Sweeping reforms are being planned of the liquidation and creditors legislation.
The Inland Revenue Department (IRD) is understood to be gauging support among business groups for the proposal as a quid pro quo for relinquishing its preferred creditor status.
The measure has support from insolvency experts, who have told a parliamentary select committee that struggling companies are being artificially propped up by unpaid PAYE and GST, which directors are using as working capital.
“It’s happening because there is no legislation preventing it, and it’s time directors were made personally liable,” said John Vague, of McDonald Vague.
It’s interesting, directors are currently personally liable if they are negligent in operating a company. So what is the need to make them more personally liable? All that will do is encourage people to take less risks. Internationally directors are not liable, because the corporate form is respected. All companies who can will insure against director liability anyway, just increasing the cost of doing business.