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9 Share Scheme Compliance and Regulatory Requirements in New Zealand 

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Share schemes are a popular tool for attracting and retaining talent across various countries, including New Zealand. However, it is essential to understand the relevant compliance and regulatory landscape when looking to implement and maintain share schemes successfully. This article will take you through nine share scheme compliance requirements and regulations in New Zealand.

What Are Share Schemes?

First, it is important to understand what share schemes are. Share schemes can come in many different forms. Although, all share schemes are ultimately intended to act as an effective incentive tool for key employees and other stakeholders. These schemes provide a straightforward method for offering participants an opportunity to ultimately acquire shares in the company. Share schemes are often made available to employees as a way to attract and retain talent and promote long-term commitment to the business’s goals. High-growth startups often have limited cash reserves. As such, share schemes remain a popular tool in New Zealand for when your startup cannot offer market value salaries. However, share schemes are subject to various laws and regulations which you must comply with before and during implementation.

What is New Zealand’s Share Scheme Regulatory Framework?

The current law and primary regulatory framework governing share schemes in New Zealand includes the following:

  • Companies Act 1993;
  • Financial Markets Conduct Act 2013; and
  • Financial Markets Conduct Regulations 2014. 

Other ancillary laws, current rules and regulations will also need to be considered when establishing and maintaining share schemes. These include, for example, the Income Tax Act 2007.

1. Companies Act 1993

The Companies Act 1993 is the foundation of New Zealand’s company law. It provides the backdrop for the legal structure and operation of all companies. This extends to the issuance of new shares or options to purchase shares. Under this Act, companies can issue shares to employees or other stakeholders but must comply with the specific requirements and procedures outlined. In addition, companies with more than one shareholder are also likely to have a shareholders’ agreement in place which often overlays the rules set out in the Act (together with the company constitution, if one has been adopted), with company-specific rules that need to be complied with before offering any securities. 

2. Financial Markets Conduct Act 2013

The Financial Markets Conduct Act 2013 (FMCA) specifically regulates financial products (including the issuing of new shares or options to purchase shares). Employee share schemes are captured by the FMCA. While typically significant disclosure obligations apply to the issue of any new securities under the FMCA (having significant and, for startups, often prohibitive time and cost implications), there are dedicated disclosure exemptions in place to enable and support the implementation of employee share schemes (in recognition of their value in the start-up ecosystem in New Zealand). Understanding the relevant exemptions (and any conditions that apply in order to rely on such exemptions) is critical to ensure compliance with the FMCA before implementing your share scheme.

3. Financial Markets Conduct Regulations 2014

The Financial Markets Conduct Regulations 2014 support the FMCA and are also relevant to employee share schemes. These Regulations provide more detailed requirements for implementing share schemes in compliance with, in particular, any disclosure exemptions that may apply under the FMCA. 

4. Tax Compliance

The Income Tax Act 2007 will be applicable (from both a company and employee perspective) when implementing a share scheme. It is important to understand these obligations and the tax treatment of share schemes. It is important to understand these obligations to ensure your business’s compliance with the Act. Likewise, you also want to make sure your company is offering an attractive proposition to employees. You do not want your employees to incur prohibitive tax implications that reduce the employee share scheme benefits.  

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What Other Regulatory Considerations Apply?

There are some essential regulatory considerations that businesses should keep in mind when implementing employee share schemes and employee share plans in New Zealand. These considerations are further to the core compliance obligations.

1. Privacy Laws

Companies must consider New Zealand’s privacy laws when implementing employee share schemes and empl. Such privacy laws require that shareholder information be handled in compliance with the Privacy Act 2020. Thorough data protection and privacy policy measures should be implemented to protect participant information.

2. Regulatory Changes

Regulations related to share schemes in New Zealand may change over time. As such, businesses must stay informed about updates and amendments to existing laws and regulations. Such changes may impact the structure and operation of share schemes. Again, it is recommended that you seek advice from a legal professional if your company has a share scheme.

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Key Takeaways 

Share schemes are a way for companies to offer key employees and other stakeholders the opportunity to acquire or purchase shares in the company. This makes them a valuable tool for attracting and retaining talent. However, it is vital to understand the compliance and regulatory requirements to implement and maintain share schemes successfully. Some key considerations that must be had include New Zealand’s:

  • regulatory framework;
  • regulations; and
  • other regulatory considerations, such as privacy laws.

If you need help understanding New Zealand’s share scheme compliance and regulatory requirements, contact our experienced business lawyers as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.  

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Emily Young

Emily Young

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