June 21 2017
There are three changes to business law on the horizon. If you’re a small to medium business owner, we recommend you read this article so you’re armed with the right knowledge and not looking down the barrel of a legal shoot-out.
The Good: Further Takeovers Code relief for small companies
The Takeovers Panel has recommended three substantive and many technical changes to the Takeovers Code. The matter is with the Minister of Commerce and Consumer Affairs.
The main proposal is to the definition of ‘Code Company,’ which will only capture companies and their subsidiaries with a total annual revenue of at least $15 million, or assets of $30 million at the end of the most recent accounting period.
The good news for small unlisted companies is this will remove the disproportionate cost of code compliance.
Two other important changes:
- ‘Days’ in the Code will be amended to ‘working days’ to bring it in line with other legislation, such as the Companies Act 1993. This will address practical issues, including the potential for interested parties to be subject to tight time frames where takeovers happen over holiday periods.
- There will be electronic access for shareholders to facilitate electronic communication and the public availability of Code documents.
- Target companies will be required to provide interested parties with the email addresses of shareholders for the purposes of receiving documents electronically.
- The Takeovers Panel will be allowed to publish Code regulated documents on the Panel’s website.
The Bad: Say adiós to employee share schemes
Inland Revenue’s recent work on employee share schemes has culminated in the recently-introduced Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Bill.
This Bill sets out the new rules for taxing employee share schemes. It’s important to companies that operate employee share schemes and people who are currently participating in them.
In the past, schemes have been established which provide non-taxable capital gains to employees. The common structure allows employees to buy company shares using a loan from the company. Essentially, under this new Bill these types of schemes will be taxed the same as employee option schemes, where employees are taxed on the difference between the strike price they pay to exercise their options and the value of the shares at the time of exercise.
Talk to our business lawyers if you have a business currently operating a share scheme, or you’re a participant in such a scheme.
The Ugly: Non-compliance with minimum employment standards
Beware the wrath of The Employment Relations Authority. They have imposed a substantial penalty of $145,000 on Manukau Auto Valet Limited for failure to pay minimum wages and/or holiday pay to at least 115 employees. The penalty is additional to Manukau Auto Valet’s reimbursement of $96,451 to its employees, which was owed as a result of non-compliance.
There were 322 separate breaches of employment law, each able to be penalised with a fine of up to $20,000. The potential liability for Manukau Auto Valet was a crippling $6,440,000. However, in similar situations, the ERA has applied a globalised approach. They also gave Manukau Auto Valet’s co-operation consideration reducing the sum to $145,000.
To avoid an ugly penalty, make sure your payroll systems and record keeping complies with the relevant employment law requirements.