NEW ZEALAND Law and Practice Contributed by: Graeme Quigley, Ashton Goatley and Erin Hickey, Webb Henderson
to the Companies Act. At present, Australia is the only approved “enforcement country” . The constitution of a company may increase the minimum number of directors. The Listing Rules require listed companies to have at least three directors – two of whom must ordinarily reside in New Zealand and two of whom must be independent directors. The Cor - porate Governance Code further recommends that the majority of the board be independent directors. “Independence” in this context is assessed hav - ing regard to the factors outlined in the Corpo - rate Governance Code. Broadly, “independent” for this purpose means directors who are free of any interest, position, association or relationship that could reasonably be perceived to materially • act in the company’s best interests; and • represent the interests of the company’s financial product holders generally. Industry-specific legislation may impose stricter obligations on the board composition of a com - pany in that industry. For example, the Reserve Bank of New Zealand’s Banking Supervision Handbook for the banking sector and its gov - ernance guidelines for the insurance sector both require at least half of the company’s directors to be independent. 4.4 Appointment and Removal of Directors/Officers Section 153 of the Companies Act provides that, unless varied by the company’s constitution, directors are appointed by ordinary resolution (a simple majority of votes) of the shareholders. influence their capacity to: • bring an independent view;
In addition, the court has the power to appoint directors upon the application of a shareholder or creditor if there are no directors – or fewer directors than the quorum for a board meeting – and it is not possible or practicable to appoint directors in accordance with the company’s constitution. A director may be removed by an ordinary resolution of shareholders at a meeting called for purposes that include the removal of the director (in which case, the notice of meeting must state this). These provisions may be modified by the consti - tution. In an incorporated joint venture, for exam - ple, it is common for each party to be able to appoint and remove a specified number of direc - tors – regardless of whether that shareholder is entitled to exercise more than 50% of the votes at a shareholder meeting. 4.5 Rules/Requirements Concerning Independence of Directors Directors are restrained from acting in situations where their personal interests may conflict with the interests of the company. Section 131 of the Companies Act requires a director to act in good faith and in what the director believes to be the best interests of the company when exercising powers or performing duties – see 4.6 Legal Duties of Directors/Officers . Section 139 of the Companies Act further defines a director as “interested” in a transaction of the company if, in broad terms, the director: • is a party to – or will or may derive a material financial benefit from – the transaction (or is a director, officer, trustee, parent, child, spouse, civil union partner or de facto partner of such a person); • has a material financial interest in another party to the transaction; or
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