Time to call in expert advice to unscramble directors’ duties law

25 March 2022

The case for calling in the Law Commission to review sections 135 and 136 of the Companies Act relating to directors’ duties is becoming urgent – particularly given the Government’s decision to push ahead with the passage of the Incorporated Societies Bill.

The Bill not only incorporates both provisions but extends their reach to officers, including volunteers, in the not-for-profit sector. This despite the fact that they are widely regarded as unworkable, even in regard to their original target – company directors.

Indeed, the Court of Appeal in its Mainzeal judgment spoke of “the need for a review of the post-1993 insolvent trading provisions, to ensure they are coherent and practically workable”, after pointing out various difficulties in their application.

For these reasons – and because we consider that they will impose disproportionately burdensome obligations and risks on the leadership of incorporated societies, many of them charities – we have been urging the Government to reconsider.

But the Bill is past the stage where it can be amended by Supplementary Order Paper and Commerce and Consumer Affairs Minister David Clark is now saying that the 18-month lag time between enactment and when the new Act will come into force will provide ample opportunity for it to be corrected, should that prove necessary.


Sir Geoffrey Palmer, who used his time in office to try to shift the New Zealand culture from being “the fastest lawmakers in the West”, will not be impressed.


Read our related publications below:

Submissions of Incorporated Societies reforms

Incorporated Societies Bill – Chapman Tripp supplementary submission

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