People that have gained more than 50 shareholders through small offers under Schedule 1 of the FMC Act
NOTE: We cannot exempt businesses from being an FMC reporting entity, but we can vary their reporting obligations using our exemption and public accountability designation power. See our exemptions section for more details.
All FMC reporting entities must prepare their financial statements in line with the requirements in Part 7 of the FMC Act.
As an FMC reporting entity, you must do all of the following:
keep proper accounting records to help you prepare compliant financial statements — records must be kept in English and a copy must be kept in NZ
prepare financial statements for your group's operations — those financial statements must comply with generally accepted accounting practice in NZ
have your financial statements audited by a licensed auditor or registered audit firm
lodge your financial statements and the auditor’s report on them with the Companies Office within 4 months after your balance date.
If you are an FMC reporting entity at any point during an accounting period, you are required to comply with these requirements for the full accounting period. Many of the requirements for FMC reporting entities are similar to those for issuers under the Financial Reporting Act 1993. Some of those key changes are:
Under Financial Reporting Act
Under Financial Markets Conduct Act
Entities with subsidiaries
Have to prepare both parent entity and group financial statements.
Do not have to prepare parent entity financial statements if they have subsidiaries – they will only need to prepare financial statements for their group.
5 months for preparation and audit with an additional 20 working days for lodgement.
4 months for preparation, audit and lodgement.
Overseas companies use of GAAP
Allowed to use financial statements prepared under overseas GAAP if considered equivalent to NZ GAAP by the Companies Registrar.
Not allowed to use financial statements prepared under overseas GAAP – unless specified in an exemption notice.
Public accountability designation
All issuers are considered are publicly accountable and must report using full NZ GAAP eg, NZ IFRS.
FMC reporting entities will be designated as having higher public accountability or not. Those that do not have higher public accountability may be able to report using reduced disclosure standards.
Managers of one or more registered schemes
If you are a manager of one or more registered schemes, you will also need to prepare, have audited and lodge financial statements:
for each scheme and
for each separate funds within each scheme.
Overseas companies that are FMC reporting entities
If you are a company incorporated outside New Zealand, you will also need to prepare, have audited and lodge financial statements for your New Zealand business (if any) that complies with generally accepted accounting practice in New Zealand.
Exemptions and public accountability variations
We can vary the reporting obligations of FMC reporting entities using exemption notices and our public accountability variation power. For example, we have put in place exemptions that provide for:
certain overseas FMC reporting entities to use their overseas financial statements in place of NZ GAAP
We cannot exempt businesses from being an FMC reporting entity, but we can vary their reporting obligations using our exemption and public accountability designation power. See our exemptions section for more details.
Note: 'voting products' is a defined term and includes ordinary shares and certain products that are convertible to ordinary shares.
This means issuers of non-voting equity products won’t be able to take advantage of the statutory exemption under the FMC Act, even if they were able to use it under the Financial Reporting Act 1993.
The 50-shareholder or parcels-of-shares rules are consistent with the Takeovers Code. The Takeovers Panel’s Guidance Note on Small Code Companies is useful to help how to count shareholders for this purpose.
Small personal offers
There are exclusions under Schedule 1 of the FMC Act that allow some offers to be made without having to provide all the usual documentation required, ie product disclosure statements.
One of those exclusions is for small personal offers of debt and equity - see clause 12 of Schedule 1. It allows you to make small offers over a 12-month period that can, in total, involve up to 20 investors and raise up to $2 million without having to produce full documentation. Any offer that would result in you exceeding either or both those limits requires full documentation under part 3 of the FMC Act.
If, over several 12-month periods, you gain more than 50 shareholders from small offers, you'll become a FMC reporting entity.
Companies that raise capital through a licensed crowdfunding platform, relying on clause 6 of Schedule 1, are not considered FMC reporting entities. This is because the offer is not considered a ‘regulated offer’ under the FMC Act. Therefore, these companies will be subject to the financial reporting requirements under the Companies Act 1993.
One-person superannuation schemes
Under Schedule 3 of the FMC Act we are allowed to approve single-person self-managed superannuation schemes that meet certain criteria (Schedule 3 Schemes).
These schemes are not FMC reporting entities therefore Part 7 does not apply. However, regulation 113 of the FMC Regulations requires these schemes to prepare financial statements that comply with generally accepted accounting practice and send a copy of these to the FMA.
To comply with this, we believe that NZ IAS 26 still applies including paragraph 1.5. Accordingly, we accept special purpose financial statements. The exact content of these is not prescribed and therefore is at the discretion of the trustees. We suggest special purpose financial statements include a profit and loss, balance sheet and cash flow statement, as well as appropriate accounting policies and notes that reflect the investments of the scheme.
Retirement village operators are not FMC reporting entities. The financial reporting obligations for retirement villages can be found in the Retirement Villages Act 2003.