Registrar comments on changes to compliance requirements for directors
The Registrar of Companies, Mandy McDonald, discusses work being done by the Companies Office Registries Integrity and Enforcement Team (RIET) to reduce the number of recurring company failures. Ms McDonald also touches on the planned change of language when referring to companies that have been “struck off” the companies register.
Ms McDonald, members of the Companies Office Registries Integrity and Enforcement Team have recently been meeting with insolvency practitioners. What has been the focus of these meetings?
The focus of these meetings has been on encouraging better communication and cooperation. I am looking at how the Companies Office can work with insolvency practitioners to boost the efficiency and effectiveness of our enforcement activities, in particular the power to prohibit directors who have been involved in company failures. When it comes down to it, insolvency practitioners are at the frontline of corporate failures, and have information that RIET needs to identify and minimise the risk of recurring failure. This means we need to work closely with insolvency practitioners.
Does this mean a focus area for you is the reduction of directors having multiple companies that fail?
My focus is on using the power to prohibit directors more effectively, helping to reduce commercial risk. The aim is to build a safer and more trusted market, prohibiting at-risk operators from causing repeated damage.
The reality is that prohibition is often faster and more efficient than criminal proceedings.
Insolvency practitioners deal with the directors and managers of failed companies on a daily basis. This means they are in a position to provide valuable information about the way the companies were managed. We have been developing ways to make it easier for people to get that information to us using a comprehensive questionnaire, thereby minimising the time it takes for practitioners to provide this vital information.
Does that mean criminal proceedings are off the table?
Definitely not. RIET deals with issues on a case by case basis. If a prosecution would be more appropriate than prohibition, then a prosecution would be initiated.
My mandate is a simple one – to protect the integrity of the Companies Register and to enforce the requirements of the Companies Act 1993. This includes making sure those who are directors comply with their duties.
Working with liquidators increases our information base and understanding of what has occurred, which increases the effectiveness of our response.
Was there anything else discussed with insolvency practitioners?
Although the legislation places responsibility for supervision with the Court on application from creditors and other interested parties, I see the Registrar’s role as making sure the creditors and other interested parties are informed. We are doing this by focusing our compliance efforts in this area on practitioners’ public reporting obligations, to ensure creditors have ready access to information. With better, more timely information, better decisions can be made.
We have also been including insolvency practitioners in the discussion about ways to improve compliance and reporting
You have also signalled that the New Zealand Companies Office will be making a change to the language used when a company has been struck off?
The Companies Office will in the near future be changing the terminology for companies that are no longer registered, status code 80, from “struck off” to “removed”.
This change is being made for two reasons: the first is legislation refers to a company being removed rather than struck off, so the change will be consistent with legislative terminology.
Secondly, I am conscious that “struck off” can have negative connotations. The vast majority of companies that are removed from the register do so voluntarily. By changing the language, we hope that any stigma associated with the current terminology will disappear. Feedback has reinforced this view.