The paper therefore concludes that New Zealand's current law is inadequate to meet the needs of closely-held companies and proposes changes to the existing law. The paper argues that the issueswould be best addressed by a new statute designed to meet the needs of closely-held companies. Itconsiders the general principles that may inform the design of such a statute, and makes specificdesign recommendations for the new statute. In the tradition of the Law Commission's proposals forcompany law reform,
the paper also sets out possible draft clauses for the new statute. Therecommendations for reform are based on this paper's empirical findings and identified issues. Thepaper is also influenced by comparative international precedent, particularly that of South Africa
and the United States.
II CLOSELY-HELD COMPANIES IN NEW ZEALAND
This section of the paper analyses the nature of companies in New Zealand. In particular, itfocuses on the ownership structure of New Zealand companies to attempt to determine theproportion that are "closely-held". For the purposes of this paper, a company is considered "closely-held" if its owners (shareholders) are involved in, or close to (for example, through family ties), themanagement of that company.
A Number of Closely-Held Companies
There are no direct statistics available on the exact number of companies with shareholdersinvolved in management. The Small Business Advisory Group however, considers that the "typical"small and medium-sized enterprise will "have the owner as the only person in a managerial position,and no board or formal governance arrangements".
Referencing the figures for small and medium-sized businesses, some 96 per cent of New Zealand businesses fit within this category.
New Zealand Law Commission
Company Law: Reform and Restatement
(NZLC R9, Wellington, 1989),paras 5-7 ["Law Commission Company Law Report"].
Close Corporations Act 1984 (ZA).
This paper uses the examples of the Wyoming Limited Liability Company Act, Wyo Stat title 17, chapter 15(1977), and the National Conference of Commissioners on Uniform State Laws
Uniform Limited LiabilityCompany Act
(National Conference of Commissioners on Uniform State Laws, Chicago, Illinois, 1996)http://www.nccusl.org(accessed 15 July 2006) [Uniform Limited Liability Company Act (1996)].
Other factors that may be considered in other contexts include the number of shareholders, lack of a marketfor the shares and even the geographical proximity and relationship of the shareholders with each other –see Baruch Gitlin "When Is Corporation Close, or Closely-Held, Corporation Under Common or StatutoryLaw" (2003) 111 ALR 5th 207, § 2[a].
Small Business Advisory Group
Small and Medium Businesses in New Zealand: Report of the Small Business Advisory Group 2004
(Ministry of Economic Development, Wellington, 2004)http://www.med.govt.nz(accessed 18 August 2006) 3-4. The criteria for small or medium enterprises arenot settled. The New Zealand statistics referenced in this paper primarily rely on the number of full time-equivalent employees, with 5 or less representing a "small" business and 6 to 19 representing a "medium"business – see, in particular, Ministry of Economic Development
SMEs in New Zealand: Structure and