If you are a director of a small or medium sized company, you may be faced with the question of determining what is a reasonable and acceptable level of remuneration for yourself as a director. Parry Field Lawyers provide legal advice for managing your company including payment of directors’ fees.
What counts as directors’ fees?
Remuneration can take many forms e.g. paying a director a fee in the form of cash, requiring the company to give a guarantee for the director’s borrowings or by the company lending money directly to the director.
When can I pay out director’s fees?
The Companies Act 1993 (“the Act”) places a restriction on the payment of remuneration or other benefits to a director. All the directors must certify that the remuneration is fair to the company and that they have reasonable grounds for that view.
Where the procedures in the Act are not followed, or if there are no grounds for the view that the proposal is fair to the company, each director is personally liable to the company if he or she cannot prove fairness.
The Act does not provide any further guidance as to what is fair remuneration for a director. Fortunately, the New Zealand Institute of Directors has published “Guidelines for Non-Executive Director Remuneration” which sets out guidelines to achieving a reasonable and acceptable level of remuneration for directors.
These guidelines may be purchased online from the Institute’s website: www.iod.org.nz.
Directors who are concerned that their levels of remuneration may not be fair would do well to seek advice and help.
Should you need any assistance with this, or with any other Commercial matters, please contact Peter van Rij or Tim Rankin at Parry Field Lawyers (348-8480).
