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Minister urged to reject NZX plans

Minister urged to reject NZX plans

Commerce Minister Lianne Dalziel should reject plans from the NZX to apply prescriptive governance rules to companies listed on the New Zealand Stock Exchange, says National Party Associate Commerce spokesman John Key.

"Prescriptive regulations such as those being floated by the NZX may be applicable in a large and deep corporate environment such as the United States where separation of ownership and control is at its most extreme.

"But in a small and transparent environment like New Zealand, rules such as these will only choke off the number of companies entering the public ownership arena.

"They'll also reduce what is already a shallow pool of independent directors currently available, with few tangible benefits," Mr Key says.

"I am surprised the exchange feels such rules are necessary in NZ given the lack of evidence that such prescription is warranted, the size and existing transparency of our market, and the exchange's documented desire to see a growth in the secondary AX market.

"Shareholders are likely to be better served by a regime of voluntary best practise, so that directors have time to perform their real function of maximising shareholder value and leave it to investors to assess the risks that different approaches might have on individual corporate performance," says Mr Key.

"New Zealand's primary focus has to be on encouraging more companies to expand and grow without having the private equity markets as their sole source of capital.

"This objective can be achieved while maintaining the integrity of our market without such prescriptive legislation that at best might with be expensive and time absorbing - and at worst may provide a false sense of security for shareholders," says Mr Key.

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