In my last newsletter I commented on proposed changes to the rules for look through companies (LTCs).
Companies and Limited Partnerships Rule Changes
The requirements for New Zealand resident directors of all companies incorporated here have now come into force. so have the strengthened identification requirements that require directors to disclose their date and place of birth.
Purchase Price Adjustments
Share sale agreements invariably provide for an agreed price that presupposes a fixed working capital balance at settlement. That balance is often agreed to be zero which will require the purchaser itself to ensure funding of working capital is available immediately after settlement.
Earn Outs
These are a commonly used vehicle for managing the respective interests and expectations of vendor and purchaser. Conceptually they are straight forward; practically they are anything but.
Restructuring Issues
Groups of companies often strive for simplicity through the disposal of unwanted companies. How is that done?
Shareholder Disputes - Managing exits by a shareholder
Take a private company setting, say 3 individual sharheolders. One of the shareholders has begun to cause trouble. The other two shareholders want him or her gone. What can be done?
Joint Ventures
The starting point with any proposed joint venture is the choice of structure. The most common form of joint venture is an unincorporated joint venture (UJV). An alternative is to form a special purpose company for the purpose (or a limited partnership or trading trust might be used).
Mergers & Acquisitions
In the context of a business disposal, a top priority for the vendor is a clean exit free of concern about waranty claims.
Winding up insolvent Look Through Companies
Does this crystallise a tax liability?
Disposal of Unwanted Companies
Unwanted companies can be disposed of in one of two ways.
Acquisitions - Shares or Assets?
For a purchaser, one factor weighs heavily in favour of purchsing shares in a target company.
Choosing between an LTC and a Limited Partnership
LTCs and LPs are both useful tools for delivering flow through tax treatment, whilst offering limited liability just as with any ordinary company. This begs the question which of them to choose betwen for your business.
Limited Partnerships - Some Traps
The major attraction with a limited partnership is its flow through tax treatment (albeit subject to a loss limitation rule) coupled with limited liability protection for the limited partners.
Employee Share Schemes
A key issue with employee share schemes is how to fund employees into the shares.
Corporate Governance - Continuous disclosure and the challenge for non-executive directors
The Rules contain continuous disclosure obligations which require issuers to keep the market fully informed, in a timely way, about material information relevant to the issuer.
Limited Partnerships
A brief word on using limited partnerships for land transactions. Developers will be familiar with the 10 year rule which is broadly that gains on disposal of land (that is not developed) will not generally be taxable where the land is held for not less than 10 years and was not acquired as part of a land dealing or developing business.
Latest Developments
The new LTC regime provokes the question whether an LTC is preferred to a LP as a choice of structure and, if so, whether existing LPs shoudl transition to a LTC.
Latest Developments
Legislation introducing the new LTC regime was passed in December.