The Law Commission formally announced yesterday that it will be undertaking a comprehensive review of directors’ duties in the Companies Act 1993 and related legislation. This project is set to reshape the rules governing how directors make decisions, particularly when companies are under financial pressure.

Why the review matters

The Commission’s work follows strong calls from the courts in cases such as Mainzeal and Debut Homes, where judges highlighted uncertainty in how directors should balance the interests of creditors against keeping a business operating. Current provisions on reckless trading and incurring obligations have been criticised as vague and overly harsh, creating risks for directors who must take commercial decisions in difficult circumstances.

Scope and process

• The review will look at core Companies Act duties and how they interact with obligations under other statutes.
• It aims to improve clarity and consistency, and to strike a fairer balance between accountability and legitimate risk-taking.
• Commissioner Geof Shirtcliffe is leading the project, with terms of reference to be published soon. Public consultation is expected in 2026, and a Final Report in 2027.

Implications

For directors and boards, the review offers an important opportunity to shape the law. Reform could:

• provide clearer guidance on decision-making in times of financial stress;
• introduce tools similar to Australia’s safe harbour provisions, which protect directors pursuing good-faith restructuring options; and
• reduce inconsistencies across different statutes that currently expose directors to overlapping liabilities.

Looking ahead

As one of New Zealand’s leading litigation firms, Anthony Harper has been at the forefront of disputes involving directors’ duties. Our commercial litigation team understands the practical challenges directors face when making decisions under pressure.

We will be closely following the Law Commission’s work and advising clients on its implications. For now, directors should stay alert to the review process, with a view to engaging in consultation once submissions open.

If you are a director, board member or governance advisor, get in touch with our team to understand the impact of these reforms and prepare for the changes ahead.

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