Local Government Borrowing Act 2011

Application of Local Government Act 2002

9: Exemption from prohibitions and restrictions applying to council-controlled trading organisations

You could also call this:

"Special rules for councils helping their own companies with money"

Illustration for Local Government Borrowing Act 2011

If you are looking at a situation where the Funding Agency is also a council-controlled trading organisation, there are some special rules that apply. You can think of a council-controlled trading organisation as a company that is owned and controlled by a local council. The Local Government Act 2002 has some rules that normally stop local authorities from giving guarantees or lending money to these organisations, but in this case, those rules do not apply.

When a local authority gives a guarantee, an indemnity, or a security, or lends money to the Funding Agency, it can do so on terms that are more favourable to the Funding Agency than they would be if the local authority were borrowing the money itself, as long as you look at section 63 of the Local Government Act 2002.

If the Funding Agency stops being a council-controlled trading organisation after the local authority has given a guarantee, loan, or other financial help, the terms of that help still apply, and the local authority's obligations and rights in respect of it continue, even though the Funding Agency is no longer a council-controlled trading organisation, according to section 63 of the Local Government Act 2002 and the rules in section 62 of the Local Government Act 2002.

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This page was last updated on 10 September 2025

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM3620724.

Topics:

Government and voting > Local councilsMoney and consumer rights > Banking and loans

8: Financial Markets Conduct Act 2013 applies to Funding Agency as if it were local authority, or

"Funding Agency must follow same financial rules as local councils"

10: Additional requirements to be specified in local authority's financial strategy, or

"What local councils must include in their money plans when guaranteeing other people's debts"

9Exemption from prohibitions and restrictions applying to council-controlled trading organisations

This section applies only if the Funding Agency is also a council-controlled trading organisation.
Despite section 62 of the Local Government Act 2002, a local authority may give a guarantee, an indemnity, or a security in respect of the performance of any obligation by the Funding Agency.
Despite section 63 of the Local Government Act 2002, a local authority may lend money, or provide any other financial accommodation, to the Funding Agency on terms and conditions that are more favourable to the Funding Agency than those that would apply if the local authority were (without charging any rate or rate revenue as security) borrowing the money or obtaining the financial accommodation.
Subsection (5) applies if a local authority gives a guarantee, an indemnity, or a security, or lends money or provides any other financial accommodation, under subsection (2) or (3) while the Funding Agency is a council-controlled trading organisation and, subsequently, the Funding Agency ceases to be a council-controlled trading organisation.
The guarantee, indemnity, security, loan, or other financial accommodation continues subject to its terms, and the obligations and rights of the local authority in respect of the guarantee, indemnity, security, loan, or other financial accommodation continue to apply, despite the Funding Agency no longer being a council-controlled trading organisation.