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turn the company into profitability before handing it back to its management. In
other instances, the receiver and manager may be able to sell the company either
in part or whole as a going concern.
The Committee had suggested the appointment of administrators regardless of
whether there was a floating charge for the purpose of rescuing and reorganising
the company. 155 It also recommended the proceeding as one of the courses that
directors could take when confronted with a wrongful trading situation. 156 The
original proposal of the administration proceeding was tedious and costly, but
this was rectified by the Enterprise Act 2002 where the procedures were
simplified in order to make it more accessible for the company at time of
difficulties. 157
10.4 Duty of Directors under New Zealand Law
10.4.1 Introduction
The law on the basic director‟s duties, prior to its amendment in 1993, had to be
gleaned from case law because there were no express provisions in the statute.
The Law Commission, therefore, decided that complete reforms were necessary
in order to make it more accessible. 158 In relation to protections on creditors
when the company continued trading at the time of financial difficulty, changes
to the old provisions in section 320 of the Companies Act 1955 were
recommended. It was thought that the courts‟ interpretations of the section
hindered the company from taking business risks. 159
155 Cork Report above n5 at (1982) [497-498].
156 Ibid, at [501].
157 See also the case of Re Chancery Plc [1991] BCLC 712 where the[word missing] allowed the
administration proceeding to depart from the usual procedures where there would be a risk of
wrongful trading. It should be noted, however, this case was decided before the procedures
were simplified by the Enterprise Act 2002.
158 NZLC R9 1989 above n39 at [186].
159 See discussion by Justice Sian Elias above n40 at 9.
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