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Extending corporate liability in New Zealand

Max Gillman (Department of Economics, University of New South Wales, Sydney, Australia)
James Hogan (Department of Economics, The University of Otago, Dunedin, New Zealand)

International Journal of Social Economics

ISSN: 0306-8293

Article publication date: 1 April 1999



New Zealand’s 1993 Companies Act defines reckless trading as when a director/manager induces a “substantial risk of serious loss to the company’s creditors”. The definition contrasts with international common and statutory law that holds managers personally liable only under circumstances of moral failing. It also allows for managers to be found liable for bad investments during the continued existence of a firm. Replacing the standard of moral failing with a standard of objective risk evaluation and allowing culpability beyond bankruptcy proceedings extends liability in a way that indirectly taxes corporations. This extension of liability stands contrary to the evolutionary development of the corporation as based on an efficient redistribution of property rights. It biases investment towards lower risk, lower yield ventures, and is expected to decrease New Zealand’s innovation‐driven economic growth



Gillman, M. and Hogan, J. (1999), "Extending corporate liability in New Zealand", International Journal of Social Economics, Vol. 26 No. 4, pp. 487-500.




Copyright © 1999, MCB UP Limited

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