Implementation in the NZ legal system

I'm posting my notes on some of legal issues of setting up a Fairshares Coop in NZ. We're seeking legal advice and I will post it here and discuss some of the implications for offering users a shareholding. Perhaps others will find this useful. [Work in progess]

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Fairshares companies in the UK may be registered as a Company, Cooperative, or Association. New Zealand make similar legal distinctions but a Fairshares implementation in NZ would seem to have less flexibility. In addition share offers (of any sort) have become tightly regulated in NZ since 2008.

The relevant acts are:
- The Companies Act, 1993,
- The Cooperative Companies Act, 1996
- The Incorporated Societies Act, 1908.

Companies registered under the Companies Act 1993 with 50 or more shareholders become a Financial Markets Conduct (FMC) reporting entity link. FMC entites have financial reporting and auditing requirements beyond the reasonable reach of startups and small businesses. Companies have to create a fully fledged fledged Product Disclosure Statement. This is designed to protect retail investors in public offers of shares.

Companies who wish to become cooperatives can additionally register under the Cooperatives Act. New Zealand has many large producer cooperatives (Fonterra, supermarket chains, kiwifruit growers), some consumer cooperatives, but only one(!) worker cooperative (Loomio). The cooperatives act grants companies the power to issue shares of a nominal value, and also requires transacting shareholders to hold at least 60% of voting rights.

Incorporated Societies cannot distribute money to their members and are probably not suited to Fairshares.

The 50 shareholder limit applies to both Companies and Cooperatives and would appear to limit any Fairshares implementation to a small scale.

However, Cooperative Business NZ has pointed ou that these requirements are onerous for small cooperatives that seek membership greater than 50 shareholders. Cooperative shareholders typically have greater involvement in the business and receive other benefits other than financial stakeholding greater than the value of their shares.

In response Financial Markets Authority has recently (December, 2016) advised that for companies registered under the cooperatives act where:

• each individual shareholder invests less than $5000 in total,
• or the cooperative has less than $2 million in revenue

shall be exempt from some the FMC requirements.

These conditions for exemption would seem to apply to Accreditron.
I'll follow up with some implications for share offers and update this thread with the advice we receive.