Business Documentation
Health Check
for NZ SMEs

Most NZ businesses think their documentation is "fine" because nothing has gone wrong yet. The problem is that documentation risk is invisible until a personal grievance, a Privacy Act breach or a customer insolvency forces the issue. By the time you find out, the time to fix it has passed. This guide explains what changes most often, where the real exposure sits and how to keep ahead of it.

Why do business documents go out of date so quickly?

Two things change. The law and your business. Both happen quietly. The Privacy Act 2020 commenced on 1 December 2020 and added mandatory breach notification, new overseas disclosure rules and stronger Privacy Commissioner enforcement powers. The Employment Relations Act 2000 has been amended multiple times. Case law on restraints, 90 day trials and contractor status keeps shifting.

Meanwhile your business adds staff, swaps premises, signs new customers, opens new lines, brings on contractors. The terms of trade that suited a sole trader rarely suit a six-person operation. The employment agreement template from 2019 has probably never been opened since.

What did the Privacy Act 2020 change?

The headline change is mandatory breach notification. If a notifiable privacy breach occurs and is likely to cause serious harm, the business must notify the Office of the Privacy Commissioner and affected individuals as soon as practicable. Failure to notify is itself an offence.

Other changes include strengthened individual rights to access and correct personal information, new rules around disclosure of personal information overseas (the receiving party must have comparable safeguards) and the Privacy Commissioner's new power to issue compliance notices. Most privacy policies, employment agreements and customer terms drafted before December 2020 do not reflect any of this.

What makes terms of trade unenforceable?

Terms of trade are only as good as your ability to rely on them in court. The most common reason businesses lose that ability is incorporation. Terms must be brought to the customer's attention before or at the time the contract is formed. Terms presented on the back of an invoice after the work is done are generally not part of the contract.

Other recurring problems include penalty clauses that may be void as unenforceable penalties, missing personal guarantees where credit is extended to companies, no jurisdiction clause (which creates uncertainty about which country's law applies), inadequate IP ownership clauses that fail to capture work created during the engagement, and retention of title clauses that aren't backed by a PPSR registration. The Contract and Commercial Law Act 2017 and Fair Trading Act 1986 both bear on enforceability.

How does contractor misclassification actually happen?

NZ courts and the Employment Relations Authority look at the reality of the working relationship, not the label on the contract. The leading test asks whether the person was in business on their own account or was an integrated part of the engaging business. Control, integration, intention and the financial reality of the arrangement all matter.

The risk is asymmetric. If a contractor is later found to have been an employee, the consequences include back-pay for annual and sick leave, KiwiSaver employer contributions, PAYE shortfalls and exposure to personal grievance claims. A documentation review catches the structural issues (sole-client contractors, fixed hours, supplied equipment, no right of substitution) before they become a claim.

What goes wrong in commercial leases?

Commercial leases are usually the second-largest fixed cost a business carries after wages, and the most commonly underread document in the building. Three areas catch tenants out: make-good (the cost of restoring premises at lease end can run to tens of thousands), permitted use (clauses that restrict what business activities you can carry on in the space) and rent review (especially market reviews and ratchet clauses that prevent rent dropping).

Assignment and subletting rights are critical if you ever want to exit early or sell the business. Personal guarantees by directors are standard and create personal liability that survives a corporate failure. A lease review before signing or renewing gives you the chance to negotiate before you're committed. A commercial lease review from us covers all of this.

How is a Health Check different from getting documents rewritten?

The Health Check is an audit and risk report. We review what you have, identify the gaps, and give you a prioritised written report. We don't rewrite the documents. The reason is simple: not everything that turns up needs fixing immediately, and a separate audit lets you decide where to spend.

If the report identifies documents that should be redrafted, we can quote that separately using our fixed-fee drafting services for employment contracts, terms of trade, contractor agreements and shareholders agreements. The Health Check stands on its own. The report is yours to act on however you choose.