In New Zealand, the Companies Act 1993 (the Act) sets out the rights and obligations of directors, shareholders, and other stakeholders in relation to company management and decision-making. Among other things, the Act includes provisions that address the disclosure of information to shareholders and the resolution of disputes between shareholders.
One of the key obligations of directors under the Act is to act in good faith and in the best interests of the company as a whole. This includes an obligation to provide shareholders with accurate and timely information about the company’s financial position and performance. Directors who fail to disclose material information to shareholders or who provide false or misleading information may be in breach of their duties under the Act and may be held personally liable for any losses suffered by the company or its shareholders as a result.
In addition to their duties under the Act, directors may also be subject to other legal obligations to disclose information to shareholders, such as the requirement to disclose any material contracts or transactions that the company is a party to, or any material changes in the company’s financial position or prospects.
If a director fails to disclose such information to shareholders, a shareholder may be able to bring a claim against the director for breach of their duties under the Act or for any losses suffered as a result of the non-disclosure.
There are several legal remedies available to shareholders in such cases, including:
- Seeking an injunction to prevent the director from continuing to breach their duties or from disposing of any assets that may be needed to compensate the shareholder for any losses suffered.
- Seeking damages from the director for any losses suffered as a result of the non-disclosure.
- Applying to the court to have the director removed from office.
- Bringing a derivative action on behalf of the company to seek compensation for any losses suffered as a result of the non-disclosure.
In addition to these legal remedies, the Act also provides for alternative dispute resolution (ADR) mechanisms to assist in the resolution of disputes between shareholders. These include:
- Mediation: This is a voluntary process in which a neutral third party assists the parties to a dispute to reach a mutually acceptable settlement.
- Expert determination: This is a process in which an expert is appointed to make a binding decision on a specific issue in a dispute.
- Arbitration: This is a formal process in which a neutral third party makes a binding decision on the dispute.
The Act also provides for the appointment of a shareholder representative to act on behalf of a group of shareholders in relation to a dispute. This can be an effective way for minority shareholders to protect their interests when dealing with a majority shareholder.
In summary, the Companies Act 1993 (nz) provides a range of legal remedies and ADR mechanisms for shareholders to resolve disputes with directors and other shareholders. It is important for shareholders to seek legal advice and consider their options carefully before pursuing any legal action in relation to a dispute with a director or other shareholder.
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