Plain language law

New Zealand law explained for everyone

 Plain Language Law homepage
Back to
137: Director's duty of care
or “Directors must act carefully and skillfully in their role”
You could also call this:

“How directors can use information and advice from others to make decisions”

When you’re a director of a company, you can use information and advice from certain people to help you make decisions and do your job. You can rely on reports, statements, financial data, and expert advice from employees of the company who you think are trustworthy and good at their job. You can also use advice from professional advisers or experts in areas they’re skilled in. You can even rely on information from other directors or groups of directors for things they’re in charge of.

But remember, you can only use this information and advice if you’re doing it for the right reasons. You need to be honest and act in good faith. If something doesn’t seem quite right, you should ask more questions. And if you know that you shouldn’t trust the information or advice, then you can’t use it.

It’s important to be careful and thoughtful when you’re using information from others to make decisions as a director. Always make sure you’re doing what’s best for the company and that you’re using reliable sources of information.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

Next up: 138A: Offence for serious breach of director's duty to act in good faith and in best interests of company

or “Directors can be penalised for knowingly acting against the company's interests”
Next

Part 8 Directors and their powers and duties
Directors' duties

138Use of information and advice

  1. Subject to subsection (2), a director of a company, when exercising powers or performing duties as a director, may rely on reports, statements, and financial data and other information prepared or supplied, and on professional or expert advice given, by any of the following persons:

  2. an employee of the company whom the director believes on reasonable grounds to be reliable and competent in relation to the matters concerned:
    1. a professional adviser or expert in relation to matters which the director believes on reasonable grounds to be within the person's professional or expert competence:
      1. any other director or committee of directors upon which the director did not serve in relation to matters within the director's or committee's designated authority.

        1. Subsection (1) applies to a director only if the director—

        2. acts in good faith; and
          1. makes proper inquiry where the need for inquiry is indicated by the circumstances; and
            1. has no knowledge that such reliance is unwarranted.