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Companies (Minority Buy-out Rights) Amendment Bill

Companies (Minority Buy-out Rights) Amendment Bill

Thursday 13 December 2007; 12.20pm

Dr Pita Sharples, Co-leader of the Maori Party

The Maori Party comes to this Bill, aware that many of our whanau, hapu and iwi are taking up the company structure as laid out in the Companies Act 1993.

Whale Watch Kaikoura Ltd, Maori active-wear brand Kia Kaha, Mai Media Ltd and Shotover Jet Ltd are all examples of Maori organisations which have been attracted to the company structure as a mechanism for its commercial operations.

These international market leaders see the provisions of the Companies Act as providing them with a robust structure for economic benefits to be realised, for the capital growth of their assets, and to ensure financial benefits to individual shareholders.

We do, however, also realise that the company structure may not be appropriate for hapu or iwi whose objectives are solely or primarily political, social or cultural. Companies may not be suitable to meet the non-commercial objectives of whanau, hapu and iwi; and we recognise that as one of the limitations of the current Companies legislation.

And so we take all of these factors and interests into mind when we consider the amendments, Madam Speaker, mooted under this Bill.

The Companies (Minority Buy-out rights) Amendment Bill seeks to improve buy-out regimes when minority shareholders have elected to have their shares purchased by the company.

The current legislation has made it easier to operate as a company with particular attention having been given to decreasing the set–up costs, and making name approvals available almost immediately.

But there are still issues apparent, particularly around the concept of minority shareholding.

From the outset, we know that the concept of minority shareholding has always been one of those issues which has turned whanau, hapu and iwi off the company structure in the first place.

The requirement that those with interests must hold shares has created practical difficulties for hapu and iwi due to the complexity of identifying all the persons to whom the shares should be issued.

This Bill, however, assumes that hapu and iwi have worked through all of those issues, and come out the other end.

In other words, in the situation of a dissenting vote, minority shareholders have willingly elected to have their shares purchased by the company and the process of this Bill is necessary to ensure their shares are fairly valued.

In general terms, the minority buy-out regime is triggered in response to a dissenting vote - that is, where the shareholder exercises the votes pertaining to that shareholder's shares against a proposal, and that proposal is agreed to by the required majority of shareholders, that shareholder is entitled to require the company to purchase those shares in accordance with Section 111 of the Companies Act 1993.

What both the Law Commission and Justice Doogue concluded was that the Companies Act 1993 was actually defective in its failure to set out a workable method when such a situation occurred.

The challenge, therefore, for this Bill, is all around how to value a minority shareholding when a minority shareholder has elected to have their shares purchased by the company under Section 111 of the Act.

In fact so convinced of the failings of this particular piece of legislation was Justice Doogue, that his year 2000 report referred to a “statutory vacuum” and that the specific section was “substantially flawed”.

We in the Maori Party are therefore pleased to receive this legislation, to ensure that the minority buy-out rights are to be both beneficial and workable.

We do not have a great deal more to add to this debate, other than to note with depressing consistency, that this appears to be another Bill before the House in which there has been little if any consultation with Maori.

We were unable to confirm what the nature of the consultation with Maori companies or Maori company directors had been in the Law Commission Review, or if there had been consultation with Maori in the drafting of this Bill. Experience to date would tell us none.

We will, however, support this Bill through to select committee, and hope that this will provide an opportunity for the independent voice of Maori to be heard.


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