Contributory mortgage brokers

What is a contributory mortgage?

A contributory mortgage is an investment vehicle that amalgamates a number of investor contributions into a larger sum which is then advanced to a borrower.

What is a contributory mortgage broker?

A contributory mortgage broker is registered under the Securities Act (Contributory Mortgage Regulations) 1988 (the Regulations).  A contributory mortgage broker is a person, not being a mortgagor under the mortgage or any other person to whom or for whose benefit any money is lent in consideration for the mortgage given by the mortgagor, who:

• offers an interest in a contributory mortgage to the public for subscription; or
• manages interests in a contributory mortgage, being interests that have been offered to the public for subscription, whether or not that person holds beneficially any interest in that mortgage.

There are two types of contributory mortgage brokers - Individuals and Body Corporates.  Individual brokers are rare.

Why register?

You can not operate as a contributory mortgage broker unless you are registered as a broker in accordance with the Regulations.

Incorporation process

1. Who may apply?

An individual or a body corporate i.e. a company, may apply.  If you are applying as a body corporate, you must be registered under the Companies Act 1993 before seeking registration as a Contributory Mortgage Broker.

2. What fees are involved?

There is no fee for filing financial statements under the Regulations.

3. How do I apply?

(From the Securities Act (Contributory Mortgage) Regulations 1988 (SR 1988/143) (as at 03 September 2007))

Information you need to provide:

• Where the applicant is an individual, the full name and address of the applicant.
• Where the applicant is a body corporate, the full name of the applicant, the address of its registered office, and the full name and address of every director of the applicant.
• The full name of the applicant's nominee company and the address of its registered office.
• The full name and address of every person who is an officer, director or shareholder of the applicant's nominee company.
• The name and address of the registered bank where the trust account for the applicant's nominee company is kept.
• The name and address of the applicant's auditor

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Documents and certificates you need to attach to your application:

1. A copy of the constitution of the applicant's nominee company.
   Clause 1 was substituted, as from 1 July 1994, by section 3 Company Law Reform (Transitional Provisions) Act 1994 (1994 No 16).
   Clause 2 was revoked by section 3 Company Law Reform (Transitional Provisions) Act 1994 (1994 No 16).
2. (1) If the applicant is an individual, the latest audited financial statements of the applicant's business, which shall—

(a) Be dated as at a date not earlier than 18 months before the date that the application is delivered to the Registrar; and

(b) Include a statement of assets and liabilities of the business (excluding contributions in respect of, and principal sums secured by, contributory mortgages and other assets or liabilities in respect of trusts administered by the applicant) and a statement of the income and expenses of the business (excluding amounts received in respect of interest on the investment of contributions and interest under contributory mortgages); and

(c) Include as a separate item or a note thereto, contributions in respect of, and principal sums secured by, contributory mortgages;

(d) Include as a note thereto, a description and amount of any losses incurred by contributors arising from any contributory mortgage in respect of which the applicant has acted as broker during the accounting period for which the financial statements have been made up; and

(e) Be signed by the applicant

(2) If the applicant is not an individual, the latest audited financial statements of the applicant, which shall -

(b) Include a balance sheet (excluding contributions in respect of, and principal sums secured by, contributory mortgages) and a profit and loss statement (excluding amounts received in respect of interest on the investment of contributions and interest under contributory mortgages); and

(c) Include as a separate item or a note thereto, contributions in respect of, and principal sums secured by, contributory mortgages; and

(d) Include as a note thereto, a description and amount of any losses incurred by contributors arising from any contributory mortgage in respect of which the applicant has acted as broker during the accounting period for which the financial statements have been made up; and

(e) Be signed by every director of the applicant.

(3) For the purposes of paragraph (d) of subclause (1) and paragraph (d) of subclause (2) of this clause, the expression any losses incurred by contributors arising from any contributory mortgage includes—

(a) Any contribution, or any part thereof, which has been paid to a mortgagor under a contributory mortgage and which has not been repaid to the contributor within six months of the due date; and

(b) Any sum due by way of interest to a contributor which has not been paid to the contributor within six months of the due date.

Clause 3(2)(b) was amended, as from 1 July 1994 by section 3 Company Law Reform (Transitional Provisions) Act 1994 (1994 No 16) by substituting the word 'statement' for the word 'account'.

4. A copy of the auditor's report on the financial statements of the applicant.
   
5. The consent of the applicant's auditor in the form set out in Schedule 6 to the regulations signed not earlier than 14 days before the date the application is delivered to the Registrar. 
   

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Filing obligations after incorporation

Contributory mortgage brokers are required to file:

1. An Annual Report – Regulation 12.  Body Corporates are required to file their annual report within three months of the balance date of the company.  All current mortgage brokers have a balance date of 31 March, therefore all annual reports should be filed by 30 June.
   
   Your report must:
   • be dated, signed by the broker or by every director or two directors signing on behalf of all directors of a body corporate
   • contain all information specified in the 9th Schedule of the Regulations
   • have attached all documents specified in the 10th Schedule.
     
     
2. Changes in information (within 30 days of change) in:

• the information specified in the 7th Schedule
• the application for registration made by the broker pursuant to Regulation 10 of these Regulations
• the information specified in the 9th Schedule
• the most recent annual return.

Can a contributory mortgage broker be removed from the register?

The only way a contributory mortgage broker can dispense with their obligation to file the annual report, was for the limited company to apply for removal under section 318(1)(d) of the Companies Act 1993.  If they do not wish to remove themselves under the Companies Act 1993, the requirement to file an audited nil annual report continues.

Filing obligations

Does a contributory mortgage broker need to file financial statements with the Registrar of Companies under the Financial Reporting Act 1993? 

No.  The Annual Report contains financial statements which are required to be filed under the Securities Act (Contributory Mortgage) Regulations 1988.

Where are documents for registration sent?

The documents are sent to:

The Companies Office
Northern Business Centre
Private Bag 92061
Victoria Street West
Auckland 1142

Can the contributory mortgage broker go into liquidation or receivership without the company going into liquidation or receivership?

No.  As the company must exist before the contributory mortgage broker, the liquidation applies to the company.  The contributory mortgage broker goes into liquidation because the company is in liquidation.

Is a contributory mortgage broker liquidation or receivership still conducted in the Companies Act 1993?

The liquidation relates to the company and not the contributory mortgage broker, it is therefore conducted under the Companies Act.