Interpretation of Section135 Companies Act 1993

Interpretation of Section135 Companies Act 1993

Introduction

Companies Act 1993 applies to trusts to the extent that, as a trust manager (trustee) will be assigned to a registered company in New Zealand. The companies act contains some of the definitions of Temin, as a director, the board of directors, and other key concepts related to the performance of the companies act sets the overall management of the company (Andrew, 2003).The rights and responsibilities of directors and proprietors (owners), make the rules regarding the case of conflict of interest, directors and shareholders, and the appointment of re-election of directors, the rights and obligations of creditors, the order of transactions, the order of liquidation of the company, etc. This paper focuses on the interpretation of Section 135 of Companies Act 1993 which consider the director's duties and their liability for reckless trading.

Discussion

All the directors of the company are required to have knowledge of the statutory duty they hold for the company about reckless trading along with their prospective liability as an individual member of the company regarding the company debts, if they are involved in doing so. However, in recent times, there are number of cases in which the courts have been involved in taking a hard line in opposition to directors. The appeal in the court has recently uphold a decision of high court, in which it has been declared that a director should be liable for reckless trading and accountable for liabilities and debts of the company individually in order to the alteration of around $8,400,000 including interests as on the day the company gets liquidated and not involving directors liability concerning to party creditors (Gordon, 2005). The section which has provided the relevant provisions is known as the section 135 of the 1993 Companies Act. According to the section 135 of the Companies Act 1993, a company's director should not;

Make any agreement regarding the company's business which has been carried in a way which is more likely to bring a considerable risk of extreme serious risk to the creditors of the company.

Become a reason or allow anything which becomes a reason to the company's business which has been carried in a way which is more likely to bring a considerable risk of extreme serious thrashing to the creditors of the company.

Precisely, which types of actions being a director of a company represents the intriguing of a considerable risk of extremely serious risk to the creditors of the company is dependent on some of the specific facts and figures provided in the cases (Gordon Walker, 2009). However, in the flow of some recent cases an attention has been drawn among the risks involved with legitimate and illegitimate risks in business and validate that onlyfew of the upheld of illegitimate risks of business guaranteed regarding reckless trading. However,some of the points are still there which are considered un-necessary points in the act that should be noted;

The company is not required to opt for liquidation in order to the ...