The corporate governance of SMEs and unlisted companies

This article looks at the corporate governance issues relating to small and medium sized enterprise (SMEs) and unlisted companies in New Zealand and shows how the Companies Act 1993 does not cater well for the SME. It looks at overseas experience and considers optional codes of self regulation and private arrangements which may assist these companies and whether a new legal vehicle is necessary.
In this article I will look first at the concept of corporate governance, and then secondly, the historical development of company laws. I will argue that the current law does not adequately meet the needs of SMEs and unlisted companies. I will then consider thirdly, the development of self-regulation and whether the current Securities Commission's Principles of Corporate Governance meet the needs of such companies or whether there is a need for a further optional code of self-regulation. I will consider fourthly, whether such companies can be the subject of private arrangements to meet their particular needs. Lastly, I will consider the Australian experience, the use of hybrid business models including the new limited partnership and whether a new vehicle such as the South African close corporation is needed for such companies.