Government to scrap requirement for company directors’ home addresses to be public as it reforms Companies Act

Reforming the Companies Act is high priority for Commerce and Consumer Affairs Minister Andrew Bayly, who started plotting changes while in Opposition. Photo / Mark Mitchell

The Government is planning to scrap the requirement for company directors to make their home addresses public on the Companies Register.

It’s proposing to allow directors to put another service address online, like an address for their business or lawyer.

The aim is to better protect directors’ safety and privacy while still ensuring an address is provided for accountability, including from those owed money by the company.

Commerce and Consumer Affairs Minister Andrew Bayly is pledging to make the change as a part of a wider revamp of the Companies Act 1993.

He will introduce a bill to Parliament early next year to revamp the three-decade-old legislation – a task the former businessman is passionate about and has been working on since before National came into Government.

Bayly plans to strengthen the regime by requiring directors or general partners to verify their identities by getting a sort of digital ID.

This will enable the Companies Office to accurately link individuals to the various entities they are associated with and display these connections on the register.

In other words, it’ll help clarify which “John Smith” is connected to which entity.

Bayly said the change would make it easier for businesses, creditors and consumers to do their due diligence. It would also help law enforcement accurately identify people.

He believed this would help combat “phoenixing”- a director setting up a new company with the intention of defeating the interests or creditors of the old company.

“The phoenixing provisions in the Companies Act aim to address the potential harm caused by a new company having a similar name to an old company, which can lead to consumers and others being misled about who they are dealing with,” Bayly said.

“However, there are other types of phoenixing behaviours, such as when a company sells its assets at undervalue to a new company, or simply walks away from the company leaving the debts behind.

“There are some provisions in the Companies Act that can capture these activities, for example, the ability of liquidators to recover money from transactions at undervalue, and the duty of directors to act in good faith and the best interest of the company.

“However, better identification and enforcement will go a step further.”

Related to this, Bayly would like to increase the use of an existing digital identifier of businesses (not directors) – the New Zealand Business Number (NZBN).

The NZBN is linked to core business information, which businesses can use in their interactions with Government and each other.

“There is a significant potential for the NZBN to contribute to improved identity verification, increased digitalisation and productivity,” Bayly said.

However, he noted for the benefits to be realised, the use of NZBNs needs scale.

He wanted to help achieve this by, for example, adding bank account names to the NZBN register to prevent scams.

Improving insolvency rules are also on Bayly’s radar, as is digitalising outdated parts of the Companies Act.

Members of the public will have an opportunity to provide feedback on Bayly’s proposals after his bill is introduced to Parliament next year, and goes through the select committee process.

Jenée Tibshraeny is the Herald’s Wellington business editor, based in the Parliamentary Press Gallery. She specialises in government and Reserve Bank policymaking, economics and banking.