Companies Office urged to use surplus to sue directors

By Nick Stride

Friday 10th October 2003

The Companies Office has built up a $25 million surplus and plans to return it to users over 10 years by further cutting fees.

But a senior securities law specialist says the money would be better spent prosecuting delinquent company directors.

Simon McArley, a partner at law firm Kensington Swan, says the suggestion has been made to the office on several occasions.

The office's group manager of business registries, Justin Hygate, said the terms of an agreement with the Treasury stipulated the money must be returned to the "community" that is, users that provided it.

In that case, McArley said, the agreement should be renegotiated.

Hygate said the money could be used for things other than fee reductions if the office put up a business case to the Treasury to support them.

"It could be argued prosecuting directors is a way of 'returning the money to the community that provided it'," he said.

The surplus, held in a "memorandum account," has accumulated because falling costs have outstripped the revenue effects of fee cuts to date.

Costs have fallen partly because of the enthusiastic uptake of the internet as a means of registering companies, providing statutory information, and searching companies' records.

The charge for a paper-based company search, for instance, had been $10 for many years.

When records were made available online three years ago, the online search fee was $4 and that has now been cut to $2.

"It's something of a double-edged sword," Hygate said.

"The more we reduce fees, the more we stimulate use of the service."

The office's biggest revenue earner, annual returns, has seen the paper fee slashed from $100 minimum 10 years ago to $30 today.

The online fee is $15.

Hygate said this year's revised fee structure was scheduled to take effect in December, pending cabinet approval. It would involve a further significant cut in annual return fees.

The office's figures to 2002 show dramatic growth in the number of companies, and in company searches.

Name approvals rose from 39,078 in 1994 to 69,645 last year.

Incorporations rose from 19,425 to 42,976 over the same period, and annual returns from 147,154 to 222,558.

Most name approvals (90%), incorporations (90%), and company searches (96%) are now done online.

The percentage for online annual returns, 57%, is much lower, perhaps because of the number of very small businesses involved.

The number of company searches has more than trebled in the past six years, from 130,390 in 1994 to 394,274 last year.

The online search service was introduced in 1997, attracting 25% of searches that year.

That percentage has now risen to 96%.

A few diehards are still paying their $10 and searching the paper files.

A new service, G2B (government to business), attracted 26,345 searches in 2000, 20,956 in 2001 and 23,177 in 2002.

The government promoted the Companies Office online search service in 1997, and other online services in government departments, as a part of an e-commerce revolution in the public sector and a way of cutting business' compliance costs.

New Zealand leads many countries, including the UK, in the provision of state online services, though the cost savings to users are not always as promised.

E-commerce has been discretely dropped from the government lexicon.

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