Obligations as a director

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:

1. The company must own more assets than liabilities.
2. 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.

Directors updates must be registered with the Companies Office

Any changes in the director(s) of a company or information relating to the director(s) must be notified to the Registrar. 

New director appointments or resignations must be notified within 20 working days of an appointment being made or a resignation taking effect.  The other changes (e.g. new director's address) must be notified within 20 working days of the company first becoming aware of the change or event.  It is an offence under the Companies Act 1993 if these requirements are not complied with (section 159).

A new director must consent to act as a director and certify that he or she is not disqualified from being appointed or holding office as a director.

The Institute of Directors in New Zealand (Inc)

The Institute of Directors in New Zealand (Inc) is a non-profit membership organisation dedicated to the promotion of effective corporate governance, representing directors' interests and facilitating their development through training.

It is open to directors, those wishing to become a director and those with a general interest in good governance.  It provides a code of practice, an accreditation programme, board evaluation, appointment and advisory services, practical governance advice and best practice guidelines for directors across a range of important issues.

It also provides a richly featured range of training courses. It organises networking breakfasts, presentations and other meetings throughout its five national branches, publishes a monthly magazine for its 3,800 members and represents directors' interests to policymakers and regulators.