Silly bill-iness from Parliament as Bill passes against expert advice

27 July 2023

Parliament last night progressed the Companies (Directors' Duties) Amendment Bill (Bill) against expert advice, from the Legislative Design and Advisory Committee, Office of the Clerk, the Ministry of Business, Innovation and Employment (MBIE), the Law Society and leading corporate law firms, including Chapman Tripp.

The Bill is expected to complete its final Third Reading stage next week, and become law soon afterward.

The Select Committee (Committee) had not agreed that the Bill should pass in the form it was reported back, with the National Party lodging Minority reports.

Labour MP Camilla Bellich (who finished up with the Bill after its original sponsor Duncan Webb was promoted to Cabinet) sought to offer up a Supplementary Order Paper (SOP) at a late stage, but in the end her SOP has not done anything substantive to improve the Bill.

In our view, the Bill should not have proceeded.

The Bill

The Bill as first drafted proposed to make clear that directors may consider a wide number of factors while making decisions, other than financial gain and provided that these factors may include the principles of te Tiriti, environmental impacts, good corporate ethics, being a good employer, and the interests of the wider community.

The Committee recommended that reference to the five non-exhaustive Environmental, Social and Governance (ESG) factors be removed and replaced with wording that makes it clear that, when considering the best interests of the company or holding company for the purposes of section 131 directors may consider factors other than profit maximisation.

The Bellich SOP amended the Committee version to add examples, to provide that:


To avoid doubt, in considering the best interests of a company or holding company for the purposes of this section, a director may consider matters other than the maximisation of profit (for example, environmental, social, and governance matters)


None of which achieves anything beyond virtue-signalling. The existing law is already clear that directors are not limited to profit maximisation and, in our experience, most directors routinely have regard to ESG considerations in their decision-making and consider it is in the company’s best interests to do so, as noted in Chapman Tripp’s legal opinion on natural capital risk for The Aotearoa Circle.

Green Party member Ricardo Menéndez March had sought to make consideration of ESG mandatory for every decision, by suggesting an SOP to change “may” to “must” but that had little support from other MPs.

What’s needed

Piecemeal, ad hoc law reform is never a good idea – especially, as in this case, where nothing of purpose is achieved. The Companies Act 1993 is now more than 30 years old. We need an expert review by the Law Commission into the whole area of directors’ duties. The reckless trading provisions in particular are not up to scratch.

A fuller explanation of our view is available in the publications linked to below.

Corporate Governance Trends and Insights, May 2022.

Time to call in expert advice to unscramble directors’ duties, March 2022


Our thanks to Sophie Chan for helping to prepare this article.

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