I recently became a director of a family-run company and did not realise it came with legal obligations of its own. Nobody explained what I am personally responsible for. What are the main duties of a director in New Zealand, and can I be held personally liable?
Directors' duties are set out in the Companies Act 1993 and are demanding. You must act in good faith and in what you believe to be the best interests of the company, exercise your powers for a proper purpose, comply with the Act and the constitution, and exercise the care, diligence and skill of a reasonable director. The Act also prohibits reckless trading, which means carrying on the business in a manner likely to create a substantial risk of serious loss to creditors, and incurring obligations you do not reasonably believe the company can perform. Breaches can lead to personal liability, court-ordered compensation and disqualification. Directors also carry responsibility under tax, employment and health and safety laws. Keep proper records, attend meetings and read financial information carefully.
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