The main corporate entities in New Zealand are closely-held limited liability companies (closely-held company) and widely-held limited liability companies that are generally listed by New Zealand Exchange Limited (NZX) on the New Zealand Stock Market (NZSX) (listed companies) and, less commonly, on the New Zealand Alternative Market (NZAX). Companies can also list debt securities on the Debt Security Market (NZDX). Most legal requirements for directors apply equally to directors of closely-held companies and listed companies. However, corporate governance codes and best practice statements apply mainly to listed companies, in addition to the listing rule requirements.
Corporate governance and directors' duties are regulated by:
The Companies Act 1993. The Companies Act defines the relationships between companies and their directors, shareholders and creditors, and provides for the incorporation, organisation and operation of companies. It also codifies the duties of directors.
A company's constitution (constitution). A company may deviate from certain provisions of the Companies Act, by incorporating structure and management rules in a constitution.
The Listing Rules of the NZSX and NZDX (Listing Rules). The Listing Rules apply to all companies listed on the NZSX. Some of the Listing Rules apply to companies solely listed on the NZDX.
The Securities Act 1978. The Securities Act and regulations under it, set out the requirements for a registered prospectus and an investment statement and other advertising, and when these documents must be made available to potential investors when securities are offered for subscription, and allotment, to the public.
The Takeovers Code. The Takeovers Code governs the rights and obligations of parties wishing to merge with or to acquire material interests in code companies (in simple terms, a company with voting shares listed on the NZSX or NZAX, or with over 50 shareholders).
The Securities Markets Act 1988. The Securities Markets Act regulates, for companies that are issuers of listed securities to the public:
insider trading and tipping;
market manipulation;
disclosure requirements.
The Financial Reporting Act 1993. The Financial Reporting Act prescribes financial reporting requirements for companies and various other entities. It requires certain issuers of securities to file financial statements that comply with generally accepted accounting practice.
Is there a unitary or two-tiered board structure?
Who manages a company and what name is given to these managers?
Who sits on the board(s)?
Do employees have a right to board representation?
Is there a minimum or maximum number of directors or members of the managerial and supervisory bodies?
Structure. A company must be managed by, or under the direction or supervision of, a unitary board of directors (board) (Companies Act).
Management. The board is responsible for the company's governance and manages the day-to-day operations of the company. This division in responsibility is not rigidly maintained. The use of delegated authorities and board committees means a level of board management exists in most closely-held and listed companies. Although not usually directors, the chief executive officer (CEO) and chief financial officer (CFO) of most listed companies usually attend board, and board committee, meetings and are members of board committees as executive advisers (except when conflicted, such as when the CEO's remuneration is being discussed). In contrast, executives of most closely-held companies are also usually directors.
Board members. The company's directors sit on its board. The directors usually consist of a mix of executive and non-executive directors (see Question 4).
Employees' representation. Employees are not entitled to board representation.
Number of directors or members. Closely-held companies must have at least one director while listed companies must have at least three directors. There is no prescribed maximum number of directors unless set by the constitution.
Directors must be over the age of 18. There is no upper age limit.
There are no nationality restrictions, but listed companies must have at least two directors that are ordinarily resident in New Zealand. Specific requirements apply to the boards of New Zealand registered banks.
Are they recognised?
Does a part of the board have to consist of them? If so, what proportion?
Do non-executive or supervisory directors have to be independent of the company? If so, what is the test for independence or what makes a director not independent?
What is the scope of their duties and potential liability to the company, shareholders and third parties?
Recognition. The Listing Rules recognise independent directors as directors who are not executive officers and who do not have a direct or indirect interest or relationship that could reasonably influence their decisions in a material way.
Board composition. For listed companies, the minimum number of independent directors is two, or one-third of the board, whichever is greater. However, the Institute of Directors in New Zealand Code of Practice for Directors (Code), which is a voluntary code, recommends that the chairman and the majority of directors of a listed company should be non-executive.
Independence. The Listing Rules require that the board of a listed company must include a minimum of two independent directors and set out non-exhaustive criteria for determining independence. A director is not independent if he:
is a substantial security holder; or
derives 10% or more of his annual revenue from the listed company, a substantial security holder of the listed company or an associated person of the listed company.
The board must determine who is independent and publish the basis for each decision in the company's annual report, and on appointment.
Duties and liabilities. All directors, whether non-executive or independent, are subject to the same duties under the Companies Act. Breach of these may result in potential liability to the company and less commonly to its shareholders.
There is no legal or regulatory requirement to keep the roles of chairman and CEO separate. However, the Code recommends the separation of these roles. Most listed companies adopt the Code guidelines (and publish them in their annual report).
The CEO of a listed company is commonly not a director of the company, because it is thought that the separation of governance and management adds a dimension of accountability. However, dual appointments are relatively common among closely-held companies.
A company's first directors are those named as directors in the company's application for registration and who consent to act as directors of the company. All subsequent directors must, unless the constitution otherwise provides, be appointed by ordinary resolution of the shareholders.
It is common for a closely-held constitution also to permit the shareholders holding the majority of voting securities to appoint subsequent directors by written notice to the company, which avoids the requirement to hold a shareholders' meeting to pass the ordinary resolution.
The directors of listed companies are generally elected at an annual meeting of shareholders. However, a listed company can provide in its constitution for a shareholder or the board to have the right to appoint one or more directors, provided certain preconditions are met (Listing Rules).
Subject to a constitution, a director may be removed by ordinary resolution passed at a shareholders' meeting called for that purpose. Generally, a closely-held constitution also permits the shareholders holding the majority of voting securities to remove directors by written notice to the company.
There are no requirements to fix the terms of appointment for directors of closely-held companies. Most directors of closely-held companies are appointed for an indefinite term (subject to the shareholders' right to remove the directors at any time). The directors of listed companies are subject to a rotation policy prescribed by the Listing Rules. Subject to limited exceptions, at least one-third of the directors, or if their number is not a multiple of three, then the number nearest to one-third, and any directors appointed by the board to fill vacancies, must retire from office at each annual meeting, but are eligible for re-election at that meeting. Directors of a listed company can then seek reappointment by the shareholders.
Directors may be employees of the company, but it is not mandatory.
Companies are not required to keep directors' employment contracts available for inspection.
Directors may hold shares in the company, but it is not compulsory.
The board determines various forms of remuneration and benefits to be paid by the company to its directors, subject to any restrictions contained in the constitution. The remuneration payable to a director includes:
Payments or provision of other benefits for services as a director or in any other capacity.
Payments of compensation to a director or former director for loss of office.
Making loans to a director.
Guaranteeing a director's debts.
Entering into a contract to do any of the above.
Before the board authorises any of the above, it must be satisfied that to do so is fair to the company. The directors who vote in favour of authorisation must sign a certificate which states that the remuneration is fair and which sets out the grounds for their opinion.
In addition, any remuneration paid to a director of a listed company must be authorised by ordinary resolution (Listing Rules).
Remuneration or other benefits paid to a director must be entered in the interests register of a company. It is the responsibility of the board to ensure that entry into the interests register occurs. The total remuneration of each director paid by the company must be disclosed, including the salary of an executive director which is paid in addition to his director's fees.
The board must also prepare an annual report to be sent to the shareholders, containing information such as the particulars of entries in the interests register and the total remuneration and other benefits received by directors or former directors.
Shareholder approval of remuneration may be required under the constitution, but this is unusual. Any remuneration paid to a director of a listed company must be authorised by ordinary resolution of the shareholders (Listing Rules).
A company's internal management is mainly regulated by the Companies Act and the constitution. Where a company does not have a constitution, the provisions of the Companies Act govern the proceedings of the board. The provisions include the following matters:
The length of notice for a board meeting is not less than two days. The notice must specify the date, time, place of the meeting and the matters to be discussed.
The method for holding directors' meetings.
The number of votes necessary to pass a resolution.
The quorum for a board meeting and the keeping of directors' minutes.
The ability for directors to pass a written resolution in lieu of meeting. A resolution in writing, signed or assented to by all the directors of the company entitled to receive notice of the meeting, is as valid and effective as if it had been passed at a meeting of the board duly convened and held.
A company's directors have all the powers necessary for managing, directing and supervising the company (Companies Act). It is unusual for the constitution to limit these powers.
If all entitled persons have agreed in writing, the board may undertake certain actions with a more limited requirement for resolutions and certificates. Among other things, the unanimous assent provision of the Companies Act may be used to do any of the following:
Authorise a dividend.
Approve a discount scheme.
Allow the company to acquire shares issued by it.
Redeem shares.
Give financial assistance in connection with the purchase of its own shares.
Provide remuneration and other benefits to directors.
Issue shares.
For listed companies, there are additional requirements placed on directors when contemplating certain transactions, including (Listing Rules):
Material transactions require shareholder approval and/or notification as well as notification to the market.
The directors have limitations on exercising their powers when entering into a related party transaction, where similar notification and approval requirements apply.
A special resolution must be passed by the shareholders before a company can (Companies Act):
Adopt, amend or revoke the constitution.
Undertake a major transaction (where the company seeks to acquire or dispose of assets, rights or interests, or incur obligations or liabilities, of a value more than half the total assets of the company before the transaction).
Amalgamate with another company.
A company's constitution and the listing rules can add further restrictions on directors' powers. Subject to the company's constitution, shareholders (including through a general meeting) do not generally have any powers to interfere with management matters. Restrictions on directors' powers are only enforceable against a third party dealing with the company where the third party knew, or ought to have known because of a relationship with the company, that the directors were exceeding their powers.
Subject to the constitution and certain other matters (see below), a board may delegate to a committee of directors, a director or employee of the company, or any other person any of its powers (Companies Act). It is unusual for the constitution to limit these powers.
Although directors may delegate powers and functions, they cannot delegate the management function itself. The board cannot delegate its power to, among other things (Companies Act):
Issue, acquire, redeem or transfer shares.
Make distributions.
Offer to acquire the company's shares.
Provide financial assistance.
Listed companies must have an audit committee (with unrestricted access to independent and internal auditors) to (Listing Rules):
Review the company's financial strategy and performance.
Monitor the independent auditors and audit practices.
Ensure that appropriate financial information and accounting processes are in place.
A majority of the audit committee must be independent directors and at least one member should have an accounting or financial background (Listing Rules).
Listed companies should also establish a remuneration committee, comprising a majority of independent directors, to recommend remuneration packages for non-executive directors and senior executives.
General duties.
Theft and fraud.
Securities law.
Insolvency law.
Health and safety.
Environment.
Anti-trust.
Other.
General duties. A director can be personally liable to the company (but not usually to its shareholders) for his acts while performing the role of director. Directors have a duty to act in good faith and in the best interests of the company and not to use their powers for an improper purpose. Directors must also exercise reasonable care, diligence and skill and have a duty to comply with the Companies Act and the company's constitution. Directors must not agree to allow the company to trade recklessly nor agree to the company incurring any obligations unless the director believes at that time, on reasonable grounds, that the company will be able to perform the obligation when required. A director is also responsible for various administrative obligations such as keeping accounting records.
Theft and fraud. A director can be criminally liable under the Crimes Act 1961 for theft and fraud (including making false statements with intent to deceive shareholders or creditors, and falsifying accounts).
Securities law. A director can be held civilly or criminally liable for misleading statements or practices, which may induce someone to buy or sell shares or other securities, contrary to the Securities Act.
Insolvency law. As a general rule, directors cannot be made personally liable for the debts and obligations of a limited liability company. There are certain exceptions however, including where a company has:
failed to keep proper accounting records under the Companies Act; and
failed to prepare financial statements under the Financial Reporting Act.
In these cases, and where the company is in liquidation, the courts may hold a director personally responsible for all or any part of the company's debts.
Health and safety. Directors are only directly liable under health and safety regulations if they control a place of work or if they directed, authorised, assented to, acquiesced in, or participated in a breach, whether or not the company is prosecuted or convicted (Health and Safety in Employment Act 1992). The company may be prosecuted for a breach of safety in combination with the individual defendant being charged with an offence, such as manslaughter, if the breach of safety resulted in an employee's death.
Environment. A director can be held personally liable when his company is in breach of environmental law if the offence took place with his authority, permission or consent (Resource Management Act 1991). Companies must avoid, remedy or mitigate any adverse effect on the environment arising from an activity it is involved in. Failure to fulfil this duty can give rise to both civil and criminal liability, though generally criminal liability arises only when the activity undertaken requires resource consent and is undertaken without it.
Anti-trust. A director can be found personally liable for his role in a company's breach of restricted trade practices, such as price-fixing and cartels. New Zealand Commerce Commission can seek civil penalties from individuals engaged in such behaviour of up to NZ$500,000 (about US$254,675).
Other. Except in certain specified circumstances, a director of a failed company (that is, a company that was placed in liquidation when it was unable to pay its due debts) must not, for a period of five years after the failed company enters liquidation, be a director of or directly or indirectly take a part in the promotion, formation, management or day-to-day business of a phoenix company (that is, a company using a pre-liquidation name of the failed company or a name that is similar to the existing name of the failed company). Anyone who contravenes the phoenix company provisions may be liable to imprisonment for a term of up to five years, or a fine of up to NZ$200,000 (about US$101,870). They may also be personally liable for all the relevant debts of the failed company.
It is generally not possible to restrict or limit a director's liability to the company in respect of the issues referred to in Question 14.
A company may, if expressly permitted by its constitution, indemnify a director for:
Any costs incurred in defending proceedings relating to liability for an act or omission in the capacity of director in which judgment is given in the director's favour, the director is acquitted or the proceedings are discontinued.
Liability to any person, other than the company, for any act or omission in the capacity of director (and for related costs), not including criminal liability (including statutory offences and fines) and liability resulting from breach of a director's duty under the Companies Act to act in good faith and in the best interests of the company.
Directors can (and directors of listed companies commonly do) obtain insurance against certain civil liabilities (including for negligence, breach of duty and breach of trust in relation to the company), but not against losses due to fraud, dishonesty or criminal behaviour. A company may, if expressly permitted by its constitution and with the board's prior approval, effect insurance for a director in respect of:
Liability, other than criminal liability, for any act or omission in the capacity of director.
Costs incurred by the director in defending or settling any claim or proceeding relating to that liability.
Costs incurred by the director in defending criminal proceedings that have been brought against the director in relation to any act or omission in the capacity as director in which he is acquitted.
A third party can be liable as a director in certain circumstances. Director is defined widely to include (Companies Act):
Persons occupying the position of director by whatever name called.
Persons in accordance with whose directions or instructions the directors may be required or are accustomed to act.
Persons to whom a duty or power of the board has been delegated directly by the board with those persons' consent or acquiescence, or who exercise a power or duty with the board's consent or acquiescence (shadow directors).
The shadow director category potentially exposes senior managers, consultants and contractors to liability for their actions or omissions as directors of the company. This ensures that those who control a company (without formal appointment) and who are involved closely in the company's affairs are subject to substantially the same legal obligations as formally appointed directors.
Any person who falls within the extended definition of a director may be sued or, where applicable, prosecuted for breaching an applicable duty (Companies Act).
Directors are subject to common law fiduciary duties. A director must not put himself in a position where his personal interests (or duties to other parties) conflict with the company's interests. A director can be liable to his company if he allows an actual or potential conflict between his personal interests and the company's interests to prejudice his ability to make decisions objectively, to the best advantage of the company. The constitution can permit certain conflicts (for example, a closely-held company's constitution usually allows directors to have an interest in a transaction in which the company has an interest, and a director to be a director of another company which also has an interest in a transaction, provided the nature of the conflict is recorded in the company's interests register).
The Companies Act contains provisions relating to transactions undertaken by a company with one or more of its directors (which may be supplemented by the constitution) including:
A duty to disclose an interest in any contract or proposed contract with the company.
A requirement that any payment of remuneration, compensation for loss of office, guarantees of debt or loan to a director must be fair to the company. In terms of loans this generally means that interest is charged at a fair rate. These types of transactions must be supported by a certificate from the directors who voted in favour of the transaction.
A requirement for shareholder approval if the company proposes to enter into a major transaction (as defined) with a director.
Controls on payments to directors on loss of office or a takeover.
Listed companies must also obtain shareholder approval for certain transactions with directors and other related parties under the Listing Rules (including shareholders holding more than 10% of a listed company's shares). There are also statutory limitations relating to conflicts of interest (see Question 18).
A director of a listed company must disclose initially, following their appointment as a director of the company (or on the listing of the company), any relevant interests in the company's securities and subsequently, any acquisition or disposal of an interest to the company and the NZX (Securities Markets Act). A director has a relevant interest if he:
Is a registered holder of a security.
Is a beneficial owner of a security.
Has the power to exercise, or control the exercise of, a right to vote attached to a security.
Has the power to acquire of dispose of, or to control the acquisition or disposal of, a security.
A director of a closely-held company is restricted in the purchase or sale of shares or other securities in the company if he has information in his capacity as a director or employee of the company or of a related company that is material to an assessment of the value of shares or other securities (Companies Act). The director may acquire or dispose of those shares or securities only if the consideration represents a fair value.
A director of a listed company can trade shares in that listed company, if he does not do so when he (Securities Markets Act):
Has material information in relation to that listed company that is not generally available to the market.
Knows or ought reasonably to know, that the information is material information and not generally available to the market.
Material information is information that a reasonable person would expect, if it were generally available to the market, to have a material effect on the price of listed securities of the listed company. If a director has knowledge of such material information, then he is considered an information insider under the Securities Markets Act, and cannot lawfully (among other things) trade the listed company's securities.
The New Zealand Securities Commission suggests that listed companies put in place a share trading policy explaining the ban on insider trading to help their directors and employees comply with the law. The Listed Companies Association has published guidelines and a template policy that assists listed companies with their policies.
Every company must either (at least 20 working days before each annual meeting):
Send an annual report to its shareholders containing information such as the financial statements and the auditor's report on the company.
Send a statement to its shareholders saying, among other things, that the shareholder has a right to receive from the company, free of charge, a copy of the annual report on request (provided the request is made within 15 working days of receipt of the notice) and that it is available by electronic means.
However, shareholders do not have any specific right to inspect a company's accounting records. They may request to see such records as information but the company may refuse the request relying on any of the grounds specified in the Companies Act. Every company must lodge an annual return each year with the Registrar.
The directors of certain types of companies must register a set of audited accounts at the New Zealand Companies Office each year. These include issuers and overseas companies which register a branch in New Zealand.
The NZX Corporate Governance Best Practice Code (NZX Code) requires listed companies to disclose how their corporate governance policies, practices and processes deviate from the NZX Code.
A company that is a party to a listing agreement with the NZX must comply with the continuous disclosure provisions of the Listing Rules in relation to the notification of material information (see Question 25) that is not generally available to the market (Securities Markets Act).
Subject to a number of exceptions (see below), the board of the company must call an annual meeting of shareholders each year.
The company must hold the first annual meeting within 18 months of its registration. After that, the meetings must not be more than 15 months apart and must be no later than six months after the balance date of the company.
It is not necessary for a company to hold the shareholders' annual meeting if everything legally required to be done at that meeting (by resolution or otherwise) has already been done by written resolution before the meeting (normally signed by at least 75% of a company's shareholders).
Generally, the only thing legally required to be done at a meeting of shareholders is the passing of a resolution either appointing an auditor or that no auditor be appointed (where this is permitted by the Companies Act). These matters can be addressed by prior written resolution.
Shareholders who hold at least 5% of the voting rights can request in writing that the board call a special meeting of shareholders (Companies Act). The constitution may also specify anyone else who is authorised to call a special meeting. A shareholder may give written notice to the board of a matter the shareholder proposes to raise for discussion or resolution at the next meeting of shareholders at which the shareholder is entitled to vote.
Shareholders can apply to the High Court of New Zealand for any of the following:
An injunction to prevent a breach of duty by a director.
An order to compel a director to act in accordance with the Companies Act.
A personal action against a director for a breach of a duty owed to the shareholder as shareholder.
Permission to bring a derivative action. This may, for example, be considered appropriate where it is in the interests of the company that the proceedings should not be left to the directors or the shareholders as a whole.
A company's constitution or a shareholders' agreement can provide shareholders with further remedies.
If a company enters liquidation, a shareholder can:
Apply to the court to enquire into the conduct of a promoter, director, manager, administrator, liquidator or receiver.
Seek an order for that person to repay or restore any money or property, or provide compensation if it appears that that person has:
misapplied, or retained, or become liable or accountable for, money or property of the company; or
been guilty of negligence, default, or breach of duty or trust in relation to the company.
There are no formal requirements relating to the internal control of business risks. However, the Code recommends the recognition and management of risk through identification, monitoring and control. Most listed companies adopt the Code's guidelines (and publish them in their annual report). Specific requirements may apply to particular types of company (for example, registered banks) under specific legislation.
Directors of a company must keep accounting records for the company in a prescribed general form. They must also ensure that the financial statements of the company comply with generally accepted accounting practice under the Financial Reporting Act.
Where a company fails to comply with the requirements of the Financial Reporting Act, every director of that company commits an offence and is liable to a fine not exceeding NZ$100,000 (about US$50,935). A director has a defence if he either:
Took all reasonable steps to ensure the applicable requirement was complied with.
Can establish that, in the circumstances, he could not reasonably have been expected to take steps to ensure that the directors complied with the requirement.
Every person who knowingly makes or authorises the making of a false statement or material omission in a document required by the Financial Reporting Act commits an offence and is liable to imprisonment for a term not exceeding five years or a fine not exceeding NZ$200,000 (about US$101,870). Any person who votes in favour of the making of the statement is deemed to have authorised the statement.
Only the following types of companies have to register a set of audited accounts at the New Zealand Companies Office each year:
An issuer under the Securities Act.
An overseas company that has registered to carry on business in New Zealand.
A company which is a subsidiary of a company or body corporate incorporated outside New Zealand.
A large company in which shares that carry the right to exercise or control the exercise of 25% or more of the voting power at a meeting of the company are held by:
a subsidiary of a company or body corporate incorporated outside New Zealand or a subsidiary of that subsidiary;
a company or body corporate incorporated outside New Zealand;
a person not ordinarily resident in New Zealand.
Companies must appoint an auditor each year unless all shareholders resolve in writing, either at, or before the annual general meeting, that no auditor be appointed. However, a company of the type listed in Question 27 that is required to file its annual accounts with the New Zealand Companies Office must appoint an auditor.
A listed company's audit committee must ensure that the external auditor or lead audit partner is changed at least every five years.
The auditor must either be a New Zealand chartered accountant or a member of an overseas association which has been approved by the New Zealand Companies Office Registrar and published in the New Zealand Gazette.
An auditor cannot be a director or employee of the company, but can assume non-audit roles for the company.
Auditors are potentially liable to a company and its shareholders if the accounts are materially inaccurate or misleading and the auditor did not use reasonable care and skill when preparing the audit. Auditors are not generally liable to third parties, unless there are special circumstances bringing the investors within the reasonable contemplation of the auditor. The duties of an auditor are mostly statutory and, as such, should not be able to be lessened by means of any arrangement with the company.
Triple bottom line or sustainable development reporting is still relatively uncommon, although in recent years some high profile large organisations in the public and private sectors have adopted this type reporting in some form. An organisation which is key to developments in this area is the New Zealand Business Council for Sustainable Development, which has produced significant material on sustainable development reporting which is available on its website.
While it is not mandatory to adopt corporate social responsibility policies, most large companies do so.
The Companies Act does not require a company to have a company secretary. If a company appoints a company secretary, responsibilities normally include:
Serving the board in an administrative capacity.
Being responsible for preparing board papers and their receipt by all board members.
Drafting the minutes, agenda construction and board processes and procedures.
Institutional investors and other shareholders groups are reasonably influential in monitoring and enforcing good corporate governance of listed companies. In particular, the New Zealand Shareholders' Association provides education and advice in relation to investment in listed companies. It also acts as a spokesperson on behalf of shareholders on corporate governance issues.
The New Zealand Institute of Directors also plays an important role in promoting excellence in corporate governance, representing directors' interests and facilitating professional development through education and training.
Employees, ex-employees, managers, independent contractors and seconded persons can disclose information about their employer with immunity from civil and criminal proceedings if (Protected Disclosures Act 2000):
It is about serious wrongdoing in or by the organisation.
The person believes, on reasonable grounds, that the information is true or likely to be true.
The person wishes to have the wrongdoing investigated.
The person wishes the disclosure to be protected.
A person's disclosure is not protected where the allegation is known to that person to be false or the person otherwise acts in bad faith. In contrast to the public sector, private sector organisations are not required to establish procedures for receiving and dealing with information about serious wrongdoing. Where there are no procedures established, disclosure should be made to the head or deputy head of the organisation.
While the fundamental principles governing directors duties in New Zealand are fairly static, increased regulation of certain sectors of the economy (particularly in the area of financial services) will continue to impose further obligations and liabilities on companies and their boards. For example, as a consequence of a string of failures by a number of finance companies, new prudential regulations have been developed which will apply to non-bank deposit takers (the majority of the new rules will come into force in 2010). Among other things, directors of non-bank deposit takers will need to ensure their companies have a risk management programme by September 2009 and take all practicable steps required to comply with that programme.
Further scrutiny will also be brought to bear on directors whose stewardship leads to insolvency and significant losses for those dealing with the company. In particular, the courts are likely to have further opportunities to consider the conduct of directors of failed finance companies to determine, among other things, whether or not those directors have breached one or more of the duties in the Companies Act.