Full source list for I'm the only director of my own company. What duties do I actually have?
Six numbered references for /wayfinder/refs/director-duties-sole-director:
1. Section 131 — duty to act in good faith and in best interests of company: a director, when exercising powers or performing duties, must act in good faith and in what the director believes to be the best interests of the company. Section 131(5), added by the Companies (Directors' Duties) Amendment Act 2023, clarifies that directors may consider matters other than the maximisation of profit (for example environmental, social and governance matters) when determining whether an action is in the best interests of the company. Section 138A, inserted by the Companies Amendment Act 2014 (No 46, in force 3 July 2014), makes serious breach of section 131 an offence — maximum five years' imprisonment or $200,000 fine for individuals.
2. Section 135 — reckless trading: a director must not agree to, cause, or allow the business of the company to be carried on in a manner likely to create a substantial risk of serious loss to the company's creditors. Established by Mason v Lewis [2006] and confirmed in Mainzeal Property and Construction Ltd (in liq) v Yan [2023] NZSC: continued trading where the company is insolvent and not salvageable breaches section 135, even where the directors believe continued trading will produce better creditor outcomes than immediate liquidation.
3. Section 136 — obligations the company cannot perform: a director must not agree to the company incurring an obligation unless the director believes on reasonable grounds that the company will be able to perform the obligation when required. This is a forward-looking duty requiring directors to assess realistic capacity to perform, not just hope for the best. Often arises in conjunction with section 135 when company collapse is examined by a liquidator.
4. Section 137 — duty of care: a director must exercise the care, diligence, and skill that a reasonable director would exercise in the same circumstances, taking into account (but not limited to) the nature of the company, the nature of the decision, and the position of the director and the nature of the responsibilities undertaken. Section 138 provides protection for directors who rely in good faith on information, opinions, or advice from professional advisers, company employees, or other directors, where reliance was reasonable in the circumstances.
5. Sections 139-149 — interested transactions: a director must disclose any direct or indirect interest in a transaction or proposed transaction with the company, and must enter the disclosure in the company's interests register under section 140. Interested transactions may be avoided by the company under section 141 unless the transaction is for fair value. The provisions apply to sole directors of sole-shareholder companies; the disclosure requirement does not depend on there being another person to disclose to.
6. Voidable transactions (sections 292-297, Companies Act 1993): if a company is liquidated, a liquidator may seek to claw back transactions made within a specified period before liquidation that prejudiced creditors. Includes preferences (paying one creditor ahead of others when insolvent), undervalue transactions (selling assets for less than market value), and transactions at undervalue with related parties. Sole-director companies are particularly exposed because the director's personal transactions with the company are scrutinised closely on liquidation.