BUSINESS AND CORPORATION LAW.
Added on 2022-11-22
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Running Head: BUSINESS AND CORPORATION LAW
0
Company Law
Law610
9/24/2019
Student’s Name
0
Company Law
Law610
9/24/2019
Student’s Name
LAW610
1
Directors and officers of the company can be considered as the brain of the same because
these are the people responsible to manage business operations of the company and to take a
decision on behalf of the same. Being in such position, directors owe fiduciary relationship with
the company and its stakeholders (Parryfield.com, 2011). In case of a company, management and
ownership remain in different hands and this manner, corporate governance becomes more
crucial. Different nations have different corporations act, which provides certain duties of
directors as well as officers of the company. In New Zealand, Companies Act 1993 is there
which contains such duties. The lead motive of such duties is to ensure that the operations of a
company are being performed in favor of stakeholders. In conjunction with the said act, some
principles and guidelines have also been developed to ensure good governance in companies
formed in New Zealand. Here the important thing to mention is that the term stakeholder is wider
than mere shareholders.
At most, of the times, directors have the misconception that they owe their duties and
responsibilities to shareholders, which is not true. Even after the existence and applicability of
Companies Act 1993 and corporate governance principles, cases of poor governance used to be
reported on a regular basis because directors used to ignore the interest of creditors while taking
business decisions and their lead focus remains on providing a higher return to the shareholder
by making profit maximization. One of such cases recently came into light that is far significant
to study to understand the importance of carrying good governance in companies. The case
redefined the duties of directors and the scope of the same.
If to discuss facts of the case this is to state that a person named Yan Ciliang formed a
company in china named Richina which further became the parent company of another formed
by Yan named Mainzeal Construction company. Mainzeal was incorporated in New Zealand and
1
Directors and officers of the company can be considered as the brain of the same because
these are the people responsible to manage business operations of the company and to take a
decision on behalf of the same. Being in such position, directors owe fiduciary relationship with
the company and its stakeholders (Parryfield.com, 2011). In case of a company, management and
ownership remain in different hands and this manner, corporate governance becomes more
crucial. Different nations have different corporations act, which provides certain duties of
directors as well as officers of the company. In New Zealand, Companies Act 1993 is there
which contains such duties. The lead motive of such duties is to ensure that the operations of a
company are being performed in favor of stakeholders. In conjunction with the said act, some
principles and guidelines have also been developed to ensure good governance in companies
formed in New Zealand. Here the important thing to mention is that the term stakeholder is wider
than mere shareholders.
At most, of the times, directors have the misconception that they owe their duties and
responsibilities to shareholders, which is not true. Even after the existence and applicability of
Companies Act 1993 and corporate governance principles, cases of poor governance used to be
reported on a regular basis because directors used to ignore the interest of creditors while taking
business decisions and their lead focus remains on providing a higher return to the shareholder
by making profit maximization. One of such cases recently came into light that is far significant
to study to understand the importance of carrying good governance in companies. The case
redefined the duties of directors and the scope of the same.
If to discuss facts of the case this is to state that a person named Yan Ciliang formed a
company in china named Richina which further became the parent company of another formed
by Yan named Mainzeal Construction company. Mainzeal was incorporated in New Zealand and
LAW610
2
was doing good till 2004-05 when it lent nearly $3.2 million to its parent company Richina for
the purpose to buy a leather business in shanghai (Nbr.co.nz, 2013). For the next 10 years, the
company the New Zealand Company continued its operations out of which most of them were
loss-making. The loan provided by Mainzeal to its Chinese operations spiraled over time and
reached up to $44 million (Mandow, 2018). Further, the company accrued many losses in
another project. In the year 2013, the company went into liquidation as the same was carrying
expensive argument with manufacturing company Siemens. By this time, the company owed
many unsecured creditors who were demanding their payments. Liquidators of the company
brought this case to the High Court and demanded $75 million from the directors of Mainzeal
(Legalwise.slatecreative.com.au, 2018).
The lead issue of the case that it failed to repay its creditors. Director Yan kept promising
for several years that asset of its Chinese operations would be available to pay the creditors of
New Zealand Company but when the requirement arose, Chinese assets been found unable to
translate into cash and to pay the creditors of Mainzeal. Yan himself made a calculation and
stated that if the company would have invested $3.2 million rather than lending the same to
Richina, it could have created a worth $900 million. It was a negligent decision of company's
directors where they did not consider the interest of creditors. Only Yan was not involved in the
whole but other directors of the same also been careless and breached their duties of directors. In
addition to the facts of the facts of the case, the decision of the same is equally important to
know. In the decision of this case, the High court held the directors of the company liable for the
breach of the director's duty. In the total court has awarded penalty worth $36m against the
directors of Mainzeal that included Richard Yan, Dame Jenny Shipley, Clive Tilby and Peter
Gomm (Hutching, 2019). In against of the decision of High court, directors made an appeal to
2
was doing good till 2004-05 when it lent nearly $3.2 million to its parent company Richina for
the purpose to buy a leather business in shanghai (Nbr.co.nz, 2013). For the next 10 years, the
company the New Zealand Company continued its operations out of which most of them were
loss-making. The loan provided by Mainzeal to its Chinese operations spiraled over time and
reached up to $44 million (Mandow, 2018). Further, the company accrued many losses in
another project. In the year 2013, the company went into liquidation as the same was carrying
expensive argument with manufacturing company Siemens. By this time, the company owed
many unsecured creditors who were demanding their payments. Liquidators of the company
brought this case to the High Court and demanded $75 million from the directors of Mainzeal
(Legalwise.slatecreative.com.au, 2018).
The lead issue of the case that it failed to repay its creditors. Director Yan kept promising
for several years that asset of its Chinese operations would be available to pay the creditors of
New Zealand Company but when the requirement arose, Chinese assets been found unable to
translate into cash and to pay the creditors of Mainzeal. Yan himself made a calculation and
stated that if the company would have invested $3.2 million rather than lending the same to
Richina, it could have created a worth $900 million. It was a negligent decision of company's
directors where they did not consider the interest of creditors. Only Yan was not involved in the
whole but other directors of the same also been careless and breached their duties of directors. In
addition to the facts of the facts of the case, the decision of the same is equally important to
know. In the decision of this case, the High court held the directors of the company liable for the
breach of the director's duty. In the total court has awarded penalty worth $36m against the
directors of Mainzeal that included Richard Yan, Dame Jenny Shipley, Clive Tilby and Peter
Gomm (Hutching, 2019). In against of the decision of High court, directors made an appeal to
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