Company Registration Questions

Click on a Heading below to Expand:

The Company's name

You can call the company anything you like,  except that:

  1. it must end with the word "limited",  or the abbreviation "ltd"
  2. it can not be offensive
  3. it can not be identical or almost identical to an existing company's  name
  4. it can not include certain words [eg, Royal,  Bank,  Insurance], 
    but exceptions are sometimes made.

We can tell you almost immediately whether your chosen name will be allowed. 
If it is not, we will email you and ask for another name.

The Company's addresses

REGISTERED OFFICE:  Every company must have a "Registered Office"  in New Zealand.  This can be a private house or an office or factory – any physical address.  It can not be a PO Box or document exchange address.  If it is an accountant or lawyer's  office you should include that information in the address,  and if it is a multi-storey buiding,  include that information also. 
For example:
Avian Necropolis & Co Ltd
Chartered Accountants
Suite 12,  14th floor
260 King Street
Newmarket
Auckland 1011

POSTAL ADDRESS:  If this is different from the street address [eg a PO Box]  give details

EMAIL ADDRESS:  Once a year your company will have to file an "Annual Return".   It is easy,  and free,  but if you forget to do it your company might be de-registered.  The MED will email you a reminder when the Annual Return is due,  and this is why we ask for an email address.

Directors

To qualify as the director of a company, a person must be:

  1. 18 years old or older
  2. not an undischarged bankrupt
  3. not a person who has already been prohibited from running a company in NZ
  4. a natural person [ie a real person, not a company or some other organisation].


Directors do not need to be resident in New Zealand.

On the order form we need:

  1. Full names [initials are not OK]
  2. Full residential address [just a PO Box or RD number are insufficient]
  3. And if you want us to get the company’s IRD number we need the director(s) personal IRD numbers


Number of Directors:

The company must have at least one director and may have as many more as you want.

Personal liability of directors

A company is a legal entity separate from its directors and shareholders, so in normal circumstances the company is liable for its own problems. The directors and  shareholders are not liable. However there are circumstances where the directors will become personally liable etc etc

Appointment of new directors:

Whenever a new director is to be appointed, or an existing director is to be dismissed, it will be done by a vote of the shareholders. (With our standard constitution each share they hold gives them one vote). There are two different ways that shareholders can vote. An ordinary resolution needs to be passed by a majority of votes – more than 50%. A special resolution is passed by 75% or more of the votes.

Constitution

Constitutions provide the administrative rules for companies. Constitutions are not compulsory because the Companies Act already provides a huge set of rules. However, the Act applies to all companies, large and small and some rules which make sense for large corporations are not appropriate for small ones. So some rules can be dropped or amended and some can be added. This is done in the company’s constitution. In particular our constitution states that if any shareholder wants to leave the company they can not immediately sell to an outsider – they first must offer their shares to remaining shareholders. If you want different classes of shares the constitution is the place to specify them. The constitution also specifies how new directors are to be appointed.
Here is a very brief summary of our standard constitution:

Directors:

  1. Directors are appointed or removed by ordinary resolution of shareholders.
  2. A quorum at a directors’ meeting is a majority of directors.
  3. The minimum number of directors is one, no maximum number is set.
  4. Directors need not be shareholders of the company.
  5. A director who has a personal interest in a transaction of the company may still vote on matters relating to it, but he must disclose his interest.
  6. The company may indemnify and/or insure directors to the extent allowed by the Act.


Transfer of Shares:

Pre-emption rules apply. Departing shareholders must offer their shares back to the company at an agreed or arbitrated “fair value”. Remaining shareholders have first option (pro rata) to purchase them.

Shareholders:

  1. A quorum of shareholders is present at any meeting if shareholders or their proxies are present (or have cast postal votes) who are between them able to exercise a majority of the votes which could be cast on the business to be transacted.
  2. Ordinary Resolutions are passed by a majority vote (ie over 50%).
  3. Special Resolutions are passed by a 75% majority.
  4. In each of the above votes, it is not the number of shareholders which is counted, but the number of shares.


Shares:

  1. Ordinary shares carry the right to one vote per share, and an equal share in dividends and distribution of assets.
  2. Shares are issued for the price of «sh1price» per share, payable at a time to be resolved by the Board of Directors.
  3. With the approval of shareholders (by special resolution) the directors may issue new shares.
  4. Newly issued shares must be offered to existing shareholders in the same proportion that they hold the existing shares of the company (ie pro-rata).
  5. The directors may issue different classes of shares
  6. The company may acquire up to 5% of its own shares.


Management:

  1. No restrictions are placed on the company’s capacity to engage in any activity approved by the directors and shareholders.
  2. The Board of Directors manages the company.
  3. Some major decisions, including individual transactions which are worth more than 50% of the company’s value, or alterations to the constitution, or appointment and removal of directors, must be made by the shareholders.

Shares

Number of shares: Every company must have at least one share, and it can have as many shares as you like. For the purposes of this explanation, we presume that all the shares in your company are going to be ordinary (ORD.).
A "share" is a token that you own part of the company. If the company has 100 shares and you own 50 of them, then you own 50% of the company. If you own 100 of them, you own the whole company. If you want to sell your friend 20% of the company, then you will sell him 20 shares. You will see that these transactions are easier to work out if there are 100 shares, and for that reason only we suggest that you start your company with 100 shares. You are free to have only one share, or a billion – but check SHAREHOLDER’S LIABILITY.

Class of shares: We expect that all the shares in your company will be ordinary [ORD]. If there are to be 100 shares, each share entitles the shareholder to one hundredth of the profit and one hundredth of the assets if the company is wound up. At meetings, there will be 100 votes, one for each share. Most decisions are made by ordinary majority vote, so if you own 51 shares you can pass resolutions even if nobody else votes with you.
If you want your company’s shares to be different, put the details in a separate email and send it to richard@companies.co.nz. We can sometimes help with simple changes to the share classes.

Issue Price of Shares: As soon as the company is registered, the shares will be “issued” to the shareholders. They can be issued to the shareholders for no price (“nil consideration” in the jargon), or for $1.00 each, or any price that the company and the shareholder agree on. Unless you have a particular reason not to, we suggest that you issue the shares for “nil”.

Sometimes the company issues a lot of shares in order to collect money from the shareholders. For example if the company is going to buy a million dollar property it might issue 1,000,000 shares for $1.00 each. If you are considering this sort of transaction you should talk to your accountant about it. And check “SHAREHOLDERS’ LIABILITY.

But usually the company will issue shares just to indicate who owns the company, and in what proportions. So we go back to the suggestion that you have 100 shares, and that they are issued for “nil” each.

Shareholder’s Liability: One of the advantages of a company is that shareholders have no liability for the company’s debts. This would be very handy in the unlikely event that the company failed, owing a lot of money. The shareholders would lose the money they had in the company, but they would not lose anything else. (Unless in a separate transaction you had personally guaranteed the company’s debts. Banks often ask you to do this). The issue price of the shares is a real debt which the shareholder owes to the company. If you take 50,000 shares in the company and they are issued to you at $1.00 each, then you actually owe the company $50,000. If the company failed and you still owed this debt, the company’s creditors would call on you to pay up. So here is another reason to form your company with 100 shares, issued for “nil” consideration.

Will the share price be paid on incorporation: If you are going to issue your shares for “nil” then you can click the “not applicable” button, because there is no money to pay, now or later. If you are issuing shares for a small total amount of money, have you already paid this money into the company? For example, you may already have bought a computer, or a shovel, and if the purchase price of those items is about the same as the issue price of your shares, then you can click “yes” . If the issue price is high, and you don’t intend to pay it now, then click “no” – AND CHECK SHAREHOLDERS’ LIABILITY.

Shareholdings

A shareholding is a parcel of the company’s shares held by one or more shareholders. The company may have several shareholdings, some held by an individual shareholder and some held by two or more shareholders - in which case the shareholders are said to hold that shareholding “jointly”.
For example, Example Company has 100 shares and they are owned as follows:

  • Shareholding 1 – 10 shares owned by Fred Smith
  • Shareholding 2 – 10 shares owned by Gladys Smith
  • Shareholding 3 – 20 shares owned by Simon and Gloria Legree jointly
  • Shareholding 4 – 60 shares owned by George and Mildred Jones jointly

So this company has 4 shareholdings, and 6 individual shareholders.

Another example, Sample company has 100 shares, all owned by Nigel Lawson. So this company has one shareholding, and one shareholder.

Shareholdings owned by a trust: Give us the full names and addresses of the individual trustees and the name of the trust, and the trust’s IRD number. The shares will be shown in the MED’s records as being owned by the trustees.

Shareholders

  1. Shareholders do not need to be resident in New Zealand. But if some of your shareholders are non-resident you should take advice from your accountant because in some circumstances a company part-owned by foreigners will have to file audited financial statements each year.
  2. A shareholder can be a real person, or a company or other registered entity such as an incorporated society.
  3. An infant can be a shareholder. But each shareholder has to sign a consent form to be a shareholder – so if your infant can not hold a pen you are in difficulty. You can not sign on his behalf unless he has already signed a form appointing you as his agent.
  4. If you want us to get the new company’s IRD number you will have to give us all the NZ resident shareholders’ personal IRD numbers.
  5. Please provide the shareholders’ full residential street addresses. [PO Box or RD numbers are not sufficient].

Options: Company in folder or electronic

Traditionally, sets of company registers come in an indexed folder. When you want to make changes to a page you take it out of the folder and wind it into a typewriter, which nobody has any more. So for the last 15 years we have been sending all the contents of the folder to you by email also, so you can make alterations on-screen, then print the new page and add it to the folder.
If you back up your computer regularly, there is no need for the paper copies, although a lot of people still like the folder and the paper copies.
So we offer you the alternative. EITHER the folder of paper, with the emailed copy as well [for $320 + gst], OR just the emailed version [for $284 + gst]

Business descriptions and BIC numbers

If we are getting the company’s IRD number we need these, otherwise we do not. You can find them at www.businessdescription.co.nz It is important to get the correct description/number because the company’s ACC levies will be based on them.

GST registration – start date

If we gst register your company we can either start gst on the date the company is formed, or start it on a future date chosen by you. We can not pre-date gst registration. If you want your gst to start sometime before the company is registered you will have to ask the IRD to agree to it after we have formed the company. In some circumstances the IRD will agree to that.

Tax agent – where do we send IRD correspondence?

Tax agents often ask us to get the IRD to send income tax correspondence to the agent, and GST correspondence to the client. We can not do this. Can we get all mail sent to one or the other? After you are appointed as agent you will be able to get the IRD to send correspondence wherever you want.