| Have you considered asking your accountants for help | | | | judgment. The most common signs of business trouble |
| if you are a director of a New Zealand business that is | | | | are strained liquidity or a balance sheet that is inching |
| in trouble? | | | | towards insolvency. |
| Does the thought of your personal liability in the event | | | | Your chartered accountants will spot the warning |
| of reckless trading bother you? No New Zealand | | | | signals and recommend the necessary measures that |
| business is immune to the global economic downturn | | | | prove that you have carried out your responsibilities as |
| and this may be a good opportunity for you to review | | | | a director. You should bear in mind that business failure |
| your responsibilities with the guidance of your | | | | is nothing to be ashamed of and is certainly not a |
| accountants. | | | | crime. Companies with strong financials can afford to |
| Your accountants will also be able to suggest steps | | | | take risks and the consequences of a prolonged |
| that you should take to prove that you have fulfilled | | | | downturn. |
| your obligations. | | | | Steps to protect your interests |
| In New Zealand, as in many other countries, the affairs | | | | You must not only exercise the necessary due |
| of a company are managed by a board of directors | | | | diligence but be seen to be doing so. Some of the |
| even though they may delegate the day-to-day | | | | steps that you should take: |
| management to professional managers. Their primary | | | | 1. Ensure that board meetings are held regularly with |
| duty is to safeguard the interests of shareholders who | | | | proper agendas and minutes. All the relevant |
| have elected them to the board. | | | | documents should be tabled at these meetings. |
| Other than this, they also have duties towards other | | | | 2. Review your business plans, budgets and forecasts |
| parties who deal with the company including creditors. | | | | 3. Monitor the actual performance of your company |
| Under NZ law, a director may not be party to a | | | | against budgets and the forecasts. You should also |
| company trading in such a fashion as to cause serious | | | | ensure that the requisite corrective action is being |
| losses to creditors. This is commonly described as the | | | | taken where performance is not up to expectations. |
| obligation to avoid reckless trading. | | | | Being a director of a troubled company is never going |
| Rely on the judgment of your chartered accountants | | | | to be easy but New Zealand law imposes the |
| Unfortunately, there is little guidance from the New | | | | additional responsibility of avoiding reckless trading. If |
| Zealand courts as to what constitutes reckless trading | | | | you feel that you may be approaching this situation, |
| as cases have mostly been decided on individual | | | | get expert help immediately. Call in a top-notch firm of |
| details. This is why you should rely on professional | | | | accountants. |