Statutory principles governing director conduct when a company is in financial distress–a Trans-Tasman comparison

Abstract

The spotlight has recently been shone on the statutory duties of directors of companies in financial distress in Australia and New Zealand. In Australia, the 2023 Report on Corporate Insolvency noted concerns about the efficacy of the Australian insolvent trading regime and mooted the possibility of Australia adopting the United Kingdom ‘wrongful trading’ standard. In August 2023 the New Zealand Supreme Court delivered a much-anticipated judgment in Yan v Mainzeal Property and Construction Limited (in liq) focusing on the equivalent reckless trading duties, prompting the question of whether the New Zealand approach may offer useful insights for Australia and the United Kingdom. This paper provides a comparative analysis of the ‘insolvent trading’ provision in Australia, the ‘wrongful trading’ provision in the United Kingdom, and the ‘reckless trading’ provisions in New Zealand, considering these provisions against the backdrop of related statutory provisions and broader policy considerations and objectives.