Skilled Migrant Category- What has changed?

On 21 June 2023, the Government announced a simplified points…
04/09/2023/by Tasha Fraser

Case study of Collaboration: Home and Parry Field Lawyers

Case study of Collaboration: Home and Parry Field Lawyers
20/07/2023/by Tasha Fraser

When is a charitable company the best option?

When is a charitable company the best option?
It is a common…
07/07/2023/by Tasha Fraser

How Does Active Investor Plus Visa work?

Since 19 September 2022, applications for Investor…
12/05/2023/by Tasha Fraser

The tax benefit of making donations: How does it work?

The tax benefit of making donations: How does it work?

06/03/2023/by Tasha Fraser

Protecting your New Zealand trademark overseas; It’s simple.

09/02/2023/by Tasha Fraser

Shadow directors in New Zealand: who are they?

The term ‘director’ usually refers to people formally appointed to a Board. However, some people who are not formally appointed may operate as ‘deemed directors’ or ‘shadow directors’. They are increasingly likely to be treated by the law in the same way as formally appointed directors. Justice Millett in a well-known case said a ‘de facto’ director “… is one who claims to act and purports to act as a director, although not validly appointed as such. A shadow director, by contrast, does not claim or purport to act as a director. On the contrary, he claims not to be a director. He lurks in the shadows, sheltering behind others who, he claims are the only directors of the company to the exclusion of himself.”[1] Justice Millett’s description is perhaps a little cynical. Some shadow directors may be trying to avoid the accountability that attaches overtly to appointed directors, while others may be quite open about the influence they have on directors and boards. What does the Companies Act say? What matters is that de facto and shadow directors are captured in the Companies Act definition of ‘director’ as  a person in accordance with who directors or instructions the board of the company may be required or is accustomed to act. This means that whether or not they regard themselves as directors, these ‘deemed directors’ may be held accountable as though they were directors for any breaches. Who might this capture? Looking at the definition, whether or not a board is “required or accustomed to act” for a deemed director is a matter of fact. The court will look at any evidence that shows a pattern of behaviour that amounts to directors being “accustomed to acting” on a deemed director’s instruction. One legal commentator has suggested that the statutory wording of “required to” might extend the accountability net to include people who can be shown to have exercised control over the board even without a pattern of behaviour,[2] although this has not yet been tested in court. An example in practice could be a large shareholder who is not a director but who behind the scenes is directly what the Board does. Key points to note:
  • Parliament implemented this definition intentionally. It makes sense that if deemed directors have been instrumental in action or inaction that breaches directors’ duties, they too should be held accountable; perhaps even more so if they did this to avoid attention and liability.
  • Boards often rely on the professional advice from lawyers or accountants. It is important that relationships with advisors are purely advisory in nature and that directors or boards are not controlled or directed by the advisors.
  • If you are a shadow director, or your company has a relationship likely to be deemed a shadow director, be aware of the implications. One question to ask might be whether or not shareholders are aware of the shadow director, and if not, why not. Should the person just be appointed?
[1] Re Hydrodan (Corby) Ltd [1994] 2 BCLC 180 Ch, at 183. [2] Taylor Lynn “Expanding the pool of defendant directors in a corporate insolvency: the de facto directors, shadow directors and other categories of deemed directors” New Zealand Business Law Quarterly 16(2) Jun 2010:203.   Should you require assistance, please contact: Steven Moe, Michael Belay, Sophie Tremewan or Yang Su at Parry Field Lawyers.
09/02/2023/by Tasha Fraser

Company Resolutions and Certificates: When each is required?

Most people have heard of resolutions for companies, but at certain…
23/01/2023/by Tasha Fraser

Sole trader or a company: what are the legal risks of these structure options?

Many people mistakenly believe it is best to register a company…
19/01/2023/by Tasha Fraser

When can a group call itself a registered charity?

There are around 28,000 officially registered charities in New…
18/01/2023/by Tasha Fraser

When do Directors Need to put Creditors Ahead of Shareholders?

In New Zealand, directors may become liable for reckless trading…
28/11/2022/by Tasha Fraser

Immigration Changes Overview

Immigration Changes Overview
There have been many changes in…
27/10/2022/by Tasha Fraser

Advertising your fundraising effort

Your business is thriving and you need substantial additional capital to fund the next stage of your growth. You have read up on the Financial Markets Conduct Act 2013 (“FMCA”) (available here) and would prefer to raise funds through one of the Schedule 1 exemptions from product disclosure statement requirements (discussed here). Being proactive, you have already approached your close business associates, relatives, and employees while also taking full advantage of your statutory small offers limit, but it is still not enough.
21/10/2022/by Tasha Fraser

Introduction to the New Zealand Emissions Trading Scheme

The New Zealand Emissions Trading Scheme (the “NZ ETS”) was introduced as a tool to combat climate change in Aotearoa New Zealand. It was created under a 2008 amendment to the Climate Change Response Act 2002 (the “Act”) with the purpose to help Aotearoa New Zealand meet its international greenhouse gas emissions obligations under the United Nations Framework Convention, the Kyoto Protocol and the Paris Agreement, and to meet its 2050 targets and emissions budgets.
18/10/2022/by Tasha Fraser

Restraint Of Trade Clauses – What You Need to Know About the Potential Incoming Changes

While the Employment Relations (Restraint of Trade) Amendment…
14/10/2022/by Kylie Shipley

Volunteer, Contractor or Employee: How do you know?

Many start-ups choose to utilise independent contractor agreements,…
11/10/2022/by Kylie Shipley

The Charities Amendment Bill: Making a submission


With over 28,000 registered charities in New…
06/10/2022/by Tasha Fraser

The Charities Amendment Bill: Key changes


With over 28,000 registered charities in New…
06/10/2022/by Tasha Fraser

Call Agreements and Volunteer Working Arrangements

Do Call Agreements and Volunteer Working Arrangements Automatically…
22/09/2022/by Tasha Fraser

How can Limited Partnerships help Entrepreneurs?

The Limited Partnership regime was introduced fairly recently in New Zealand through the Limited Partnership Act 2008.  As such, limited partnerships may not be as familiar to Kiwi entrepreneurs and founders.  In this article, we highlight a few of the advantages and disadvantages of choosing a limited partnership for your business structure.  In our view, they represent a relatively simple structure which can really be useful in the right situation.
14/09/2022/by Tasha Fraser

Structures for Business, which is best for you?

There are many business structure options in New Zealand, including companies, partnerships and Trusts, and you want to be sure you are picking the right one. We frequently assist clients who are considering starting a business navigate the different business structure options to find what best suits their needs. The various business structure options each have their own pros and cons. What the best structure is for you will depend on your particular circumstance, desire and purpose.
29/08/2022/by Tasha Fraser

What is a Wholesale Investor?

Companies need money, it is the fuel for the engine of their growth.  Very often they will get that money through issuing equity (shares to people who invest) or issuing debt (loans to people who provide finance).  If you do either of these activities you are offering a financial product and captured by the Financial Markets Authority and their rules which state you need to provide extensive disclosure documentation to those investing – unless an exemption applies.
17/08/2022/by Kylie Shipley

Small Businesses- Are your contract terms fair?

From 16 August 2022, the Fair Trading Amendment Act 2021 will…
03/08/2022/by Tasha Fraser
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