A 2018 Court of Appeal decision[1] has made a director liable for almost $500,000 of company debt due to the company’s failure to keep adequate accounting records. The decision highlights the importance for directors to understand their duties under the Companies Act 1993. The Act requires directors to ensure that the company keeps proper financial records.
If you are a director and fail to keep adequate accounting records, and the company is unable to pay its debts in liquidation, then the court can make you personally liable if the failure has resulted in:
- Uncertainty of the company’s assets and liabilities
- The liquidator being impeded in the company’s liquidation, and/or
- The company’s insolvency has been caused by the failure.
The duty to keep proper accounting records is one of a number of duties that all directors have under the Act.
If you have any questions about what your duties might be, or what you need to do to fulfil those duties, please get in touch with us.
© NZ LAW Limited, 2019. Aspiring Law is proud to be a member of NZ LAW Limited, an association of 55 law practices working together to proactively share ideas and expertise for the benefit of our clients.
2 Bishop Warden Property Holdings Ltd v Autumn Tree Ltd [2018] NZCA 285