Transparency New Zealand

Open letter and Official Information act request to Paul Goldsmith

Muse on Allen limited lack of compliance with the companies act.

On 19 August you responded to my letter dated 9 July 2015 in which I raised concerns with regards to enforcement of the companies act.

In that letter I had asked for a ministerial enquiry into the abuse of the companies act legislation. a copy of that letter which was addressed to Craig Foss and passed to you as responsible minister  can be  found here Abuse of Companies act – Muse on Allen Limited- request for ministerial investigation

There are several  matters  which  I believe may have been overlooked  and which are of significance they are

1. That there are some 30   serious  offences disclosed  as  listed here
2. The penalties range from $5,000  fine to 5 years imprisonment
3. There are four offenders not including the company.
4. The company is currently before liquidation court
5. The civil action which was commenced by the lawyers of Jozsef Szekely is under section 174 of the act and does not include any of the offences which I have provided evidence for.
6. The directors of the company have taken over the company without any legal right and have removed Jozsef’s shareholding contrary to law.
7. The court action commenced in 2012 is now into its third year and a hearing date of April 2016 is expected.  This is estimated to cost Jozsef a further $42,000 he has already incurred costs of over $50,000…..affordable, quick.. definitely no to both

By way of OIA could you please advise

1. How action under section 174 of the companies act Prejudiced shareholders could possibly have any relevance to the offences which have been identified.
2. The Muse on Allen matter proves that he who holds the company key controls the company and can make changes to the register with total disregard to the requirements of the companies act.    How is this not a “a reputational threat to the New Zealand corporate registration system.”
3. In the case of Muse on Allen there are gross inaccuracies of the companies register , on what basis  does the registrar believe that these inaccuracies are not a “a material risk of financial or other loss or harm to users of the register “  the inaccuracies have been there since  August 2012  they are
   1. 17 Aug 2012 Debbie North appointed herself as Director and back dated this to the date of formation of the company. The reality is that she was appointed only as alternate director.  While there Is no provision in the act for this many companies overcome this by inserting the words alternate for alongside the name.
   2. 19 Dec 2012 Samuel North transfers shares into his own name  reducing the shareholding  of Jozsef Szekely  to 49%  in direct contradiction to the companies  accounts  and without the  required compliance with  the
   3. 09 Jan 2013 Malcolm North is appointed as director this is done using the alternate directors vote alongside the director she is alternate for. This appointment is therefore contrary to the provisions of the act.
   4. 11 Jan 2013 Samuel North removes Jozsef as a director he was voted off by the alternate director and the director who was not lawfully appointed when the three , all family members had a late night meeting in their home.
   5. 20 Feb 2013 Samuel North changes the registered address of the company to his home address.
   6. 24 Feb 2013 Samuel North transfers the remaining shares into his own name and becomes the 100% shareholder of the company. Company records at the time show that there are two shareholders Jozsef with $64,118 equity and Samuel with $5,235.    The on line shareholding continues to show that there is just one share holder.
   7. 21 Oct 2013 the annual return is filed  and incorrectly  records the shareholding  showing  100% of the shares owned by Samuel North .
   8. In January 2014 a statement of defence is filed and claims that “The Companies Office records stating otherwise are in error, and that the plaintiff remains a shareholder in the Company,” the annual return is filed 09 Oct 2014 and despite claiming that there had been an error in the shareholding no correction has been made. The company accounts now show that there is only  one shareholder with paid up equity, this is  Jozsef with $64,118  while Samuel has a deficit of $6420
4. It stands to reason that when shareholders and directors have not been appointed according to the act that everything done from the point of the first breaches of the act impact on the  entire  integrity of the company . The company has a number of PPSR’s against it and is currently in liquidation court. Those  who  have security interests in the company  have relied upon the falsehoods in the register in lodging those security interests . Do those  who provide a ppsr to a company have any right   of confidence in knowing that  what is on the register reflects reality.
5. I have looked at your policy and it states “In order to maintain and enhance our international reputation, the Companies Office recognises that a well-regulated corporate registration system must be not only simple and cost-effective– the information that it contains must also be seen to have integrity, and to be accurate and reliable “  The  information with regards to Muse on Allen  has no integrity, is not reliable  or accurate , I can see how it is cost effective  for  the government but I cannot see how  spending  nearly $100,000 in court action   hell bent on delay  is   at all cost effective for Jozsef   Please advise   whether the cost effectiveness and simplicity  is  for the users of the companies register or for the  government.
6. With regards to Muse on Allen the lawyer for the company Abricossow , refuses to seek a correction of the register despite the acknowledged error. The registrar will not intervene. It is therefore apparent that acknowledged error remains on the company record without amendment and without consequence .  Does this not implicate the registrar in allowing inaccuracies to remain on the records?  Does this not conflict with policy? What rights does the registrar have to ignore policy ? how long can an error remain before it is deliberate ?
7. There can be no doubt that those who are holding themselves out to be directors of Muse on Allen have abused the privileges of corporate structure.  It is not Jozsef’s fault that his lawyers unwisely sought to take court action in which he is now trapped. Due to non-compliance  with the  companies act Jozsef has   suffered significant  financial losses  please advise why this matter does not come under  section 19 of  your guidelines and what  your definition of serious financial loss is and  is this  ” significant  financial loss in any way  related to a persons income or are we looking at figures which   only the very rich   could  lose.
8. We have not received a response from the registrar on  our latest complaint  please provide a copy of all correspondence from the registrar   showing the decision in terms of  section 22 of the guide lines as to why this matter should not be prosecuted.
9. Under the prosecution guide lines http://www.crownlaw.govt.nz/uploads/prosecution_guidelines_2013.pdf  you state that he registrar should note that before considering enforcement action the Registrar would need to be satisfied that the offending was serious andimpacted on the ability of the register to perform its purpose;
   1. poses a serious risk of financial or other loss or harm;
   2. poses a reputational threat to the New Zealand corporate registration system;
   3. was premeditated or undertaken for the purposes of dishonest or improper gain;
   4. was likely to be repeated; and/ or
   5. was undertaken by an offender with a previous history of serious offending or persistent non-compliance.

On the evidence I have provided it would appear that the offending of  the directors of Muse on Allen tick all these boxes , please advise why   enforcement action will not be taken .

10. You state in your letter “It is unlikely that enforcement action would be taken where non-compliance is technical, where (as in Mr Szekely’s case) civil actions or other alternatives to prosecution are available to remedy harm or where prosecution would not be likely to attract a material penalty. Enforcement action would also be unlikely where compliance has already been achieved.”
    1. Please advise if this matter  is considered “ technical noncompliance “ and  provide a definition of  what “ technical noncompliance “ is
    2. What type of matters would not have a  civil  or other alternative , it would appear that  all matters  have  a civil  or other alternative.
    3. Where in the policy and  or the prosecution guidelines  is there a reference to “material penalty” does this mean that  the registrar will not prosecute any matters where imprisonment is likely ?
    4. With regards to enforcement action where compliance has already been achieve   does this mean that  a company like Muse on Allen  can blatantly breach the companies  act    and  comply   only  at the 11^th hour  and the by prevent prosecution  . if this is the case could the minister   please also see that this is applied to speeding , parking      Please advise why enforcement of the companies act legislation should not be on a par with the enforcement of speeding and parking offences.

I am certain that the news media, chamber of commerce, accountant and the public in general will be interested in your response.  It is for that reason that I will be publishing my request and   your response.

The matter of Muse on Allen is   well investigated, the evidence is there the offences are   blatant and repeated   and it appears that the victim has to endure years of civil litigation which he cannot afford and all the while the offending continues and the  register remains inaccurate.

Please also advise if you will be conducting a ministerial   enquiry into this matter as it reflects on the integrity of new Zealand companies and he register and is proof that the system   is unsafe.

As a former police officer I firmly believe that compliance is only a reality when the   prosecution is real and expected and the penalty outweighs the advantages of the offending.

It appears that   the registrars  policies are more in line with  economics  than they are with  serious  enforcement and ensuring  integrity  and it makes our companies  registrar  totally unsafe.

Grace Haden