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Director obligations
Responsibilities of directors
Directors are responsible for managing the company’s day-to-day business. In doing so, directors owe duties to the company, to its shareholders, and to others dealing with the company.

Directors must act honestly in what they believe to be the best interests of the company and with such care as may reasonably be expected of them in all the circumstances.

Directors must not carry on the business in a manner likely to create a substantial risk of serious loss to the company’s creditors (so-called “reckless trading”).

The solvency test
The Companies Act 1993 requires directors to abide by a two-step test at all times:
  • The company must own more assets than liabilities.
  • The company must be able to pay all its accounts as they fall due.

Who cannot be a director?
A person cannot be a director of a company if he/she is:
  • under 18 years of age
  • an undischarged bankrupt
  • prohibited from directing/promoting/participating in the management of a company under any statutory provisions
  • subject to a property order made under sections 30 or 31 of the Protection of Personal and Property Rights Act 1988
  • not qualified pursuant to the constitution of a particular company.

Source: New Zealand Companies Office

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