By Geoff Scenescall
Sovereignty issues surrounding Air New Zealand have the potential to trip up any quick exit by Brierley Investments to Bermuda.
In question is Brierley's ability to migrate while it still holds Air New Zealand A shares.
These shares make up 51 per cent of Air New Zealand's register. They can be owned only by New Zealanders, to preserve the national flag carrier's international landing-rights agreements with other countries.
The concern is that Brierley's departure might jeopardise the agreements.
A merchant banker said that if an arch competitor, such as Qantas, felt Air New Zealand was flouting overseas ownership limits, it could make life difficult for the local airline.
Qantas might also exploit any hint of impropriety by lobbying the Australian Government to try to hold up Air New Zealand's plans to buy the other half of Ansett it so dearly wants.
Brierley holds its A shares in a special-purpose vehicle called BIL NZ Assets, which it set up in 1996 to get around the fact that 70 per cent of its shareholders were based overseas.
While beneficial ownership remains with Brierley, control of BIL NZ Assets is in the hands of four individual New Zealand residents - Bill Wilson, QC, Peter Shirtcliffe, Sir Ron Trotter and Mark Horton (the only Brierley member).
This satisfied both the Overseas Investment Commission and Air New Zealand.
But this was at a time when Brierley was managed and controlled in New Zealand. Most of its directors and senior management were New Zealanders based in Wellington.
After the upheaval on the board last year, only two of the six board members could be classed as New Zealanders. Many of the New Zealand executive staff have also gone as Brierley seeks to secure shareholder approval to move its head office to Singapore and its incorporation to Bermuda.
This must be a concern for Air New Zealand because it changes the New Zealand character that had existed while Brierley was based here.
The Overseas Investment Commission has given Brierley clearance to migrate its holding structure of the A shares overseas.
But Air New Zealand may be able to object to the A shares being held by Brierley. It could require Brierley to set up a different structure, dispose of the shares to New Zealanders, or face forfeiture.
The "kiwi shareholding" has specific rights in areas of the company's activities and is controlled by the Minister of Transport, Maurice Williamson.
While Mr Williamson has not made an issue of the matter, it is understood the Government has concerns relating to BIL NZ Assets if Brierley moves.
Should BIL NZ Assets prove robust enough to survive Brierley's departure to Bermuda, nothing could stop the structure, as long as it retained New Zealand directors, from being sold to anyone else.
Taking this further, nothing could stop Brierley, or anyone for that matter, from putting a BIL NZ Assets-type structure around all the A shares and giving all the voting power to the 49 per cent of B shares.
Shares could clip wings
AdvertisementAdvertise with NZME.