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New Zealand law explained for everyone

Companies Act 1993

Liquidations - Voidable transactions

291A: Meaning of related party

You could also call this:

“Who counts as connected to a company in specific ways”

You are related to a company if you are connected to it in certain ways. This includes being a director or senior manager of the company or a close company to it. It also includes being married to a director or senior manager. You’re related if you’re a close family member of a director or senior manager, like a grandparent, parent, child, sibling, or cousin. If you’re married to one of these family members, you’re also related to the company.

You’re related to the company if you’re a close company to it, a business partner of the company or its director, or a close business associate. If you own 5% or more of any type of the company’s shares, or 20% or more of a close company’s shares, you’re related too. Being married to or a close family member of someone who fits these descriptions also makes you related to the company.

If you’re a trustee of a trust where the company or someone related to it is a beneficiary who can get money from the trust or control the trustee, you’re related to the company. You’re also related if you’re a trustee of a family trust where most beneficiaries are related to the company, or if you’re acting on behalf of someone who is related to the company.

In sections 292 and 293, you’re a related party if you’re related to the company when a transaction happens or when security is given. For ongoing business relationships mentioned in section 292(4B)(a), you’re a related party if you’re related to the company at any time during that relationship.

Companies are considered close if one owns the other, if they share a lot of the same shareholders, if their businesses are hard to tell apart, or if they’re both close to another company.

A close business associate is someone who has a close professional or business relationship with the company, its directors, or senior managers. This relationship lets them check if the company has enough money to pay its debts or get information to help them do this check.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS348752.

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Part 16 Liquidations
Voidable transactions

291AMeaning of related party

  1. For the purposes of this section, a person is related to a company if the person—

  2. is a director or senior manager of the company or of a close body corporate of the company; or
    1. is the spouse of a director or senior manager of the company; or
      1. is a grandparent, parent, child, grandchild, brother, sister, nephew, niece, uncle, aunt, or first cousin of a director or of a senior manager of the company, whether or not by a step relationship; or
        1. is the spouse of a person who is related to the company under paragraph (c); or
          1. is a close body corporate of the company; or
            1. is a partner of the company or of a director of the company (under the Partnership Law Act 2019); or
              1. is a close business associate of the company; or
                1. has an interest, direct or indirect, in 5 percent or more of any class of shares of the company; or
                  1. has an interest, direct or indirect, in 20 percent or more of any class of shares of a close body corporate of the company; or
                    1. is the spouse of a person who is related to the company under any of paragraphs (f) to (i); or
                      1. is a child, parent, brother, or sister (whether or not by a step relationship) of a person who is related to the company under any of paragraphs (f) to (i); or
                        1. is a trustee of a trust under which the company, or a person related to the company (under paragraphs (a) to (k)), is a beneficiary who—
                          1. is presently entitled to a share of the trust estate or of the income of the trust estate; or
                            1. is, individually or together with other beneficiaries, in a position to control the trustee; or
                            2. is a trustee of a trust if—
                              1. the trust is a family trust within the meaning of section 173M(5) of the Tax Administration Act 1994; and
                                1. a majority of the individuals who are beneficiaries under the trust are related to the company (under paragraphs (a) to (k)); or
                                2. is a nominee of a person who is related to the company under any of paragraphs (a) to (m).

                                  1. In sections 292 and 293, a person is a related party of a company in relation to a transaction or charge if the person is related to the company at the time the transaction is made or the charge given.

                                  2. However, in the case of a transaction referred to in section 292(4B)(a), a person is a related party of a company if the person is related to the company at any point during the continuing business relationship.

                                  3. For the purposes of determining whether, in this section, a person is a close body corporate of a company (or whether 2 bodies corporate are close), 2 bodies corporate (A and B) are close if—

                                  4. B is A’s holding company or subsidiary; or
                                    1. more than half of A’s issued shares (other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital) are held by B and bodies corporate that are close to B (whether directly or indirectly, but other than in a fiduciary capacity), or vice versa; or
                                      1. more than half of the issued shares (other than shares that carry no right to participate beyond a specified amount in a distribution of either profits or capital) of each of A and B are held by members of the other (whether directly or indirectly, but other than in a fiduciary capacity); or
                                        1. the businesses of A and B have been so carried on that the separate business of each body corporate, or a substantial part of that business, is not readily identifiable; or
                                          1. there is another body corporate to which A and B are both close.

                                            1. In this section,—

                                              close business associate, in relation to a company, means a person who has a close professional or business relationship with the company, or with a director or senior manager of the company, that allows the person to—

                                              1. assess the solvency of the company; or
                                                1. obtain information from the company or any other person involved with the company that will enable the person to assess the solvency of the company

                                                  director, in relation to a body corporate that is not a company, has the same meaning as in relation to a company

                                                    senior manager has the same meaning as in section 6(1) of the Financial Markets Conduct Act 2013.

                                                    Notes
                                                    • Section 291A: inserted, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).