What are my obligations as a Company Director?

What are my obligations as a Company Director?

Every company in New Zealand has at least one director. Most of these companies run small to medium sized businesses. Usually company ownership is recommended by a lawyer or accountant. But do all of these directors understand their obligations? Do these directors know that the Companies Act 1993 (“the Act”) places very specific duties as well as more wide ranging and general obligations on Directors? We have summarised these specific and general duties as follows: 1.  Participation A director in a company must perform the duties and obligations of a director. There is no option to be a “passive” director. You are obliged to perform your role and will be liable for the decisions made by the other director(s) even if you haven’t actually been involved in the decision. 2.  Governance and Management The director(s) govern the company. That means they supervise the management of the company. In most New Zealand companies the directors or one or two of the directors will also manage the company. That means overseeing the day to day activities of the company. A director has a duty to act with the care, diligence and skill that a reasonable director would in the circumstances. The question may be asked whether the director has complied with this standard when making a decision. Therefore a genuinely held but clearly stupid and reckless belief that a transaction was in the best interest of the company will not satisfy this standard. 3.  Good Faith A director has the duty to “act in good faith” and in what the director believes to be “the best interests of the company”. This...