Category: Good Business

Good Business: Do I need a Will?

Posted on by Helen Garner

Do I need a Will?

Making a will is one of those uncomfortable topics. Everyone knows they should have a will but it is typically a job for a rainy day. Having a will in place is one of the most important things you can do to ensure your wishes are carried out after you pass away. If you die without leaving a will, your will is outdated or is not legally valid, it can cause confusion and in some cases conflict and disputes between family members as to how your assets are distributed.

One of the main reasons to have a will is to ensure that your wishes are carried out and that your loved ones are taken care of. Although it is assumed that everything you own passes to your spouse or partner, this is not always the case. If you do not have a will, your assets will be distributed in accordance with the laws of intestacy, which means the distribution is governed by the Administration Act 1969.

Appointing the right Executor
Choosing an executor of your will is an important decision that can have a significant impact on how your estate is managed and distributed after you pass away. In New Zealand, the executor is responsible for managing your estate, selling and calling in your assets, paying your debts and taxes, and distributing your assets according to your wishes. When making this decision you should think about whether the person you appoint is capable of handling those responsibilities.

You should also consider the relationship between your executor and your beneficiaries. You may consider choosing someone who is able to remain impartial and who can make decisions that are in the best interests of your estate. By choosing the right executor, you can ensure your wishes are carried out and that your estate is managed in a way that aligns with your wishes.

Guardians
Choosing a guardian for your children is an important decision that should be made with careful consideration. Think about the people in your life who you would trust to take care of your children if you were no longer able to. It is important to choose someone who is willing and able to take on this responsibility. This is an essential point to review and update as your family grows and the needs of your children change. Making this appointment under your will can give you peace of mind knowing that your children will be taken care of by someone you trust.

Trusts and Wills
There is the general misconception that where your assets are held by a trust a will is not necessary. Although it is true that most valuable assets will be owned by the trust, some will still be in your own name, for example, Kiwisaver, personal bank account, vehicles, and jewellery. If there is any debt owed to you by the trust, you can gift the balance of the debt by will, otherwise the trust itself will owe that money to the beneficiaries of your estate.

Where you are the sole settlor or trustee with the power of appointment in your trust deed and there are no provisions to pass on this power of appointment, you might want to consider making the proper arrangements in your will otherwise your trust can end up having no person with ultimate control over the trust.

Gifts and Distribution of Assets
The decision of who to distribute your assets to in your will is a personal one and will depend on your individual circumstances. Your assets include items such as your home and car, bank accounts and investments, personal chattels etc. You may want to consider distributing your assets to family members, friends or charities that are important to you. If you have a blended family it is important to consider how your will affects your spouse and children from current and previous relationships.

You can also leave specific bequest to a particular person or organisation. These specific bequests are given effect to first before the remainder of the estate is distributed.

When should I update my will?
As life changes occur it is advisable to consider if your will reflects your current position and wishes. Typical changes are; purchasing or selling a property, entering a marriage or civil union, the breakdown of relationships, and having children.

How do I make a Will?
Now is the right time to get in touch with Horsley Christie about reviewing your current will or putting a new will in place. Horsley Christie has an experienced team of solicitors and legal executives who can advise you on the best approach for your specific circumstances.

Contact us if you wish to arrange an appointment.
Phone: 06 349 0090. Email: cassiew@horsleychristie.co.nz.

Cassie Williams
REGISTERED LEGAL EXECUTIVE

Disclaimer: This publication should not be construed or acted on as legal advice. It is brief and general in nature. Specific advice should be sought.

Good Business: The New Incorporated Societies Act 2022

Posted on by Helen Garner

The new Incorporated Societies Act 2022 (“the Act”) was passed by Parliament in 2022. The Act will take effect from October 2023 and the final Regulations will be passed by September 2023.

The new Act will focus on improving Incorporated Society governance by retaining the best of the 1908 Act and codifying case law in the new Act.

What is an Incorporated Society?
An Incorporated Society is a membership-based organisation that exists for a lawful purpose other than making a profit. It is an incorporated body with legal identity of its own and thus ensure perpetual succession even though its membership may change. Members are not responsible for debts or other obligations that the society takes on. The activities are limited by the Act and the rules of the organisation.

What are the main changes?
The new Act will require primarily the following:
1. Constitutions will have to be compliant with the new Act containing specific content relating to the composition, roles, powers, functions, and procedures of the committee/board. This is a significant change compared to the old Act.
2. Clearer governance arrangements are required with 3 officers required to manage the affairs of the society with duties similar to that contained in the Companies Act 1993, such as duty to act in good faith, in the best interest of the society, exercise reasonable care and diligence, and officers will be liable for any breach of those duties.
3. Qualification of officers will be based on an officer being a natural person, and not disqualified on the basis of being an undischarged bankrupt, previously convicted of dishonest offences etc.
4. Officers have to disclose conflicts of interests where they might be obtaining a benefit and there should be a clear process managing this situation.
5. Dispute resolution procedures must be in place to deal with member grievances and complaints.
6. Transparency and accountability in the form of members being able to access information about the society and there are further requirements around financial reporting and return filing.

The next steps
All existing Incorporated Societies will have to re-register to continue as an Incorporated Society and failure to re-register will result in removal form the Register. Applications to be reregistered can only be made after October 2023 until April 2026.

New members must consent before joining and accurate records must be kept.

There are new accounting standards, financial reporting and annual return details and audit requirements.

The Government is still finalising the Regulations to sit alongside the new Act and it is the Regulations that will provide the most guidance as to what is actually required in the constitution. The finalised Regulations will be published around September 2023.

Conclusion
This is a good opportunity to review your Incorporated Society’s Constitution, make the necessary amendments, prepare for re-registration, and ensure that your society will be able to comply with the new Act. We have a team ready to assist you if this task seems too daunting to tackle on your own.

If you have any questions or need any advice, please contact us for an appointment T:06 349 0090 or email joamariv@horsleychristie.co.nz

Joamari Van der Walt │ LLB │ BComm(Econ)-Law (Stellenbosch) │
SOLICITOR

Disclaimer: This publication should not be construed or acted on as legal advice. It is brief and general in nature. Specific advice should be sought.

Good Business: Employment Law – Basics of Dismissal

Posted on by Helen Garner

Employment Law – Basics of Dismissal

Ending an employee’s employment is not straightforward. There are many steps an employer must follow before they can tell an employee that they are dismissed. Those steps are different depending on the proposed reason for dismissing the employee.

Reasons for Dismissal

There are many reasons why an employer may want to dismiss an employee, including but not limited to:
• Performance issues;
• Repeated misconduct;
• Serious misconduct;
• Health reasons; and
• Restructuring/Redundancy.

How should an employer conduct themselves?

Throughout the dismissal process, an employer must act in good faith, have a good reason to do what they are doing, follow a fair and reasonable process and have an open mind when dealing with the issue; to ensure no outcomes are predetermined.

If an employer fails to conduct themselves in the manner above, the employee may be able to bring a personal grievance against the employer.

What is the employer’s first step?

No matter the proposed reason for dismissing an employee, as a start the employer should familiarise themselves with the employee’s individual employment agreement (“IEA”) or collective employment agreement (“CEA”).

There are certain clauses in an IEA/CEA that may be applicable to the situation. For example stand-downs/suspensions, notice periods, examples of misconduct and/or serious misconduct, redundancy, consultation obligations.

By way of example, if an employer needs to suspend an employee to investigate an issue in the workplace, the employer must abide by what the IEA/CEA says in respect of suspension. If the IEA/CEA does not contain a suspension clause, it can be more difficult to suspend the employee.

How should an employer engage with the employee at the start?

Ideally, an employer will make first contact with the employee in written form; that may be a letter or an email. The email/letter needs to provide the employee with all the relevant information that is applicable to the situation.

For example, if an incident has occurred in the workplace warranting an investigation, an employee must provide the employee with all the details surrounding the incident ( that may be witness statements, video recordings etc.), what the employer’s process will be (internal or external investigation), whether the employee is to be stood down, who the employee’s point of contact is and that the employee is entitled to take advice and/or bring representation to any meetings that occur.

There should be minutes taken of all meetings.. Alternatively, the meetings can be recorded digitally if all parties agree.

What happens if the employee does not respond to the employer’s communications?

An employer must endeavour to receive a response from the employee. If an employee is ignoring requests to meet or comment on issues/an incident, an employer is entitled to make a decision in their absence.

Before a decision is made, the employer must advise the employee of their intention to make a decision in their absence.

The employer has come to a decision, what is next?

Once the employer has made a decision, they must provide that outcome to the employee and seek comments from the employee. Depending on the outcome, the employer may be able to dismiss the employee without notice. If so, the employee is required to leave the workplace immediately and will not be paid for any notice period.

Note: an employee is still entitled to any entitlements (such as holidays etc.) they are owed, which must be paid out in their final pay.

Summary

An employer cannot dismiss an employee without following a fair and reasonable process. Throughout the process the employer must act in good faith.

The process of dismissal can be daunting for employers. There are risks throughout the process that may lead to liability for the employer if they are not conducted properly. An employer’s best bet at reducing that risk is to seek employment advice before engaging in the process.
If you have any questions or need any employment advice, please contact us for an appointment T:06 349 0090 or email mattb@horsleychristie.co.nz.

Matt Bouzaid LLB Bcom
SOLICITOR

Disclaimer: This publication should not be construed or acted on as legal advice. It is brief and general in nature. Specific advice should be sought.

 

Good Business: New Zealand’s Skills Shortage and Employment of Skilled Migrants

Posted on by Helen Garner

New Zealand’s Skills Shortage and Employment of Skilled Migrants

 

“Skilled Migrant”

 Someone who is skilled, has the knowledge and ability to do something well. If people migrate, they move from one place to another. – Collins Dictionary.

 People who have skills that will contribute to New Zealand’s economic growth. – Immigration New Zealand.

This article is not taking a political stance. It is highlighting the complexities in the current Immigration space and how to critically evaluate and navigate your way as employer or Skilled Migrant worker.

 

Immigration Reset confusion

New Zealand businesses are suffering a shortage in both skills and labour post Covid, a perfect storm created by factors such as the decrease in population growth, New Zealanders heading overseas again, excess retirement aka the “Great Retirement” and the not so new Immigration Reset.

In August 2022 Economist Brad Olsen stated that the population growth is at a 36-year low, his finding supported by Stats NZ data.  Net migration has fallen to its lowest levels since the 1990’s and the current labour market shortage is likely to continue.

The Immigration Reset was designed to rebalance the immigration system and make it easier for the Skilled Migrants we need to get a fast track to residency. Unfortunately, rather than make it easier for Skilled Migrants to be eligible for residence, it appears to be achieving the exact opposite.  Special Green Lists with high thresholds on qualifications, above median wage requirements, and a very limited range of required skillsets is causing headaches for all operating in the immigration sphere.

 

Chef vs Cook

The different requirements for Chefs and Cooks is an example that left everyone astonished, causing restaurants to close their doors because of the shortage of Chefs.

A “Chef”, who might have trained under world class Dabiz Muñoz in Spain, but without a Level 4 NZQA Professional Cookery qualification (ie. New Zealand cooking school qualification), could not get a work visa but “Cooks” (ie. Cooks not Chefs) could get a work visa based on their experience only (ie. no NZQA requirement needed if they have experience instead).  This anomaly was overturned on 18 October 2022; however, we will need to pay our Chefs and Cooks $29.66 per hour from 27 February 2023 as the Median Wage for immigration purposes will go up.

Skilled Migrants want certainty, whether they are in the hospitality industry or any other industry.  A Chef migrant uprooting their family to New Zealand to fill a much-needed Chef position, wants to know that they can get residence, unless it is their choice to live a nomadic lifestyle.  Without certainty that they can get residence in New Zealand the lush borders of Australia might attract them.

 

The confusion continues

Under the Immigration Reset, sectors which rely on migrant labour, like tourism and the primary industries, are intended to look different in future and to replace unskilled migrant labour with higher-valued jobs and the expectation is that industries will invest in automation and new delivery models.

The reset resulted in our tourism industry struggling the most. It is our largest export industry delivering pre-Covid $40.9 billion to the country. Our hospitality, horticulture and agriculture industries are also struggling because the Reset settings.  Under the settings, supposedly gone are the days of employing cheap “woofer” and “travelling student” migrants.

But a recent Beehive article has stated:

“Our government recognises the crucial part working holiday visa holders’ play in the New Zealand economy. We need their skills here to meet demand in industries like tourism, hospitality, agriculture, horticulture.  Since the beginning of November, we have seen weekly arrivals of over 1,200 visa holders.  Monthly arrivals have built, from 1000 in July to over 4000 in October. “

 This is 2022 data.  A Working Holiday visa is a visa issued to a typical student (low skilled, low value) travelling and working, for a year. Issuing easily obtainable, low value, low skilled visas to smooth over the long-term shortage of skilled labour is raising some eyebrows.

Further confirmation of numbers of low skilled short-term visas issued:

“Over 17,000 working holiday visitors have now arrived in the country, out of the 36,000 approved since March, providing much need labour during a time of global shortage.” 

Employing a Scandinavian student worker for a year might sound like a good solution to the current labour shortage, but is it feasible and efficient to retrain a new student every year as you hand over the position from working holiday student to working holiday student?  Should a newly employed student be the face of our $40.9 billion tourism industry?

 

Employing Migrants as an Option

Employment of Skilled Migrants is an integral part in any economy whether you are for or against the concept.  An OECD Migration report found that: migrants positively contribute by filling important niche sector jobs; contribute more in taxes and social contributions than they receive in benefits; have the most positive impact on the public purse; boost the working-age population; arrive with skills and contribute to human capital development and contribute to technological progress.

There are a number of pathways to get your Skilled Migrant employee into the country.  To employ them, your business will have to be Accredited with Immigration New Zealand.  The most prudent option would be to ensure that your Skilled Migrant employee can also qualify for residence so that you are sure you are able to keep the employee for a period longer than a year and knowing that if they don’t get residence they will have to leave the country after three years.

A holistic approach is needed, looking at the employee’s situation from entering New Zealand on the Accredited Employer Work visa to the point of obtaining residence and without residence we are back looking for new migrants to fill our job shortages.

 

If you have any questions, please contact us for an appointment T: 06 3490090 or email joamariv@horsleychristie.co.nz.  You can also visit our website at www.horsleychristie.co.nz

 

Joamari Van der Walt │ LLB │ BComm(Econ)-Law (Stellenbosch) │

SOLICITOR

 

Disclaimer: This publication should not be construed or acted on as legal advice. It is brief and general in nature. Specific advice should be sought.

<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<

https://www.newshub.co.nz/home/money/2022/08/economist-brad-olsen-says-current-labour-shortages-to-continue-as-population-growth-hits-36-year-low.html

[1] Hon Michael Wood 15 November 2022 https://www.beehive.govt.nz/release/new-zealand%E2%80%99s-tourism-rebound-continues

https://www.oecd.org/migration/OECD%20Migration%20Policy%20Debates%20Numero%202.pdf

Good Business: Fair Trading Act 1986 – is a Director’s liability limited?

Posted on by Helen Garner

Fair Trading Act 1986 – is a director’s liability limited?

 The Fair Trading Act 1986 (“the Act”) was enacted to protect consumers from misleading and deceptive trader behaviour and unfair trading practices.

As there are many small businesses in New Zealand, it is common practice for a director of the company to be dealing directly with a customer during a transaction.

It is important that directors do not breach the Act, as the law allows for a director to be held personally liable for such a breach.

 

What constitutes a breach under the Act?

The main breaches under the Act are when an individual (or a business) in trade:

  • Engages in conduct that is unconscionable;
  • Engages in conduct that is misleading or deceptive or is likely to mislead or deceive;
  • Makes an unsubstantiated representation; or
  • Makes a false or misleading representation in relation to goods or services.

 

Is the “corporate veil” applicable?

It is well established that a company is a separate legal entity from its directors, shareholders, employees, and agents (“the corporate veil”).

The corporate veil is a metaphoric veil with the company on one side and the directors/shareholders etc. on the other side. Liability does not pass through the company side to the director/shareholder side.

In theory this means that if a director breached the Act, the corporate veil would protect them from personal liability.

 

Section 45

However, Parliament was not happy with the prospect of directors being protected by the corporate veil. Which is where section 45 of the Act comes into play.

Section 45 states:

  • Where, in proceedings under this Part in respect of any conduct engaged in by a body corporate, being conduct in relation to which any of the provisions of this Act applies, it is necessary to establish the state of mind of the body corporate, it is sufficient to show that a director, servant or agent of the body corporate, acting within the scope of that person’s actual or apparent authority, had that state of mind.
  • Any conduct engaged in on behalf of a body corporate—
    • by a director, servant, or agent of the body corporate, acting within the scope of that person’s actual or apparent authority; or
    • by any other person at the direction or with the consent or agreement (whether express or implied) of a director, servant, or agent of the body corporate, given within the scope of the actual or apparent authority of the director, servant or agent—

shall be deemed, for the purposes of this Act, to have been engaged in also by the body corporate. In summary, section 45 deals with comparing the state of mind of the director, to the state of mind of the company. If the two states of mind are the same and the director acted within their scope of authority, the Court can hold the director personally liable for breaching the Act.

 

What have the Courts said?

In Cornfields Ltd v Gourmet Burger Co Ltd (2000) 9 TCLR 698(HC), McGechan J said at paragraph 27:

“It will be a rare case where a director who participates directly in negotiations as to his or her company’s business will be able to avoid s 9 liability simply on the basis that he was acting only on the company’s behalf. The Fair Trading Act is in our view intended to cast its net wider than that.”

 This was upheld by the Court of Appeal in Kinsman v Cornfields Ltd (2001) 10 TCLR 342(CA), where the Court stated further that the word “also” in s 45(2) of the Act suggested that both the director and the company itself could be liable under the Act when a director acted within their actual or apparent authority.

In the 2004 Court of Appeal case of Giltrap City Ltd v Commerce Commission [2004] 1 NZLR 608, the principal and chief executive of Giltrap City entered into a price fixing arrangement which was contrary to the Commerce Act 1986. The Court found that the principal and chief executive had acted in the scope of their actual/apparent authority. Therefore, the Court determined that their conduct was that of the Company and they were both personally liable under the Commerce Act. The Court said further at paragraph 54 that, “there cannot in our view be any material difference … between s 45 of the Fair Trading Act and s 90 of the Commerce Act.”

 

Summary

Both the company and the director can be held liable for a breach of the Act due to s 45 of the Act giving the Court the ability to pierce the corporate veil. As such, it is really important that your terms of trade and your general business conduct do not breach the Fair Trading Act.

 

If you have any questions, please contact us for an appointment T: 06 3490090 or email mattb@horsleychristie.co.nz.  You can also visit our website at www.horsleychristie.co.nz

 

Matt Bouzaid LLB Bcom

SOLICITOR

 

Disclaimer: This publication should not be construed or acted on as legal advice. It is brief and general in nature. Specific advice should be sought.

Good Business: Are your Contract Terms Unfair?

Posted on by Helen Garner

Are your Contract Terms Unfair?

Businesses that use standard form contracts need to be aware of the recent law changes which came into effect on 16 August 2022 under the Fair Trading Amendment Act 2021.  Pursuant to the new laws, contract terms that are ‘unfair’ may now be unenforceable.  A similar law already applied in relation to business to consumer contracts, but this new law now captures business to business contracts.

What Is ‘Unfair’?

Generally a contract term will be considered ‘unfair’ if it:

  • would cause a significant imbalance in the parties’ rights and obligations; and
  • is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term; and
  • causes detriment (whether financial or otherwise) to a party if it were applied, enforced, or relied on.

Some examples of terms that could be considered unfair include terms that:

  • allow one party to unilaterally vary the terms of the contract;
  • allow one party to vary the upfront price payable under the contract without the right of another party to terminate the contract;
  • allow one party to vary the characteristics of the goods or services to be supplied;
  • allow one party to determine whether the contract has been breached or to interpret its meaning; or
  • limit one party’s right to sue another party.

Does This Impact Your Contracts?

A contract is subject to these new laws if it is:

  1. A standard form contract: For example, a template type of contract which is not subject to negotiation.
  2. An ‘In Trade’ contract: A business to business contract, where the parties are in trade.
  3. A ‘Small Contract’: A contract in which the trading relationship has an anticipated annual value of less than NZD$250,000 (including) GST at the time the trading relationship began.

Penalties

If a contract term is held to be ‘unfair’, a Court can order a number of remedies, including:

  • Removing the unfair term from the contract (i.e. the term becomes unenforceable).
  • Issuing a fine of up to $200,000 for an individual or $600,000 for a company.

In light of the new laws, businesses are recommended to review their standard form contracts to ensure that they comply with the new requirements and to avoid the penalties of non-compliance.

If you have any questions, please contact us on T: 06 3490090 or email timo@horsleychristie.co.nz.

 

Tim Oliver LLB(Hons) BProp

ASSOCIATE

 

Disclaimer: This publication should not be construed or acted on as legal advice. It is brief and general in nature. Specific advice should be sought.

Good Business: Helping your Children into their First Home

Posted on by Helen Garner


Helping your children into their first home

In the current lending environment, banks seem to be requiring higher deposits from first home buyers. This, coupled with how quickly house prices have increased in recent times, means that houses have become unaffordable for many first home buyers. This often means that the “Bank of Mum and Dad” is asked to assist their children with a loan application.

There are a variety of ways this can be done, three of which are outlined briefly below:

Gift

A gift is a straightforward way to instantly increase your child’s deposit.

A gift does not have any repayment requirement and the gifted money becomes the recipient’s property outright. This is not to say that a reciprocal gift couldn’t be made at a later date but that would be solely at the discretion of the gift recipient (i.e. the child).

If you are gifting to your child and your child is in a relationship/purchasing the property with their partner, they should certainly consider entering into a relationship property (contracting out) agreement in order to retain the value of the gift as their ‘separate property’.

There can be inadvertent side effects with gifting where the amount of the gift exceeds $27,000.00 and a conversation with an accountant is recommended prior to signing a gifting certificate as this cannot be re-documented at a later date.

A gift is irrevocable and therefore needs to be carefully considered before proceeding.

Loan repayable on sale

Unlike a gift, funds can be advanced on the basis that they must be repaid at some future date.

Generally speaking, the banks are cautious with private lending arrangements, especially where interest may be charged by the lender.

In some circumstances the bank may be comfortable with a loan only if it is interest free and not repayable until the property is sold.

If you wish to use this option, please be aware that you will need to seek approval from the bank as early as possible in the process, to ensure there are no issues down the track.

Guarantor

Where servicing of the lending is not a problem and the application just needs some additional security to satisfy the bank’s requirements, a guarantee could be given to the bank in respect of the child’s obligations.

The nature of a guarantee means that you become liable to the bank for the obligations of the borrower. Guarantees can be limited or unlimited. If your liability is unlimited, you are effectively writing a blank cheque to the bank to cover all of the borrower’s obligations. You can ask the bank to limit your liability under the guarantee (which the bank may or may not agree to), and this is highly recommended.

Providing a guarantee is inherently risky and could ultimately result in the bank pursuing you for your child’s debts (which could involve forcing the sale of your home). Therefore, you need to be very cautious if requested to provide a guarantee, and if you decide to give one, you should seek to limit your potential liability as much as possible.

The above are some of the common methods but there are always other potential creative options.
Whichever approach is taken, there is no substitute for seeking early legal and accounting advice and discussing with your bank/mortgage advisor. Where there is sufficient time afforded, all can work together to create the best solution for your individual circumstances.

 

If you have any questions, please contact us for an appointment T: 06 3490090 or email jais@horsleychristie.co.nz. You can also visit our website at www.horsleychristie.co.nz

 

Jai Stephens LLB BCom (Finance)
SENIOR SOLICITOR

 

Disclaimer: This publication should not be construed or acted on as legal advice. It is brief and general in nature. Specific advice should be sought.

Good Business: The Ins and Outs of Holiday Pay in New Zealand

Posted on by Helen Garner

The Holidays Act 2003 (“Act”) can be a complicated piece of legislation. Many employers still struggle to understand what they need to pay their employees under the nearly 20-year-old Act. Below I tackle some of our commonly asked questions employers have when dealing with the Act.

How many public holidays are there in New Zealand?

There are 12 public holidays recognised in New Zealand; Christmas Day, Boxing Day, New Year’s Day, 2 January, Waitangi Day, Good Friday, Easter Monday, ANZAC Day, the birthday of the reigning Sovereign (observed on the first Monday in June), Te Rā Aro ki a Matariki/Matariki Observance Day, Labour Day (being the fourth Monday in October) and the day of the anniversary of a province or the day locally observed as that day.

(Where any of the public holidays above fall on the weekend, the Act permits the Holiday to be recognised on the following Monday.)

What happens if an employee does not work on the public holiday?

If an employee does not work on any part of the public holiday in question and they would usually work on that day, the employee is entitled to be paid their usual wage or salary for that day, being at their relevant daily pay or average daily pay (whichever is greater). The employee is not entitled to an alternative holiday.

What happens if an employee does work on the public holiday?

If an employee works on any part of the public holiday and they would usually work on that day, in addition to being paid their usual wage or salary, the employee is entitled to receive time and a half for the hours/time they actually worked on that day. On top of that, the employee is also entitled to an alternative holiday.

Note: Collective Employment Agreements (“CEA”) or Individual Employment Agreements (“IEA”) can provide for extra payment on top of the employee’s entitlement under the Act for working on a public holiday

What happens if an employee is “on-call” for any part of the public holiday?

If an employee is “on-call” for any part of a public holiday, their entitlement under the Act may change. The first hurdle is understanding if the employee being “on-call” is classified as work. Unfortunately, there is no straight forward answer. The Employment Relations Authority and the Courts have given us some guidance, to an extent.

Member Doyle in Sanderson v South Canterbury District Health Board, [2017] NZERA Christchurch 37 said at paragraph 39:

The factors to be considered when assessing what constitutes “work” were stated by the Employment Court in Idea Services Ltd v Dixon and confirmed by the Court of Appeal in Idea Services Ltd v Philip William Dixon. The three factors are:

(a) The constraints placed on the freedom an employee would otherwise have to do as she or he pleases;

(b) The nature and extent of the responsibilities placed on an employee; and

(c) The benefit to the employer of having an employee perform the role.

The Court of Appeal in Idea Services Ltd v Philip William Dixon [2011] NZCA 14 stated at paragraph 8:

“The greater the degree or extent to which each factor applied (ie the greater the constraints, the greater the responsibility, the greater the benefit to the employer), the more likely it was that the activity in question ought to be regarded as work … ”

And further at paragraph 12:

“ … that there are considerable differences between a typical on-call doctor, who is under relatively few constraints, and someone like Mr Dixon while on a sleepover. For instance, Mr Dixon, unlike an on-call doctor, is prevented from leaving his workplace and from seeing friends or family without his employer’s permission. He must be constantly available to anyone who might want to see him in his (compulsorily unlocked) room.”

What if “on-call” is classified as work?

An employee is entitled to time and half for the period that the employee is “on-call” during the public holiday. The employee is also entitled to an alternative holiday.

What if “on-call” is not classified as work?

An employee is only entitled to an alternative holiday “if the nature of the restriction imposed by the on call condition on an employee’s freedom of action is such that, for all practical purposes, an employee has not had a whole holiday.” (Section 59 of the Act). The employee must still be paid in accordance with the CEA or IEA for being “on-call”.

Note: The Employment Relations Act 2000 requires “availability provisions” to be recorded in the relevant employment agreement.

If you have any questions, please contact us for an appointment T:06 349 0090 or email mattb@horsleychristie.co.nz.

Matt Bouzaid LLB Bcom

SOLICITOR

 

Disclaimer: This publication should not be construed or acted on as legal advice. It is brief and general in nature. Specific advice should be sought.

 

Good Business: Director Duties and the Risk of Personal Liability for Directors

Posted on by Helen Garner

Whether you are a first-time director of a newly formed start-up, or a seasoned director sitting on multiple boards, it can be useful to regularly remind yourself of your director duties. Why is fulfilling your director duties so important? If you breach your duties and the company is placed into liquidation, you risk being held personally liable to repay funds, or to contribute an amount of money to the assets of the company.

By way of summary, as a director you have a range of specific legal duties, including to:
• act in good faith and what you believe to be the best interests of the Company (which includes an obligation to consider the interests of all creditors);
• use your powers for a proper purpose;
• follow the Companies Act and your constitution;
• be able to meet your commitments;
• trade in a manner that protects your creditors; and
• use company information appropriately.

Because these duties are active, rather than passive, it is impossible to be a ‘silent’ or ‘sleeping’ director. All directors are responsible for fulfilling these duties, which means that you cannot simply delegate duties to your co-directors.

In a 2020 decision (Debut Homes Limited v Cooper) , the Supreme Court clearly spelt out that that in insolvency, or near-insolvency situations, it is not acceptable to simply try to “trade through” in the belief that this will improve the Company’s financial position. Instead, directors must ensure they use the formal (or informal) mechanisms provided for in the Companies Act 1993 (“Act”) to address their financial predicament. If directors fail to meet their duties, they face a very real risk of incurring personal liability. Where there are no prospects of a company returning to solvency, it makes no difference that a director honestly thinks some of the creditors will be better off by continuing trading. Directors need to be careful not to enter into a course of action that results in some creditors receiving a higher return at the expense of incurring new liabilities which will not be paid. As the Supreme Court put it, it is not legitimate to “rob Peter to pay Paul”.

Options for directors
As a director, there are various mechanisms that are available to you if you are facing insolvency or near-insolvency. The key mechanisms are:
• Liquidation – winding up the company.
• Creditor’s compromise – this usually involves part of a company’s debts being forgiven. It must be approved by a majority of creditors, representing at least 75% of the debt owed to each class of creditors.
• Court-approved creditor’s compromise – where the court agrees that a compromise is fair and reasonable to creditors.
• Voluntary administration – an administrator is appointed to increase the prospects of a company surviving. This must be approved by a majority of creditors, representing at least 75% of the debt owed to each class of creditors.

Summary
If a company reaches the point where continued trading will result in a shortfall to creditors and the company is not salvageable, then continued trading will be deemed reckless and a breach of director duties. If as a director you allow an insolvent company to continue trading without using one of the available formal or informal mechanisms, then you will breach your director duties and likely incur personal liability. Whether or not to continue trading is therefore a critical decision for directors. If you are a director of a company in financial distress, it is essential that you promptly deal with the situation and seek both legal and accounting advice as to your options. This should include considering the mechanisms available through the Act, such as liquidation, voluntary administration or a creditors’ compromise.

If you have any questions, please contact us for an appointment T:06 349 0090 or email timo@horlseychristie.co.nz.

Tim Oliver
ASSOCIATE
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Disclaimer: This publication should not be construed or acted on as legal advice. It is brief and general in nature. Specific advice should be sought.

 

Good Business: Growing a Business starts with Strong Foundations

Posted on by Helen Garner

Starting a new business venture with other people can be a very exciting time, filled with good intentions, optimism and possibilities. It is also the perfect time to get your foundation or constitutional documents in order. Whether this is a shareholder’s agreement, a partnership agreement, a joint venture agreement or otherwise, the best time to get these foundation or constitutional type of documents prepared is right at the beginning of your business venture and the next best time is right now!

These foundation documents generally set out how the parties are going to work together, how decisions will be made and how the rewards are to be shared. These documents can also cover what happens when the parties cannot agree or if one party wants to exit the arrangement. By their very nature, these documents are best prepared when everyone is happy and things are going well – as it can be difficult to sort out these issues when things are not going well.

At Horsley Christie, we have one of the largest and most experienced commercial and property teams in Whanganui. We can help you to construct and shape these foundation documents to suit your individual needs. A lot of potential problems can be avoided with good planning and good systems. Well-crafted foundation or constitutional documents help set the respective parties expectations and will go a long way to manage those expectations going forward to ensure the parties remain on the same page.

Turning to the contents of the documents, there are a range of matters to consider, including but not limited to the following:

–              How will the business operate?

–              How will decisions be made? And how will they be recorded?

–              How will funding be arranged?

–              How will distributions be calculated? And when will they be paid?

–              What are the parties obligations to the business?

–              What are the parties obligations to each other?

–              When can one party bind the business or the other party?

–              What happens if the parties cannot reach an agreement?

–              What happens if one party wants to exit?  Or you want to introduce another party?

–              Will both parties do the same amount work or contribute the same amount of capital? And if not, how will you value the reward for effort and the reward for investment?

While some of these issues can be difficult to raise and perhaps uncomfortable to talk about at the beginning of your business venture, it is absolutely in your interest to still have that discussion. In our experience, those conversations are best had at the outset and do not get any easier if the parties are starting to disagree.

If you already have these documents in place, that is a good start but it is not the end of the matter. It is still really important that you regularly read and review these documents to ensure they are still appropriate, that they still reflect how you are actually carrying on your business and that they are compliant with any relevant legislation.

Your foundation and constitutional documents need to be living documents that are capable of growth, adapting to changes in law and to changes in the way you operate your business. Regular reviews with quality legal advice will ensure your business has solid foundations to help support future success!

If you have any questions regarding any of the above or if you would like an appointment to discuss setting up your own foundation documents or to review your existing documents, please telephone the Horsley Christie Lawyers for an appointment 06 349 0090 or email miken@horlseychristie.co.nz.

Mike Neil LLB

PARTNER