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Types of companies and entities

State-owned enterprises

State-owned enterprises (SOEs) are Crown-owned companies that are expected to be as profitable and efficient as comparable businesses not owned by the Crown. SOEs are also required to be good employers and to exhibit a sense of social responsibility.

SOEs are subject to the State-Owned Enterprises Act 1986 and, as companies, they are subject also to the Companies Act 1993

The one exception is the New Zealand Railways Corporation, a statutory corporation established by its own legislation, the New Zealand Railways Corporation Act 1981. It is an SOE but it is not a company under the Companies Act 1993.

Crown entity companies

Crown entity companies are established and owned by the Crown to further certain policy objectives.

The Treasury provides performance advice on Radio New Zealand Ltd, Television New Zealand Ltd, and Crown Irrigation Investments Ltd.

Crown entity companies are registered as companies and are subject to the Companies Act 1993. They are also subject to relevant provisions of the Crown Entities Act 2004.

Public Finance Act 1989 Schedule 4A companies

Schedule 4A companies are established when the objectives sought (which could be a mixture of social and commercial objectives) might be best supported by joint ownership. The Crown may not own all shares at the start or it may wish to reduce its shareholding in future. An example is City Rail Link Ltd in which the Crown and Auckland Council each have a 50% shareholding.

Companies listed in Schedule 4A of the Public Finance Act 1989 are subject to the Companies Act 1993 and relevant provisions of the Crown Entities Act 2004

Crown research institutes

Crown research institutes (CRIs) are Crown entity companies whose purpose is to undertake scientific research for the benefit of New Zealand. They are required to:

  • ensure that their 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 financial viability.

Unlike SOEs, they are not expected to maximise profit, but to operate in a way that maintains their financial viability.

CRIs are established under the Crown Research Institutes Act 1992, are Crown entity companies under the Crown Entities Act 2004, and are companies subject to the Companies Act 1993.

The Ministry of Business, Innovation and Employment (MBIE) has the primary role for providing performance advice on the CRIs, with the Treasury playing a secondary role.

Statutory entities

Statutory entities have boards but are not companies. Each statutory entity usually has its own establishing legislation that contains entity-specific objectives that could be a mix of social, cultural, public policy, or commercial.

There are three types of statutory entity:

  • Crown agents
  • autonomous Crown entities (ACEs)
  • independent Crown entities (ICEs).

One of the differences between these types is the degree to which they are expected to operate in line with government policy if directed by Ministers. For example:

  • Crown agents must give effect to government policy
  • ACEs must have regard to government policy
  • ICEs are generally independent of government policy.

Ministers appoint board members to Crown agents and ACEs. Some Crown agents such as the district health boards also have publicly elected members. ICE board members are appointed by the Governor-General on the recommendation of Ministers.

Statutory entities can have non-commercial functions or commercial imperatives. For example, the Crown financial institutions have specific responsibilities for the management and investment of Crown financial assets in line with the Crown’s fiscal policy and risk appetite. Their investments are intended to cover future liabilities that may arise, such as earthquake insurance or for forecast future expenditure such as superannuation.

Other companies in which the Crown is a shareholder

The Crown holds shares, but not full ownership, in some other companies.

  • Council-controlled trading organisations

Council-controlled trading organisations are set up by local authorities to undertake activities on their behalf. They are established by the Local Government Act 2002 and, as companies, are subject to the Companies Act 1993.

The Crown owns shares in the airport companies in Christchurch, Dunedin, and Hawke’s Bay that are part-owned by local councils.

The Crown also owns 20% of Local Government Funding Agency Ltd, that provides funding for local authorities.

  • Listed companies

In 2013 the Government introduced the mixed ownership model (MOM) and sold shares to the public in three electricity companies: Genesis Energy Ltd, Meridian Energy Ltd, and Mercury NZ Ltd. The Crown holds 51% of the shares in these companies. No other person may have more than a 10% holding or voting interest in a MOM company.

The Crown also has a majority shareholding of around 52% in Air New Zealand.

 

Last updated: 
Tuesday, 24 March 2020