- About COMU
- Board Appointments
- Ownership Framework
Page updated 18 Jul 2012
State-owned enterprises (SOEs) are Crown-owned companies that operate as commercial businesses.
SOEs are established by the State-Owned Enterprises Act 1986 (Legislation website), are registered as companies, and are bound by the provisions of the Companies Act 1993 (Legislation website). The one exception to this regime is the New Zealand Railways Corporation, which is also known as KiwiRail. KiwiRail is a statutory corporation established by its own legislation, the New Zealand Railways Corporation Act 1981 (Legislation website). Although KiwiRail is an SOE and is therefore subject to the State-Owned Enterprises Act 1986 (Legislation website)), it is not a company under the Companies Act.
The principal objective of every SOE is to operate as a successful business and, to this end, to be as profitable and efficient as comparable businesses that are not owned by the Crown. SOEs are also required to be good employers and to exhibit a sense of social responsibility. Crown-owned companies are classified as SOEs where there are identifiable commercial functions and the entity can operate as an efficient and profitable business. A function is deemed a ‘commercial function’ and undertaken by an SOE when:
- performance is measured primarily in financial terms; and
- revenue is generated through the sale of goods and services.
SOEs tend to sell into contestable markets although some regulated monopoly enterprises exist.
The State-Owned Enterprises Act 1986 recognises that an SOE may have non-commercial roles, but requires Ministers to enter into an agreement with the SOE to pay for any goods or services that they wish an SOE to provide to any person.
Each SOE has two Shareholding Ministers; one is the Minister of Finance and the other is the relevant Shareholding Minister. The board of directors of an SOE, which is appointed by the Shareholding Ministers, is accountable to the Shareholding Ministers for the performance of that SOE. SOE boards are required to produce an annual Statement of Corporate Intent and half yearly and annual reports, all of which must be presented to the House of Representatives by the relevant Shareholding Minister. Most SOEs are subject to ministerial direction in relation to the content of certain aspects of the company's Statement of Corporate Intent and the level of dividend payable to the Crown. Shareholding Ministers may remove board members by shareholder resolution under the Companies Act 1993. Under the Companies Act 1993, an alternative process may be followed if allowed by the company’s constitution. In the case of KiwiRail, the Minister of Finance and the Minister for State-Owned Enterprises (the two Shareholding Ministers) may jointly remove board members at any time and entirely at their discretion.
Further information on the governance and accountability regime for SOEs can be located in the Owner's Expectations Manual. The manual is designed to help boards to operate efficiently in their roles and to clarify their responsibilities. It also takes account of the particular expectations by Shareholding Ministers of board members of SOEs. Information on individual SOEs is located at Portfolio of Entities - SOEs.
Information on the history of the establishment of SOEs can be found in this Treasury document: State-Owned Enterprises: History of Policy Development and Implementation (614 KB), which was released in response to an Official Information Act request in April 2004.