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Companies Act 1993

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

149: Restrictions on share dealing by directors

You could also call this:

“Directors must follow rules when trading company shares”

If you’re a director of a company, you need to be careful when buying or selling shares or other financial products of your company or a related company. You can’t use special information you have as a director to get an unfair advantage.

When you want to buy shares or financial products, you must pay at least the fair value for them. When you want to sell them, you can’t ask for more than their fair value. The fair value is based on all the information you know as a director or that is available to everyone.

These rules don’t apply if you’re just buying or selling shares or financial products for the company itself or a related company.

If you break these rules when buying, you might have to pay extra money to the person you bought from. If you break the rules when selling, you might have to give back some money to the person you sold to.

These rules don’t apply to financial products that are traded on a licensed market.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM320686.

Topics:
Business > Industry rules
Business > Fair trading
Money and consumer rights > Banking and loans
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Part 8 Directors and their powers and duties
Transactions involving self-interest

149Restrictions on share dealing by directors

  1. If a director of a company has information in his or her capacity as a director or employee of the company or a related company, being information that would not otherwise be available to him or her, but which is information material to an assessment of the value of shares or other financial products issued by the company or a related company, the director may acquire or dispose of those shares or financial products only if,—

  2. in the case of an acquisition, the consideration given for the acquisition is not less than the fair value of the shares or financial products; or
    1. in the case of a disposition, the consideration received for the disposition is not more than the fair value of the shares or financial products.

      1. For the purposes of subsection (1), the fair value of shares or financial products is to be determined on the basis of all information known to the director or publicly available at the time.

      2. Subsection (1) does not apply in relation to a share or financial product that is acquired or disposed of by a director only as a nominee for the company or a related company.

      3. Where a director acquires shares or financial products in contravention of subsection (1)(a), the director is liable to the person from whom the shares or financial products were acquired for the amount by which the fair value of the shares or financial products exceeds the amount paid by the director.

      4. Where a director disposes of shares or financial products in contravention of subsection (1)(b), the director is liable to the person to whom the shares or financial products were disposed of for the amount by which the consideration received by the director exceeds the fair value of the shares or financial products.

      5. Nothing in this section applies to financial products that are quoted on a licensed market.

      Notes
      • Section 149(1): amended, on , by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).
      • Section 149(1)(a): amended, on , by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).
      • Section 149(1)(b): amended, on , by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).
      • Section 149(2): amended, on , by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).
      • Section 149(3): amended, on , by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).
      • Section 149(4): amended, on , by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).
      • Section 149(5): amended, on , by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).
      • Section 149(6): replaced, on , by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).