State-owned enterprises (SOEs) are Crown-owned companies that operate as commercial businesses. The principal objective of every SOE is to operate as a successful business and, to this end, to be as profitable and efficient as comparable businesses that are not owned by the Crown. SOEs are also required to be good employers and to exhibit a sense of social responsibility.
A list of SOEs and information on the Crown’s financial interest in each SOE is available in the Financial Statements of the Government of New Zealand for the year ended 30 June 2017 in the section: Information on SOEs and Crown Entities.
The one exception to this framework is the New Zealand Railways Corporation [KiwiRail]. KiwiRail is a statutory corporation established by its own legislation, the New Zealand Railways Corporation Act 1981. Although KiwiRail is an SOE and is therefore subject to the State-Owned Enterprises Act 1986, it is not a company under the Companies Act.
Crown Research Institutes (CRIs) are Crown-owned companies, or Crown entity companies, whose principal objective is to carry out scientific research for the benefit of New Zealand. Unlike SOEs, the Crown does not expect CRIs to maximise profit, but do expect them to cover their cost of capital.
The Ministry of Business, Innovation and Employment(MBIE) is the primary monitoring department for CRIs, with the Commercial Operations Group providing a second-opinion role in relation to CRI financial performance. The Commercial Operations group also plays a key role in the board appointments advice process, working alongside MBIE.
Crown Research Institute
The purpose of every CRI is to undertake research. In fulfilling this purpose, CRIs are required to:
- ensure that research is undertaken for the benefit of New Zealand
- pursue excellence in all their activities
- comply with applicable ethical standards
- promote and facilitate the application of the results of research and technological developments
- be a good employer
- exhibit a sense of social responsibility, and
- maintain their financially viability.
CRIs have been encouraged to take a greater role in commercialising their own research through the establishment of subsidiaries and joint ventures. CRIs are not fully commercial but need to ensure appropriate commercial disciplines are applied while their scientific purposes are fulfilled. As Crown entity companies, ownership must remain 100% with the Crown.
CRIs are established by the Crown Research Act 1992, are Crown entity companies under the Crown Entities Act 2004 and are registered as companies and are bound by the provisions of the Companies Act 1993. Not all the provisions of the Crown Entities Act 2004 apply to CRIs.
Crown Financial Institutions
Crown Financial Institutions (CFIs) are entities that have specific responsibilities relating to the management and investment of significant Crown financial assets.
Currently there are five CFIs:
- the New Zealand Superannuation Fund (NZSF),
- the Government Superannuation Fund Authority (GSF),
- the investments of the Earthquake Commission (EQC),
- the investments of the Accident Compensation Corporation (ACC) which are all statutory Crown entities, and
- the National Provident Fund (NPF), which is not a Crown Entity and has its own legislation.
A CFI’s financial assets are held to pre-fund future expenditure, either for specific liabilities (GSF, NPF, EQC and ACC) or expected future expenditure (NZSF).
All the CFIs have individual establishing legislation and the statutory Crown entities are all subject to Crown Entities Act 2004.
Half-Yearly Monitoring Reports
The Treasury releases half-yearly reports on the performance of CFIs.
The Ministry of Business, Innovation and Employment (MBIE) is the primary monitoring department for ACC.
Crown-owned entity companies
Other Crown-owned companies - companies that are not state-owned enterprises or Crown Research Institutes - are generally established by the Crown to further certain policy objectives.
The objectives are entity-specific and can be a mix of social, cultural, public policy and commercial goals. This entity form is used where the context or environment in which a function is to be undertaken is not fully commercial or the entity undertaking a function has mixed objectives.
We split this group into two sub categories:
- other Crown entity companies; and
- companies listed on the Public Finance Act 1989 Schedule 4A.
Other Crown entity companies
Crown entity companies are wholly owned by the Crown; shares may be held only by Ministers. Crown entity companies monitored by the Treasury include the New Zealand Venture Investment Fund, Radio New Zealand, and Television New Zealand.
Companies listed on Schedule 4A of the Public Finance Act 1989
Through the Public Finance Act 1989, some accountability provisions of the Crown Entities Act usually apply. This form of entity is used where the Crown may wish to establish a company other than a state-owned enterprise, but it is not appropriate to establish the entity as a Crown entity company because:
- joint ownership is necessary or desirable as the Crown intends to reduce its shareholding at some stage to somewhere between 50% and 100%; or
- 'materiality' or 'distinctiveness' reasons indicate that a Crown entity company is not feasible or appropriate.
Information on individual Schedule 4A companies is located at Portfolio of Entities: Companies listed on Schedule 4A of the Public Finance Act.
Statutory Crown Entities
Statutory Crown entities are generally established by the Crown to deliver many of the public services of importance to New Zealanders. They are wholly Crown-owned non-company entities with boards, and have been given greater operational freedom than government departments on the principle that services will be more efficiently produced if the entity has discretion within a framework. Each statutory Crown entity usually has its own establishing legislation and falls into one of the five categories of Crown entities subject to the Crown Entities Act 2004. The entity’s establishing legislation contains entity specific objectives. These objectives can contain a mix of social, cultural, public policy and commercial statements. A statutory Crown entity’s establishing legislation can expressly modify or negate provisions of the Crown Entities Act 2004.
There are three types of statutory Crown entities: Crown agents (Agents), autonomous Crown entities (ACEs) and independent Crown entities (ICEs). Each type of entity is subject to different provisions of the Crown Entities Act, depending on how close they are to the government. For example, Agents must give effect to government policy, ACEs must have regard to government policy, but ICEs are not required to give effect to or have regard to government policy. ICE board members are appointed by the Governor-General on the recommendation of the Responsible Minister, while the Responsible Minister appoints board members for Agents and ACEs (excluding any board members who are elected). The process for the removal of board members differs depending on the type of entity, how the person was appointed and who the appointer was.
Statutory Crown entities can have non-commercial functions but some, like those monitored by the Treasury, have commercial imperatives: the New Zealand Superannuation Fund, the Government Superannuation Fund Authority, the Earthquake Commission, the investments of the Accident Compensation Corporation, the Public Trust and the New Zealand Lotteries Commission.
Amongst other things, statutory Crown entities are required to produce an annual Statement of Intent and an Annual Report, both of which are presented to the House of Representatives. Further information and guidance for Crown entities is located at Crown Entities.
Companies the Crown holds shares In
These entities are companies under the Companies Act 1993, where the Crown does not fully own the company. The Crown has chosen to be a shareholder in these companies for various reasons.
Mixed Ownership Model Companies
In 2013 the Government completed share offers for up to 49% of the shares in three electricity companies. This led to the establishment of a new ownership framework, the Mixed Ownership Model (MOM). MOM companies are governed by Part 5A of the Public Finance Act 1989.
Air New Zealand
The Crown has a majority shareholding of around 52% in Air New Zealand, a publicly listed company. Air New Zealand is not subject to Part 5A of the Public Finance Act 1989.
Council-Controlled Trading Organisations
- A council-controlled trading organisation operates with the purpose of making a profit. The level of council ownership is 50% or more, held by either one or more councils.
The Crown owns shares in three airports (Christchurch, Dunedin, Hawke's Bay) which are Council-controlled Trading Organisations.
For further information on Council controlled trading organisations refer to the Local Councils web page.
There are some other entities established by legislation that do not fall into these categories. The Treasury monitors only one of these entities, the National Provident Fund, which is subject to the National Provident Fund Restructuring Act 1990. For the purposes of the Treasury’s monitoring, the National Provident Fund is treated as a Crown Financial Institution.