NEW ZEALAND Law and Practice Contributed by: Graeme Quigley, Ashton Goatley and Erin Hickey, Webb Henderson
requirements in relation to corporate govern - ance – for example, requirements concerning the composition of the board, director remu - neration, continuous disclosure, financial report - ing, share issues, voting rights, and approval of major transactions. The NZX also issues a Corporate Governance Code that takes effect on “comply-or-explain” basis, meaning that the issuer must either com - ply with the recommendations made in the Cor - porate Governance Code or explain: • which recommendations were not followed; • why, and in what period, those recommenda - tions were not followed; and • any alternative practice adopted in lieu of those recommendations (in which case, the issuer must confirm that this practice has been approved by its board). 2. Corporate Governance Context 2.1 Hot Topics in Corporate Governance Recent areas of focus for corporate governance in New Zealand include director independence requirements, company law reform, shareholder activism, ESG reporting, climate-related finan - cial disclosures and climate litigation (see 2.2 ESG Considerations ), and changes to the NZX capital-raising settings and guidance relating to major and related-party transactions (see 3.2 Decisions Made by Particular Bodies ). As a result of a second round of consultation on its director independence settings, the NZX has amended the Listing Rules and Corporate Gov - ernance Code effective from 31 January 2025. The Listing Rules now require that where the board determines a director to be an “independ- ent director” notwithstanding the presence of a
factor specified in the Corporate Governance Code which may give rise to “disqualifying rela- tionship” (ie, non-independent status), an issuer of Quoted Equity Securities must publicly dis - close the basis on which the relevant factor from the Corporate Governance Code was triggered, and why the board has determined that the rel- evant director is nevertheless independent. The relevant changes to the Corporate Govern - ance Code include: • clarifying that in assessing whether there is “disqualifying relationship” as a result of the director receiving a substantial proportion of annual revenue from the issuer, the board must consider not only the director’s fees but also any distributions paid by the issuer to the director; and • amending the audit committee composition recommendations such that one member must (i) have an adequate accounting or financial background, and (ii) be an “inde- pendent director” . The Corporate Govern - ance Code contains guidance on determining whether the relevant person’s background is deemed to be adequate. On 15 August 2024, the government announced a two-phase process of reforms to modernise and simplify company law in New Zealand. The first phase focuses on legislative reforms aiming to streamline the operation of the Companies Act, including expanding the ability to use mod - ern technology to comply with Companies Act requirements. The bill containing these amend - ments is expected to be introduced to Parlia - ment this year. For the second phase, the Law Commission has been tasked with conducting a review of directors’ duties and related issues of director liability, including issues raised by the Mainzeal litigation (see 4.6 Legal Duties of
614 CHAMBERS.COM
Powered by FlippingBook