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Passive Directors and Reckless Trading

If you are a director of a company, you must take proper steps to be in a position to guide and monitor the management of that company. Being a passive director no longer exists.

The importance of this can be illustrated in the case Mason v Lewis, HC AK CIV 2003-404-0936.

In this particular case a company called Global Print Strategies Limited had gone into liquidation. The directors took no or little part in managing the business. The only reason they became directors was to protect their 20% shareholding in the company.

For two years the company had been trading at losses and had a negative equity. No proper books of accounts were maintained. The directors failed to take notice of this and the business continued trading. It wasn't until they knew that the executive director was a fraudster that they took control of the business. Shortly after this, Global Print Strategies Limited was put into liquidation.

Jeff Meltzer and Karen Mason (liquidators) took the directors to court. It was decided that directors were liable for trading recklessly and failing to maintain proper books of account. They were ordered to contribute $1.26 million to the liquidation.

If you feel that you are a director of a company yet take no or little part in the running of the business, then we suggest you contact us immediately to discuss your options.

New UOMI rate

IRD use of money interest rate - Interest rate on overpaid tax 1.75%. Interest rate on underpaid tax 8.4%. (This change is effective from 8 May 2012).

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