relatives or close business associates "of the issuer". We have seen a number of cases where people purport to rely on this exception by virtue of the relationship between the promoter and offeree, instead of the issuer and the offeree. The term close business associate has been considered by the Court of Appeal in the case of Securities Commission v Kiwi Cooperative Dairies Ltd [1995] 3NZLR 26. The Court concluded that each of the persons receiving the offer should be on intimate business terms with the person making the offer otherwise the exception cannot be relied on. A factor to be considered is whether the offeree knows, or is readily able to ascertain, the up to date financial circumstances of the offeror. The courts have imposed an evidential burden on issuers to show that one of the exceptions in section 3(2) of the Act applies when relied upon. This appears to require issuers to maintain records that enable them to demonstrate that the characteristics and circumstances of all the parties to whom securities were offered properly fell within the terms of the relevant exception. Specialist legal advice is likely to be required to enable an issuer to be aware of the requisite characteristics and circumstances and related evidence. Commission exemption summaries To assist issuers and their advisers, and to inform the public generally, we publish on www.seccom.govt.nz a summary of each exemption granted by the Commission. Each exemption summary is written in business language and describes the effects of the exemption; the context or background to the exemption; the sections of the Securities Act and or the Securities Regulations from which the exemption is granted; and the conditions that apply to the person using the exemption. Usually the conditions aim to ensure that the prospective investor is given information equivalent or similar to information they would receive if the offer was made under the full law. As well, each summary includes a statement of the Commission's reasons for granting the exemption. This aims to demonstrate the Commission's thinking and how it uses its exemption power to address rigidities in the law to enable a variety of investment opportunities for New Zealand investors. Exemptions also aim to reduce costs for issuers where appropriate. Exemption summaries remain on the website even after the exemption notice has expired as an archive of exemptions granted. Exemption notices A list of all exemptions currently in force is also published on www.seccom.govt.nz/notices. When the relevant exemption summary is also available it is linked from the exemption notice on the list. The full texts of exemption notices are published on www.legislation.govt.nz in the Statutory Regulations list. Developing corporate governance principles for New Zealand We received 169 written responses to our public consultation on corporate governance principles for New Zealand. Responses came from a wide range of entities including listed and unlisted companies, co-operative companies, government entities, as well as professional advisers and a variety of associations and interested parties. Commission Members chaired discussion groups with people from the business communities in Christchurch, Wellington, Hamilton and Auckland during October and November. These were very useful in providing opinions from people directly involved in the securities markets. "We are very pleased with the thoughtfulness that has gone into this consultation," Chairman Jane Diplock said. "It shows that New Zealand takes corporate governance seriously." The aim of the project is to identify principles of corporate governance that are important and appropriate for New Zealand and which are in line with international best practice. We will report to the Minister of Commerce on principles and practices of corporate governance that the Commission advocates as appropriate for New Zealand. It will take into account the views gained from the consultation as well as international best practice. The report will include the areas of consensus and areas of disagreement that have emerged from the consultation process. We trust this work will be useful for all types of entity in New Zealand that have an economic impact on the markets and on the economy. Adopting the principles and applying the best practices will enable New Zealand to be seen to be aligned with overseas countries and help build confidence in our securities markets. We had aimed to publish our report before Christmas but to do justice to the very large number of considered responses to the questionnaire and consultation process we are taking more time to complete the work. The Commission's report on corporate governance principles for New Zealand will be delivered to the Minister of Commerce by 16 February 2004.

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THE BULLETIN January 2004

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