I would be surprised if a person of appropriate knowledge, skill and experience, offered a directorship, would decline because of the directors' duties as now set out in the Act. Reliance would only be unreasonable where the director was aware of circumstances of such a character so plain, so manifest, and so simple of appreciation, that no person with any degree of prudence acting on his behalf would have relied on the particular judgment, information and advice of the officers.
This will go towards showing that you acted on Nz companies act directors duties grounds". Offences and penalties are set out in Part XXI. Section of the Act provides that a director who possesses confidential information must not disclose that information to any person, nor make use of it or act on it, subject to the following exceptions: This recognises that these are unique entities - whose operation is dependent upon directors having a free rein to carry out the intention of their often conflicting shareholders.
Who is a director? This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Make sure you have a reasonable knowledge of goings on no matter what your level of involvement in the company. To put it in the alternative, if a director does not believe on reasonable grounds that the company will be able to perform its obligations when required, it is appropriate that the director should be liable for any resulting loss.
The Act is not the only place to look when considering the obligations of a director. One of the disadvantages of this method of law reform is that the changes introduced by the Law Reform Division are not accompanied by any report explaining the reasons for them.
This requirement has been deleted. The Act imposes numerous responsibilities on directors, of which failure to discharge may result in criminal liability discussed later.
Being active includes an obligation to make a judgment and to act on that judgment. When making a decision of this kind, the board should leave a "paper trail" - detailing not only their decision, but also their reasons. I intend to make a brief reference to the history of the reform, to comment on the approach to directors' duty that has finally emerged in the Act, to examine the statutory duties and make some comments on them, to consider the extent to which other provisions in the Act bear on these duties, and to point out the civil and criminal liabilities that may flow from a breach of those duties.
However, it appears that a director is not ordinarily supposed to have special skills - so there may be differing levels of skill and care expected from executive and non-executive directors but note that any difference between these directors applies to this duty only.
Unfortunately, it seems that at present directors are either largely ignorant of these standards or do not take them sufficiently seriously. What follows is a whistle-stop tour or steeple-chase of further provisions of the Companies Act which could cause a director to stumble: The Commission said that it had refrained from a recommendation that its proposal on director's duties be described as a code, but was confident that the courts would recognise a statutory set of director's duties as the text of first resort in considering issues in that area.
If their purpose is not to serve the company's interest, then it is an improper purpose. A report Liability of Multiple Defendants was released in June Balancing the rights of shareholders, directors, executive officers and creditors" paper presented to the Company Law Conference, It is imperative to get things right at the time each decision is made.
In its second report, it referred to the common law concept of "proper purposes" which, it said, involved great uncertainty in the absence of identifiable limits to the powers of companies and directors. Certainly some purposes are clearly not proper, generally because they are purposes relating to the directors' own interests rather than the interests of the company.
Duty in relation to Obligations s A director must not agree to the company incurring an obligation unless he or she believes on reasonable grounds when the obligation is incurred that the company will be able to perform the obligation when required to do so.
Nor is it unusual for this duty to be expressed in statutory form. Linley MR said that, if directors act honestly for the benefit of the company they represent, they discharge both their equitable as well as their legal duty to the company.
He thus seemed to differ from Byrne J in Punt, where the latter said that the power must be exercised for the benefit of the company.The definition of a director can be found in s of the Act.2 A director can be someone who is appointed by the company, but can also be someone who performs directors’ duties and/or a person who has a reasonable amount of control or influence over the running of the company.
Directors’ duties can be found in ss of the Act. Section 2(1) designated settlement system: inserted, on 24 Novemberby section 16 of the Reserve Bank of New Zealand Amendment Act ( No 53). Section 2(1) enforcement country: inserted, on 1 Mayby section 8 of the Companies Amendment Act ( No 46).
Directors also have significant duties and obligations in relation to health and safety in the workplace. The Financial Markets Authority outlines 8 principles of effective and transparent corporate governance in their handbook Corporate Governance in New Zealand: Principles and Guidelines.
Section Duty of directors to act in good faith and in best interests of the company. Subject to exceptions set out in Sectiona director of a company, when exercising powers or performing duties, must act in good faith and what the director believes to be in the best interests of the company.
The many duties and obligations of directors within New Zealand companies is a topic of changing and seemingly never-ending debate.
Legal duties tied in with equitable and fiduciary obligations can leave even the most learned practitioner perplexed. The passing of the Companies Act (the Act) with its detailed provisions spelling out the powers and duties of directors has resulted in further interest in the topic - an interest that no doubt will heighten further when the Act comes into force on 1 JulyDownload