Automatic prohibition on conviction
In addition to the power of prohibition by the Registrar or the FMA under section 385 [of the Companies Act 1993], a person is automatically prohibited from acting as a director or manager if they have been:
Convicted on indictment of any offence in connection with the promotion, formation or management of a company or
An offence under sections 377 to 380 of the Companies Act 1993
An offence against section 58 of the Securities Act. or sections 51 or 61 of the Financial Markets Authority Act 2011.
Any crime involving dishonesty as defined by section 2(1) of the Crimes Act 1961 or
The subject of a pecuniary penalty under the Securities Act 1978.
[Note: THIS “AUTOMATIC PROHIBITION” APPLIES IF A BANNED COMPANY DIRECTOR IS CONVICTED OF BREACHING A BANNING ORDER, AND IT IS IMPOSED OVER AND ABOVE ANY PRE-EXISTING BAN THAT HAD ITS OWN TERM (e.g. a four year ban). IT WOULD APPEAR THAT THE “AUTOMATIC PROHIBITION” CAN ONLY BE REMOVED BY A COURT ORDER DISCHARGING THE PROHIBITED PERSON FROM HIS OR HER STATE OF DISQUALIFICATION. NO BANNING ORDER IMPOSED BY THE REGISTRAR UNDER S. 385 (3) CAN EXCEED TEN YEARS].
Question: So what does the current law say about any additional “prohibition” imposed by the Registrar or automatically applying to a director of a company who has been banned from being a company director under s. 385 (3) of the Companies Act for four years and who then breaches that ban within one year, pleads guilty and is convicted of breaching the ban fined $5,000 and ordered to pay court costs? Is he “automatically banned from acting as a director or manager” – beyond the end point of the initial four year ban? Does the automatic PROHIBITION time frame commence de novo from the date of his most recent conviction?
The relevant matters to consider in order to answer this question are found in the Companies Act 1993 (“the Act”) and dealt with in more general terms on the Ministry of Business, Innovation and Employment (MBIE) website:
The initial four year banning order was made under S. 385 (3) of the Act and the penalties for breaching that order are set out in s. 373(4).
385 Registrar or FMA may prohibit person from managing companies
(3) The Registrar or the FMA may, by notice in writing given to a person, prohibit that person from being a director or promoter of a company, or being concerned in, or taking part, whether directly or indirectly, in the management of, a company during such period not exceeding 10 years after the date of the notice as is specified in the notice. Every notice shall be published in the Gazette.
(9) Every person to whom a notice under subsection (3) is given who fails to comply with the notice commits an offence and is liable on conviction to the penalties set out in section 373(4).
Part 21 Offences and penalties
373 Penalty for failure to comply with Act
(4) A person convicted of an offence against any of the following sections of this Act is liable to imprisonment for a term not exceeding 5 years or to a fine not exceeding $200,000:
The conviction of the breach of the banning order which occurred in mid- 2011 resulted in a penalty being imposed under s. 373(4) of the Companies Act 1993. This is a CRIMINAL CONVICTION..
MBIE states very VERY clearly on its website that a person is disqualified from being appointed a company director who is under the age of 18 years OR is an undischarged bankrupt OR HAS BEEN CONVICTED OF A CRIME INVOLVING DISHONESY IN THE LAST FIVE YEARS OR HAS BEEN PROHIBITED FROM MANAGING A COMPANY …..BY THE REGISTRAR OF COMPANIES” [Currently Ms Mandy McDonald].
DISQUALIFICATION DETAILS 1. A person who is not a natural person cannot be a director of a company. 2. A person cannot be a director of a company if he or she is any of the following: › under 18 years of age: › an undischarged bankrupt: › prohibited from being a director or promoter of, or being concerned or taking part in the management of, a company under any statutory provisions: › subject to a property order under section 30 or 31 of the Protection of Personal and Property Rights Act 1988: › not eligible because of requirements contained in the company’s constitution (if any).