Venture Capital Fund Act 2019

1: Title
This Act is the Venture Capital Fund Act 2019.
2: Commencement
This Act comes into force on the day after the date on which it receives the Royal assent. Preliminary provisions
3: Purpose of Act
The purpose of this Act is—
a: to establish a Venture Capital Fund; and
b: to provide for the Guardians of New Zealand Superannuation to manage and administer that fund.
4: Outline of Act
This Act—
a: establishes the Venture Capital Fund (the VCF
b: provides for payments into and out of the VCF:
c: provides for the Guardians of New Zealand Superannuation to manage and administer the VCF:
d: requires the Guardians to invest the VCF in New Zealand’s venture capital markets:
e: empowers the Minister to give certain directions to the Guardians in respect of the VCF:
f: provides for other matters relating to the VCF.
5: Interpretation
1: In this Act, unless the context otherwise requires,— board custodian section 30(1) divestment programme section 32(1)﻿(e) entity Guardians section 48 invest Minister subsidiary
a: means a subsidiary within the meaning of sections 5 to 8
b: includes an entity that is classified as a subsidiary in any relevant financial reporting standard (within the meaning of section 5 VCF section 8
2: A function, power, or duty performed or exercised in respect of a part of the VCF may be performed or exercised in respect of—
a: a specified proportion of the VCF; or
b: a part of the VCF that is defined in any other way.
3: In this Act, unless the context otherwise requires, Crown Crown Bank Account financial year Government public money Treasury section 2(1)
6: Transitional, savings, and related provisions
The transitional, savings, and related provisions set out in Schedule 1
7: Act binds the Crown
This Act binds the Crown. Establishment of Venture Capital Fund
8: Establishment of VCF
This section establishes the Venture Capital Fund (the VCF 2001 No 84 s 37
9: Purpose of VCF
The purpose of the VCF is to contribute to a sustainable and productive economy by—
a: increasing the venture capital available to New Zealand entities; and
b: developing New Zealand’s venture capital markets to function more effectively so that over time—
i: more venture capital becomes available to New Zealand entities from sources other than the VCF; and
ii: New Zealand entities that receive venture capital become more likely to grow into successful and sustainable businesses; and
iii: those markets become self-sustaining (including through more investment from New Zealand investors).
10: Property of VCF
1: The VCF consists of—
a: money paid into the VCF by the Crown under section 13
b: VCF investments:
c: money accruing from the investment of the VCF:
d: any other money that may be lawfully payable into the VCF.
2: The VCF is not an entity separate from the Crown.
3: However, subsection (2) does not limit section 39(2) 40(1)
4: VCF money is not public money for the purpose of the Public Finance Act 1989 2001 No 84 ss 38 39(5)
11: Ownership of VCF
The VCF is the property of the Crown. 2001 No 84 s 40
12: Payments out of VCF
1: Money may be paid out of the VCF—
a: to pay any fee that is payable to an investment manager or a custodian in respect of the VCF:
b: to meet any other obligation that is directly related to the operation of the VCF:
c: to pay the taxation liabilities arising in respect of the VCF:
d: to the Crown in accordance with an agreement between the Guardians and the Minister:
e: to comply with a direction under section 31
2: No payment may be made out of the VCF except in accordance with subsection (1) and unless it has been authorised by the Guardians.
3: See section 41A of the New Zealand Superannuation and Retirement Income Act 2001 2001 No 84 s 41 Contributions to VCF
13: Contributions to VCF
The Minister may pay any money into the VCF. Acquisition of financial products, borrowing, guarantees, indemnities, and derivatives
14: Crown Entities Act 2004 provisions about acquisition of financial products, borrowing, guarantees, indemnities, and derivatives do not apply
1: Sections 100 160 to 164
2: There are no restrictions on the Guardians’ power to invest the VCF, other than as provided by sections 16 to 24 31 32 Schedule 1
3: This section is subject to section 15 2001 No 84 s 49
15: Borrowing
1: The Guardians may not, except with the approval of the Minister of Finance,—
a: borrow money (in respect of the VCF); nor
b: mortgage or charge any of the real or personal property of the VCF, whether present or future, as security; nor
c: hold any financial instrument that places or may place a liability or a contingent liability on the VCF, or the Crown.
2: The Minister’s approval may be given for any class of transactions in subsection (1)﻿(a) to (c). 2001 No 84 s 50 Investment of VCF
16: Responsibility for investing
The Guardians are responsible for investing the VCF. 2001 No 84 s 58(1)
17: Guardians must use best-practice investment management
1: The Guardians must invest the VCF in New Zealand’s venture capital markets using best-practice investment management that is appropriate for institutional investment in those markets.
2: However, this section is subject to the directions that the Guardians must give effect to under sections 19 to 23 2001 No 84 s 58(2)
18: Guardians must manage and administer the VCF in certain manner
1: The Guardians must manage and administer the VCF in a manner consistent with—
a: the policy statement in effect under section 19
b: avoiding prejudice to New Zealand’s reputation as a responsible member of the world community.
2: Section 17
a: pending investments being made in those markets; or
b: otherwise on an interim basis.
19: Minister must give policy statement that specifies high-level requirements
1: The Minister must give the Guardians a policy statement.
2: Sections 20 and 23
3: The Minister must take reasonable steps to ensure that a policy statement remains in effect at all times on and after the expiry of the 1-month period that starts on the commencement of this section.
4: This section does not limit section 33
20: Directions in policy statement that must be consulted on
1: The Minister may give a direction of the kind described in this section only if the Minister has consulted the Guardians. Directions Guardians must give effect to
2: The policy statement must contain directions that—
a: specify what must be considered to be venture capital and a New Zealand venture capital market; and
b: require the venture capital made available through the VCF to be made available wholly or substantially to New Zealand entities specified under paragraph (c), whether it is made available directly to those entities or indirectly through funds; and
c: specify, for the purposes of paragraph (b),—
i: what must be considered to be a New Zealand entity; and
ii: how to calculate whether venture capital is being made available substantially to those entities; and
d: require that, to the extent that the venture capital is made available through funds, the venture capital is wholly or substantially made available through funds with a New Zealand connection specified under paragraph (e); and
e: specify, for the purposes of paragraph (d),—
i: what must be considered to be a fund with a New Zealand connection; and
ii: how to calculate whether venture capital is being made available substantially through those funds; and
f: set the minimum proportion of investment that must be made by other investors in 1 or more circumstances specified in the direction.
3: The Guardians must give effect to the directions under subsection (2) when managing and administering the VCF. Directions Guardians must have regard to
4: The policy statement may contain directions about 1 or more of the following:
a: the Government’s expectations as to the time period during which all or a part of the venture capital to be made available through the VCF will be made available to entities:
b: the Government’s expectations as to the time period during which all or a part of the capital invested through the VCF will become available to be returned to the Crown:
c: the Government’s commitment to a low-emissions economy:
d: the Government’s commitment to an inclusive economy:
e: the Government’s wider economic policy as specified in the direction.
5: The Guardians must have regard to the directions under subsection (4) when managing and administering the VCF.
21: Minister may approve departure from direction in particular circumstances
1: The Guardians do not have to give effect to a direction under section 20(2)﻿(b), (d), or (f)
2: The Minister’s approval may be given for any class of circumstances.
22: Other provisions about directions under section 20
1: A direction under section 20
2: In the case of venture capital being made available to entities indirectly through funds, nothing in or under section 20
23: Directions in policy statement that require Guardians’ agreement
1: The Minister may give a direction of the kind described in this section only if the Guardians have agreed to the direction.
2: The policy statement may contain directions that—
a: impose requirements concerning the use of an overarching model or approach for investing the VCF or a part of the VCF; or
b: relate to other high-level matters to ensure that the VCF achieves the purpose set out in section 9
3: The Guardians must, when managing and administering the VCF,—
a: give effect to a direction under subsection (2)﻿(a):
b: give effect to, or have regard to, a direction under subsection (2)﻿(b).
4: Subsection (1) does not limit the Minister’s power to give a direction of the kind described in section 20
24: Limits on policy statement
Despite anything to the contrary in the Crown Entities Act 2004
25: VCF investment vehicles
1: All or any of the investments of the VCF may be held in an entity that is formed or controlled by the Guardians for the purpose of holding, facilitating, or managing the investments of the VCF (a VCF investment vehicle
2: A VCF investment vehicle is not a Crown entity subsidiary for the purposes of section 7(1)﻿(c)
3: Interests in VCF investment vehicles are VCF investments and part of the VCF.
4: To avoid doubt, the Official Information Act 1982 Ombudsmen Act 1975
5: Subsection (1) applies despite anything to the contrary in the Crown Entities Act 2004
6: For the purposes of this Act, an entity is controlled
a: the entity is a subsidiary of the Guardians; or
b: the Guardians control the entity within the meaning of any relevant financial reporting standard (within the meaning of section 5
c: the Guardians can control directly or indirectly the composition of the board of the entity within the meaning of sections 7 8 2001 No 84 s 59A
26: VCF investment vehicles not required to prepare statements or annual reports
1: A VCF investment vehicle is not required to do either of the following:
a: prepare financial statements or group financial statements that are separate from those prepared for the VCF under section 39
b: have financial statements or group financial statements audited.
2: If a VCF investment vehicle is a company, the board of the company is not required to prepare an annual report.
3: Subsections (1) and (2) apply despite anything to the contrary in the Companies Act 1993 Limited Partnerships Act 2008 Public Audit Act 2001
4: This section does not limit sections 39 to 41
5: In this section, annual report board section 2(1) 2001 No 84 s 59B
27: Guardians must establish investment policies, standards, and procedures
1: The Guardians must establish, and adhere to, investment policies, standards, and procedures for the VCF that are consistent with their duty to invest the VCF in accordance with sections 16 to 24
2: The Guardians must review those investment policies, standards, and procedures for the VCF at least annually. 2001 No 84 s 60
28: Contents of statements of investment policies, standards, and procedures
A statement of investment policies, standards, and procedures must cover (but is not limited to)—
a: the selection criteria that the Guardians use for deciding who will be appointed under section 29
b: the selection criteria that the Guardians will use for making investment decisions (where the Guardians undertake the investment of any part of the VCF other than through a person appointed under section 29
c: the determination of standards against which the performance of the VCF as a whole will be assessed; and
d: standards for reporting the investment performance of the VCF; and
e: ethical investment, including policies, standards, or procedures for avoiding prejudice to New Zealand’s reputation as a responsible member of the world community; and
f: the VCF management structure; and
g: the governance framework for the implementation and operation of VCF investment vehicles referred to in section 25
h: the use of derivative financial instruments; and
i: the management of credit, liquidity, operational, currency, market, and other financial risks; and
j: the method of, and basis for, valuation of investments that are not regularly traded at a public exchange; and
k: prohibited or restricted investments or any investment constraints or limits. 2001 No 84 s 61
29: Investment management
1: The Guardians may appoint, on any terms and conditions that the Guardians think fit, 1 or more persons (including any department) to undertake the investment of any part of the VCF.
2: Different persons may be appointed for different parts of the VCF.
3: The Guardians must state, in each instrument of appointment, the powers and rights of the person appointed (including, without limitation, the extent of that person’s power to delegate any of those powers and rights).
4: This section is subject to sections 19 to 24 Part 1
5: This section does not limit section 17 2001 No 84 s 62
30: Custodianship of VCF
1: The Guardians may appoint a person or persons (including any department) to act as custodian of the VCF, or any part of the VCF.
2: A custodian so appointed must hold the property of the VCF, or that part of the property of the VCF for which they have been appointed, in their name or, if the Guardians authorise it, in the name of 1 or more nominees.
3: An appointment may be on any terms and conditions that the Guardians think fit.
4: The Guardians must specify, in each instrument of appointment, the powers and rights of the person or persons appointed (including, without limitation, the extent of that person’s powers to delegate any of those powers and rights).
5: This section does not limit section 17 2001 No 84 s 63 Directions for winding up VCF
31: Minister may give directions for winding up
1: The Minister may, after complying with section 32
a: stop reinvesting money from the VCF or part of the VCF in New Zealand’s venture capital markets in a specified manner:
b: comply with a divestment programme ( see section 32(1)﻿(e)
c: pay 1 or more amounts from the VCF to the Crown in a specified manner.
2: Every amount paid to the Crown under a direction must be paid into a Crown Bank Account.
3: The Minister may also give directions that the Guardians must give effect to regarding the realisation of particular investments of the VCF in a specified manner if—
a: the Minister—
i: has been unable to agree with the Guardians on a divestment programme after having made reasonable efforts to do so; or
ii: considers that the Guardians have failed to comply with a divestment programme in a material respect; and
b: the Minister has had regard to the desirability of divesting the investments of the VCF over a time period that is most likely to maximise returns.
32: Process for directions for winding up
1: The Minister may give a direction under section 31
a: a person or persons (including any department) appointed by the Minister has prepared a report on—
i: the amount of venture capital available to New Zealand entities if the VCF or part of the VCF were to be wound up; and
ii: whether, if the VCF or part of the VCF were to be wound up, New Zealand’s venture capital markets would be likely to function effectively; and
b: the Minister has taken the report into account; and
c: the Minister has consulted the Guardians; and
d: the Minister is satisfied that, if the VCF or part of the VCF were to be wound up, New Zealand’s venture capital markets would be likely to function effectively; and
e: the Minister has made reasonable efforts to agree with the Guardians on a programme for the realisation of the investments of the VCF or part of the VCF (a divestment programme
2: The Minister may, after subsection (1)﻿(a) to (d) has been satisfied, give directions to the Guardians relating to the Government’s expectations as to the time frame for the divestment programme.
3: When making efforts to agree on a divestment programme,—
a: the Minister must have regard to the desirability of divesting the investments of the VCF over a time period that is most likely to maximise returns; and
b: the Guardians must have regard to—
i: any directions under subsection (2); and
ii: the desirability of divesting the investments of the VCF over a time period that is most likely to maximise returns.
4: In this section, New Zealand’s venture capital markets would be likely to function effectively Other provisions about policy statement and directions
33: Amendment or replacement of policy statement or directions
The policy statement under section 19 section 31 41(1)﻿(h)
34: Amendment or replacement of policy statement or directions does not affect existing matters
The amendment or replacement of the policy statement under section 19 section 31 41(1)﻿(h)
35: Publication of policy statement or directions
As soon as practicable after giving a policy statement under section 19 section 31 41(1)﻿(h)
a: publish it in the Gazette
b: publish it on the Internet; and
c: present a copy of it to the House of Representatives.
36: Reporting relating to directions
1: The Guardians must notify the Minister of how the entity proposes to have regard or give effect to any direction given under sections 19 to 23 31 41(1)﻿(h)
2: The Guardians’ annual report must, in relation to the year to which the report relates, include a statement of how the entity is having, or has had, regard to, or is giving, or has given, effect to, any ministerial directions given under sections 19 to 23 section 31 2001 No 84 s 64(6), (7)
37: Limit on directions relating to VCF
Despite anything to the contrary in the Crown Entities Act 2004 2001 No 84 s 64(2)﻿(b)
38: Certain Crown Entities Act 2004 provisions about directions do not apply
Sections 115 115A sections 19 to 23 31 41(1)﻿(h) Accountability
39: Financial statements of VCF
1: The Guardians must ensure that financial statements for the VCF are prepared for each financial year.
2: The annual financial statements must be prepared in accordance with generally accepted accounting practice (as defined in section 8 2001 No 84 s 66
40: Auditor-General is auditor of VCF
1: The VCF is to be treated as if it were a public entity as defined in section 4
2: The Guardians must, not later than 90 days after the end of the financial year, forward the annual financial statements of the VCF to the Auditor-General.
3: The Auditor-General must issue an audit opinion within 30 days of receipt of the annual financial statements and must return the annual financial statements, with the audit report attached, to the Guardians. 2001 No 84 s 67
41: Annual report
1: The annual report of the Guardians prepared each financial year under Part 4
a: the financial statements of the VCF for that financial year prepared under section 39
b: a statement of responsibility for the financial statements of the VCF, signed by the chairperson of the board and the chief executive of the Guardians (if any), and comprising the same statements that are required by section 155
c: the audit report on the financial statements; and
d: an analysis and explanation of the performance of the VCF over that financial year; and
e: a statement of the investment policies, standards, and procedures for the VCF established by the Guardians under section 27
f: a statement signed by the chairperson of the board and the chief executive of the Guardians (if any) certifying whether or not the investment policies, standards, and procedures for the VCF have been complied with throughout that financial year; and
g: a schedule of the investment managers and custodians used by the Guardians in relation to the VCF during that financial year and the classes of investments for which each was responsible; and
h: any other information that the Minister directs the Guardians to include.
2: If the Guardians’ statement of performance expectations relating to the financial year sets out the Guardians’ expectations about the performance of the VCF, the information under subsection (1)﻿(d) must include a comparison of the performance of the VCF with those expectations.
3: Before giving a direction under subsection (1)﻿(h), the Minister must have regard to the purpose of the VCF set out in section 9 2001 No 84 s 68
42: Reporting by Guardians on VCF
1: The Guardians must report to the Minister on the VCF at those intervals that the Minister may require.
2: The Guardians’ report must include any information that the Minister may require. 2001 No 84 s 69