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Chris The Lawyer
Chris The Lawyer, Lawyer
Category: New Zealand Law
Satisfied Customers: 22969
Experience:  38 years qualified as a lawyer; LLB, MMgt and FAMINZ.
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A company is going through a major shareholding change and

Customer Question

Hi a company is going through a major shareholding change and the possible new larger shareholder / director wants me come on the board of directors removing the old main shareholder director. I do not have a good knowledge of the financial position or the possible legal arrangements of the deal between the old director / owner and the possible new. This is a messy and emotional change between the directors shareholding and thinking that my appointment as a director could put me in a vulnerable and liable position ? Your thoughts ?
Submitted: 1 year ago.
Category: New Zealand Law
Expert:  Chris The Lawyer replied 1 year ago.

There are obligations on a shareholder to know the financial information and the state of the company. So it is prudent to ask questions and look at the books of the company before you take this on. Having said that, provided you do take the step of doing some due diligence on the state of the comapny you are not really at serious risk unless you participate in reckless trading of the company or acting when you know the company is insolvent. In those situations you can become personally liable but the risks are not high, especially if you have taken the steps to check the state of the company