Business law basics in NZ

Most people start a business focused on the product and the customers, and the legal side only becomes urgent after a problem. That is backwards. The basics are not complicated, and understanding them prevents most of the expensive surprises. This guide covers the three that matter most.

Contracts: the plain rules that make them work

A contract does not need to be a formal, lawyer-drafted document to be real. In New Zealand a contract exists when there is a clear agreement, something of value passing between the parties, and a genuine intention to be bound. The practical rules that keep you safe:

• Get it in writing. Verbal deals are enforceable in principle, but a written record removes all doubt about what was agreed. Even a short email confirming the key terms is worth far more than a handshake.
• Spell out the important things. What work is done, what is paid, when it is due, and what happens if either side does not deliver. Vague contracts collapse when something goes wrong.
• Treat the small print of other people's contracts seriously. Standard terms from clients and suppliers can include obligations you did not notice. Read them before you agree, and have a lawyer review the ones that really matter.

The honest view on lawyers here: you do not need one for every purchase order, but for the contracts that underpin your business, the fee for a review is cheap insurance against signing something you do not actually understand.

Governance and directors' duties

If you run a company, you carry duties that go beyond running the day to day. Corporate governance is the framework of rules and duties that decides how the company is run and who is accountable, and the responsibilities that land on directors are real:

• Act in the company's interests. Directors owe duties to the company itself, not just to themselves or a single shareholder. That means making decisions that serve the company and its creditors, not just your own benefit.
• Keep proper records and file on time. A company must keep accounting records that show its financial position, and there are clear filing and reporting obligations attached to it. These are legal duties, not paperwork options.
• Disclose conflicts and act within the rules. When a director's personal interests clash with the company's, the law expects that conflict to be managed properly. The formalities exist for a reason, and ignoring them creates real exposure.

The obligations you carry as a business owner

Beyond contracts and governance, every business carries a set of standing obligations, whether you are a sole trader or a company:

• Tax and record keeping. You are responsible for meeting your tax obligations, including GST once you are required to be registered, and for keeping the records that support your returns. The tax compliance guide walks through the personal side of this.
• How you treat customers and staff. Consumer law and employment law both create obligations you cannot contract out of, from honest marketing to fair treatment and minimum standards for anyone you employ.
• Privacy and data. If you hold any personal information about customers or staff, you have obligations about how you collect, use and protect it.

These standing obligations are why a little professional support early is usually a poor place to economise. A single overlooked filing, an unread clause, or a privacy lapse can cost far more than the modest fee an accountant or lawyer would have charged to catch it. The businesses that get into real legal trouble are rarely the ones that worried about the rules and asked questions; they are the ones that treated compliance as a problem for later. Later shows up, and it is always more expensive then.