Articles

New criminal offences for directors

July 7th, 2014

KEY CHANGES TO THE COMPANIES ACT 1993

The Companies Amendment Bill (No.4) amends the Companies Act to create two new criminal offences & is outlined in the Bell Gully article below:

1.Offence for serious breach of a director’s duty to act in good faith and in the best interests of the company: It will be an offence for a director to exercise powers or perform duties in bad faith towards the company, believing that such conduct is not in the best interests of the company, and knowing that the conduct will cause serious loss to the company. This is a new standalone offence under section 138A of the Companies Act.

2.Offence for dishonestly allowing an insolvent company to incur debts: It will be an offence for a director to dishonestly fail to prevent the company from incurring a debt when the director knows that the company is insolvent or will become insolvent by incurring the debt. This offence is incorporated into the existing provision for carrying on business fraudulently under section 380 of the Companies Act.

Both offences come into effect the day after the Bill receives Royal assent. The offences will be punishable by up to five years’ imprisonment or a fine of up to $200,000.

For further details on the background to these new offences and commentary on their likely impact see our earlier client update: Criminalisation of directors’ duties – the final outcome.

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