The Companies Office laid 48 charges against 11 people in the last financial year, despite finding apparent non-compliance with the Companies Act in 754 cases.
Concerns have been raised in the public sector about a culture of “education over enforcement”. Those concerns boiled over at NZTA, which discovered several cases of flagrant non-compliance going back many years — one case appeared to result in the death of a motorist who was driving an unsafe vehicle.
Information released to Newsroom under the Official Information Act found the Companies Office received 1040 matters for consideration in the the 2017/18 financial year.
Those 1040 matters for consideration were swift whittled down to a much smaller number to be considered for prosecution.
The Office was unable to find a breach in 161 cases, while another 125 were identified as matters that were not within the regulatory mandate of the Companies Office.
Of the 754 remaining matters, the Office worked to achieve compliance in 255 cases by working with companies found in breach.
A further 170 companies were considered for director prohibition, and 128 complaints were not progressed due to companies being placed into liquidation, 42 cases were closed due to insufficient evidence and eight were withdrawn by the complainant.
It is only at this stage that the Office considers potential action — potentially prosecution, alongside other sanctions including formal warnings, or cancelling an entities registration at the Office. A full investigation was carried out into 151 matters to determine whether serious breaches of the Companies Act had occurred.
The Office’s guidelines set quite a high bar for prosecution. It considers factors such as the seriousness of offending, the extent to which it constitutes an abuse of corporate structure, and the history of offending.
The Office also said it considers cost to be a relevant factor.
In the end, 48 charges were laid against 11 people last year, although a number of investigations remain ongoing. In addition, nine individuals were convicted during the year in relation to charges laid in previous years.
One case, revealed by Newsroom last year showed companies owned by the Optimus Group, a Japanese holding company, had misled the Companies Office about their ownership for more than a year.
The case triggered NZTA to review its conflict of interest rules, but the Companies Office told Newsroom in November that there was no public interest in prosecution of breaches of the Companies Act.
“Enforcement action (including prosecution) for possible offending would only be taken after an assessment of various factors, including whether a prosecution would be in the wider public interest,” it said in a statement.
The Companies Office also expects declarations of ownership to be truthful. A false declaration, If proven, can be punishable with a prison term of up to five years or a maximum fine of $200,000.
Commerce Minister Kris Faafoi said the Office was guided “by its enforcement policy which aims to achieve compliance rather than penalising”
“As Minister I do not have details on the cases referred to, but I understand the approach towards compliance is consistent with the Solicitor-General’s guidelines and it seems sensible and appropriate to focus on the most serious breaches,” he said.
National’s Commerce spokesperson Brett Hudson said that it was incumbent on the Government to ensure regulations were fit for purpose.
“They should create incentive for people to build and grow a business but also provide protection for all. We’ve got to be ever watchful that we get it right, as best we can, and not compromising the consumer or the business,” he said.
The Companies Office told Newsroom its enforcement policy guidelines were focused firstly on seeking to achieve compliance by individuals with their statutory obligations, “rather than seeking to penalise them for any and every breach”.