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Companies Act 1993

Directors and their powers and duties - Transactions involving self-interest

140: Disclosure of interest

You could also call this:

“Directors must disclose their business interests to the company”

If you’re a director of a company, you need to tell the company about any business deals you’re involved in that might affect the company. You do this by writing it down in a special book called the interests register. If there’s more than one director, you also need to tell the other directors.

You need to say what the deal is about and how much money is involved if you know. If you don’t know how much money, you need to explain how big the deal is in other ways.

You don’t have to do this if the deal is between you and the company, and it’s a normal part of how the company does business with its usual rules.

You can also write a general note in the interests register (and tell the other directors if there are any) saying that you’re involved with another company or person. This note means you don’t have to tell them every time there’s a new deal with that company or person.

If you forget to tell the company about a deal you’re involved in, it doesn’t make the deal invalid. But you might get in trouble with the law if you don’t follow these rules. The punishment for not following these rules is explained in section 373(2).

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM320673.

Topics:

Business > Industry rules

Business > Fair trading

Government and voting > Government departments

139: Meaning of interested, or

“What it means to be 'interested' in a company transaction as a director”

141: Avoidance of transactions, or

“Cancelling transactions involving company directors”

Part 8 Directors and their powers and duties
Transactions involving self-interest

140Disclosure of interest

A director of a company must, forthwith after becoming aware of the fact that he or she is interested in a transaction or proposed transaction with the company, cause to be entered in the interests register, and, if the company has more than 1 director, disclose to the board of the company—
if the monetary value of the director's interest is able to be quantified, the nature and monetary value of that interest; or
if the monetary value of the director's interest cannot be quantified, the nature and extent of that interest.

A director of a company is not required to comply with subsection (1) if—
the transaction or proposed transaction is between the director and the company; and
the transaction or proposed transaction is or is to be entered into in the ordinary course of the company's business and on usual terms and conditions.

For the purposes of subsection (1), a general notice entered in the interests register and, if the company has more than 1 director, disclosed to the board to the effect that a director is a shareholder, director, officer or trustee of another named company or other person and is to be regarded as interested in any transaction which may, after the date of the entry or disclosure, be entered into with that company or person, is a sufficient disclosure of interest in relation to that transaction.
A failure by a director to comply with subsection (1) does not affect the validity of a transaction entered into by the company or the director.
Every director who fails to comply with subsection (1) commits an offence and is liable on conviction to the penalty set out in section 373(2).

Compare

1955 No 63 s 199

Notes

Section 140(1A): inserted, on 30 June 1997, by section 12 of the Companies Act 1993 Amendment Act 1997 (1997 No 27).
Section 140(2): amended, on 3 May 2001, by section 11 of the Companies Act 1993 Amendment Act 2001 (2001 No 18).