As a director of a company you have duties to your company, shareholders and under the Companies Act 1993.
Your role as a director
Company directors are elected or appointed to manage a company's business and affairs.
A director's duties can include:
- determining and implementing policies and making decisions
- preparing and filing statutory documents with the Companies Office or other agencies
- calling meetings, including an annual meeting of shareholders
- maintaining and keeping records
- binding the company to contracts with suppliers, lenders and others dealing with the company.
Your company constitution, if you have one, may set out additional duties and responsibilities.
Your obligations as a director
As a director you must act honestly, in the best interests of the company, and with reasonable care at all times.
You mustn't act, or agree to the company acting, in a manner that's likely to breach the Companies Act 1993 other legislation or your company's constitution.
Part 8 of the Companies Act describes:
- who can't be a director
- the various duties of directors
- how directors can exercise their rights and powers
- the minimum standards of behaviour expected of directors within their role.
The minimum standards include:
- acting in good faith and in the best interests of the company
- exercising your power as a director for a proper purpose
- not allowing, agreeing or causing the business to be carried out in a way likely to create a substantial risk of serious loss to the company's creditors
- taking the care, diligence and skill that a reasonable director would exercise in the same circumstances
- ensuring the company can pay all its debts and has more assets than liabilities
- complying with the Companies Act.
Your company's board of directors is responsible for calling meetings of shareholders as required by the Companies Act and your company's own constitution, if it has one. This may include calling an annual meeting of shareholders.
You're responsible for meeting your company's filing obligations to the Companies Office.
Accounting and company records
All NZ companies need to keep and maintain certain records including:
- the constitution, if it has one
- minutes of shareholder and director meetings for the past 7 years
- a director interests register
- certificates given by directors
- communications to shareholders over the past 7 years
- the share register
- accounting records.
Your financial responsibilities
You're responsible for acting in a way that doesn't create a substantial risk of serious loss to your company's creditors — sometimes called reckless trading. Exactly what this involves varies from company to company.
You must take steps to minimise the impact of any financial difficulties on your shareholders, creditors, employees and others who have a financial interest in your company.
If your company continues to trade while it's insolvent, and goes further into debt, you may be personally liable and face prosecution.
Seek professional assistance from a solicitor or accountant on how best to resolve your company's financial position.
Voluntary administration, receivership and liquidation
If your company is unable to pay its debts as they fall due, it can be placed into voluntary administration receivership or liquidation, limiting your powers as director.