KEY POINTS:
Out-of-pocket finance company investors may be surprised to hear New Zealand has topped the rankings for minority investor protection in a World Bank business study.
The high protection ranking helped New Zealand maintain its position as the second-easiest place in the world to do business for the third
year in a row, behind Singapore.
But it comes at a time when thousands of investors have lost money in failed finance companies.
Russell Muir, lead economist for the Hong Kong arm of the World Bank, said it was important to remember the study measured only four prescribed factors: the extent of disclosure, extent of director liability, ease of shareholder legal suits and strength of investor protection.
"That wouldn't necessarily cover why a company goes belly up. So there may be a bit of a disconnect." He also warned there could be a time lag between events taking place and their being factored into the annual research.
In its report, the World Bank commended New Zealand for its extensive disclosure requirements.
"New Zealand and Singapore, which top the rankings on the index with 29 and 28 of 30 possible points, both require immediate disclosure of a related-party transaction and of the conflict of interest.
"They require prior approval of the transaction by the other shareholders. They enable the shareholders to hold the directors liable and to have the transaction voided if it damages the company."
It also applauded New Zealand for allowing shareholders to inspect all internal documents before deciding whether to sue.
New Zealand also topped the ranks for the ease of starting a business, and was ranked second in dealing with construction permits and third for registering property.
But did not do so well when it came to trading across borders and closing a business, ranking 23rd and 17th respectively.
The study, now in its sixth year, uses information provided by local experts such as lawyers, accountants and government officials to help to rank 181 countries.
The ranks are based on 10 indicators of business regulation that record time and cost of meeting government requirements in starting and operating a business, trading across economies, paying taxes and closing a business.
SIMPLE BUSINESS
Easiest countries to do business in, according to the World Bank:
1. Singapore
2. New Zealand
3. United States
4. Hong Kong, China
5. Denmark
6. United Kingdom
7. Ireland
8. Canada
9. Australia
10. Norway