Bay of Plenty MP Todd Muller’s member’s bill to simplify the sometimes complex issue of co-operative wet and dry share rights was passed unanimously. It followed hard on the heels of the End of Life Choice Bill and only two weeks after the Zero Carbon Bill.
While not as high profile as its predecessors, Muller said the bill will be welcomed by the rural business community, in particular, where rural suppliers or processors might opt for a co-operative model.
The Companies (clarification of dividend rules in companies) Amendment Bill clears up a long-standing doubt about the ability of a company’s constitution to provide for dry shares that don’t carry the usual provisions for voting or dividend payments.
“We have had conflicting interpretations of section 36 of the Companies Act that says you can provide differently for these shares while section 53 says you cannot. A lot of people have thought I was having a go at the Co-operatives Act, which I was not. This was an anomaly in the Companies Act.”
As an ex-general manager of Zespri Muller said he had experienced first hand the challenges the legislation has posed over the years.
“Zespri was required to establish itself under the Companies Act not the Co-operatives Act. But the legislation was a pain for Zespri. You could not be sure when you put changes through regarding shares if you were going to get someone objecting under that section so Zespri was forced to come up with variations on share types to try and reduce that happening.”
Under the change, even if a co-operative chooses to set up under the Companies Act, as long as its constitution is clear about how dry and wet shares are treated, then it is now free to do so.
Co-operative Business New Zealand chief executive Roz Henry said while the bill does not directly benefit Co-operative Business NZ members registered as co-operative companies it does benefit those operating under the Companies Act but working on similar principles with supplier shareholders.
The change removes uncertainty about their ability to pay dividends in relation to levels of trading, in the same way co-operatives operate.
