How does Section 19 work?

This page gives specific examples of when and where to apply Section 19 of the Financial Reporting Act 1993.

Section 19 in scenario format

19. Overseas companies and certain other companies to register financial statements—  

(1) This section applies to any company, other than an issuer,—
 

(a) That is an overseas company; or
 

(b) A “large” company In which shares that in aggregate carry the right to exercise or control the exercise of 25 percent or more (by implication, 50%) of the voting power at a meeting of the company are held by—
 

(i) A subsidiary of a company or body corporate incorporated outside New Zealand; or
 

(ii) A company or body corporate incorporated outside New Zealand; or
 

(c) That is a subsidiary of a company or body corporate incorporated outside New Zealand (i.e. if the overseas company or body corporate holds above 50% in the New Zealand company or another of the subsidiary(ies))

19(1)(b) and 19 (1)(c)

Companies with 25% overseas shareholding as per s19(1)(b); and

Companies that are subsidiary/(ies of a company or body corporate incorporated outside New Zealand as per s19(1)(c) of the Financial Reporting Act 1993 (FRA).

1.1 These companies are captured under section 19 of the Financial Reporting Act 1993.  In essence where a company registered in New Zealand has between 25 and 50 percent of its shareholding held by a person or body corporate outside of New Zealand it may be required to file financial statements pursuant to the Financial Reporting Act 1993, but only if it is “large”.

1.2 Section 19 of the FRA identifies three scenarios where a company with between 25 and 50 percent overseas shareholding may be required to file if it is “large”.

Diagram 1

 

Filing requirement

In this instance the subsidiary company (Frontiers Pty Limited) in which 25% of it shares are held by a body corporate incorporated outside of New Zealand (Clearstream US Inc) must file audited financial statements under section 19(1)(b)(ii) of the Financial Reporting Act 1993 if, and only if, it is a “large” company as at balance date.

Diagram 2

Filing requirement

If Oak Shore Limited is a “large” company, it will be required to file financial statements under section 19(1)(b)(i) because Caravan Leisure Limited holds 35% of the shares in Oak Shore Limited, and Caravan Leisure Limited is a subsidiary of an overseas company (Manila Pty Limited).

Caravan Leisure Limited having 100% of its shares owned by a company or body corporate outside New Zealand (Manila Pty Limited), is a subsidiary and will be required to file financial statements under section 19(1)(c) of the Financial Reporting Act 1993 regardless of whether it is a “large” company or not.

Diagram 3

Filing requirement

One Dimension 3 Limited has 50% of its shares held by One Dimension 2 Limited, which is a subsidiary of One Dimension Limited, which in turn is a subsidiary of an Overseas Company (Imports Australasia Pty Limited).  Therefore One Dimension 3 Limited will be required to file financial statements under section 19(1)(b)(i) of the Financial Reporting Act 1993 if, and only if, it is a “large” company.

The other two companies (One Dimension 2 Limited and One Dimension Limited) having 100% of its shares owned by a company or body corporate outside New Zealand (Imports Australasia Pty Limited), are therefore considered subsidiaries and will be required to file financial statements under section 19(1)(c) of the Financial Reporting Act 1993 regardless of whether they are “large” companies or not.

Diagram 4

Filing requirement

Adelaide NZ Limited has 60% of its shares held by a person not ordinarily resident in New Zealand (Jonathan Beckett), it will therefore be required to file financial statements under section 19(1)(b)(iii) of the Financial Reporting Act 1993 if, and only if, it is a “large” company.

Diagram 5 

 

Filing requirement

All three companies are ultimately owned by the overseas company (Time Square Pty Limited), all subsidiaries will need to file audited financial statements pursuant to s19(1)(c) of the Financial Reporting Act 1993 regardless of whether they are “large” companies or not.

Note - The word ‘subsidiary’ in the Financial Reporting Act 1993 refers to all levels of subsidiary of a company, therefore if there are three levels of subsidiaries, all subsidiaries may be required to file financial statements.