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Companies Act 1993

Directors and their powers and duties - Miscellaneous provisions relating to directors

161: Remuneration and other benefits

You could also call this:

“How directors can be paid and receive benefits for their work”

The board of your company can decide to give directors money or other benefits for their work. They can also pay directors who have left the company, lend them money, or promise to pay their debts. The board can only do these things if they think it’s fair to the company.

When the board decides to do any of these things, they need to write it down in a special book called the interests register right away.

If the board has already agreed to pay a director as part of a contract, they don’t need to agree to it again separately.

When the board members vote to give money or benefits to a director, they need to sign a paper. This paper says they think it’s fair to the company and explains why they think so.

If the board doesn’t follow these rules when they give money or benefits to a director, or if they didn’t have good reasons to think it was fair, the director might have to pay the money back to the company. But if the director can prove it was actually fair to the company, they might not have to pay it back.

If the board lends money to a director without following the rules or without good reasons, the director has to pay the money back to the company right away. But if the director can prove the loan was fair to the company, they might not have to pay it back so quickly.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM320805.

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Part 8 Directors and their powers and duties
Miscellaneous provisions relating to directors

161Remuneration and other benefits

  1. The board of a company may, subject to any restrictions contained in the constitution of the company, authorise—

  2. the payment of remuneration or the provision of other benefits by the company to a director for services as a director or in any other capacity:
    1. the payment by the company to a director or former director of compensation for loss of office:
      1. the making of loans by the company to a director:
        1. the giving of guarantees by the company for debts incurred by a director:
          1. the entering into of a contract to do any of the things set out in paragraphs (a), (b), (c), and (d),—
              1. if the board is satisfied that to do so is fair to the company.

            1. The board must ensure that forthwith after authorising the making of the payment or the provision of the benefit or the making of the loan or the giving of the guarantee or the entering into of the contract, as the case may be, particulars of the payment or benefit or loan or guarantee or contract are entered in the interests register.

            2. The payment of remuneration or the giving of any other benefit to a director in accordance with a contract authorised under subsection (1) need not be separately authorised under that subsection.

            3. Directors who vote in favour of authorising a payment, benefit, loan, guarantee, or contract under subsection (1) must sign a certificate stating that, in their opinion, the making of the payment or the provision of the benefit, or the making of the loan, or the giving of the guarantee, or the entering into of the contract is fair to the company, and the grounds for that opinion.

            4. Where a payment is made or other benefit provided or a guarantee is given to which subsection (1) applies and either—

            5. the provisions of subsections (1) and (4) have not been complied with; or
              1. reasonable grounds did not exist for the opinion set out in the certificate given under subsection (4),—
                  1. the director or former director to whom the payment is made or the benefit is provided, or in respect of whom the guarantee is given, as the case may be, is personally liable to the company for the amount of the payment, or the monetary value of the benefit, or any amount paid by the company under the guarantee, except to the extent to which he or she proves that the payment or benefit or guarantee was fair to the company at the time it was made, provided, or given.

                1. Where a loan is made to which subsection (1) applies and either—

                2. the provisions of subsections (1) and (4) have not been complied with; or
                  1. reasonable grounds did not exist for the opinion set out in the certificate given under subsection (4),—
                      1. the loan becomes immediately repayable to the company by the director, notwithstanding the terms of any agreement relating to the giving of the loan, except to the extent to which he or she proves that the loan was fair to the company at the time it was given.