Before incorporating your company in New Zealand, you may want a trusted local provider to look at your business. An entity health check in New Zealand is a vital tool for understanding a company’s status in the eyes of the government. Mitigate risk and ensure full corporate compliance for your company through an entity health check in New Zealand, whether that’s fiscal or legal.
Key Takeaways
| Types of entity health check in New Zealand | There are two main types of entity health checks. They typically focus on either the fiscal or legal condition of the company. |
| Reasons for an entity health check in New Zealand | To enable executives to know how the business is being managed To reduce risks of penalties and negative reputation To reduce transaction risks |
| Necessity of entity health checks in New Zealand | It is not a legal necessity in of itself, but it will help you make sure you are staying compliant. |
| Who conducts an entity health check in New Zealand | It should be done by a fully independent auditor to ensure total neutrality. The auditor should also be well aware of company law in New Zealand. |
What is an entity health check in New Zealand?
An entity health check is a review of a company’s overall fiscal and legal condition. Usually, an independent auditor will carry out an entity health check on a company. These can also often be referred to as ‘corporate health checks.’
The auditor’s goal is to get an overall picture of the company’s corporate compliance status in New Zealand. This means examining legal documents and financial transactions, plus payroll and other employment records, and any applicable licensing documents the company uses to operate. These records are checked against New Zealand corporate regulations and the requirements of the individual agencies responsible for administering them.
The purpose of checking the legal and fiscal conditions of a company is to understand whether there are any non-compliance issues that prospective investors should be aware of before incorporating that company.
Why is it important?
It’s important to get an entity health check in New Zealand, as it means giving yourself peace of mind before investing in a company. Get a picture of the company’s ‘health’ in the eyes of the government, so you know if you need to take action to ensure it meets all local corporate compliance requirements. Once you’ve achieved this, you can operate commercially in New Zealand with confidence and certainty that everything is above board.
If you incorporate a company before undertaking an entity health check in New Zealand, you put yourself at risk of financial penalty and reputational fallout. You won’t necessarily know about the company’s status according to agencies like the Inland Revenue Department, New Zealand’s local tax authorities. Running a company that is not compliant with corporate legal and tax requirements could result in costly fines, and loss of credibility to your consumers.
Save yourself from any future mishaps or penalties by knowing the exact status or ‘health’ of a company, and work with a professional to ensure you meet all corporate compliance requirements in New Zealand before operating.
When should I get an entity health check?
Ideally, you’ll want to get an entity health check in New Zealand before you begin the process of incorporating the company. You shouldn’t wait until you are already operational and carrying out commercial activities to do this step; you don’t want to risk finding out about a potential entity health issue too late.
Knowing status of a company after an entity health check in New Zealand empowers you to make the right decisions for your company, and start off on the right foot in the country’s thriving business climate.
Entity health check types
There are two main types of entity health checks. They typically focus on either the fiscal or legal condition of the company.
Legal health checks
The legal health check focuses on reviews of commercial contracts, employment contracts, industry-specific regulations, and intellectual property protection. The industry your business operates within is also an important element for auditors to consider when conducting a legal entity health check in New Zealand.
Particular industries carry additional and strict regulations that businesses must comply with; it’s important to know that your business is adhering to any additional industry-specific regulations.
Fiscal health checks
A fiscal entity health check will ensure that your accounts, social security payments, and taxes are consistent with regulations and give you information that will be valuable for your future choices and strategies.
How does this check fit in with corporate compliance in New Zealand?
New Zealand’s government sets a number of legislative requirements to do business in the country. Though getting an entity health check in New Zealand is highly recommended, it’s not compulsory.
However, there are several specific corporate legal and accounting compliance requisites in New Zealand that you must ensure your company adheres to. You can use the entity health check as a tool to protect your company from any gaps in your overall compliance with local law.
This includes:
- having a registered office in the country
- a minimum of one shareholder with a share capital of NZ$1, and one director residing in either Australia or New Zealand
- holding annual meetings for shareholders
- public disclosure of financial statements if income exceeds NZ$60 million, or NZ$30 million over two consecutive accounting periods
- paying corporate, payroll, goods and services, and other taxes.
FAQs on an entity health check in New Zealand
1. Why should you get an entity health check?
The main advantages of conducting an entity health check include:
To enable executives to know how the business is being managed
To reduce risks of penalties and negative reputation
To reduce transaction risks
2. What steps are there to an entity health check?
Carrying out a successful entity health check involves the following 3 key steps:
1. Information collection
When carrying out an entity health check, a large amount of information will have to be gathered. This will include collecting data from your company’s operations, legal, accounting, and administrative departments.
Note that a best practice many companies are adopting is the creation of a compliance or audit department, in charge of centralizing important company information, which eases this first step.
2. Information validation
Once gathered, the information goes through a validation process. In this step, an entity health check agent will review all the data and documents obtained, cross-reference it against primary sources where necessary, and otherwise seek to prove the veracity of all records being audited.
3. Record Keeping
Records of all the documents and evaluations made during your entity health check will not only be valuable for presenting to tax authorities in case of an inspection, but also during future entity health checks. In some cases, keeping such records is a legal obligation, due to laws desiged to prevent money laundering.
3. What happens in an entity health check?
Generally, an entity health check includes:
Evaluation of finances, social security payments, and other fiscal obligations
Examination and review of contracts signed with third parties
Review of corporate and accounting books
Review of monthly tax returns and tax statements
Review of upcoming renewals of certificates and policies
Preparation of financial statements
Review of balance sheets submitted at the closure of the fiscal period
4. Who can perform an entity health check in New Zealand?
It should be done by a fully independent auditor to ensure total neutrality and make sure everything is in accordance with the authorities.
Be confident doing business in New Zealand
New Zealand is renowned for its status as the easiest place to do business in the world, besting 189 other countries on the World Bank Group’s Doing Business Rankings.
New Zealand offers short wait times to start your business, straightforward company formation and corporate compliance requirements and ample institutional support to ensure your business has what it needs to succeed locally.
Start off on the right foot, and protect yourself financially by first investing in an entity health check in New Zealand for your company. This will bring you certainty and crucial information on how to proceed with your business expansion into the country.
Get an entity health check in New Zealand with Biz Latin Hub
Getting an entity health check in New Zealand means protecting yourself and mitigating risk when incorporating a business. Take the time to start your expansion the right way. Engage with trusted local professionals who will ensure you can make informed decisions about your new company and your corporate compliance obligations.
At Biz Latin Hub, our team of local and expatriate professionals offers a range of legal, accounting and human resource services. We are a single point of contact for ensuring your successful company incorporation and market entry in New Zealand.
Reach out to us today for personalized support and information about entity health checks in New Zealand.
Learn more about our team and expert authors.
