Law Commission to undertake project on directors’ duties

Published: 4 June 2024

The Minister of Justice has asked the Commission to undertake a review of directors’ duties and liabilities.

The Companies Act 1993 was originally informed by two Law Commission reports and Kaikōmihana | Commissioner Geof Shirtcliffe, who will lead the project, has substantial experience in this field of law. 

Mr Shirtcliffe says:

“The law relating to directors’ duties and liabilities has been causing concern for some time and a review is timely. 

Duties in the Companies Act relating to reckless trading and incurring obligations are particularly unclear and difficult to apply as they are currently framed and may discourage directors from taking legitimate business risks.

In addition, directors can be liable under a range of other Acts.  It is appropriate to consider the overall burden of liability on directors, including its impact on directors’ willingness to take legitimate business risks and its consistency with the underlying purpose of directors’ duties in the Companies Act.

The review is also likely to examine the enforcement of directors’ duties, including whether the current modes of enforcement are effective and who should be responsible for that enforcement.”

It is expected that the Commission will begin this project in the first half of 2025.