9.05.2018

Recent case finds that lack of a resident director isn’t immediately fatal

A New Zealand company needs at least one resident director

The absence of a resident director might result in a New Zealand company being struck off, but that won’t prevent it from enforcing its rights whilst still in existence.

A New Zealand company needs at least one resident director, i.e., one director who is either:

a)   New Zealand resident; or

b)   an Australian resident who is also a director of an Australian company.

Failing to satisfy the resident director requirement is a breach of the Companies Act 1993 and can result in a company being struck off or put into liquidation. However, as we discuss further below, New Zealand’s High Court has recently ruled that such a breach will not disqualify a company from the protection of the law or from being able to validly exercise its powers and rights whilst it does still exist.

Case review

YL NZ Investment Limited v Ling [28 NZTC 23-026] concerned the sale and purchase of real estate for $3.5 million inclusive of Goods and Services Tax. At the time the agreement was signed:

  • YL (the purchaser) was registered for GST;
  • Ling (the vendor) gave a warranty that she was not. Therefore, YL entered the agreement believing it could claim a GST input tax credit on the sale of $365,869.57; and
  • YL did not have a resident director.

The NZ Inland Revenue Department refused YL’s subsequent claim for the input tax credit on the basis that, although Ling was not registered for GST at the time, she should have been. Therefore, the sale of the property was zero-rated for GST, meaning GST was neither payable by Ling, nor claimable by YL.

YL sued Ling for breach of warranty. In her defence, Ling argued that YL’s failure to have a resident director at the relevant time meant it had no standing to bring this claim.

In awarding judgment to YL for the amount of the missing GST input tax credit, the Judge found that not having a resident director did not disqualify YL from the protection of the law, nor from being able to validly exercise its powers and rights.

Next steps

This case provides reassurance about a company’s ability to legitimately carry on business even without a resident director. However, it doesn’t change the fact that such a breach could lead to the company being struck off. If you need assistance appointing a resident director to a New Zealand company, or with any other New Zealand corporate legal advice, please get in touch, 09 375 8700.

Do you need expert legal advice?
Contact the expert team at Hesketh Henry.
Kerry_100x100 1
Media contact - Kerry Browne
Please contact Kerry with any media enquiries and with any questions related to marketing or sponsorships on +64 9 375 8747 or via email.

Related Articles / Insights & Opinion

Employment Law Team – Some exciting changes
The Employment Law team at Hesketh Henry is thrilled to welcome Jodi Sharman back from parental leave.  Jodi is excited to be back at her desk.  We are also happy to announce that Sam Houliston has ...
25.09.2018 Posted in Employment Law
LexisNexis Foreign Investment Law Guide 2018-2019
Hesketh Henry has authored the New Zealand chapter of the LexisNexis Foreign Investment Law Guide 2018-2019, a guide for foreign investors interested in doing business in New Zealand. The chapter prov...
25.09.2018 Posted in Foreign Investment
Getting the Deal Through: Construction 2019
Partners Nick Gillies, Helen Macfarlane and Christina Bryant are the contributing authors of the New Zealand Chapter of the 2019 edition of “Getting the Deal Through Construction”. Getting...
19.09.2018 Posted in Construction Law
UAE COMPANIES LAW UPDATE
New Zealand businesses looking to establish a foothold in the UAE have many options
10.09.2018 Posted in Trade and Commodities
When You Can’t Have it Your Way
Antares Restaurant Group Limited (which owns and operates Burger King in New Zealand) has received a whopper of a sanction – a ban on the company supporting visa applications until July next year.
4.09.2018 Posted in Employment Law
Getting the Deal Through: Shipping 2019
The Marine team at Hesketh Henry have again contributed to Getting the Deal Through: Shipping 2019.
30.08.2018 Posted in Maritime Law
A Guide to Concurrent Delay
Hesketh Henry was pleased to host the New Zealand Institute of Quantity Surveyors on 14 August 2018, where one of our construction partners, Nick Gillies, presented on concurrent delay.  The same pre...
22.08.2018 Posted in Construction Law
Send us an enquiry
For expert legal advice, please complete the form below or call us on (09) 375 8700.
  • This field is for validation purposes and should be left unchanged.