To have the Registrar consider your application you will need to provide additional information, including:

the actual time you spend in New Zealand

your connection and ties to New Zealand

how you live when in New Zealand, and

whether the combination of these factors will allow us to determine whether you've met your company's obligations.

Some of the reasons you can't be a director include if you're:

under 18 years of age.

an undischarged bankrupt.

subject to a property order under Section 30 or 31 of the Protection of Personal and Property Rights Act 1988.

prohibited from being a director, general partner or promoter under certain statutory provisions.

prohibited from being involved in the management of a company or limited partnership under certain statutory provisions.

This includes, but isn't limited to people who've been:

convicted of a crime involving dishonesty in the last five years, or

prohibited from managing a company or limited partnership by the Registrar of Companies or Financial Markets Authority.

It also includes people who've been prohibited from being a director, general partner or promoter of, or taking part in the management of, an overseas company or overseas limited partnership under Australian law.

Other disqualification criteria can be found in the Companies Act 1993.

Shares and shareholders

Every company must have at least one shareholder and at least one share.

Shareholders are investors in the company, but they’re not responsible for the day-to-day management of a company’s business.

They have the right to vote at meetings of shareholders on some decisions about how the company is run, including:

changes you make to a company's constitution.

approving major transactions, and

authorising dividends.

The number of shares each shareholder owns determines the level of voting control they have.

Rights and responsibilities of shareholders

As a shareholder you:

aren't responsible for, and don't participate in the day-to-day management of the company (unless you have authority from the company to do so), and

have the right to a percentage of any distribution or dividend paid to shareholders, based on how many shares you own.

Who can be a shareholder?

You can only register a shareholder in your company if they're:

an individual person.

an New Zealand company, or

another legal entity, such as an overseas registered company or limited partnership.

Registering shareholders when you incorporate

When you submit your application for incorporation, you must register each shareholder.

You must record each shareholder's personal details and state how many shares they hold in your company. Depending on the type of shareholder, you need to provide:

for individuals — a full legal name, residential address, and an Inland Revenue number if the shareholder is an New Zealand resident, and you're registering your company for tax.

for registered New Zealand companies — a full company name and incorporation or registration number.

for trustees — a full legal name and residential address for each trustee jointly holding shares.

for other entities — a full legal name, country of origin and registered address.