New Zealand Companies Act 1993 - Offences and Penalties

New Zealand New Zealand Companies Act 1993 New Zealand Companies Act 1993 New Zealand Companies Act 1993

Part 21 Offences and penalties

373 Penalty for failure to comply with Act

  • (1) A person convicted of an offence against any of the following sections of this Act is liable to a fine not exceeding $5,000:

    • (1) section 25(5)(a) (which relates to the use of a company name):

    • (2) section 47(7) (which relates to the consideration for which shares are issued):

    • (3) section 49(5) (which relates to the consideration for which convertible securities, options, and shares are issued):

    • (4) section 52(5) (which relates to distributions to shareholders):

    • (5) section 60(7) (which relates to offers to shareholders to acquire shares):

    • (6) section 61(9) (which relates to the procedure for making a certain type of offer to shareholders):

    • (7) section 61(10)(a) (which relates to the procedure for making a certain type of offer to shareholders):

    • (8) section 63(9) (which relates to stock exchange acquisitions of a company's own shares subject to prior notice to shareholders):

    • (9) section 65(3)(a) (which relates to stock exchange acquisitions of a company's own shares without prior notice to shareholders):

    • (10) section 69(6) (which relates to the redemption of shares at the option of a company):

    • (11) section 70(4) (which relates to the requirement for a company to satisfy the solvency test on the redemption of shares):

    • (12) section 71(8) (which relates to special redemptions of shares):

    • (13) section 71(9)(a) (which relates to special redemptions of shares):

    • (14) section 76(7) (which relates to offers of financial assistance to acquire shares):

    • (15) section 77(4) (which relates to the requirement to satisfy the solvency test):

    • (16) section 78(8) (which relates to offers of financial assistance in certain cases):

    • (17) section 78(9)(a) (which relates to offers of financial assistance in certain cases):

    • (18) section 80(2)(a) (which relates to the provision of financial assistance not exceeding 5% of shareholders' funds):

    • (19) section 83(5)(a) (which relates to statements of shareholders' rights):

    • (20) section 84(6)(a) (which relates to the transfer of shares):

    • (21) section 85(2)(a) (which relates to the transfer of shares under an approved system):

    • (22) section 95(7)(a) (which relates to share certificates):

    • (23) section 108(6) (which relates to the requirement to satisfy the solvency test):

    • (24) section 122(7)(a) (which relates to resolutions in lieu of meetings):

    • (25) section 218(2)(a) (which relates to the obligation to provide copies of documents):

    • (26) section 221(6) (which relates to approval of an amalgamation proposal):

    • (27) section 222(6) (which relates to short form amalgamations):

    • (27A) section 239AEA(3) (which relates to the failure by a company in administration to disclose the fact of administration):

    • (27B) section 239AW(4) (which relates to attendance by a director at a watershed meeting):

    • (28) section 243(10) (which relates to the duty of a liquidator to summon meetings of creditors).

    (2) A person convicted of an offence against any of the following sections of this Act is liable to a fine not exceeding $10,000:

    • (a) section 34(3) (which relates to an alteration to the constitution of a company by the court):

    • (b) section 87(4)(a) (which relates to the obligation to keep a share register):

    • (c) section 88(5)(a) (which relates to the place where the share register must be kept):

    • (d) section 90(2) (which relates to the duties of directors in relation to the share register):

    • (e) section 140(4) (which relates to the disclosure of directors' interests):

    • (f) section 179(8) (which relates to disclosure and use of information obtained in the course of an investigation):

    • (g) section 189(5)(a) (which relates to company records):

    • (h) section 195(3)(a) (which relates to the place where accounting records must be kept):

    • (i) section 196(7)(a) (which relates to the appointment of an auditor):

    • (j) section 206(4) (which relates to access to information by auditors):

    • (k) section 215(2)(a) (which relates to public inspection of company records):

    • (l) section 216(2)(a) (which relates to inspection of company records by shareholders):

    • (m) section 250(7) (which relates to the termination of the liquidation of a company):

    • (ma) section 258A(5) (which relates to the duty of liquidators to report suspected offences):

    • (n) section 280(3) (which relates to the qualifications of liquidators):

    • (o) section 333(5)(a) (which relates to name reservation by overseas companies):

    • (p) section 334(6)(a) (which relates to the registration of overseas companies):

    • (q) section 339(2)(a) (which relates to changes in the constitution of an overseas company):

    • (r) section 340(6)(a) (which relates to the filing of annual returns by overseas companies):

    • (s) section 365(5) (which relates to the Registrar's powers of inspection):

    • (t) section 366(4) (which relates to the disclosure of information and reports obtained during an investigation):

    • (u) section 381 (which relates to improper use of the word “Limited”.

    (3) A person convicted of an offence against any of the following sections of this Act is liable to a fine not exceeding $50,000 or to imprisonment for a term not exceeding 2 years:

    • (a) section 261(6A) (which relates to the power of liquidators to obtain documents and information):

    • (b) section 273(2) (which relates to certain prohibited conduct):

    • (c) section 274(2) (which relates to the duty to identify and deliver property).

    (4) A person convicted of an offence against any of the following sections of this Act is liable to imprisonment for a term not exceeding 5 years or to a fine not exceeding $200,000:

    • (a) section 304(6) (which relates to false claims by unsecured creditors in liquidations):

    • (b) section 305(11) (which relates to false claims by secured creditors in liquidations):

    • (c) section 377 (which relates to false statements):

    • (d) section 378 (which relates to the fraudulent use or destruction of property):

    • (e) section 379 (which relates to falsifying records):

    • (f) section 380 (which relates to carrying on business fraudulently):

    • (g) section 382(4) (which relates to persons prohibited from managing companies):

    • (h) section 383(5) (which relates to acting as a director of a company while prohibited by the court):

    • (i) section 385(9) (which relates to acting as a director of a company or taking part in the management of a company while prohibited by the Registrar or the FMA):

    • (j) section 386A(2) (which relates to acting as a director of a phoenix company).

    Section 373(1)(2): amended, on 1 July 1994, by section 46 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

    Section 373(1)(27A): inserted, on 1 November 2007, by section 39(1) of the Companies Amendment Act 2006 (2006 No 56).

    Section 373(1)(27B): inserted, on 1 November 2007, by section 39(1) of the Companies Amendment Act 2006 (2006 No 56).

    Section 373(2)(ma): replaced, on 1 February 2011, by section 241(2) of the Insurance (Prudential Supervision) Act 2010 (2010 No 111).

    Section 373(3)(a): replaced, on 3 May 2001, by section 14(2) of the Companies Act 1993 Amendment Act 2001 (2001 No 18).

    Section 373(3)(b): replaced, on 3 May 2001, by section 14(2) of the Companies Act 1993 Amendment Act 2001 (2001 No 18).

    Section 373(3)(c): inserted, on 3 May 2001, by section 14(2) of the Companies Act 1993 Amendment Act 2001 (2001 No 18).

    Section 373(4)(i): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

    Section 373(4)(j): inserted, on 1 November 2007, by section 39(2) of the Companies Amendment Act 2006 (2006 No 56).

374 Penalties that may be imposed on directors in cases of failure by board or company to comply with Act

  • (1) A director of a company who is convicted of an offence against any of the following sections of this Act is liable to a fine not exceeding $5,000:

    • (a) section 25(5)(b) (which relates to the use of a company name):

    • (b) section 61(10)(b) (which relates to the procedure for making a certain type of offer to shareholders):

    • (c) section 63(10) (which relates to stock exchange acquisitions of a company's own shares subject to prior notice to shareholders):

    • (d) section 65(3)(b) (which relates to stock exchange acquisitions of a company's own shares without prior notice to shareholders):

    • (e) section 71(9)(b) (which relates to special redemptions of shares):

    • (f) section 78(9)(b) (which relates to offers of financial assistance in certain cases):

    • (g) section 80(2)(b) (which relates to the provision of financial assistance not exceeding 5% of shareholders' funds):

    • (h) section 83(5)(b) (which relates to statements of shareholders' rights):

    • (i) section 84(6)(b) (which relates to the transfer of shares):

    • (j) section 85(2)(b) (which relates to the transfer of shares under an approved system):

    • (k) section 95(7)(b) (which relates to share certificates):

    • (l) section 107(8) (which relates to unanimous assent to certain types of action):

    • (m) section 122(7)(b) (which relates to resolutions in lieu of meetings):

    • (n) section 188(6) (which relates to a requirement to change a company's registered office):

    • (o) section 218(2)(b) (which relates to the obligation to provide copies of documents).

    (2) A director of a company who is convicted of an offence against any of the following sections of this Act is liable to a fine not exceeding $10,000:

    • (1) [Repealed]

    • (2) section 32(4) (which relates to the adoption and alteration of a constitution):

    • (3) section 33(6) (which relates to a new form of constitution):

    • (4) section 43(2) (which relates to the obligation of the board to deliver a notice of the issue of shares):

    • (5) section 44(5) (which relates to the issue of shares with the approval of shareholders):

    • (6) section 47(9) (which relates to the consideration for which shares are issued):

    • (7) section 49(6) (which relates to the consideration for which convertible securities, options, and shares are issued):

    • (8) section 58(4) (which relates to the acquisition by a company of its own shares):

    • (9) section 87(4)(b) (which relates to the obligation to keep a share register):

    • (10) section 88(5)(b) (which relates to the place where the share register must be kept):

    • (11) section 159(3) (which relates to the obligation to give notice of a change of directors):

    • (12) section 176(4) (which relates to alterations to the constitution of a company by the court):

    • (13) section 189(5)(b) (which relates to company records):

    • (14) section 190(3) (which relates to the form in which company records are kept):

    • (15) secion 194(4) (which relates to the keeping of accounting records):

    • (16) section 195(3)(b) (which relates to the place where accounting records must be kept):

    • (16A) section 196(3B) (which relates to the notification of the resignation of an auditor):

    • (17) section 196(7)(b) (which relates to the appointment of an auditor):

    • (18) section 206(3) (which relates to access to information by auditors):

    • (19) section 207(2) (which relates to the attendance of auditors at meetings of shareholders):

    • (20) section 208(2) (which relates to the duty to prepare an annual report):

    • (21) section 209(7) (which relates to the obligation to make the annual report available to shareholders):

    • (22) section 209A(5) (which relates to the obligation to send copies of annual reports or concise annual reports to shareholders on request):

    • (22A) section 209B(3) (which relates to making annual reports and concise annual reports available by electronic means):

    • (23) section 214(10) (which relates to the obligation to file an annual return):

    • (24) section 215(2)(b) (which relates to public inspection of company records):

    • (25) section 216(2)(b) (which relates to inspection of company records by shareholders):

    • (26) section 236(5) (which relates to the approval of arrangements, amalgamations, and compromises by the court):

    • (27) section 237(3) (which relates to the power of the court to make additional orders in connection with the approval of an arrangement or amalgamation or compromise):

    • (28) section 333(5)(b) (which relates to name reservation by overseas companies):

    • (29) section 334(6)(b) (which relates to the registration of overseas companies):

    • (30) section 339(2)(b) (which relates to changes in the constitution of an overseas company):

    • (31) section 340(6)(b) (which relates to the filing of annual returns by overseas companies).

    Section 374(2)(1): repealed, on 1 July 1994, by section 47 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).

    Section 374(2)(16A): inserted, on 15 April 2004, by section 21(1) of the Companies Amendment Act (No 2) 2004 (2004 No 24).

    Section 374(2)(21): replaced, on 18 June 2007, by section 13 of the Companies Amendment Act (No 2) 2006 (2006 No 62).

    Section 374(2)(22): replaced, on 18 June 2007, by section 13 of the Companies Amendment Act (No 2) 2006 (2006 No 62).

    Section 374(2)(22A): inserted, on 18 June 2007, by section 13 of the Companies Amendment Act (No 2) 2006 (2006 No 62).

375 Proceedings for offences

  • (1) [Repealed]

    (2) [Repealed]

    (3) Despite anything to the contrary in section 25 of the Criminal Procedure Act 2011,—

    • (a) a charging document may be filed at any time in respect of an offence against section 373(4); and

    • (b) the limitation period in respect of an offence specified in section 373(1) or (2), or section 374 of this Act ends on the date that is 3 years after the date on which the offence was committed.

    (4) Nothing in sections 377 to 380 affects the liability of any person under any other Act, but no person shall be convicted of an offence against any of those sections and a provision of any other Act in respect of the same conduct.

    Section 375(1): repealed, on 1 July 2013, by section 413 of the Criminal Procedure Act 2011 (2011 No 81).

    Section 375(2): repealed, on 1 July 2013, by section 413 of the Criminal Procedure Act 2011 (2011 No 81).

    Section 375(3): replaced, on 1 July 2013, by section 413 of the Criminal Procedure Act 2011 (2011 No 81).

376 Defences

  • (1) It is a defence to a director charged with an offence in relation to a duty imposed on the board of a company if the director proves that—

    • (a) the board took all reasonable and proper steps to ensure that the requirements of this Act would be complied with; or

    • (b) he or she took all reasonable and proper steps to ensure that the board complied with the requirements of this Act; or

    • (c) in the circumstances he or she could not reasonably have been expected to take steps to ensure that the board complied with the requirements of this Act.

    (2) It is a defence to a director charged with an offence in relation to a duty imposed on the company if the director proves that—

    • (a) the company took all reasonable and proper steps to ensure that the requirements of this Act would be complied with; or

    • (b) he or she took all reasonable steps to ensure that the company complied with the requirements of this Act; or

    • (c) in the circumstances he or she could not reasonably have been expected to take steps to ensure that the company complied with the requirements of this Act.

377 False statements

  • (1) Every person who, with respect to a document required by or for the purposes of this Act,—

    • (a) makes, or authorises the making of, a statement in it that is false or misleading in a material particular knowing it to be false or misleading; or

    • (b) omits, or authorises the omission from it of, any matter knowing that the omission makes the document false or misleading in a material particular—

    commits an offence, and is liable on conviction to the penalties set out in section 373(4).

    (2) Every director or employee of a company who makes or furnishes, or authorises or permits the making or furnishing of, a statement or report that relates to the affairs of the company and that is false or misleading in a material particular, to—

    • (a) a director, employee, auditor, shareholder, debenture holder, or trustee for debenture holders of the company; or

    • (b) a liquidator, liquidation committee, or receiver or manager of property of the company; or

    • (c) if the company is a subsidiary, a director, employee, or auditor of its holding company; or

    • (d) a stock exchange or an officer of a stock exchange,—

    knowing it to be false or misleading, commits an offence, and is liable on conviction to the penalties set out in section 373(4).

    (3) For the purposes of this section, a person who voted in favour of the making of a statement at a meeting is deemed to have authorised the making of the statement.

    Compare: 1955 No 63 s 461; 1980 No 43 s 47

378 Fraudulent use or destruction of property

  • Every director, employee, or shareholder of a company who—

    • (a) fraudulently takes or applies property of the company for his or her own use or benefit, or for a use or purpose other than the use or purpose of the company; or

    • (b) fraudulently conceals or destroys property of the company—

    commits an offence, and is liable on conviction to the penalties set out in section 373(4).

    Compare: 1955 No 63 s 461A; 1980 No 43 s 47

379 Falsification of records

  • (1) Every director, employee, or shareholder of a company who, with intent to defraud or deceive a person,—

    • (a) destroys, parts with, mutilates, alters, or falsifies, or is a party to the destruction, mutilation, alteration, or falsification of any register, accounting records, book, paper, or other document belonging or relating to the company; or

    • (b) makes, or is a party to the making of, a false entry in any register, accounting records, book, paper, or other document belonging or relating to the company—

    commits an offence, and is liable on conviction to the penalties set out in section 373(4).

    (2) Every person who, in relation to a mechanical, electronic, or other device used in connection with the keeping or preparation of any register, accounting or other records, index, book, paper, or other document for the purposes of a company or this Act,—

    • (a) records or stores in the device, or makes available to a person from the device, matter that he or she knows to be false or misleading in a material particular; or

    • (b) with intent to falsify or render misleading any such register, accounting or other records, index, book, paper, or other document, destroys, removes, or falsifies matter recorded or stored in the device, or fails or omits to record or store any matter in the device—

    commits an offence, and is liable on conviction to the penalties set out in section 373(4).

    Compare: 1955 No 63 s 461C; 1980 No 43 s 47

380 Carrying on business fraudulently

  • (1) Every person who is knowingly a party to a company carrying on business with intent to defraud creditors of the company or any other person or for a fraudulent purpose commits an offence and is liable on conviction to the penalties set out in section 373(4).

    (2) Every director of a company who,—

    • (a) by false pretences or other fraud induces a person to give credit to the company; or

    • (b) with intent to defraud creditors of the company,—

      • (i) gives, transfers, or causes a charge to be given on, property of the company to any person; or

      • (ii) causes property to be given or transferred to any person; or

      • (iii) caused or was a party to execution being levied against property of the company—

    commits an offence and is liable on conviction to the penalties set out in section 373(4).

    (3) Every director of a company commits an offence and is liable on conviction to the penalties set out in section 373(4), who, with intent to defraud a creditor or creditors of the company, does any thing that causes material loss to any creditor.

    Compare: 1955 No 63 s 461D; 1980 No 43 s 47

    Section 380(3): inserted, on 1 November 2007, by section 33 of the Companies Amendment Act 2006 (2006 No 56).

381 Improper use of “Limited”

  • Any person who, not being incorporated with limited liability, whether alone or with other persons, carries on business under a name or title of which “Limited or a contraction or imitation of that word is the last word, commits an offence and is liable on conviction to the penalty set out in section 373(2).

    Compare: 1955 No 63 s 462

382 Persons prohibited from managing companies

  • (1) Where—

    • (a) a person has been convicted under any of subparagraphs (g) to (j) of section 373(4) of any offence in connection with the promotion, formation, or management of a company; or

    • (b) a person has been convicted of an offence under any of sections 377 to 380 or of any crime involving dishonesty as defined in section 2(1) of the Crimes Act 1961,—

    • (c) [Repealed]

    that person shall not, during the period of 5 years after the conviction or the judgment, be a director or promoter of, or in any way, whether directly or indirectly, be concerned or take part in the management of, a company, unless that person first obtains the leave of the court which may be given on such terms and conditions as the court thinks fit.

    (2) A person intending to apply for the leave of the court under this section shall give to the Registrar not less than 10 days' notice of that person's intention to apply.

    (3) The Registrar, and such other persons as the court thinks fit, may attend and be heard at the hearing of any application under this section.

    (4) A person who acts in contravention of this section, or of any order made under this section, commits an offence and is liable on conviction to the penalty set out in section 373(4).

    (5) In this section, the term company includes an overseas company that carries on business in New Zealand.

    Section 382(1)(a): amended, on 1 July 2013, by section 413 of the Criminal Procedure Act 2011 (2011 No 81).

    Section 382(1)(c): repealed, on 29 February 2008, by section 25 of the Securities Amendment Act 2006 (2006 No 46).

383 Court may disqualify directors

  • (1) Where—

    • (a) a person has been convicted under section 373(4) of an offence in connection with the promotion, formation, or management of a company, or has been convicted of a crime involving dishonesty as defined in section 2(1) of the Crimes Act 1961; or

    • (b) a person has committed an offence for which the person is liable (whether convicted or not) under this Part; or

    • (c) a person has, while a director of a company and whether convicted or not,—

      • (i) persistently failed to comply with this Act or the Companies Act 1955, the Securities Act 1978, the Securities Markets Act 1988, the Takeovers Act 1993, or the takeovers code in force under that Act or, if the company has failed to so comply, persistently failed to take reasonable steps to obtain compliance with those Acts or the code; or

      • (ii) been guilty of fraud in relation to the company or of a breach of duty to the company or a shareholder; or

      • (iii) acted in a reckless or incompetent manner in the performance of his or her duties as director; or

    • (ca) a person has been prohibited in a country, State, or territory outside New Zealand from carrying on activities that the court is satisfied are substantially similar to being a director or promoter of or being concerned or taking part in the management of a body corporate; or

    • (d) [Repealed]

    • (e) a person has become of unsound mind,—

    the court may make an order that the person must not, without the leave of the court, be a director or promoter of, or in any way, whether directly or indirectly, be concerned or take part in the management of, a company for such period not exceeding 10 years as may be specified in the order.

    (2) A person intending to apply for an order under this section must give not less than 10 days' notice of that intention to the person against whom the order is sought, and on the hearing of the application the last-mentioned person may appear and give evidence or call witnesses.

    (3) An application for an order under this section may be made by the Registrar, the FMA, the Official Assignee, or by the liquidator of the company, or by a person who is, or has been, a shareholder or creditor of the company.

    (3A) Subsection (3B) applies on the hearing of—

    • (a) an application for an order under this section by the Registrar, the FMA, the Official Assignee, or the liquidator; or

    • (b) an application for leave under this section by a person against whom an order has been made on the application of the Registrar, the FMA, the Official Assignee, or the liquidator.

    (3B) The Registrar, the FMA, the Official Assignee, or the liquidator (as the case may be)—

    • (a) must appear and call the attention of the court to any matters that seem to him, her, or it to be relevant; and

    • (b) may give evidence or call witnesses.

    (4) An order may be made under this section even though the person concerned may be criminally liable in respect of the matters on the ground of which the order is to be made.

    (4A) If conduct by a person constitutes grounds for making an order under any 1 or more of this section, section 43F of the Securities Markets Act 1988, section 44F of the Takeovers Act 1993, and section 60A of the Securities Act 1978, proceedings may be brought against that person under any 1 or more of those provisions, but no person is liable to more than 1 order under those provisions for the same conduct.

    (5) The Registrar of the court must, as soon as practicable after the making of an order under this section, give notice to the Registrar that the order has been made and the Registrar must give notice in the Gazette of the name of the person against whom the order is made.

    (6) Every person who acts in contravention of an order under this section commits an offence and is liable on conviction to the penalties set out in section 373(4).

    (7) In this section, company includes an overseas company.

    Compare: 1955 No 63 s 189; 1988 No 236 s 4

    Section 383(1)(a): amended, on 1 July 2013, by section 413 of the Criminal Procedure Act 2011 (2011 No 81).

    Section 383(1)(c)(i): replaced, on 25 October 2006, by section 25 of the Securities Amendment Act 2006 (2006 No 46).

    Section 383(1)(ca): inserted, on 22 November 2006, by section 14 of the Companies Amendment Act (No 2) 2006 (2006 No 62).

    Section 383(1)(d): repealed, on 29 February 2008, by section 25 of the Securities Amendment Act 2006 (2006 No 46).

    Section 383(3): replaced, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

    Section 383(3A): inserted, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

    Section 383(3B): inserted, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

    Section 383(4A): inserted, on 25 October 2006, by section 25 of the Securities Amendment Act 2006 (2006 No 46).

384 Liability for contravening sections 382 and 383

  • A person who acts as a director of a company in contravention of section 382 or an order made under section 383 is personally liable to—

    • (a) a liquidator of the company for every unpaid debt incurred by the company; and

    • (b) a creditor of the company for a debt to that creditor incurred by the company—

    while that person was so acting.

385 Registrar or FMA may prohibit persons from managing companies

  • (1) This section applies in relation to a company—

    • (a) that has been put into liquidation because of its inability to pay its debts as and when they became due:

    • (b) that has ceased to carry on business because of its inability to pay its debts as and when they became due:

    • (c) in respect of which execution is returned unsatisfied in whole or in part:

    • (d) in respect of the property of which a receiver, or a receiver and manager, has been appointed by a court or pursuant to the powers contained in an instrument, whether or not the appointment has been terminated:

    • (e) in respect of which, or the property of which, a person has been appointed as a receiver and manager, or a judicial manager, or a statutory manager, or as a manager, or to exercise control, under or pursuant to any enactment, whether or not the appointment has been terminated:

    • (f) that has entered into a compromise or arrangement with its creditors:

    • (g) that is in voluntary administration under Part 15A.

    (2) This section also applies in relation to a company the liquidation of which has been completed whether or not the company has been removed from the New Zealand register.

    (3) The Registrar or the FMA may, by notice in writing given to a person, prohibit that person from being a director or promoter of a company, or being concerned in, or taking part, whether directly or indirectly, in the management of, a company during such period not exceeding 5 years after the date of the notice as is specified in the notice. Every notice shall be published in the Gazette.

    (4) The power conferred by subsection (3) may be exercised in relation to—

    • (a) any person who the Registrar or the FMA is satisfied was, within a period of 5 years before a notice was given to that person under subsection (5) (whether that period commenced before or after the commencement of this section), a director of, or concerned in, or a person who took part in, the management of, a company in relation to which this section applies if the Registrar or the FMA is also satisfied that the manner in which the affairs of it were managed was wholly or partly responsible for the company being a company in relation to which this section applies; or

    • (b) any person who the Registrar or the FMA is satisfied was, within a period of 5 years before a notice was given to that person under subsection (5) (whether that period commenced before or after the commencement of this section), a director of, or concerned in, or a person who took part in, the management of, 2 or more companies to which this section applies, unless that person satisfies the Registrar or the FMA—

      • (i) that the manner in which the affairs of all, or all but one, of those companies were managed was not wholly or partly responsible for them being companies in relation to which this section applies; or

      • (ii) that it would not be just or equitable for the power to be exercised.

    (5) The Registrar or the FMA must not exercise the power conferred by subsection (3) unless—

    • (a) not less than 10 working days' notice of the fact that the Registrar or the FMA intends to consider the exercise of it is given to the person; and

    • (b) the Registrar or the FMA considers any representations made by the person.

    (6) No person to whom a notice under subsection (3) applies shall be a director or promoter of a company, or be concerned or take part (whether directly or indirectly) in the management of a company.

    (7) Where a person to whom the Registrar or the FMA has issued a notice under subsection (3) appeals against the issue of the notice under this Act or otherwise seeks judicial review of the notice, the notice remains in full force and effect pending the determination of the appeal or review, as the case may be.

    (8) The Registrar or the FMA may, by notice in writing to a person to whom a notice under subsection (3) has been given,—

    • (a) revoke that notice; or

    • (b) exempt that person from the notice in relation to a specified company or companies.

    Every such notice shall be published in the Gazette.

    (9) Every person to whom a notice under subsection (3) is given who fails to comply with the notice commits an offence and is liable on conviction to the penalties set out in section 373(4).

    (10) In this section, company includes an overseas company that carries on business in New Zealand.

    Compare: 1955 No 63 s 189A; 1988 No 236 s 5

    Section 385 heading: amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

    Section 385(1)(g): inserted, on 1 November 2007, by section 34 of the Companies Amendment Act 2006 (2006 No 56).

    Section 385(3): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

    Section 385(4)(a): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

    Section 385(4)(b): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

    Section 385(5): replaced, on 3 May 2001, by section 15 of the Companies Act 1993 Amendment Act 2001 (2001 No 18).

    Section 385(5): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

    Section 385(5)(a): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

    Section 385(5)(b): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

    Section 385(7): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

    Section 385(8): amended, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

385A Appeals from FMA's exercise of power under section 385

  • (1) A person who is aggrieved by the FMA's exercise of a power under section 385 may appeal to the court within 15 working days after the date that the notice is published in the Gazette under section 385(3), or within any further time as the court may allow.

    (2) On hearing the appeal, the court may approve the FMA's exercise of the power or may give any directions or make any determination in the matter that the court thinks fit.

    (3) Section 370 provides for appeals from the Registrar's acts or decisions under section 385.

    Section 385A: inserted, on 1 May 2011, by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).

386 Liability for contravening section 385

  • A person who acts in contravention of a notice under section 385 is personally liable to—

    • (a) a liquidator of the company for every unpaid debt incurred by the company; and

    • (b) a creditor of the company for a debt to that creditor incurred by the company—

    while that person was so acting.

386A Director of failed company must not be director, etc, of phoenix company with same or substantially similar name

  • (1) Except with the permission of the court, or unless one of the exceptions in sections 386D to 386F applies, a director of a failed company must not, for a period of 5 years after the date of commencement of the liquidation of the failed company,—

    • (a) be a director of a phoenix company; or

    • (b) directly or indirectly be concerned in or take part in the promotion, formation, or management of a phoenix company; or

    • (c) directly or indirectly be concerned in or take part in the carrying on of a business that has the same name as the failed company's pre-liquidation name or a similar name.

    (2) A person who contravenes subsection (1) commits an offence and is liable on conviction to the penalty set out in section 373(4).

    Compare: Insolvency Act 1986 s 216 (UK)

    Section 386A: inserted, on 1 November 2007, by section 35 of the Companies Amendment Act 2006 (2006 No 56).

    Section 386A(2): amended, on 1 July 2013, by section 413 of the Criminal Procedure Act 2011 (2011 No 81).

386B Definitions for purpose of phoenix company provisions

  • (1) In sections 386A to 386F,—

    director of a failed company means a person who was a director of a failed company at any time in the period of 12 months before the commencement of its liquidation, and director of the failed company has a corresponding meaning

    failed company means a company that was placed in liquidation at a time when it was unable to pay its due debts

    phoenix company means, in relation to a failed company, a company that, at any time before, or within 5 years after, the commencement of the liquidation of the failed company, is known by a name that is also—

    • (a) a pre-liquidation name of the failed company; or

    • (b) a similar name

    pre-liquidation name means any name (including any trading name) of a failed company in the 12 months before the commencement of that company's liquidation

    similar name means a name that is so similar to a pre-liquidation name of a failed company as to suggest an association with that company.

    (2) For the purposes of sections 386A to 386F, a company is known by a name if that name is its registered name or if it carries on business, or carries on a part of its business, under that name.

    Compare: Insolvency Act 1986 s 216(6) (UK)

    Section 386B: inserted, on 1 November 2007, by section 35 of the Companies Amendment Act 2006 (2006 No 56).

386C Liability for debts of phoenix company

  • (1) A person who contravenes section 386A(1)(a) or (b) is personally liable for all of the relevant debts of the phoenix company.

    (2) A person (A) who is involved in the management of a phoenix company is personally liable for all of the relevant debts of the company if—

    • (a) in the management of the company A acts or is willing to act on instructions given by another person (B); and

    • (b) at that time A knows that B is contravening section 386A(1)(a) or (b) in relation to the company.

    (3) In this section, relevant debts—

    • (a) in subsection (1), means the debts and liabilities incurred by the phoenix company during the period when the person liable was involved in the management of the company and the phoenix company was known by a pre-liquidation name of the failed company or a similar name:

    • (b) in subsection (2), means the debts and liabilities incurred by the phoenix company during the period when A was acting or was willing to act on the instructions of B and the phoenix company was known by a pre-liquidation name of the failed company or a similar name.

    (4) Liability under this section is joint and several.

    (5) For the purposes of this section, a person who, as a person involved in the management of a company, has at any time acted on instructions given by a person who he or she knew at the time to be in contravention of section 386A is presumed, unless the contrary is shown, to have been willing at any later time to act on any instructions given by that person.

    Compare: Insolvency Act 1986 s 217 (UK)

    Section 386C: inserted, on 1 November 2007, by section 35 of the Companies Amendment Act 2006 (2006 No 56).

386D Exception for person named in successor company notice

  • (1) Section 386A does not apply to a person named in a successor company notice.

    (2) A successor company is a company that acquires the whole or substantially the whole of the business of a failed company under arrangements made by a liquidator or receiver or made under a deed of company arrangement under Part 15A.

    (3) A successor company notice is a notice by a successor company that—

    • (a) is sent by the successor company to all creditors of the failed company for whom the successor company has an address; and

    • (b) is sent to those creditors within 20 working days after the arrangements for the acquisition of the business are made under subsection (2); and

    • (c) specifies—

      • (i) the name and registered number of the failed company; and

      • (ii) the circumstances in which the business has been acquired by the successor business; and

      • (iii) the name that the successor company has assumed, or proposes to assume, for the purpose of carrying on that business; and

      • (iv) any change of name that the successor company has made, or proposes to make, for the purpose of carrying on that business; and

    • (d) states, in respect of a person named in the notice,—

      • (i) his or her full name; and

      • (ii) the duration of his or her directorship of the failed company; and

      • (iii) the extent of his or her involvement in the management of the failed company.

    Compare: Insolvency Rules 1986 rule 4.228 (UK)

    Section 386D: inserted, on 1 November 2007, by section 35 of the Companies Amendment Act 2006 (2006 No 56).

386E Exception for temporary period while application for exemption is made

  • (1) A person does not contravene a prohibition in section 386A for the temporary period set out in subsection (2) if that person applies to the court within 5 working days after the commencement of the liquidation of the failed company for an order exempting that person from the prohibition in question.

    (2) The temporary period in subsection (1) is the period beginning on the date of the commencement of the liquidation of the failed company and ending on the earlier of—

    • (a) the close of 6 weeks after the commencement of liquidation; and

    • (b) the date on which the court makes an order of exemption.

    Compare: Insolvency Rules 1986 rule 4.229 (UK)

    Section 386E: inserted, on 1 November 2007, by section 35 of the Companies Amendment Act 2006 (2006 No 56).

386F Exception in relation to non-dormant phoenix company known by pre-liquidation name of failed company for at least 12 months before liquidation

  • (1) The prohibitions in section 386A(1)(a) and (b) do not apply in respect of a phoenix company that has been known by a name or names that are the same as the failed company's pre-liquidation name or are similar names if—

    • (a) it has been known by that name or those names for not less than the period of 12 months before liquidation commences; and

    • (b) it has not been dormant during those 12 months.

    (2) For the purposes of subsection (1), a company has not been dormant during the 12-month period if transactions that are required by section 194(2) to be recorded in its accounting records have occurred throughout that period.

    Compare: Insolvency Rules 1986 rule 4.230 (UK)

    Section 386F: inserted, on 1 November 2007, by section 35 of the Companies Amendment Act 2006 (2006 No 56).

New Zealand Companies Act 1993 New Zealand Companies Act 1993 New Zealand Companies Act 1993
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