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Company Law - Residency Requirements of Directors

August 24, 2016

Companies Act - whether a director “lives in” New Zealand

Section 10(d) of the Companies Act requires every company incorporated in New Zealand to have at least one director who:

  • lives in New Zealand; or
  • lives in Australia who is a director of an Australian company.

What does “lives in New Zealand mean? Company lawyers haven't necessarily been sure as the Act gives no guidance.

The Registrar of Companies has relied on tax residency requirements - a director would be deemed to live in New Zealand if they have been physically present in New Zealand for at least 183 days in any particular year. If the director can’t satisfy that test, the Registrar gives the company the chance to point to other factors to satisfy the residency requirement.

Section 10(d) was considered in Re Carr [2016] NZHC 1536. The case will assist company lawyers and company directors to consider how section 10(d) should apply.

The court considered that a director’s physical presence in New Zealand for at least 183 days in every year was an important consideration and if met, would mean that the director would meet the residency test. However, this isn't the only consideration – the test might be met based on other factors.

The court didn’t set out a definitive formulation but referred to the following considerations:

  • the amount of time that the director spends in New Zealand;
  • the director’s connection to New Zealand;
  • the other ties that the director has to New Zealand; and
  • how the director lives when in New Zealand.
  • The court held that the director (Mr Carr) lived in New Zealand and satisfied the residency requirement set out in section 10(d). Mr Carr:
  • spent, on average, a third of the year in New Zealand;
  • had a partner who lived in New Zealand for most of the year;
  • had a home and other land in New Zealand;
  • was a member of various clubs and organisations in New Zealand;
  • had a New Zealand doctor;
  • had strong business relationships in New Zealand;
  • employed a significant number of people in New Zealand;
  • had New Zealand bank accounts; and
  • in general terms, had the hall marks that a New Zealand business person would have.

Company lawyers and directors alike will welcome this case as providing more certainty in relation to the director residency issue.

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