A critical element of having a shareholder’s rights protected is how their exit rights are defined. In a publicly listed company, an aggrieved shareholder can simply sell their shares through the Stock Exchange to quit their shareholding in the company. However, it’s not quite so straightforward and simple for minority shareholders to dispose of their shares in a private company. This is particularly so if the company’s Constitution limits its shareholders’ ability to sell or transfer their shareholding. Hence, exit clauses are commonly included in the Shareholders’ Agreement to enable all private company shareholders to sell their shares and quit the business in a way that is equitable for all the company’s shareholders. Exit Strategies For Minority Shareholders Are you…

Even in New Zealand’s currently comparatively benign economic conditions, some businesses inevitably find themselves struggling to survive. If you want your business to survive and then flourish, you need to put a business recovery plan in place. Managing a struggling business is stressful and demanding on directors, management and staff alike. The thought of impending failure is emotionally taxing on all stakeholders. Gambling on the business’ success with money from your family or friends, or extending credit with suppliers just to get by is often a poor strategy. Hope is never a reliable method.Moreover, the ethical challenges involved in risking other peoples’ money is a major stressor for most people.   Why Businesses Find Themselves Struggling Businesses can often struggle…

INTRODUCTION One way of dealing with difficult shareholder disputes is to have an independent party control and sometimes deal with the company assets, while the dispute is worked through. This allows the parties to focus on the dispute without further issues arising from current trading. Such a reliable independent party is a liquidator (solvent liquidation). CASE STUDY We were appointed by the High Court as liquidators of a solvent company to resolve a shareholder impasse. Two shareholders owned 70% and 30% respectively of the company shares. The companies only asset was its ownership of all the shares in a trading subsidiary company. The directors were in dispute on the management of this company. The liquidators needed to control the subsidiary…

Section 15 of the Companies Act 1993 states that a company is a separate legal entity, in its own right, separate from the shareholders, and continues in existence until it is removed from the New Zealand Register. Effectively that means it has the rights and obligations of person. It can own property, carry on a business, initiate legal action etc. It is also responsible for its actions and can be sued. The use of the company structure, with its separate identity, allows people to operate more than one business at the same time but keep the assets and liabilities of those separate businesses apart – so one business doesn’t drag the other down. CASE STUDY We were appointed as receivers…

So, yet another year is gone and a shiny fresh new year beckons. Will 2019 offer small business owners an opportunity to absorb the lessons from the best strategies and business results of 2018, and plan effectively for this year? Of course, business doesn't trade in isolation and small business trends are continually evolving. Whether the major small business trends are in customer service, marketing or technology, business owners need to understand the prevailing external factors in order to fine-tune their internal operations. Of course, some trends will have more of a direct impact on your business, than others regardless of your niche. However, the key is how you embrace and adapt them to your business’ needs and how successfully…

As it is in all areas of business, when you are seeking advice or input on insolvency matters it is important to go to the right source. There are lawyers and accountants that specialise in insolvency but, depending of the circumstances, and what you are looking to achieve, who you choose is important. Under the current legislation, the Companies Act 1993, anyone, without conflict of interest, and with a few other exceptions, can take an appointment as an Insolvency Practitioner and be appointed as liquidator or receiver of a company. They do not have to have any formal qualification and do not have to be registered or subject to any particular code of conduct. This situation is likely to change…

Shareholders are the foundation of our listed company system. One of the key protections given to shareholders is the right of minority shareholders to be treated on an equal footing to majority shareholders. Under section 174 of the Companies Act of 1993, every minority shareholder in a company has the right to seek relief from the court if it feels its rights have been unfairly prejudiced or if they believe the officers of the court have been conducting the affairs of the company in a manner that is oppressive, unfairly discriminatory, or unfairly prejudicial to the interests of the shareholder."The Institute of Directors’ guidelines says “Directors should ensure fairness to all shareholders in disclosure of information, general communications and in…

A question that will often arise in discussions with the directors and shareholders of companies facing financial difficulties is what their personal liabilities are. The initial response to the question is, if the company is a limited liability company, you are not personally liable for the debts of the company BUT… and it is a reasonably big “BUT” because there are a number of ways in which an individual can become personally liable in relation to an insolvent company. The purpose of this article is to identify some of the ways in which you can become personally liable and the steps you can take to avoid or mitigate that liability. Personal Guarantees: It is common for trade suppliers to require…

The winding up of a company in New Zealand can occur in three ways – • A voluntary liquidation initiated by the shareholders of the company (solvent or insolvent companies); or• A Court ordered winding up initiated by a creditor of the company; or• A short form removal also known as Section 318(1)(d) process (solvent companies) The purpose of this article is to set out the different processes involved with these options. Voluntary Winding Up: The process to be followed by the directors and shareholders of a company to wind the company up depends on the financial position of the company, that is whether it is solvent or insolvent. Solvent Companies: When the decision has been made that a solvent…

In our previous article, Internal Fraud – The Threat from Within (April 2017), we gave a broad outline of the basic steps that can be taken to help reduce the chances of internal fraud and increase the chances of fraud being identified if it is happening. This article sets out in a bit more detail some of the policies and procedures you should consider implementing in your business, if they are not already in place. The size of your business, and the number of employees involved, will have a bearing on what can be done. EMPLOYING STAFF: The employees of a company can be its greatest asset or its greatest liability. Employing the wrong person can have a devastating effect…

As a landlord of commercial property it is important for you to understand your rights and responsibilities to ensure you don’t inadvertently breach legislation and obligations. If you do, you may face significant liability. A Deed of Lease details the relationship and terms/conditions between a commercial landlord and tenant. The Property Law Act 2007 (“PLA”) defines rights and obligations of landlords and tenants. The Unit Titles Act 2010 can also apply if the property is a unit title. A commercial landlord has obligations to comply with the Building Act 2004 and Building Code and to complete a building warrant of fitness for Council. A commercial landlord also has obligations to maintain the building, comply with health and safety standards. A…

What is a General Security Agreement? A General Security Agreement (GSA) is a document recording a security provided by a debtor company to its creditor over a specific group of assets or over all assets of the business. The GSA records the terms which include a right of the creditor to register their interest on the Personal Property Securities Register (PPSR) so that there is a public record of that financial interest in the assets of the debtor company. We always recommend to directors/shareholders investing moneys into their business on start-up that they attend to completing the appropriate loan documentation (between company and individual) and a General Security Agreement recording the terms. It is important that this GSA is registered on…