NEW ZEALAND Law and Practice Contributed by: Ian Beaumont, Tom Gillespie and Sam Kember, Russell McVeagh
will typically step back from deliberations. In these circumstances, boards commonly form a committee made up of independent and non-conflicted directors to evaluate the proposal, engage with advisers and make recommendations, supporting both compliance with directors’ duties and confidence in the decision- making process. Boards may also establish special committees for practical and operational reasons, particularly to man - age takeover offers or schemes of arrangement. Del - egating responsibility to a smaller group can facilitate more efficient decision-making and responsiveness, especially where transactions are subject to com - pressed timeframes or regulatory processes. While the Companies Act permits boards to delegate powers to committees (subject to certain statutory limits), the board retains overall responsibility for the exercise of those powers. Accordingly, boards typical - ly maintain oversight of committee activities to ensure decisions are made consistently with directors’ duties. 8.3 Business Judgement Rule New Zealand courts do not apply a formalised “busi - ness judgement rule” in the US sense. However, the courts generally show a high degree of deference to the judgement of directors, including in takeover situ - ations, provided that directors act in good faith, for proper purposes, on an informed basis and without conflicts of interest. Judicial intervention is typically limited to circumstances involving breaches of direc - tors’ duties, such as conflicts, bad faith, improper pur - pose or procedural unfairness, rather than a reassess - ment of the commercial merits of the board’s decision. 8.4 Independent Outside Advice Directors considering M&A activity will typically obtain advice from a range of external advisers, reflecting both market practice and governance expectations. With the exception of the independent adviser’s report required in takeover offers and schemes of arrangement, there is no general statutory obligation to engage advisers, but doing so is standard in most transactions. Boards commonly engage legal advisers to guide them on directors’ duties, conflict management, regulatory
requirements and transaction mechanics. Financial advisers are frequently retained to provide strategic input, valuation analysis and, where relevant, fairness or reasonableness opinions, particularly in transac - tions involving shareholder approvals or heightened scrutiny. Tax and accounting advisers are also rou - tinely consulted to address structuring considerations, tax implications and financial reporting issues. Where conflicts of interest arise, or where a special committee has been established, it is common for that committee to retain advisers who are separate from management’s advisers, in order to support independ - ence and process robustness. In public transactions, companies may also engage communications or pub - lic relations advisers to assist with investor, media and stakeholder engagement. Outside the context of a specific transaction, NZX‑list - ed companies are generally expected to maintain pre - paredness for potential control transactions, including having response protocols and an informed view of company value, often developed with input from legal and financial advisers. 8.5 Conflicts of Interest Directors of New Zealand companies owe statutory and fiduciary duties to properly identify, disclose and manage conflicts of interest. Under the Companies Act, a director who is interested in a transaction or proposed transaction with the company must disclose the nature and extent of that interest to the board. Courts may consider conflicted transactions primarily through the application of directors’ duties under the Companies Act, with particular focus on whether con - flicts were properly disclosed, whether conflicted par - ties abstained from decision-making, and whether the board’s process demonstrated informed, good-faith consideration of the transaction, rather than engaging in a merits-based review of the commercial outcome. The Takeovers Panel routinely examines whether con - flicts involving directors, advisers or controlling share - holders have been appropriately identified, disclosed and managed, including whether conflicted parties were excluded from relevant decision-making. While most matters are resolved without court litigation,
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