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due to the difficulty in obtaining a conviction. Even when a conviction could be
secured, there was the possibility that the court would still insist on the criminal
standard. 230 As in the UK, most potential cases were not brought to court due to the
difficulties of discharging the burden of proof. 231 The criminal penalty was seen as
an unsuitable remedy, either to the particular creditor or creditors in general because
of their inability to recover compensation from the convicted directors. 232
In New Zealand, there was no specific section to deal with directors‟ liabilities in
incurring debts of a company in the earlier legislation. For example, the section in
the Companies Act 1908 focussed on the court‟s power to order delinquent directors
or officers to repay any money or restore any property they had misappropriated or
had become liable. 233 However, in order for the court to make such an order, there
must be a prior conviction of the offences under the Act. Such requirement would be
a hurdle to recover money from the director and consequently the director may
escape liability.
Despite the difficulty, the provision remained in the UK Companies Act 1948 and
the Act also imposed personal liability on any persons who committed an act deemed
to be a misfeasance. These provisions allowed the liquidator to recover
compensation from the director on behalf of the company or creditors who had
suffered losses as a result of the director‟s misconduct. 234 However, if the court was
satisfied that the director has acted honestly and reasonably under all circumstances
of the case, the court had the power to excuse the director from such liability. 235 The
230 Ibid.
231 Ibid.
232 Ibid.
233 Section 254 of the Companies Act 1908.
234 Cork Report n 74 above at [1753].
235 Ibid.
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