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• Part I: Discussion Document
• Entity Neutrality

• Corporate Law and Governance

• Financial Reporting Law

• Part I: Reporting Structure

• Part I: Discussion Document
• Summary of Submissions
• Submissions

• Comparative International Jurisdictions
• Question 3 - Entity Neutrality

151. New Zealand does not have a uniform financial reporting regime that encompasses all forms of entity. Although the Financial Reporting Act 1993 imposes reporting requirements on a range of entities, such as all forms of issuers, its primary focus is companies registered under the Companies Act 1993. Some other entities are subject to financial reporting requirements, but this is due to specific pieces of legislation, in particular, the Public Finance Act 1989 and related legislation.⁸⁸

152. The ASRB view is that this leaves some gaps and inconsistencies, in particular for entities such as partnerships, incorporated societies, mutuals, and trusts. The reporting requirements (if any) for entities of this sort are typically imposed by the specific legislation under which they are registered, and in some cases, even by case law.

153. Generally, it is inefficient to have a variety of reporting requirements spread over various pieces of legislation that have evolved in an ad hoc manner. However, more significantly, an entity's legal form does not necessarily determine the extent to which potential users might rely on its financial reports. Two entities that are identical other than their registered status under the Companies Act should face the same reporting requirements for the same policy rationales. For example, where there is external accountability, whether to the shareholders of a company or the beneficiaries of a trust, the reporting requirements should be the same.

154. In this respect, New Zealand already has a degree of entity neutrality in respect of issuers. Every entity that issues securities under the Securities Act 1978⁸⁹ or is a party to a listing agreement with a registered exchange⁹⁰ is required to report, regardless of that entity's form.

155. All reporting requirements for other entities would, however, be subject to the same reporting framework as for companies. For example, a partnership that does not have reporting responsibilities or exceed the size threshold should be able to meet the tier 3 requirements as if it were a company.

156. This would, however, typically result in more rigorous reporting requirements for most entities, with corresponding costs. In particular, most clubs (who have officers accountable to its members) would face either tier 1 or 2 reporting requirements, dependent on size. However, the Ministry has anecdotal evidence that suggests many entities already produce financial reports beyond the minimum requirements, some even having these audited.

Comparative International Jurisdictions

157. Australia already has uniform financial reporting requirements regardless of legal form, requiring all forms of entity to be registered under the Corporations Act 2001. This in turn subjects those entities to the financial reporting framework of that Act (see above).⁹¹ In this respect, requiring entity neutrality in New Zealand is likely to be a positive step towards any joint trans-Tasman institution.

158. On the other hand, both the United Kingdom and Singapore have, like New Zealand, specific statutory instruments requiring registration for specific legal forms, in turn imposing specific reporting requirements.

⁸⁸See generally discussion on sector neutrality, paragraphs 159-162, infra.

⁸⁹Financial Reporting Act 1993, section 4(1)(a).

⁹⁰ibid., section 4(1)(c).

⁹¹Paragraphs 88 and following, supra.