Shell company crackdown imminent

MATT NIPPERT
Last updated 15:12 24/06/2014

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A long-awaited crackdown on New Zealand shell companies is finally expected to come into force tonight when Parliament votes to ammend the Companies Act.

The Companies Amendment Bill (No 4) will require all New Zealand-registered companies to have a local director, and all directors to file identifying information to the registrar of companies, including the company's ultimate owner, and their date and place of birth.

Parallel legislation requiring limited partnerships to have practically identical residency requirements, the Limited Partnerships Amendment Bill (No 2), will also receive its third reading tonight.

The new law's genesis came from revelations in early 2010 that a New Zealand-registered company, SP Trading, had leased a plane loaded with 35 tonnes of guns and explosives that was later intercepted in Bangkok trying to smuggle the arms from North Korea to Iran.

Since the SP Trading story broke, generating considerable international media attention, media have discovered widespread use of New Zealand shell companies for illegal activities including the laundering of drug-sale proceeds, the looting of Eastern European state coffers, and international financial scams.

The vast majority of these shells have used New Zealand companies directed by foreign nominees, often residing in jurisdictions such as Cyprus and Panama, making enforcement by local authorities impossible.

A report prepared for Commerce Minister Craig Foss in August 2012 said New Zealand shell companies allowed money laundering totalling $1.5 billiona year, and warned the country was becoming a "domicile of choice" for those seeking to engage in illegal activities.

At the time the report was made public, Foss said: "I've made it a mission to understand more about it and understand why some legislation has not progressed as quickly as we would have liked."

The legislation was introduced to the House in October 2011 by then-Commerce Minister Simon Power, but has languished for nearly three years.

Both bills are to have their third reading tonight.

Given both the Labour Party and Green Party have criticised the Government for the slow passage of the laws, the legislation is expected to pass without problem.

If passed, companies will have until December 21 to meet the new director and disclosure requirements. Failure to do so could see the companies struck from the register.

The laws will also make trading recklessly a criminal offence for directors, unless creditors have granted consent for continued trading.

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- This story has been corrected

- Stuff

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