The changing landscape of corporate law: A ground-breaking journey

by Sophie Schroder18 Jul 2014
The changing landscape of corporate law is to be examined by eminent international and local presenters at a one-day conference in Auckland to mark 20 years of the Companies Act 1993.

The Act was once described by well-renowned and respected professor Len Sealy as “perhaps the most radical reappraisal of this branch of the law that has been put forward anywhere in the Commonwealth since limited liability was introduced in 1855”.

At the time, the Companies Act 1993 was a watershed piece of legislation. It marked a turning away from an approach to corporate law where New Zealand essentially adopted UK legislation, to the adoption of legislation that had its foundations in North American legislation but with its own idiosyncratic New Zealand flavour.

One of the key architects of the Act, Chapman Tripp partner Jack Hodder QC, is speaking at the conference, which will be held on August 7.

He told NZ Lawyer that the Companies Act 1993 was a “big deal” at the time and that its legislative innovations have had a significant impact on the practice of corporate law.

In 1986 Hodder was selected by Sir Owen Woodhouse to be a member of the commission that, among other things, drafted the legislative framework that would become the Act.

He was appointed the role of project leader alongside Dame Sian Elias, Chief Justice.

“The new legislation passed in 1993, and the regime was in place in 1995-1996,” Hodder says. “The general concept was that most of what you needed to know about a company, you could find in the Act.”

There were three major points that made the Companies Act 1993 unique within the Commonwealth, he says.
  • A semi-codification of directors duties
  • The establishment of a default in the Act for all companies from which they could choose to opt out
  • The abolishment of par-value shares.
These aspects took this New Zealand legislation away from one that previously had a distinctly UK flavour and instead towards something more similar to what you’d find in North America and Canada.

Hodder says this was a purposeful decision based on economic factors.

“If you think about capitalism as being the most successful economic system in the world at the time – and now – you look at the US,” he says. “You can always say company law is about capitalism, so [looking] to Russia doesn’t make sense.”

After all the changes, streamlining and reconstruction, the Companies Act 1993 was half of the size of what it once was.

And the very small number of major tweaks that have been made to it since then indicate that it is a fine piece of legislation – or as Hodder jokes – “working not badly”.

Another speaker at the conference, the University of Auckland’s Professor in Law Susan Watson, also told NZ Lawyer that 20 years on and the Act is working well.

“The fact that you don’t hear much about it is a good sign…There haven’t been many amendments.”

Watson says the Act is significant in a number of ways, one of the most important being that it was first time that New Zealand put together companies’ legislation that was distinctly its own.

Within the Commonwealth at the time the fact that the Companies Act 1993 actually set out a director’s duty was also unique, she says.

And it could also be surmised - although perhaps they wouldn’t be quick to admit it - that Great Britain has subsequently followed some of what was set out in our legislation.

“Most jurisdictions at that time hadn’t set out their directors’ duty in the Act,” says Watson. “The Companies Act 2006 in the UK has also set out their director’s duty in the Act, but it’s the first time they’ve ever done that.”

The plethora of international speakers at the conference will provide an invaluable opportunity for debate about our Act, where it works well and where potential pressures lie.

“It’s a chance to look at best practice overseas,” says Watson.

The keynote speaker is Professor Joe McCahery, a Professor of International Economic Law at Tilburg University, where he is also a Fellow of the Tilburg University Law and Economics Centre and the European Banking Centre. He is programme director of the MSc and LLM in Finance and Law at Duisenberg School of Finance in Amsterdam.

The speakers are set to question whether the law that governs the primary vehicle of business enterprise has adapted sufficiently to the 21st Century business landscape and make suggestions for changes where it has not.

They will also draw on international legislative developments and thinking and apply it to New Zealand company law and practice.

A key topic will be the impact of those legislative innovations on the practice of corporate law, how our company law might adapt and develop in a fast changing world in the future.

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