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Incorporation Corporate Personality – Not Examinable Company Capacity Legal Relations Crimes and Torts Constitutions Divisions of Power Shares and Distributions Directors - WHO ARE DIRECTORS? 10 – (Fiduciary/Equitable) 11 – (Statutory) 12 and Remedies 13 Answers Incorporation – chapter 8INCORPORATIO...

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1. Incorporation 2. Corporate Personality – Not Examinable 3. Company Capacity 4. Legal Relations 5. Crimes and Torts 6. Constitutions 7. Divisions of Power 8. Shares and Distributions 9. Directors - WHO ARE DIRECTORS? 10. Directors – (Fiduciary/Equitable) 11. Directors – (Statutory) 12. Enforcement and Remedies 13. Example Answers

Incorporation – chapter 8

INCORPORATION The right to apply for registration - CA 1993, S 11

Right to apply for registration - Any person may, either alone or together with another person, apply for registration of a company under this Act.

Essential requirements - S 10, 12, 13, 134 - Every company must have (s 10): - a name; - 1 or more shares; - 1 or more shareholders; - 1 or more directors (one of whom must live in a NZ or in an enforcement company and be a director of a company registered in that enforcement country). Re Carr

Registration Order of St John Northern Regional Trust v Gemini 10 Ltd at [19]-[20]: - “Company” is defined in s 2 of the Companies Act 1993 as a “company registered under Part 2 of this Act” or a re-registered company. In Part 2, s 11 gives any person the right to apply for “registration of a company under this Act”, the formal requirements for which appear in s 12. And s 13 provides that as soon as the Registrar receives a properly completed application for registration the Registrar must register it and the issue of certificate of incorporation. Section 14 provides that the issue of certificate of incorporation is “conclusive evidence” that all the statutory requirements for registration have been completed and, “on and from the date of incorporation” the company is “incorporated under this Act”. Every company, once registered, “continues in existence until it is removed from the New Zealand register” (s 15). - It is therefore clear that, in human terms, registration is the corporate equivalent of parturition and, once issued, the certificate of incorporation is the rough equivalent of a birth certificate. However, unlike humans, companies have perpetual existence and, unless removed from the register, a death certificate is never issued for them. Application for registration: s 12 - Signed application - Director(s) + signed consents + certificate of non-disqualification - Shareholder(s) + number & class of shares taken + signed consents - Full name, address (and other specified details) of applicant(s), director(s), shareholder(s)

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Ultimate holding company (if applicable) Registered office (physical address) Address for service (of legal documents) Name reservation notice Constitution (if proposed company is to have one)

13. Registration As soon as the Registrar receives a properly completed application for registration of a company, the Registrar must— (a) register the application; and (b) issue a certificate of incorporation. 14. Certificate of incorporation A certificate of incorporation of a company issued under section 13 of this Act is conclusive evidence that— (a) all the requirements of this Act as to registration have been complied with; and (b) on and from the date of incorporation stated in the certificate, the company is incorporated underthis Act. 15. Separate legal personality A company is a legal entity in its own right separate from its shareholders and continues in existence until it is removed from the New Zealand register. RESERVATION OF A COMPANY NAME

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Application for registration cannot proceed unless name first reserved: s 20 Use of ‘Limited’ in company name: s 21 Application made to Registrar: s 22(1) Names that cannot be reserved by the Registrar: s 22(2) Power of Registrar to direct a company to change its name if the Registrar believes on reasonable grounds that the name under which the company is registered should not have been reserved: s 24

- General right of appeal from Registrar’s decision: s 370 - Procedure for a company to change its name: s 23

The Registrar must not reserve a name: s 22(2) – - The use of which would contravene an enactment: s 22(2)(a) - Just because the registrar approves the name, doesn’t mean the name wont contravene the legal right of another company

- Flags, Emblems and Names Protection Act 1981, pts 2-3 - Fair Trading Act 1986 - Trade Marks Act 2002

Flight Centre (NZ) Ltd v Registrar of Companies

- I have looked at s 32(a) [s 22(2)(a)] in its statutory context and considered the policy of the legislation. Just looking at s 32 it would have been my view that para (a) must have been intended to be restricted in its application to enactments which specifically prohibit or restrict the use of a name. I am reinforced in this opinion after venturing on a consideration of the history of the legislative process out of which the current form of s 32 emerged. NZ Conference of Seventh Day Adventists v Registrar of Companies

- I respectfully agree [with Blanchard J’s view expressed in Flight Centre (NZ) Ltd v Registrar of Companies] that the 1993 package of reforms was concerned to provide a proper balance between efficiency in the processing of name approvals and name changes within the office of the Registrar of Companies on the one hand and some degree of screening names for identification and distinctiveness purposes on the other. The substitution of the more specific test "the use of which would contravene an enactment" for the broad test "undesirable" reflects a general intention to promote the efficient administration of the Act at the level of Companies Act approvals, leaving it to the Courts to determine more refined value judgments in the context of consumer protection legislation, passing off and intellectual property legislation. For myself, I would be inclined to express this in terms which would recognise that with certain enactments it is inherently unlikely that any breach could be demonstrated in advance, rather than Blanchard J's implied legislative intention to arbitrarily limit the scope of the eligible enactments, but this is more a matter of expression than anything else. Certainly, in a case like the present one it could not have been said at the time of the name reservation in 1991 that use of the name "Seventh-Day Adventists Resource Centre Limited" would contravene the Fair Trading Act. As that was the only ground upon which the Registrar was invited to direct a name change it follows that the appeal must fail. Where the name is identical or almost identical to the name of another company or a name that has already been reserved by the Registrar: s 22(2)(b),(c). Registrar’s Guidelines: Paint Factory Ltd v Registrar of Companies

- It’s difficult to define when a name is almost identical, but when you reserve a name, we consider the entire name and the order of the words.

- We ignore the case of letters, accents, spaces between letters and punctuation marks. We also disregard some abbreviations used in a name, including: o ‘&’ for and o ‘no’ for number o ‘co’ or ‘coy for company o ‘N.Z.’ or ‘NZ’ for New Zealand o ‘Bros’ for brothers.

- To distinguish one name from another, it may be enough to include: o a year — for example, (2017) o a number — for example, No. 1, or o a place — for example, (Nelson)

- For example, ‘Clothing Company Limited’ and ‘Clothing Company (2015) Limited’ are not almost identical. Stanley-Hunt Earthmovers Ltd v Registrar of Companies

- … in considering whether two names are almost identical, it may be relevant to consider the degree of distinctiveness of the words common to both names. If the key words are distinctive, the addition of a year is less likely to render the names not almost identical than if the key words are in common use, simply because the distinctive words will have a greater impact and the year will have less.

- In the present case the key words are “Stanley-Hunt” and “Earthmovers”. In both names they appear in the same order. The key word “Stanley-Hunt” is a particularly distinctive word or pair of words. The word “Earthmovers” describe with some precision what at least from the name would appear to be the activities of the two companies.

- It is my conclusion that the two names are almost identical. I reach this conclusion having regard to the distinctive nature of the key words. In this particular case I do not consider that the addition of a year removes the two names from being almost identical. I am reinforced in this conclusion by my view that members of the public dealing with the two companies would regard the names as almost identical. Because of that near identity, the public is likely to regard the two companies as closely related or connected. This is not a conclusion that permits of much elaboration. Judging whether two names are or are not almost identical involves a subjective assessment, taking into account such of the factors to which I have referred as may be relevant. Dr Rust Ltd v Registrar of Companies

- The history of the legislation … makes it clear that the original intention of the amendments was to relieve the Registrar from the need to make value judgments in relation to names. That intention has not been entirely successful because a consideration of whether a name is nearly identical to another does require a value judgment. However, I agree that the Registrar should not have to consider questions as to whether members of the public are likely to be confused because that would almost inevitably lead to his having to consider evidence on such questions.

- This appeal is by way of de novo hearing from the Registrar’s decision Vicom New Zealand Ltd v Vicomm Systems Ltd [1987] 2 NZLR 600, so that as a matter of jurisdiction this Court is able to consider evidence which was not before the

Registrar. However, in my view the policy of the legislation is against the consideration of evidence such as that called in this case. I hold that the function of the Court is to consider, as did the Registrar, whether or not the two names are identical or nearly identical. That determination should be made by the application of commonsense to an examination of the names themselves.

- The Registrar has prepared a set of guidelines for use in determining the question. He must, of course, be careful not to allow those guidelines to become invariably applied rules. In the end it must be a matter of judgment to be exercised in each particular case. There is no problem if the names are in fact identical. Almost identical names must be names which are difficult to distinguish or which, on a passing observation would be considered the same.

- Mr Ivory acknowledged, correctly in my view, that the purpose of the legislation was to enable companies to be distinguished from one another. On that basis I consider that the names Dr Rust Ltd and The Rust Doctor Ltd are not almost identical and accordingly the appeal is dismissed. The Paint Factory Ltd v Registrar of Companies

- [18] With great respect, however, this Court has some difficulty with the dicta in Stanley-Hunt Earthmovers that a test can be whether members of the public would recognise the two companies as different entities or would think they were connected. If those observations were intended by the learned Judge to do no more than state the objective test in different words, then this Court would respectfully agree, but if they were intended, as on one view of them they might, to suggest that the correct test is the likelihood of mistake by members of the public in similar names used by different companies then, with respect, this Court would find itself unable to follow such a test. It appears to hark back to the now supplanted test under the Companies Act 1955, s 31. Further, whilst words such as Stanley-Hunt may have been important in that case, this Court has difficulty accepting that the distinctiveness of individual words in the names of companies is decisive. The statutory task is for the Registrar and for this Court on appeal to consider the whole name of each of the two companies in contest and form an objective view as to whether they are “almost identical”. The test does not vary according to whether the two names under consideration contain commonplace words or words which are striking because they are arcane, dramatic, made-up or outlandish.

- [21] In returning to the matter in issue in this appeal it is, of course, axiomatic that the Court should focus on the sole relevant statutory test as to whether or not the names in question are “almost identical”. That, as other Judges have observed, is largely a matter of both objective impression and analysis. Applying those tests names which look or sound markedly different are unlikely to be regarded as “almost identical”. Names which look or sound “almost identical” are likely to be found to infringe s 22(2)(b). This is particularly the case if the only differences in the names are in definite and indefinite articles, pronouns, conjunctions, punctuation marks and other differences likely to go unremarked.

- [23] With more direct reference to the matter in issue in this appeal, when any of the tests discussed are applied, it follows that names where the differences under consideration are geographical, numerical or date markers, ought not to be regarded as “almost identical” unless there are other factors about the names which lead to that conclusion. On objective impression and analysis, names containing such differences look and sound different from each other. - [24] If the inclusion of geographical markers were not held to be sufficient to prevent names being adjudged “almost identical” so that regional, national or international variants in company names were proscribed, such would be tantamount to granting a veto to companies with similar names but containing no geographical marker. Similarly, with names containing numerical markers such as “No 1”, “No 2” or the like and there seems no reason in principle to regard as “almost identical” the names of companies which may wish to emphasise their age or date of incorporation in their title.

Where, in the opinion of the Registrar, the use of the name is offensive: s 22(2)(d) South Pacific Airlines of NZ Ltd v Registrar of Companies

- What might be undesirable would include the prohibited words contained in subs. (2), but the area in my view would be much more extensive. Any name of an obscene nature, it is needless to say, would be undesirable and objectionable. Any name which might give offence to a friendly State would be undesirable. The expression "undesirable" would seem to embrace any name or names which would offend public policy or might give offence to any particular section of the community, or any particular religion. The Registrar may determine that a name is offensive if it is: - of an obscene nature, or - contrary to public policy, or likely to offend any particular section of the community or any particular religion

Corporate Personality CORPORATE LEGAL PERSONALITY Historical developments The steps that led to the corporate legal personality in its modern form are divided into three periods: - The period up until 1720 - The period from 1720 – 1844 - The period from 1844 through to the present. In the first period, incorporation, resulting in the creation of a legal person, was achieved by Royal Charter or Act of Parliament, both of which were difficult and expensive to achieve. Examples of early corporations are trade guilds and, in later times, companies like the East India Company or the Russia Company. Nevertheless attempts were made to devise a legal structure that could accommodate large numbers of individuals associating together for the purposes of economic gain. These attempts resulted in what is known as the joint stock company. Use of the term “company” in this context did not carry its modern meaning of a separate legal person. Instead, “company” carried its colloquial meaning – a collection of individuals. By contract or deed, individuals contributed funds to a common pool to carry out a business venture. Each individual retained ownership of his or her share of the contributed funds. Contributors agreed to share the profits and losses of the venture. A practice developed where, by agreement, contributors could transfer their “share” of the fund and any resulting profits without the consent of the other contributors. A “share” referred to the contributors’ ownership of a part of the common fund. The early 18th century was a time of economic boom and then speculation. Shares in joint stock companies were often bought and sold at a price that did not reflect the actual value of the assets acquired with the underlying fund. In 1720 the boom turned to bust and many individuals found they were holding shares worth a fraction of the value which they had paid for them, leading to economic ruin for many. The English Parliament responded with the Bubble Act of 1720 which prohibited the establishment of joint stock companies with freely transferable shares. However, the economic needs of the time necessitated the development of a form of business structure that allowed the aggregation of large amounts of capital. Deeds of settlement companies were a more refined attempt at a structure to accommodate a business venture with a large number of investors. A deed of settlement company was in fact a large partnership. By deed, “partners” would contribute to a common fund, which was held on trust. Specialist managers (the precursor of the modern director) were appointed to manage the fund. The interest of individual partners in the common fund was termed a

“share”. “Partners” were permitted to transfer their interest in the fund. Although this practice contravened the Bubble Act, the regulators generally ignored this. In practical terms, the relationship between members of these organisations was not truly one of partnership, a relationship based on mutual trust and confidence. There were also significant disadvantages associated with deed of settlement companies for both partners and the creditors who dealt with them. Joint Stock Companies Act 1844 (UK) - Permitted the creation of an entity with a separate legal existence – the forerunner of s 15 – BUT - Liability of shareholders remained unlimited. - Minimum number of shareholders (25). - Limits on numbers of individuals able to carry on partnership (carried through to CA 1955). - Arose out of pressure to regulate large collections of individuals carrying on an association for economic gain. The Joint Stock Companies Act 1844 (UK) is the forerunner of s 15 of the Companies Act 1993, although the rules governing companies and shareholders under this statute differ from more modern rules in a number of ways. The liability of members was unlimited. A minimum of 25 members was required. There were also limits placed on the numbers of individuals able to carry on business in partnership. The Joint Stock Companies Act was the result of pressure to regulate large collections of individuals carrying on an association for the purpose of economic gain. It was the desire to regulate large collections of individuals carrying on an association for economic gain that led to the birth of the modern company. Early company law was developed to regulate this type of entity and even today the Companies Act 1993 is drafted so that its default rules suit widely held companies rather than the small to medium enterprises, SME’s, that make up the majority of present day companies. The above commentary focuses on the English position but until the enactment of the Companies Act 1993, company law in NZ was a facsimile of English legislation: see the Joint Stock Companies Act 1860 and the Companies Acts of 1882, 1903, 1908, 1933 and 1955. Section 15 of the Companies Act 1993 restates the principle of separate legal personality. 15. Separate Legal Personality - A company is a legal entity in its own right separate from its shareholders and continues in existence until it is removed from the New Zealand register. A summary: Susan Watson “Corporate Legal Personali...