Company formation in New Zealand

General overview

New Zealand is easily accessed by air travel and has the time zone advantage of same day access to Asia and parts of America. The capital of New Zealand is Wellington, and the largest city is Auckland. The population of New Zealand numbers 4.2 million. About 70% of the population is of European ancestry (mostly British, Irish and Dutch). Europeans who were born in New Zealand commonly are called Pakeha.

Language

Official languages are English, Maori, and New Zealand Sign Language.

Economy and Infrastructure

New Zealand has a modern, developed economy and a high standard of living. The main export industries are agriculture, horticulture, fishing and forestry. Major export partners are Australia, US, Japan, China, and Germany.

New Zealand takes pride in well-developed communication, business and commercial infrastructure and a high standard of professional services. The legal and banking professions are also of high level.

Granted autonomy in 1947 New Zealand has a progressive economy that is based largely upon banking and finance. Due to changing economic situation since 1984 a major macroeconomic restructuring was made leading the country to economic liberalisation. There have been several reforms, such as the removal of interest and exchange controls allowing the free flow of capital in and out of the country. The current New Zealand government’s economic objectives are centred on pursuing free-trade agreements and building a “knowledge economy”.

Currency

The currency is New Zealand Dollar with no exchange controls applied.

Company incorporation

Although it is possible to register an unlimited liability company, companies are usually either limited liability companies or limited partnerships, amongst other types of entities. There is great flexibility in the incorporation and management of a New Zealand Company. So far, Companies Office (local Registrar of Companies) does not impose any sort of no capital requirements and has a simple and fast incorporation procedure.

Every company must have a registered office in New Zealand, where statutory registers are kept, as well as an address for service, where legal documents can be delivered to the company. Both addresses must be notified to the Registrar on application for incorporation. It has to be a physical New Zealand address – virtual office addresses are not acceptable or applicable.

Types of corporate entities

Currently, there are a few commonly used types of companies in New Zealand:

• LTC – Look-Through Company
• LLC – Limited Liability Company
• LP – Limited Partnership
• Foreign Trust

Further information about these types of corporate bodies, will be found in our website pages.

Shareholders and Directors

Minimum number of shareholders is one and corporate shareholders are allowed. Minimum number of Directors is one; corporate directors are not allowed. Shareholders may be of any nationality but all New Zealand companies must have at last one NZ Resident Director. If more than 25% of the shares or a majority of Directors reside outside New Zealand the company has to file annual financial accounts. A private company cannot have unissued shares. Bearer shares are not allowed.

Every company should hold an annual meeting of shareholders once every calendar year. Annual meetings may be held anywhere. A Company can obviate holding an annual general meeting, if all matters specified in the Companies Act 1993 are done by way of a resolution in writing.

Changes under the Companies Amendment Act – resident Director requirements

From 1 May 2015, every New Zealand incorporated company will need to have at least one director who is either a New Zealand resident or lives in an enforcement country and is a director of a company registered in that enforcement country (i.e. Australia).

Though the resident director requirement will come into effect on 1 May 2015, New Zealand incorporated companies registered prior to 1 May 2015 will have a further 180 days to comply. New Zealand incorporated companies registered on or after 1 May 2015 will need to comply from 1 May 2015.

Company suffixes

An only suffix “Limited” is allowed. After incorporation, the suffix “Ltd” can be used everywhere; except the Limited Partnerships where the permitted suffix is “PL”. The following abbreviations whenever they appear in a name are allowed: “&” for “and”; “no” for “number”; “co” or “coy” for “company”; “N.Z.” or “NZ” for “New Zealand”; “Bros” for “Brothers”.

Annual taxation and fees

A company pays tax at 28% on any profit. If the company tax paid profit is later distributed to shareholders as dividends, the individual shareholders receive a credit in their tax returns for the tax the company has already paid. Thus there is no double taxation.

A New Zealand company is taxable on its worldwide income

A New Zealand Company, which is structured as the Trustee of a non-resident New Zealand Trust is not taxable. If the settlor of the Trust does not reside in New Zealand during the income year, the Trust is not taxed.

New Zealand has double tax treaties with 39 countries, therefore New Zealand companies may take advantage of the low rates of non-resident withholding taxes deducted by the source country on interest, royalties and dividends ranging generally from 10-15%. However, a New Zealand Trust with a trustee resident in New Zealand should qualify as a resident of New Zealand for the purposes of a double taxation treaty.

New Zealand LLC

An LLC exists as a formal and legal entity in its own right. It is separate from the shareholders or beneficial owners. Its members are not personally liable for the entity’s debts and liabilities which make it different to a Partnership. Liability for the debts of the company does not fall onto the Shareholders (subject to any personal guarantees given) – the debts of the company are only liable to the liquidator, for any unpaid money owing on their shares.

For non-New Zealand residents carrying out international business activities, this company is limited in use to corporate trustee services or the holding of assets like intellectual property and so. This is because a New Zealand company is usually taxed on its worldwide income. So, if the company received income from anywhere in the world, then tax registration is required and filings of tax need to be done.