Mainzeal Case

The implications of the Mainzeal case are being felt far and wide amongst the directorship community. We summarise below the findings of the Supreme Court case. 

In August, after the case worked its way through the High Court and Court of Appeal, the Supreme Court found that the directors should be personally liable for $39.8 million plus interest payable  at 5% pa from the date of liquidation – together more than $50 million. The chief executive of Mainzeal (who was also a director) is responsible for the full sum, and the personal liability of the three other directors was capped at $6.6 million each plus interest.

In 2013, Mainzeal went into receivership and liquidation. It was calculated the company owed around $110 million to unsecured creditors. The liquidators believed that the directors of the company had breached s135 (reckless trading) and s136 (trading whilst insolvent) of the Companies Act 1993 and should be held personally liable for the losses of the company’s creditors.

Many directors may want to take a moment to reflect on what the Supreme Court decision may mean for them now and in the future. Becoming personally liable for a company’s debts is a significant risk associated with accepting (or continuing) a director role.

If you are considering taking on a directorship, you should take independent legal and accounting advice to not only carefully assess whether your skills are a good match for the company and the sector in which it operates, but also to be clear on any potential personal liability.

DISCLAIMER: All the information published is true and accurate to the best of the authors knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this article. Views expressed are those of individual authors, and do not necessarily reflect the view of this firm. Articles appearing in this newsletter may be reproduced with prior approval from the editor and credit given to the source. Copyright, NZ LAW Limited, 2019. Editor: Adrienne Olsen. E-mail: adrienne@adroite.co.nz. Ph: 029 286 3650 or 04 496 5513.