3.54 The Crown has an ownership interest in a range of companies in the public sector.
3.55 Companies that are wholly or majority owned by the Crown are usually (although not always) subject to a statutory accountability regime, such as Crown entity companies, companies listed on Schedule 4A of the Public Finance Act 1989, state-owned enterprises, and mixed-ownership model companies. For all such regimes, the Crown's interest is held through two shareholding Ministers—the Minister of Finance and one other.
3.56 All companies are bound by the provisions of the Companies Act 1993. Each company has a board of directors, which has responsibility for running the business. The board of directors is accountable to the shareholding Ministers for the company's performance.
3.57 The relationship between Ministers and companies in the public sector differs from the relationship between Ministers and agencies in the public service. Although the nature of the relationship with a particular company will vary, some general principles are common to all.
- Focus on policy, not operations: As in all areas of their portfolio responsibilities, Ministers should focus on government policy rather than day-to-day operations.
- No product endorsement: Ministers should not endorse any product or service offered by a company in the public sector (see paragraphs 2.106 - 2.108).
- Avoidance of conflict between public duty and personal interests: As in all areas of their portfolio responsibilities, Ministers should take care to ensure that no conflict exists or appears to exist between their public duty and their personal interests (see paragraphs 2.59 - 2.76).
- Careful use of information: Information relating to companies that are listed on the New Zealand stock exchange (NZX) and NZX Debt Market (NZDX) must be treated with particular care to avoid breaches of the insider trading regime (see paragraphs 8.14 - 8.16).
3.58 The applicable monitoring department (usually the Treasury) provides the government with advice to enable the shareholding Ministers to hold boards of Crown-owned companies accountable for their performance.
Crown entity companies and Public Finance Act 1989 Schedule 4A companies
3.59 Crown entity companies are 100 percent owned by the Crown. Public Finance Act 1989 Schedule 4A companies must be more than 50 percent (and can be up to 100 percent) owned by the Crown.
3.60 The expectations of Crown entity companies and Public Finance Act 1989 Schedule 4A companies vary in accordance with their constitution, strategic direction, and performance expectations. Crown entity companies are subject to the accountability regime set out in the Crown Entities Act 2004. Public Finance Act 1989 Schedule 4A companies are subject to Part 5AAA of the Public Finance Act 1989, which applies select provisions of the Crown Entities Act 2004 to all Public Finance Act 1989 Schedule 4A companies as though they were Crown entity companies.
3.61 The role of the shareholding Ministers is prescribed in the Crown Entities Act 2004 (in the case of Public Finance Act 1989 Schedule 4A companies, to the extent applicable). Their functions include:
- appointing directors;
- if applicable, approving the exercise of key financial powers (such as lending, borrowing, and guarantees) and directing payment of surpluses;
- reviewing the company's operations and performance and requesting information;
- monitoring performance; and
- participating in the process of setting the company's strategic direction and performance expectations, and presenting them to the House.
3.62 State-owned enterprises are 100 percent owned by the Crown. All state-owned enterprises are required by the State-Owned Enterprises Act 1986 to operate as successful businesses.
3.63 The role of the shareholding Ministers is prescribed in the State-Owned Enterprises Act 1986. Their functions include:
- appointing directors; and
- presenting to the House the state-owned enterprise's statement of corporate intent and annual report.
3.64 Most state-owned enterprises are subject to ministerial direction as to certain aspects of the content of the company's statement of corporate intent and the amount of dividend payable, in accordance with section 13 of the State-Owned Enterprises Act 1986.
Mixed-ownership model companies
3.65 The mixed-ownership model allows for ownership by the Crown and minority shareholders. The Crown must retain at least a 51 percent shareholding and no other party may own more than 10 percent of the shares.
3.66 Unlike Crown entity companies, Public Finance Act 1989 Schedule 4A companies, and state-owned enterprises, mixed-ownership model companies are publicly listed on a registered market.
3.67 The publicly listed companies are bound by the provisions of the Companies Act 1993 and NZX rules.
3.68 The shareholding Ministers have the role of a shareholder of a publicly listed company. As the Crown is the majority shareholder, the Crown's vote determines the outcomes of resolutions on matters such as director appointments. The Minister of Finance must approve the board's choice of chair. Unlike other statutory regimes for Crown-owned companies, shareholding Ministers have no formal powers to issue ministerial directions to the listed companies.