Well, sorry for the delay in getting this latest newsletter out but 2015 has certainly been frenetic. Covisory has probably been the busiest it has been in many years. Despite the economic doom and gloom that may exist in New Zealand, especially in the rural sector given the demise of dairy payouts, our clients have seen a lot of activity and it has not been limited to any one particular area.
While the Fonterra payout may have come down and it is certainly affecting rural New Zealand, there are some positive signs in tourism, with meat prices firming, forestry showing strong improvement and the Bay of Plenty on a high with the massive rebound that kiwi fruit has seen.
While interest rates remain low, who only knows how long that will be the case. The new norm means that people are more likely to borrow money and invest in productive capacity and we welcome these opportunities for our clients. Many are grasping the opportunity to do things with their business that in the past, higher interest rates or productive constraints, had seen them reluctant to embark upon.
What we have been working on
To start with, it is probably been the busiest 5 months that Covisory has seen in many years. We have seen a wide range of activities and has continued strong economic interest in terms of New Zealander’s doing business outside New Zealand, New Zealander’s doing business within New Zealand and particularly overseas parties coming to New Zealand to do business for the first time.
Some of the examples of things we have been doing include the following:
- Court appointed trusteeship of a major investment trust, meeting with beneficiaries and reviewing investment strategy.
- Negotiating for the sale of an agency business to the principal on behalf of the owners of the agency business.
- Structuring a significant acquisition of Australian commercial property by New Zealand tax resident individuals including the use of look through company structures to eliminate double taxation.
- Reviewing and restructuring international trust and business structures for ex-pat Kiwi now living in Australia.
- Assistance regarding winding up international trust structures for New Zealand and Australian resident beneficiaries under UK inheritance tax structures.
- Managing a number of IRD audits in relation to property transactions, privately owned companies and the IRD cash economy audits.
We continue to work with several families to help them through their succession process. Some of these will see businesses sold to third parties, and the wealth retained within the family and used to grow current and future generations, investments and business activities. In these cases Mum and Dad will help children enter into businesses that may have been different to what Mum and Dad have historically done.
Similarly, we also have several assignments at the moment where we are working with the family and existing management to determine the interest of the children and being involved, their ability and capacity to do so. Through a series of interviews and testing we can determine and predict the likelihood of children to be successful within businesses in the future. From this we can then work with them to grow their ability for both technical (eg engineering, accounting etc) skills or soft skills around people management, leadership and the like. Given sufficient time, they can be “reprogrammed” to become the leader that their parents wanted them to be.
The key to this is to work with the family through the process and to gain an understanding of the individuals and families aspirations, together with the capacity of both the family and existing management within the business. At an extreme, this can involve bringing in a CEO for a period of a few years with a specific view to mind the business between a handover from a parent to a child and to mentor the child into that role. To often it is difficult for Mum or Dad to mentor a child to replace them, whereas the interposition of a interim CEO can often put a very capable third party into that role and give a far more successful outcome.
All family businesses are different so it is always a matter of working out what is the best way to achieve the desired result.
With our move to formalise our trust work under Covisory Trust Services we have had the opportunity to be involved in many areas covering such assignments as:
- Reviewing clients existing trust structures, updating trusts and reviewing clients overall affairs to optimise their trust and creditor protection.
- A court appointment as trustees in a disputes situation.
- Forming trusts for clients.
- International tax planning for clients using New Zealand foreign trusts.
All we need now is another good Christmas break with good weather, a relaxing time with friends and family and everyone will come back in 2016 with more confidence and excitement for what 2016 will deliver personally and for business.
As always, we have welcomed the opportunity to work with you this year, and look forward to doing so again in the future.