NZ Company Director Duties and Personal Liability: A 2026 Guide for New Directors

What the Companies Act 1993 Requires of Directors

When you are appointed as a director of a New Zealand company, you take on personal legal duties that exist independently of the company itself. These duties are set out primarily in sections 131 to 149 of the Companies Act 1993 and cannot be contracted out of or waived by a shareholder vote.

The core duties every NZ director must understand are:

• Act in good faith and in the best interests of the company: This means prioritising the company's interests over your personal interests or the interests of any related party. It applies even when you are the sole shareholder.
• Exercise powers for a proper purpose: Directors must use their powers as set out in the constitution and Companies Act, not for personal gain or to disadvantage minority shareholders.
• Comply with the Companies Act and the constitution: Ignorance of the law is not a defence. If your company has a constitution, read it. If it does not, the default rules in the Act apply.
• Not act in a manner that creates a substantial risk of serious loss to creditors: This is particularly important when the company is financially stressed. Trading while insolvent exposes directors to personal liability.
• Not incur obligations the company cannot perform: If you know the company cannot meet its obligations, taking on new obligations is a breach of duty and can result in personal liability to creditors.

When Does Personal Liability Apply?

The limited liability of a company protects shareholders from the company's debts. It does not protect directors from their own conduct. Personal liability for a director can arise in several situations:

• Insolvent trading: If you allow the company to incur debts when you know it is unable to pay, a liquidator can pursue you personally for those debts.
• Reckless trading: Trading recklessly in a way that creates a substantial risk of serious loss to creditors is a breach of duty. Courts have awarded personal liability against directors for losses caused to creditors in this way.
• Personal guarantees: Banks, landlords, and many trade creditors require a personal guarantee from directors of new companies. If the company defaults, you are personally liable under the guarantee. Read every guarantee carefully before signing.
• GST and PAYE obligations: Inland Revenue can pursue directors personally for unpaid GST and PAYE in certain circumstances, particularly where the company is unable to pay and the director knew or ought to have known.
• Director disqualification: Persistent breaches of director duties can lead to disqualification from acting as a director for up to 10 years under section 385 of the Companies Act.

Key Obligations from Incorporation Day

Several obligations begin immediately when your company is incorporated. Many new directors are unaware of these until they face a compliance issue.

• Register for GST if your turnover will exceed NZ$60,000 in 12 months: Failure to register on time results in backdated GST liability. If you are close to the threshold, register early.
• Set up PAYE before your first employee starts: PAYE must be deducted and filed with Inland Revenue on each payday under payday filing rules introduced in 2019. Late filing incurs penalties.
• File annual returns: Every NZ company must file an annual return with the Companies Office within 20 working days of its incorporation anniversary. The fee is NZ$45.74 online. Failure to file results in a warning and eventual removal from the register.
• Keep accurate financial records: Directors must ensure the company keeps proper financial records for at least seven years. These are required for tax purposes and for any future audit or sale process.
• Disclose interests in contracts: If you have a personal interest in a contract the company is entering into, you must disclose that interest at a board meeting and it must be recorded in the interests register.

Practical Steps to Protect Yourself

• Open a dedicated company bank account immediately. Do not mix personal and company funds.
• Get a shareholder agreement in place before you bring in co-founders or investors. Disputes without a shareholders agreement are expensive and unpredictable.
• Review any personal guarantees carefully with a lawyer before signing. Where possible, negotiate a cap or time limit on the guarantee.
• Set aside GST from every invoice into a separate account. Do not treat GST collected as operating revenue.
• Engage an accountant in your first month of trading to set up your accounts correctly. The cost is far lower than fixing problems later.
• Keep minutes of any board or shareholder decisions, even if you are a sole director. A written record protects you if your decisions are later questioned.

Where to Get Help

The Companies Office at companiesoffice.govt.nz provides guidance on director duties, filing requirements, and the annual return process. Inland Revenue (ird.govt.nz) has comprehensive guidance on GST, PAYE, and provisional tax obligations for new businesses.

For legal advice on director duties, shareholder agreements, or contracts, connect with a commercial solicitor in your region. FreshFirms can connect you with local advisers through our partner network at freshfirms.nz/connect.