Foss eases back on criminalising directors in late legislative tweak
Commerce Minister Craig Foss has softened his legislative plans to impose greater criminal sanctions on directors for failing in their duties with a late tweak to the Companies and Limited Partnerships Amendment Bill.
The minister today tabled a Supplementary Order Paper in Parliament amending planned legislation that would have made it a criminal offence for a director to let a business be managed in a way that created a substantial risk of a serious loss to its creditors.
The changes mean directors will only face criminal sanctions if they knowingly let creditors suffer a serious loss, or if they act against the best interests of the company.
"The changes in relation to directors' duties follow substantial consultation with key stakeholders," Mr Foss says in a statement. "They strike the right balance between holding to account directors who irresponsibly breach their duties and cause serious loss while still allowing for legitimate risk-taking."
In December, Parliament's commerce select committee was wary of making it a criminal offence for a director to breach their fiduciary duties and asked the government to have another look when reporting back on the bill.
At its first reading in June last year, Mr Foss said he was mindful that criminal sanctions could deter people from accepting board appointments, and that the legislation would have a "high threshold aimed at serious misconduct and would not catch an inadvertent act or omission by a director".
The bill was introduced in 2011 as part of a crackdown on company registration after a New Zealand shell company was linked to illegal arms deals with North Korea.