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Director duties aren't optional.
The Companies Act doesn't care about company size. Your personal liability applies whether you are running a two-person operation or sitting on a major board.
Personal liability is not theoretical.
Being a director comes with legal obligations that apply regardless of company size. Whether you are running a two-person company or sitting on the board of a larger enterprise, the Companies Act duties are yours personally.
"Many directors don't realise their personal assets could be on the line until something goes wrong."
First-Time Directors
Taking on your first directorship is exciting, but the legal responsibilities are immediate. From day one, you are personally bound by duties that can result in personal liability if breached.
Beyond Owner-Operator
When your company grows beyond the owner-operator stage, governance becomes more complex. More stakeholders, more decisions, more documentation, more risk.
- Board procedures needed
- Shareholder expectations
- Compliance requirements
When Companies Face Difficulty
Director duties become critical when a company is struggling. Section 135 prohibits reckless trading - continuing to trade when there's substantial risk of serious loss to creditors. Getting this wrong means personal liability.
Your core duties as a director.
These duties are not optional. They apply to every director, regardless of company size.
Good Faith
Act in good faith and in what you believe to be the best interests of the company; not your interests, not any particular shareholder's interests.
Proper Purpose
Exercise powers for legitimate company purposes. Using director powers to benefit yourself or disadvantage particular shareholders is a breach.
No Reckless Trading
Don't carry on business in a way that creates substantial risk of serious loss to creditors. Critical when companies face financial difficulty.
No Impossible Obligations
Don't incur obligations unless you believe on reasonable grounds the company can meet them. No promising what you can't deliver.
Care, Diligence, Skill
Exercise the care, diligence and skill a reasonable director would in the same circumstances. The standard depends on the nature of the company and your role.
ESG Considerations
Directors may now consider environmental, social, and governance matters when acting in the company's best interests. Sustainability thinking is explicitly permitted.
When things go wrong.
These consequences aren't meant to frighten you. They exist to ensure directors take their responsibilities seriously. Understanding them is the first step to protection.
Personal Liability
You can be personally liable to the company or creditors for losses caused by your breach. Your personal assets may be at risk.
Civil Penalties
The Companies Act provides for pecuniary penalties and compensation orders against directors who breach their duties.
Disqualification
In serious cases, you can be disqualified from acting as a director of any company for a period determined by the court.
Criminal Liability
For serious breaches involving dishonesty or reckless conduct, criminal charges are possible.
Director Duty Advice
Practical guidance on your obligations in specific situations. We explain what your duties require and help you make informed decisions.
Governance Frameworks
For growing companies, we establish appropriate governance structures, board procedures, and decision-making processes.
Constitution Review
Your constitution governs how the company operates. We ensure it suits your situation and supports effective governance.
Conflict Management
Help navigating situations where director and company interests may conflict, including proper disclosure and process.
Board Appointments
Guidance on the process, obligations, and implications of joining or leaving a board.
Supporting Hawke's Bay Directors
We have advised directors across Hawke's Bay for over 150 years. From family companies to larger enterprises, orchardists to professional practices, we understand the governance challenges local businesses face. Our advice is practical, not theoretical.
What Our Clients Say
"Prompt, friendly & efficient service"
"I have always received excellent service from Carlile Dowling."
"A pleasure to work with."
To ensure candour, all feedback was collected anonymously.
Related Reading
Limitation Periods in New Zealand: Time Limits for Legal Claims
Understanding time limits for legal claims. Covers contract (6 years), tort (6 years), employment (90 days), and when time starts running.
New Zealand Disputes Tribunal: A Complete Guide
Everything you need to know about the Disputes Tribunal. Covers jurisdiction limits, types of disputes, process, costs, and when to use it.
Company vs Trust: Which Structure for Your Business?
Companies and trusts serve different purposes. Understanding when each is appropriate helps you choose the right structure for your situation.
Meet the team
behind your governance
Common Questions
We work with businesses of all sizes across Hawke's Bay, from startups and family businesses to established enterprises. Our clients include vineyards, orchards, professional services, hospitality, retail, trades, and many others.
Many business issues require legal advice, even for small businesses. Getting structures and agreements right from the start often prevents costly problems later. We are happy to discuss whether legal help would benefit your situation.
Accountants and lawyers complement each other. Your accountant advises on financial and tax issues. Working alongside your accountant, we handle legal structures, contracts, financing, securities, employment and more.
Any existing documents relevant to your situation: company records, contracts, agreements you are considering, or details of issues you are facing. But if you are just at the thinking stage, that is fine too.
Your Responsibilities as a Director
Understand your duties and responsibilities as a director.
Read the GuideReady to discuss your needs? We're here to help.