Outcome of online Māori Fisheries Amendment Bill hui

The purpose of the hui was to update iwi on the current drafting of the Bill at the time of the third reading (which commenced on the evening of Tuesday 28 May). We also discussed:

• RMO voting rights regarding the appointment of directors for Te Ohu Kai Moana Trustee Limited; and
• Potential tax implications involved in the transfer of Aotearoa Fisheries Limited shares to iwi.

RMO voting rights in regard to the appointment of directors for Te Ohu Kaimoana

Background and context

In response to the 2015 review of Te Ohu Kaimoana Group entities, Iwi agreed to restructure the governance of Te Ohu Kaimoana which would see the replacement of appointment body Te Kāwai Taumata (TKT) in favour of a ‘1iwi, 1 vote’ system to bring iwi closer to decision making. The result of this decision would also mean the removal of RMOs in the appointment process.

Hon Shane Jones advised that he had accepted the recommendation from the Māori Affairs Select Committee, that RMOs should be included in the appointment process and would receive the same weighted vote as iwi (1 vote per entity). This means MIO/RIO will have 58 votes and RMOs will have 7 votes in total when it comes to appointing directors to Te Ohu Kaimoana.

Key takeouts, pātai and discussion from hui

There was extensive discussion from iwi and RMO representatives concerning the decision by the Minister to accept the recommendation of the Māori Affairs Select Committee, which grants individual RMOs the same status as individual iwi in regard to the appointment process for directors for Te Ohu Kaimoana. Some iwi representatives present voiced their opposition to the decision, while an RMO representative endorsed the Minister’s decision for equal representation.

Tax implications – transfer of Aotearoa Fisheries Limited income shares

Background and context

Another iwi resolution from 2015/16 was that iwi hold all shares in Aotearoa Fisheries Limited (AFL). This will mean that income shares that Te Ohu Kaimoana currently holds in AFL will be converted to ordinary shares and transferred to MIOs and to be held by their AHCs, providing iwi with direct influence of key decisions relating to AFL and the appointment of AFL directors. Redeemable preference shares would also be converted to ordinary shares and transferred to MIOs.

Because Te Ohu Kaimoana is a registered charity under the Charities Act 2005, we are limited to transferring these shares to a recipient entity who will be required to hold and apply these assets for a charitable purpose. This could potentially be problematic for iwi that want to be freed from any requirement to hold and apply these shares for strictly charitable purposes. Therefore, Te Ohu Kaimoana proposed to the Crown that those MIOs who do not have charitable status (or prefer for the shares to beheld in a non-charitable entity) should be provided with a tax exemption when receiving such shares. Te Ohu Kaimoana also sought a further exemption that would allow an iwi to transfer those assets to another entity, such as its non-charitable arm or separate governance entity without tax implications (we refer to this below as the ‘further tax exemption’).

As at this current time, Minister Jones has not accepted the further tax exemption changes Te Ohu Kaimoana had advocated for.  We understand this decision was made in keeping with the general tax policy approach. We are pleased to receive confirmation from the Minister that the Bill provides that the initial transfer of the shares from Te Ohu Kaimoana to MIOs should not be subject to tax. Following the initial share transfer from Te Ohu Kaimoana, general tax rules will apply to any transfers that MIOs may decide to make in the future regarding how they arrange their affairs.

To be clear, as the Bill currently stands, all shares will need to be held by the AHC of a MIO.

Key takeouts, pātai and discussion from hui

• A representative of iwi asked why the shares must be transferred to a MIO instead of directly to an AHC. The reference to shares being transferred to MIO encompasses the AHC by way of its status as being wholly owned by the MIO. Te Ohu Kaimoana clarified the provisions of the Act that require that an AHC must hold all settlement quota and income shares allocated by Te Ohu Kaimoana will remain.
• A representative of iwi sought clarification on what is meant by the ‘initial transfer will not be subject to tax’. Te Ohu Kaimoana clarified that our understanding is the transfer from Te Ohu Kaimoana to MIO (and on to AHC) will not be subject to tax. However, any further transfer a MIO should choose to may will be subject to tax.
• The possibility of cancelling the shares completely (rather than converting and transferring to MIO) was also raised. At the time of the hui we noted that this had once been explored in the past, but hadn’t recently been investigated in depth. However, Te Ohu Kaimoana noted there had been little appetite from Government on this approach. Since that hui, and on further investigation, cancelling the shares is no longer an option we could consider pursuing. The Bill is explicit in its requirements of Te Ohu Kaimoana once enacted into law. We are required to convert the shares and transfer to MIO. Anything but this will be considered acting in non-compliance with the Act.
• We were also asked if imputation credits could be used to offset share transfers from MIOs to AHCs.  We can confirm that the Bill provides that the initial transfer of the shares from Te Ohu Kaimoana to MIOs should not be subject to tax. Following the initial share transfer from Te Ohu Kaimoana, general tax rules will apply to any transfers that MIOs may decide to make in the future regarding how they arrange their affairs. Given the different structures of each iwi, we recommend that iwi seek their own independent tax advice.

Summary

While a range of views and positions were shared on both matters, the general consensus of meeting attendees was to note these views – but to support the continued progression of the bill.

Other matters of interest and further questions

Are there any further opportunities to input into, or influence changes to the Bill?

Te Ohu Kaimoana understands that the third reading of the Bill is likely to complete when the House resumes. This could be at the end of June, but we expect with the priorities of the government, its likely to resume in late July or early August.

Valuation of income shares held by Te Ohu Kaimoana in Aotearoa Fisheries Limited

Te Ohu Kaimoana provided a brief update to attendees that it has a valuation process underway in regard to the valuation of income shares it holds in AFL. Te Ohu Kaimoana has sent Request for Proposals (RFP) to suitably qualified providers, with the view that the valuation process will be completed by December 2024 with the findings/outcome then communicated to iwi.

Next steps in regard to the implementation of the MFA Bill

Te Ohu Kaimoana has a project plan underway and is working on a communications plan to support the delivery of communications and engagement opportunities. This will ensure that iwi, RMOs and TKT are informed and equipped with key information throughout the implementation process.

If you have any pātai in regard to the Māori Fisheries Amendment Bill – please contact Bede Dwyer (Brand and Communications Manager) via email: bede.dwyer@teohu.maori.nz or phone: 021 073 9684.