Bay of Plenty MP Todd Muller’s Members’ Bill which would give clarity around dividend rules has been drawn from the ballot and will be debated in Parliament.
“I am pleased that my Members’ Bill, the Companies (Clarification of Dividend Rules in Companies) Amendment Bill, has been drawn from the ballot. This Bill would amend the Companies Act 1993 to provide legal certainty around dividend rules,” Mr Muller says.
“There is currently doubt about the ability of a company’s constitution to provide for ‘dry shares’. These are shares which do not carry dividend rights in prescribed circumstances and are typically used in cooperatives when the shareholder no longer supplies the cooperative.
“Currently, section 36 of the Act suggests that provision for dry shares can be made in the constitution of a company. However, section 53 can be read in a manner that would seem to negate that right. This amendment seeks to clear up this historic confusion, which will provide much more clarity for cooperatives and shareholders.
“This simple amendment is supported by Cooperative Business New Zealand and makes it categorically clear that the constitution of a company can provide that shares in a class do not confer a right to receive dividends in the circumstances specified in the constitution.
“Zespri has also welcomed the clarity this Member’s Bill would offer on this point which has created challenges for them in the past as a grower-owned organisation. This change would help simplify the shareholding rules for both Zespri and their kiwifruit grower-shareholders.
“Most of my professional career has been in New Zealand’s agricultural sector, where cooperatives flourish, and I know from first-hand experience the challenges that have occurred around the interpretation of the current act.
“The passage of this Bill will build on the work that the previous National Government carried out to make doing business in New Zealand easier. I will be seeking cross-party support for this Bill from first to final reading.”