Plain language law

New Zealand law explained for everyone

Companies Act 1993

Enforcement - Personal actions by shareholders

169: Personal actions by shareholders against directors

You could also call this:

“Shareholders can sue directors for not fulfilling their duties”

If you’re a shareholder or used to be one, you can take legal action against a director if they don’t do their job properly in ways that affect you as a shareholder. However, you can’t sue them just because the value of your shares went down or didn’t go up as much as you wanted, if that’s the only reason.

There are some specific duties that directors have to shareholders. These include making sure the share register is correct, telling people about any interests they have that might affect the company, and letting everyone know if they’re buying or selling shares in the company.

There are also duties that directors have to the company itself, not to individual shareholders. These include acting in good faith and doing what’s best for the company, using their powers for the right reasons, not taking silly risks with the company’s money, not agreeing to things that could get the company into trouble, being careful in how they do their job, and not misusing information about the company.

If you want to know more about any of these duties, you can click on the links in the original text to see the full details of each one.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM320830.

Topics:
Business > Industry rules
Business > Fair trading
Crime and justice > Courts and legal help
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168: Compromise, settlement, or withdrawal of derivative action, or

“Getting court approval to end or change a legal case started by shareholders or directors”

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170: Actions by shareholders to require directors to act, or

“Shareholders can ask courts to make directors follow company rules or laws”

Part 9 Enforcement
Personal actions by shareholders

169Personal actions by shareholders against directors

  1. A shareholder or former shareholder may bring an action against a director for breach of a duty owed to him or her as a shareholder.

  2. An action may not be brought under subsection (1) to recover any loss in the form of a reduction in the value of shares in the company or a failure of the shares to increase in value by reason only of a loss suffered, or a gain forgone, by the company.

  3. Without limiting subsection (1), the duties of directors set out in—

  4. section 90 (which relates to the duty to supervise the share register); and
    1. section 140 (which relates to the duty to disclose interests); and
      1. section 148 (which relates to the duty to disclose share dealings)—
          1. are duties owed to shareholders, while the duties of directors set out in—
        1. section 131 (which relates to the duty of directors to act in good faith and in the best interests of the company); and
          1. section 133 (which relates to the duty to exercise powers for a proper purpose); and
            1. section 135 (which relates to reckless trading); and
              1. section 136 (which relates to the duty not to agree to a company incurring certain obligations); and
                1. section 137 (which relates to a director's duty of care); and
                  1. section 145 (which relates to the use of company information)—
                      1. are duties owed to the company and not to shareholders.