The New Zealand Companies Office has provided this update from the Registrar of Companies (and Registrar of Personal Property Securities), Mandy McDonald on current issues.
Mandy, the Personal Property Securities Register is over 14 years old, how has the Register contributed to the economy over its lifespan?
The Personal Property Securities Register is an important part of the New Zealand economy with over 2 million active financing statement registrations of security interests over personal property. This includes motor vehicles, money, goods, livestock, investment securities and documents of title, essentially any property someone can own other than real estate and large ships.
The Register and the Personal Property Securities Act 1999 help to regulate financial risk, access to credit and consumer protection. There have been 2.8 million searches on security interests on the Register in the past 12 months. By searching the Register, people and businesses are able to protect their financial interests, reduce investment risk and make more informed financial decisions.
Consumers are able to check whether they’re buying personal property with existing finance owing, particularly in relation to highly mobile property like motor vehicles. Creditors who register a security interest get priority over that personal property, which means that, if a debtor defaults, the creditor may have a better chance of recovering property or money they’re owed. The Register is also important when deciding whether to lend money or lease equipment as searching the Register can show whether the debtor has other security interests registered against them or over the property they are proposing to use as collateral.
What do you have planned for the future for this significant register?
The Register is over 14 years old and we are undertaking a technology refresh to mitigate the risks and costs associated with ageing technology. Given the successful operation of the Register in the New Zealand jurisdiction, the Personal Property Securities Act 1999, regulations and core functionality will fundamentally remain the same. The main changes in the new Register will be the recognition of the New Zealand Business Number and an improved user experience.
How does the Register contribute to New Zealand’s reputation internationally?
New Zealand’s Personal Property Securities Act 1999 and the associated Register are well respected internationally. We are leaders in modern securities registration and consistently rank highly among the best jurisdictions in the world. The 2017 World Bank Ease of Doing Business rankings placed New Zealand first in the world for getting credit. The Personal Property Securities Register directly supported this rank through successful ‘strength of legal rights’ and ‘depth of credit information’ indexes. This contributed to New Zealand being ranked first in the world for ease of doing business.
How do you manage director prohibitions and disqualified directors?
I believe that businesses that understand the law are more likely to comply with it. An important aspect of the work we do is helping directors and companies understand the laws that apply to them and what their obligations are. While the vast majority of directors are compliant, there are instances where we must prohibit someone from being a director.
In brief, those who do not qualify to be a director include (sections 151 and 382 – 385 of the Companies Act 1993):
- those under 18 years of age;
- undischarged bankrupts;
- certain prohibited persons;
- persons subject to a property order under the Protection of Personal and Property Rights Act 1988;
- those not eligible because of requirements in the company’s constitution.
I’m able to prohibit persons from being directors or taking part in the management of a company for a period of up to ten years (section 385 of the Companies Act). The Registrar’s power of prohibition can be exercised where a person has been a director, within the previous five years, of one or more companies that have failed, and their mismanagement was at least partly causative of the failure/s. In addition the Court is able to make director disqualification orders without any maximum term.
There is also an automatic director prohibition for a period of five years from conviction for persons who have been convicted of:
- criminal offending in relation to the promotion, formation, or management of a company (being an offence that is punishable by a term of imprisonment of not less than three months); or
- certain offending under the Companies Act; or
- any crime involving dishonesty as defined in the Crimes Act 1961.
The prohibition of directors helps to provide protection for the public from directors who have mismanaged companies or been convicted of a crime involving dishonesty (section 382 – 385AA of the Companies Act). This means that for the period of their prohibition, these directors are not able to be appointed directors of a company or be involved in a company. Prohibition also acts as a deterrent and serves to set appropriate standards of behaviour for directors.