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Companies Act 1993

Directors and their powers and duties - Directors' duties

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

You could also call this:

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

If you are a director of a company, you can commit an offence if you use your powers or do your duties as a director in a way that is not good for the company. This happens when you act in bad faith, knowing that what you’re doing is not in the company’s best interests and will cause serious harm to the company.

However, you won’t be committing this offence if you’re acting under certain rules. These rules are found in section 131(2) to (4) or if you’re using a power under section 132.

If you are found guilty of this offence, you can face penalties. These penalties are listed in section 373(4) of the Companies Act.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM6183100.

Topics:
Business > Industry rules
Business > Fair trading
Crime and justice > Criminal law
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Part 8 Directors and their powers and duties
Directors' duties

138AOffence for serious breach of director's duty to act in good faith and in best interests of company

  1. A director of a company commits an offence if the director exercises powers or performs duties as a director of the company—

  2. in bad faith towards the company and believing that the conduct is not in the best interests of the company; and
    1. knowing that the conduct will cause serious loss to the company.

      1. However, a director does not commit an offence under subsection (1) if the power or duty in question is exercised or performed under any of section 131(2) to (4) or is a power exercised under section 132.

      2. A person who commits an offence under this section is liable on conviction to the penalties set out in section 373(4).

      Notes
      • Section 138A: inserted, on , by section 4 of the Companies Amendment Act 2014 (2014 No 46).