School boards are employers which mean they have certain obligations and powers.  They can appoint, suspend, and dismiss staff and the principal.[1]  They have responsibilities under other Acts such as the Employment Relations Act 2000, the HRA, the Privacy Act 2020 and the Health and Safety at Work Act 2015.

Generally, under the Employment Relations Act 2000 (the ERA) parties in an employment relationship are under an obligation to deal with one another in good faith and not do anything to mislead or deceive each other.[2]  The object of the ERA is to build productive employment relationships through promoting good faith.[3]

State and State integrated school boards as employers also have a responsibility to be a ‘good employer’ under the Public Service Act 2020.[4]  A ‘good employer’ creates policies accepted as necessary for the “fair and proper treatment of employees in all aspects on their employment”.[5]  Each school board will have their own policies in place.  They must ensure they comply with their policies and annually report on their compliance.[6]

Staff employed in State schools such as principals, teachers and other staff are generally on ‘Collective Agreements’ with specific terms and conditions covering their roles.  Education collective agreements include equal employment opportunity clauses to recognise disadvantaged groups in employment.  However, these collective agreements often vary depending on the particular category of school (e.g. primary, secondary or area school).  This means there is no one size fits all in relation to employment law obligations for schools.  It is advised that you consult a lawyer if you have questions about obligations under your Collective Agreements.

As the employer, the board of a State or State integrated school is accountable for employment matters despite delegating employment management to the principal. These delegations need to be documented so the principal and the board are aware of their responsibilities.  When employment issues arise, matters only come before the board through the procedures set out by the board or where a complaint is raised. If the issue is in relation to a principal however the board has direct involvement.

Schools will have performance management processes that teachers and staff are required to participate in. These assess and monitor staff to ensure they are providing effective education and services. Staff skills, knowledge and training are developed in a way that optimises student’s learning outcomes. The school board is responsible for managing the principal’s performance and ensuring the principal effectively undertakes staff performance management also. Professional standards are set out in staff employment agreements which are used to assess performance.

School boards must create a performance management system that fits their school. Section 599 of the Education and Training Act 2020 (ETA) allows the Chief Executive of the Ministry of Education (Secretary) to prescribe matters employers are to have regard to when assessing teacher performance.  The Secretary prescribes guidelines setting out what boards need to have in place in assessing the performance of teachers.  Current guidelines on the Minister of Education website are based upon s 77C of old repealed Education Act 1989 but can still provide some guidance.

Having good performance management allows teachers to understand what is expected of them and can be aided in achieving those expectations.  Frequent conversations regarding any concerns or to ensure progress is being made are important.  This removes any surprises or uncertainty when performance is evaluated.  Conversations includes appraisal and elicit professional trust and growth.

The ETA removed performance appraisal requirements and replaced it with a professional growth cycle (PGC) which takes a more holistic approach to performance management.  The principal or professional leader will design the process for the professional growth cycle while consulting teachers.  The Teaching Council dictates elements that will be in the cycle but generally it is up to the leadership team and teachers to determine what it will look like.   A summary statement outlines whether the teacher has met the Standards for the Teaching Profession.  This new approach focusses on professional learning journeys as opposed to compliance activities as seen in the old approach.

 

This article is general in nature and is not a substitute for legal advice. You should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source. Contact Kris Morrison at krismorrison@parryfield.com to request this or for any other questions.

 

[1] Education and Training Act 2020, ss 128, 129.

[2] Employment Relations Act 2000, section 4.

[3] Employment Relations Act, 2000, section 3.

[4] Public Service Act 2020, section 73.

[5] Public Service Act 2020, section 73(3).

[6] Public Service Act 2020, section 73(1).

State schools, state-integrated schools and kura are governed and managed by a school board.  The board is a Crown entity as it receives public funding and is in the public sector.  A board has no more than 7 members and at least 3 parent representatives.[1]  Members can be co-opted, appointed, selected or elected to the board and members are all equal in standing.

The board is responsible for the governance and management of the school which encompasses setting policies as to how the school is to be controlled and managed.[2]  Section 127 of the Education and Training Act 2020 (ETA) sets out a board’s primary objectives when governing a school, they must ensure:

  • every student at the school is able to attain their highest possible standard in educational achievement; and
  • the school—
    • is a physically and emotionally safe place for all students and staff; and
    • gives effect to relevant student rights set out in this Act, the New Zealand Bill of Rights Act 1990, and the Human Rights Act 1993; and
    • takes all reasonable steps to eliminate racism, stigma, bullying, and any other forms of discrimination within the school; and
  • the school is inclusive of, and caters for, students with differing needs; and
  • the school gives effect to Te Tiriti o Waitangi, including by—
    • working to ensure that its plans, policies, and local curriculum reflect local tikanga Māori, mātauranga Māori, and te ao Māori; and
    • taking all reasonable steps to make instruction available in tikanga Māori and te reo Māori; and
    • achieving equitable outcomes for Māori students.

In meeting these primary objectives, a school board must comply with all obligations under the ETA or any Act, including having particular regard to the statement of national education and learning priorities (NELP) issued by the Minister of Education under s 5, and performing its functions and powers in a financially responsible way.[3]  A board must also give effect to a board’s obligations in relation to teaching and learning programmes along with monitoring and reporting student progress.[4]  This is inclusive of things such as managing student behaviour, staffing matters, handling complaints, health, safety and wellbeing for students and staff, strategic planning and reporting, building relationships and actively engaging with the community.

A board can appoint, suspend, and dismiss school staff and the principal.[5]  The school principal is the board’s chief executive and retains the discretion to manage the school’s day-to-day administration however they see fit, though they must comply with the board’s policy directions.[6]  Generally, the board as the governance body determines the what, the ends and the policies whereas the principal as the management leader determines the how, the means and the procedures.  Board members are to adhere to any code of conduct issued by the Minister of Education.[7] The Ministry has now issued a code of conduct, which can be found at: https://www.education.govt.nz/school/boards-information/boards-of-schools-and-kura/code-of-conduct/

Private schools are governed and managed by their own independent boards.  Managers of private schools must be fit and proper persons to manage the school.[8]  When operating the school, managers must have regard to any NELP and ensure when developing and delivering the curriculum the principal and staff have regard to NELP also.[9]  The obligation to have regard to NELP is a lower standard than required of State schools that must have particular regard under s 127. This section is in relation to schools ensuring students attain highest possible education standard, the school is safe, observes student’s rights, takes steps to eliminate racism, stigma, or bullying, the school is inclusive and caters for students with different needs and that it gives effect to the Te Tiriti o Waitangi.  However, in decision making, managers of private schools still need to have given regard to the NELP.

Primary Objectives for State schools

Part 3, subpart 5 of the ETA governs the administration of all State schools (including State integrated schools but not including private schools). Section 127(1) notes that school boards have several primary objectives in governing a school.

For State integrated schools, the rules in Part 3 (including section 127) are subject to specific provisions set out in Schedule 6 of the ETA that protect the special character of the State integrated school.[10] Boards of State integrated schools must comply with the objectives set out in section 127 of the ETA, but in deciding how to do so they must also act in light of their special character in accordance with Schedule 6.

The primary objectives include to:[11]

  • ensure that every student at the school is able to attain their highest possible standard in educational achievement;
  • ensure that the school:
    • is a physically and emotionally safe place for all students and staff;
    • gives effect to relevant student rights set out in the ETA, the New Zealand Bill of Rights Act 1990, and the Human Rights Act 1993;
    • takes all reasonable steps to eliminate racism, stigma, bullying, and any other forms of discrimination within the school;
  • ensure that the school is inclusive and cater for students with differing needs; and
  • ensure that the school gives effect to Te Tiriti o Waitangi.

Section 127(2) says that to meet these primary objectives, each school’s board must have particular regard to the NELP issued under section 5. The current NELP identifies six priorities for education:

Priority 1: Ensure places of learning are safe, inclusive, and free from racism, discrimination, and bullying.

Priority 2: Have high aspirations for every learner/ākonga, and support these by partnering with their whānau and communities to design and deliver education that responds to their needs and sustains their identities.

Priority 3: Reduce barriers to education for all, including for Māori and Pacific learners/ākonga, disabled learners/ākonga and those with learning support needs.

Priority 4: Ensure every learner/ākonga gains sound foundation skills, including languages, literacy, and numeracy.

Priority 5: Meaningfully incorporate te reo Māori into the everyday life of the place of learning.

Priority 6: Develop staff to strengthen teaching, leadership, and learner support capability across the education workforce.

Strategic Planning

State and state-integrated school boards must have in place a strategic plan which sets out its strategy for achieving its objectives for a 3-year period (unless determined by the Chief Executive of the Ministry of Education)), and an annual implementation plan each year which sets out how the board intends to implement that strategy during the year.[12]

The strategic plan must be submitted to the Chief Executive and Secretary of the Ministry of Education (the Secretary).  Whilst preparing the plan the board is required to consult the school community, school staff, school student (where appropriate), and comply with other regulations such as for State integrated schools, ensuring it reflects their special character.[13]  The proprietor of a State integrated School has the responsibility of ensuring the school’s special character is maintained.[14]  The secretary can review the plan and require the board to amend it, or the board may make amendments to the plan on their own accord.[15]

The annual implementation plan must contain information required by regulations made under the ETA, it can also be amended by the board.[16]  The board has a duty to monitor and evaluate its performance in achieving the objectives set out in the strategic plan.[17] Along with monitoring and evaluating the implementation of its strategy set out in the annual implementation plan in accordance with any regulations made under s 639 of the ETA.

The school’s performance in regard to the Strategic Plan must be reported on in the annual report as per s 145(3) of the ETA. Further, school boards are required to publish their strategic plan and annual implementation plan on their Internet site.[18]

These planning and reporting requirements help schools achieve their goals and remove barriers to success.  It encourages relationships between school boards and their communities by facilitating communication and feedback, while increasing accountability of boards to their communities.

 

This article is general in nature and is not a substitute for legal advice. You should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source. Contact Kris Morrison at krismorrison@parryfield.com to request this or for any other questions.

 

[1] Education and Training Act 2020, s 119.

[2] Education and Training Act 2020, s 125.

[3] Education and Training Act 2020, s 127(2).

[4] Education and Training Act 2020, s 127(2)(b).

[5] Education and Training Act 2020, ss 128 and 129.

[6] Education and Training Act 2020, s 130.

[7] Education and Training Act 2020, ss 166-169.

[8] Education and Training Act 2020, sch. 7 cls. 2 and 6.

[9] Education and Training Act 2020, sch. 7 cl. 7.

[10] Education and Training Act 2020, schedule 6, clauses 24 & 58.

[11] Education and Training Act 2020, section 127(1).

[12] Education and Training Act 2020, s 138.

[13] Education and Training Act 2020, s 139.

[14] Education and Training Act 2020, sch. 6 cl. 1(3).

[15] Education and Training Act 2020, ss 140 and 141.

[16] Education and Training Act 2020, ss 143 and 144.

[17] Education and Training Act 2020, s 145.

[18] Education and Training Act 2020, s 146.

Suspensions and Expulsions

Before discussing the legislative rules around suspensions and expulsions covered by the Education and Training Act 2020 (ETA), it is important to differentiate between them.  Note the relevant sections in the ETA only apply to State schools (including State integrated schools).

A suspension involves removing a student from school for a period of time which expires after the earlier of seven school days or the date or time at which the suspension meeting is held and the matter is resolved.[1]  Being stood-down is where a student is removed from school for up to five school days per term or ten school days per year.[2]  Exclusion is where a student under the age of 16 is removed from school and required to enrol in another school.  Lastly, expulsion is the removal of a student who is 16 years old or over from the school; the student may enrol at another school if they wish to carry on schooling.

Boards, principals and teachers must be fair and flexible when they deal with the misbehaviour of students or their risk to other students.  This is in line with principles of natural justice; all circumstances and factors must be weighed up and considered before making any decisions.

Investigation

Following an incident regarding a student’s behaviour, a staff member or the school’s principal should investigate the matter.  This aims to paint a true picture of what occurred.  It is best practice to have procedures in place and to document this process; the Ministry of Education has produced an ‘incident report’ template in appendix 3 of their guidelines here.

Staff should provide students the opportunity to comment on the facts and record their responses; it is good practice to have another adult present.  Before deciding to stand-down or suspend a student, ideally one of the following would be applicable: the student was caught in the act, the incident was witnessed by someone the staff believes to be credible, the student was clearly implicated by other circumstantial evidence, or the student freely admitted to being responsible.

Principal’s Decision

For a student to be stood-down or suspended, the principal must be satisfied the student’s behaviour amounted to gross misconduct or continual disobedience that is a harmful example to other school students, or risked the serious harm of other students.[3] If the behaviour does not fall into any of these categories the student may not be stood down.

Gross misconduct has been described by the High Court as “striking and reprehensible to a high degree”.[4]  While continual disobedience is a firm pattern of misbehaviour.  Further it would be setting a harmful or dangerous example to other students where, if the misbehaviour went unpunished, the discipline and safety standards would be undermined.  Despite these, it is important for the student’s individual circumstances to be taken into account. This may also require talking to their parents.

Before making a decision, consideration should be given to the affect suspension will have on the student’s right to go to school.

Suspension or stand-down

Upon deciding to suspend a student it is the principal’s obligation to inform the student’s parents, the board and the Ministry of Education.[5]  They are also obliged to take all reasonable steps to make sure the student obtains guidance and counselling under s 103 of the ETA.  The student and parent needs to be given an Information for Parents pamphlet which sets out relevant information.

The Education (Stand-Down, Suspension, Exclusion and Expulsion) Rules 1999 (“the Rules”) require the principal to write a report for the board setting out the incident and why it amounts to conduct requiring suspension.  The report, along with information regarding the suspension meeting, must reach the student and their parents at least 48 hours before the meeting.[6] It must take place between seven school days of the suspension.  During the meeting the board determines whether to lift or extend the suspension with or without conditions; where it is more serious, they may decide to exclude or expel the student.[7]

Stand-downs have a similar process. A detailed report is not needed, though data about stand-down decisions must still be provided to the Ministry of Education.  A meeting can be requested by the student or parent. There is a different pamphlet here.  In both situations the student can attend school if it is appropriate or a parent requests it, provided the principal thinks it reasonable.[8]

Exclusion or expulsion

The board may decide to exclude or expel the student from school following a suspension meeting under s 81(1)(c) of the ETA.  The principal may also decide to request the board reconsider their decision where a student did not comply with conditions imposed by the board; this may result in exclusion or expulsion.[9]

Upon a decision to exclude a student the parents and Ministry of Education must be informed.  The principal has to try find another suitable school for the student to attend.[10] If the principal is unable to do this they must inform the Secretary (chief executive of the Ministry of Education) of the steps they undertook.[11]  The Secretary can lift the exclusion, arrange the student to enrol in another school or a distance school, but must have made all reasonable attempts to consult the student, their parents and the board.[12] The Secretary can direct the board of another State school to enrol the student, but cannot direct the board of a State integrated school to enrol the student.[13]

Where a student is expelled the student’s parents and the Ministry of Education must be informed. The student should also be informed that the Ministry of Education can provide them assistance.

What about Student Discipline in Private Schools?

Private schools decide their own rules and policies in relation to discipline but must behave fairly and reasonably.  The rules around suspensions, exclusions and expulsions under the ETA do not apply to private schools.

However, clause 16 in schedule 7 of the ETA sets out that where a student has been suspended or expelled from a private school the principal must provide the Chief Executive and Secretary (the Secretary) of the Ministry of Education written notice of the student’s name, address, and the day they were expelled or suspended, along with the reasons for such suspension or expulsion.  The Secretary can arrange for them to be enrolled at another school after making reasonable attempts to consult the student, the student’s parents, and the board.

 

This article is general in nature and is not a substitute for legal advice. You should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source. Contact Kris Morrison at krismorrison@parryfield.com to request this or for any other questions.


[1]
Education and Training Act 2020, section 81.

[2] Education and Training Act 2020, section 80(2).

[3] Education and Training Act 2020, section 80(1).

[4] M & Anor v S & Board of Trustees of Palmerston North Boys’ High School [2003] NZAR 705, 712 (decided 5 December 1990).

[5] Education (Stand-Down, Suspension, Exclusion and Expulsion) Rules 1999, rules 9 and 10.

[6] Education (Stand-Down, Suspension, Exclusion and Expulsion) Rules 1999, rules 15.

[7] Education and Training Act 2020, section 81.

[8] Education and Training Act 2020, section 80(3).

[9] Education and Training Act 2020, section 81(3)-(4).

[10] Education and Training Act 2020, section 81(6).

[11] Education and Training Act 2020, section 81(7).

[12] Education and Training Act 2020, section 82.

[13] Education and Training Act 2020, section 87(3).

There are three levels to New Zealand’s education system.  The first level is early childhood education (ECE) for children from infants to school entry age.  This is not compulsory, but 96.8% of children attend ECE and government subsidies are available for children attending ECE for 20 hours a week.

The second level of New Zealand’s education system is primary and secondary education which extends from Year 1-13.  Primary education goes from Years 1-8 for children generally aged 5-12.  Secondary education starts at Year 9 and goes through to Year 13 encompassing children aged 13-17 generally.  Kids must attend school from ages 6 to 16.

The third level is tertiary education.

Forms of Schools that are Recognised in New Zealand

State schools are non-religious, state-owned, and state-funded schools and make up most schools within New Zealand.  They teach the national curriculum and are free if the child is a New Zealand citizen or permanent resident and are aged 5 to 19.

The board of a State school is a body corporate and is a crown entity under the Crown Entities Act 2004. The board is responsible for the governance of the school, including setting the policies by which the school is to be controlled and managed.[1] The principal is the board’s chief executive in relation to the school’s control and management. The principal must comply with the board’s general policy directions (and all applicable legislation) but has discretion to manage the school’s day to day administration.[2]

Primary and secondary state schools are required to design a curriculum in accordance with principles and values set out in the national curriculum.  Primary education is predominantly foundational learning with a focus on competency in literacy and numeracy along with a variety of other subjects.  Secondary schools provide a balanced curriculum but allow students to specialise in different courses and subjects from Years 11-13.  In these years students can achieve the National Certificate of Educational Achievement (NCEA) at three levels. Some state schools also offer alternative academic pathways such as the International Baccalaureate programme and the Cambridge International General Certificate of Secondary Education and AS & A Levels.

State integrated schools are State schools operating in partnership with privately owned Proprietor boards. State-integrated schools exist to provide education with a special character.  This is defined under the Education and Training Act 2020 (ETA) as a framework of education with general religious or philosophical beliefs and associated with observances or traditions relating to those beliefs.[3]  The education at each state integrated school will reflect its own values within the context of its specific philosophy or religion. Attendance dues may be payable for attending State integrated schools.

Private schools are privately owned schools that operate more independently of the State school system. They are generally funded by charging school fees though they do also receive some government funding.  It is not compulsory for private schools to follow the national curriculum. They are free to design their own curriculum or adopt a particular form of curriculum. Private schools are governed by their own independent boards.  However, reviews of private schools are undertaken by the Education Review Office, and the chief executive of the Ministry of Education (the Secretary) has powers to act where private schools are not satisfying requirements set out under the ETA.[4]

Kura kaupapa Māori or kura are state schools that teach in te reo Māori and operate in a manner that reflects Māori values and culture. They follow Māori-medium teaching, learning and assessment and may have students from years 1-8 or years 1-13.

Designated character schools are state schools that have a character that is in some specific way or ways different from the character of ordinary State schools. Kura kaupapa Māori can also be designated character schools. The board of a designate character school may refuse to enrol a student whose parents do not accept that the school operates consistently with its different character.

Distance learning is available for children who may have reasons for not attending schools such as special needs students or students that live a long way away from a school.  Te Aho o Te Kura Pounamu (Te Kura) is New Zealand’s correspondence school which teaches the first two levels of New Zealand’s education system through online learning.  Te Kura (also known as the Correspondence School) caters for students with health difficulties, or who for other reasons cannot attend a local school. Te Kura is New Zealand’s largest state school. Its health schools are based in Auckland, Wellington and Christchurch, though it covers the entire country (and some overseas based students).  Teachers can work with students both at home and in the hospital.

Special schools provide education to students that have particular needs as a result of special talents, learning or behavioural issues. Special schools operate using the New Zealand curriculum.

Home-schooling is where parents seek to educate their children themselves rather than enrolling them at a school. Registration for home-schooling requires the Ministry of Education to be satisfied that parents wanting to home-school their children will teach their child regularly, and at a similar level as to what the children would be taught in a registered school.  Upon being satisfied with this, the Ministry of Education provides a Certificate of Exemption to parents that apply to home-school their children.

 

This article is general in nature and is not a substitute for legal advice. You should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source. Contact Kris Morrison at krismorrison@parryfield.com to request this or for any other questions.

 

[1] Education and Training Act 2020, section 125.

[2] Education and Training Act 2020, section 130.

[3] Education and Training Act 2020, s 10 (definition of education with a special character).

[4] Education and Training Act 2020, Sch 7, cls. 9-10.

The Supreme Court has recently decided the case of Yan v Mainzeal Property and Construction Limited which has direct implications for company directors. What can directors learn from this case and how will it affect how directors undertake their duties? We set out the key facts and principles so that you can stay safe.

Mainzeal was a property focussed company that went into liquidation owing approximately $110 million to creditors. As the Board was chaired by a former Prime Minister it has gotten a lot of attention. There were five directors and four were held liable for breaches.

This case primarily looked at directors’ duties under sections 135 and 136 of the Companies Act 1993. These sections recognise creditors interests that are to be considered by directors where a company is insolvent or near insolvent.[1] Section 135 provides that a director must not carry on a company’s business in a manner likely to create substantial risk of loss to its creditors. Section 136 outlines the duty of a director not to agree to incurring obligations unless they reasonably believe it will be able to be performed on time.

The Court upheld the Court of Appeals finding that the directors had breached their duties under these sections and compensation was granted under s 136 for new debt incurred but not under s 135 as net deterioration to creditors was not proved.[2]

The Supreme Court summarises the implications for directors of their approach to ss 135 and 136 liability. Three key takeaways for directors from this case are:

  1. Don’t rely on assurances
  2. Get advice early
  3. Know your duties

 

1. Don’t rely on assurances

Mainzeal had been balance sheet insolvent for years yet continued to trade because its directors primarily relied on assurances of support from companies it was associated with.[3] One company provided a formal letter of support, otherwise known as a “letter of comfort”, while other assurances were less formal.[4] However, these ‘assurances’ were far from sure and critically they were not legally enforceable.

The Supreme Court stated that where assurances are not legally or practically enforceable and not honoured, relying on them will raise questions as to the reasonableness of doing so.[5] In this way it may be found that relying on such assurances is unreasonable and may result in a breach of directors’ duties which may also lead to potential liability.

Key point: Assurances should be documented and legally binding.

 

2. Get advice early

The Court does consider this when looking at the actions a director took. Directors should seek professional or expert advice early and from sources that are independent from the company. This can help directors be sure of their duties and how to avoid potential breaches, and in turn avoid personal liability. It means they can squarely address whether there are potential risks of loss to creditors or doubt as to whether it is reasonable to believe that obligations incurred will be able to be honoured.[6] By engaging external advice early, directors allow themselves reasonable time decide the course of action they should take.[7]

Section 138 of the Companies Act 1993 specifically allows directors to rely on such advice where they act in good faith, make proper inquiries where circumstances require it and have no knowledge that relying on the advice is unwarranted.[8] Directors should ascertain whether the relevant risks can be avoided or a plan for continued trading can be used to avoid the serious loss or creditors and meet the obligations agreed to.

Directors that do this will be appropriately considering creditors interests and it may help prevent personal liability. Furthermore, the courts take into consideration whether directors obtained advice when determining the reasonableness of a director’s actions.[9]

We help directors stay safe by understanding their duties. Check out our free guides or arrange a conversation with one of our team on the support we can provide you.

Key point: If you are wondering about getting advice, that means you probably should.

 

3. Know your duties

Governance is all about continual learning. While the concept of limited liability protects directors from some liability it does not protect them from their breach of duties. All the more reason for directors to know their duties and learn how to effectively discharge these duties.

This case outlines some of the duties that directors should be aware of. But they are not the only ones. Directors are required to exercise the care, diligence and skill a reasonable director would exercise in the same circumstances.[10] To do this, they need to continue to monitor the company’s performance and prospects and must not carry on trading in a way that creates a likelihood of substantial risk of loss to the company’s creditors.

[11] This is objectively assessed and directors are at fault if they allow the company to keep trading when they recognised this risk or where they would have recognised it if they had acted reasonably and diligently.[12] Further, directors should not take on new obligations without measures in place to ensure they will be met or without the belief on reasonable grounds that they will be honoured.[13]

If you are a director it is vital to ensure you know what duties who owe to the company, shareholders and creditors in order to avoid breaching them and finding yourself personally liable for it.

Key point: Keep learning individually and as a board about your duties.

 

Mainzeal will be talked about for a long time to come and it perhaps signals that there is a broader need for reform of the Companies Act.  In the meantime there are some practical steps which you can take as a director to ensure you keep on the straight and narrow and avoid liability if you are involved in governance of a company which is getting close to insolvency.

 

Parry Field Lawyers could help with each step of the process. If you would like to find out more, get in touch to arrange a call or meeting.

This article is not a substitute for legal advice and you should consult your lawyer about your specific situation. Please feel free to contact us at Parry Field Lawyers:

 

[1] Yan v Mainzeal Property and Construction Limited (in Liq) [2023] NZSC 113 at [359].

[2] Yan v Mainzeal Property and Construction Limited (in Liq) at [371]-[375].

[3] Yan v Mainzeal Property and Construction Limited (in Liq) at [2].

[4] Yan v Mainzeal Property and Construction Limited (in Liq) at [36]-[37] and [42].

[5] Yan v Mainzeal Property and Construction Limited (in Liq) at [363]. 

[6] Yan v Mainzeal Property and Construction Limited (in Liq) at [270].

[7] Yan v Mainzeal Property and Construction Limited (in Liq) at [271].

[8] Companies Act 1993, s 138(2).

[9] Yan v Mainzeal Property and Construction Limited (in Liq) at [273].

[10] Companies Act 1993, s 137.

[11] Yan v Mainzeal Property and Construction Limited (in Liq) at [270] and [360].

[12] Yan v Mainzeal Property and Construction Limited (in Liq) at [360].

[13] Yan v Mainzeal Property and Construction Limited (in Liq) at [273] and [369].