Appendix 2: Some key statutory rules about conflicts of interest

Managing conflicts of interest: Guidance for public entities.

The descriptions that follow provide a summary of some key statutory provisions, and enable a comparison between them. They are necessarily brief and general in nature, and involve some paraphrasing. They are not a comprehensive statement of the relevant law. Readers wanting to apply the rules to a particular situation should refer to the wording of the relevant statute, or seek legal advice.

The Acts discussed in this Appendix are the:

Crown Entities Act 2004

The relevant provisions in this Act1 apply to members of boards of statutory entities (as that term is defined in the Act), except for district health boards.

Before appointment, a prospective member must disclose to the Minister the nature and extent of all interests that they have, or are likely to have, in matters relating to the entity.

A member who is "interested in a matter" relating to the entity must disclose the nature and value (or extent) of the interest. The disclosure must be made in the interests register, and to the chairperson (or deputy, or Minister, in some cases). Standing disclosures (disclosures with ongoing effect) may be made. The member must not vote or take part in any discussion or decision of the board or any committee relating to the matter, nor otherwise participate in an activity of the entity that relates to the matter, nor sign related documents.

A member is "interested" in a matter if they (or their spouse, civil union partner, de facto partner, child, or parent) may derive a financial benefit from it; or if they may have a financial interest in (or are a partner, director, officer, board member, or trustee of) a person to whom the matter relates; or if they are otherwise directly or indirectly interested in the matter. Certain exceptions apply, including where the member is a member or officer of a subsidiary, or where the interest is so remote or insignificant that it cannot reasonably be regarded as likely to influence them in carrying out their responsibilities.

The board must notify the Minister of a failure to comply with these provisions, and the member may be removed from office. In some cases, the entity may be able to cancel a transaction that was entered into in breach of the conflict of interest rules.

The chairperson (or deputy, or Minister, in some cases) may grant written permission for one or more members to act despite their interest in a matter. Such permission must be disclosed in the entity's annual report.

For more information about these provisions, see the State Services Commission's publication Board Appointment and Induction Guidelines.

New Zealand Public Health and Disability Act 2000

The relevant provisions in this Act apply to members of boards of district health boards (DHBs).2

Before appointment or election, a prospective member must disclose to the Minister or electoral officer, and in the interests register, all conflicts of interest that they have, or are likely to have, in matters relating to the DHB. A person who fails to disclose a material conflict of interest before accepting nomination as a candidate for election is disqualified from membership.

A member who is "interested" in a transaction of the DHB must disclose the nature of the interest to the board. The disclosure must be recorded in the minutes and in the interests register. The member must not vote or take part in any deliberation or decision of the board relating to the transaction, nor sign related documents. (The definition of being "interested in a transaction" is similar to the definition of being "interested in a matter" under the Crown Entities Act. One difference is that it excludes an interest in a party that is – or is owned by – a publicly-owned health and disability organisation.)

A member who fails to comply with these provisions may be removed from office.

The other members of the board may decide to permit the member to participate in the board's deliberations (but not its decision) about the transaction. Certain matters about the permission must be recorded in the minutes.

The Minister may waive or modify the prohibition on participation for particular members or transactions or classes of transactions. A copy of any such waiver or modification must be presented to the House of Representatives.

Companies Act 1993

This Act applies to company directors.3

A director who is interested in a transaction or proposed transaction with the company must disclose the nature and value (or extent) of the interest (unless the transaction is between the director and the company and is in the ordinary course of business on usual terms and conditions). The disclosure must be made in the interests register, and to the board. Standing disclosures may be made.

A director is "interested" in a transaction if they:

  • are party to it or may derive a material financial benefit from it;
  • have a material financial interest in another party to it;
  • are a director, officer, trustee, parent, child, spouse, civil union partner or de facto partner of another party (or person who may derive a material financial benefit from it); or
  • are otherwise directly or indirectly interested in the transaction.

Certain exceptions apply, including in relation to subsidiaries and remuneration.

It is an offence for a director to fail to comply with these provisions. In some cases, the company may be able to cancel a transaction in which a director was interested.

Subject to the constitution of the company, a director who is interested in a transaction may vote on a matter relating to it (and do other things relating to it in their capacity as a director).4

Local Authorities (Members' Interests) Act 1968

This Act applies to members of the governing bodies of city councils, district councils, regional councils, community boards, tertiary education institutions, and a range of other public bodies. It also applies to members of their committees.

A person is disqualified from being a member of the local authority (or a committee) if they are concerned or interested in contracts with the authority under which the total payments made, or to be made, by or on behalf of the authority exceed $25,000 in any financial year.

It is an offence for the person to act as a member of the local authority while disqualified.

The Auditor-General may grant prior approval and, in limited cases, retrospective approval, of a member's interest in contracts, which has the eff ect of suspending the disqualification rule in relation to that case.

A member of the local authority (or a committee) must not vote on, or take part in the discussion of, a matter before the authority in which they have a pecuniary interest (other than an interest in common with the public).5 Certain exceptions apply. When the matter is raised at a meeting, the member must declare that they have a pecuniary interest in it, and the minutes must record the fact of the disclosure and abstention.

It is an offence for a member to breach this provision, and, if convicted, they automatically vacate office.

The Auditor-General may grant an exemption or declaration, in a limited range of situations, which allows a member to participate in a matter in which they have a pecuniary interest.

In some cases, a member who is associated with a company is deemed to share any interests of that company. A member can also have a deemed interest through their spouse, civil union partner, or de facto partner.

For more information about this Act, see our 2007 publication Guidance for members of local authorities about the law on conflicts of interest.

Education Act 1989

The relevant provisions in this Act apply to members of school boards of trustees.6

Before appointment or election, a prospective trustee must confirm that they are eligible to be a trustee.

A person is disqualified from being a trustee of the board (or member of a committee) if they are concerned or interested in contracts with the board under which the total payments made, or to be made, by or on behalf of the board exceed a specified amount (currently $25,000) in any financial year.

In some cases, a trustee who is associated with a company is deemed to share any interests of that company.

The Secretary for Education may grant approval of a contract, which has the effect of suspending the disqualification rule in relation to that case.

A trustee must be excluded from any meeting of the board while it discusses, considers or decides on a matter in which they have a pecuniary interest, or any interest that may reasonably be regarded as likely to influence them in carrying out their duties and responsibilities. However, they may attend to give evidence, make submissions, or answer questions.

For more information about these provisions, see the Ministry of Education's publications Conflicts of Interest for School Trustees Circular and Guidelines for Approval of Board Contracts Notice 2004.


1: See sections 31, 53, 59, and 62-72.

2: See sections 6, 21 and 29, clauses 6 and 17 of Schedule 2, and clauses 36-37 of Schedule 3. (Section 31 of the Crown Entities Act 2004 applies to appointed members. Sections 53 and 59 of that Act also apply to members.)

3: See sections 139-144. In relation to Crown entity companies, see also section 90 of the Crown Entities Act 2004 about disclosures before appointment.

4: However, this provision does not override the duty under section 131 to act in good faith and in the best interests of the company: see Hedley v Albany Power Centre (No. 2) (2006) 9 NZCLC 264,095.

5: A similar rule for members of tertiary education institution councils is also provided in section 175 of the Education Act 1989. The council may dismiss a member who, without reasonable excuse, breaches that provision – section 174.

6: See sections 103, 103A, and 103B, and clause 8 of Schedule 6.

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