Chapman Tripp today urged the New Zealand government not to proceed with a Ministry of Economic Development proposal which would require large privately owned companies to file public accounts, regardless of whether they sell securities to the public.

“They made cutting-room floors for ideas like this,” said Chapman Tripp Partner, Pip England.

The recommendation, which could also apply to partnerships, is contained in the Financial Reporting Review discussion document released by the department last month.

The proposal is a result of the GFC, with the MED saying there is “a broad societal interest” in the financial health of large entities because, were they to collapse, the reverberations would be felt across the wider economy.

Largeness is defined as having any two of three criteria: total assets of at least NZ$10m; consolidated annual revenues of at least NZ$20m; and/or at least 50 full-time equivalent employees. “To require an entity which does not seek to raise money from the general public to make its financial reports publicly available is an unwarranted intrusion of privacy and commercial confidentiality, and will impose unnecessary compliance costs and will create a disincentive to invest in New Zealand,” England said.

“This was the clear message from clients when the MED ran a similar idea up the flagpole in 2005. On that occasion, the then Labour Government decided not to proceed with the move on the grounds that the additional disclosure would not deliver any great value.” He acknowledged that Chapman Tripp could be caught by the proposed change if extended to partnerships.  “But that is not our motivation,” he said.

“We were just as strongly opposed in 2005 although there was no policy intention at that time to extend the requirement beyond companies.” England said that the department is proposing that New Zealand follow Australia’s lead and implement a ‘grandfathering provision’ to exempt entities already in existence when new regime comes into effect.

“That will provide some comfort to those who qualify for the exemption but it does not even begin to address the principled question of whether the proposal has any intrinsic merit which, in our view, it does not,” he said.

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