NEW ZEALAND Law and Practice Contributed by: Graeme Quigley, Ashton Goatley and Erin Hickey, Webb Henderson
of Directors ), as well as an obligation to supervise the maintenance of the company’s share register and obligations to ensure relevant filings are made with the Companies Office. Section 131 – Good Faith and Best Interests of the Company A director is required to act in good faith and in what the director believes to be the best interests of the company when exercising their powers or duties. This test is subjective – ie, it relies on the director’s belief, rather than what is objectively in the company’s best interests ( Madsen - Ries and Levin as Liquidators of Debut Homes Limited ( in liquidation ) v Cooper (2020) NZSC 100 at [112]) – although “directors will probably have a hard task persuading the court that they hon - estly believed that an act or omission that resulted in substantial and foreseeable detriment to the company was in the company’s best interests” (at [109]), and “the fact that an allegedly unreasonable belief was held may... provide evidence that the belief was not honestly held” (at [109]). Case law and commentary has also identified exceptions to the subjective nature of the test where there is no evidence of actual con - sideration of the best interests of the company, where there is a failure to consider the interests of creditors in an insolvency or near-insolvency situation, where there is a conflict of interest, or where a director’s decisions are irrational (at [113]). If provided for in the company’s constitution and (in some cases) agreed to by the other shareholders, a director may act in the best interests of a parent com - pany or – in the case of a joint venture – their appoint - ing shareholder, even though such actions may not be in the best interests of the company. In the absence of such a provision in its constitution, the interests of a company must be considered separately from the interests of a group of related companies ( Kumar v Smartpay Ltd (2023) NZCA 410). Section 131 was amended in 2023 to expressly state that as part of directors’ duty to act in good faith and in the best interests of the company, directors “may consider matters other than the maximisation of profit (for example, environmental, social, and governance matters)”. The amendment was criticised as unnec - essary and potentially limiting, given its reference to
abstain, and listed company directors must do so under the Listing Rules. Directors are also restricted from using or disclosing company information that is obtained in their capac - ity as a director or an employee of the company and not otherwise available to them. Disclosure may be permitted where approved by the board, the company is not (and is not likely to be) prejudiced by the dis - closure, and particulars of the disclosure are recorded in the interests register. Disclosure to a nominating shareholder or principal is also permitted (unless prohibited by the board), subject to disclosure of the recipient in the interests register. Directors must also disclose any acquisition or dis - posal of a “relevant interest” (ie, an ownership or vot - ing interest) in the company’s shares, including details of the interest and transaction. Listed company directors and senior managers are required to also publicly disclose any acquisition or disposal of a “relevant interest” in the company’s (and its related bodies corporates’) quoted financial prod - ucts. A director must not trade in an unlisted company’s shares or other financial products while in possession of material information about their value (received by virtue of their role) unless the transaction is no more favourable to the director than fair value. For listed companies, insider trading prohibitions under the Financial Markets Conduct Act 2013 (FMCA) apply, preventing trading, tipping or disclosure of inside information. The Listing Rules and CGC specify additional factors for assessing the independence of directors of listed issuers, including the absence of employment or other disqualifying relationships that could materially influ - ence the independent judgment of that director. 3.6 Legal Duties of Directors/Officers The principal legal duties of directors under the Com - panies Act are described in the following sections. Directors also have a number of administrative obli - gations, including those relating to disclosure of their interests and share dealings (see 3.5 Independence
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