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New Zealand law explained for everyone

Companies Act 1993

Directors and their powers and duties - Directors' duties

135: Reckless trading

You could also call this:

“Directors must not allow risky business practices that could harm creditors”

You must not agree to run a company’s business in a way that might cause big problems for the people the company owes money to. This means you can’t let the company do things that could make it lose a lot of money and not be able to pay its debts.

You also can’t make the company do risky things that could cause it to lose a lot of money. This includes letting other people run the company in a way that could cause big losses.

As a director, you need to be careful and think about how the company’s actions might affect the people and businesses it owes money to. You should always try to keep the company safe and able to pay its debts.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM320666.

Topics:
Business > Industry rules
Business > Fair trading
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134: Directors to comply with Act and constitution, or

“Directors must follow the law and company rules”

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136: Duty in relation to obligations, or

“Directors must carefully consider if the company can fulfil new obligations”

Part 8 Directors and their powers and duties
Directors' duties

135Reckless trading

  1. A director of a company must not—

  2. agree to the business of the company being carried on in a manner likely to create a substantial risk of serious loss to the company's creditors; or
    1. cause or allow the business of the company to be carried on in a manner likely to create a substantial risk of serious loss to the company's creditors.