Business Law Archives | Edmonds Judd

Consequences of ‘accidental directorship’

August 5, 2026

Business Law, Company Law, Corporate Governance, Directors’ Duties, StartupAdvice, Startups, Venture Capital

Caution for investors, startup advisers and board observers

Startup companies often rely on advisers, investors and board observers to help guide their new businesses. This is a good thing, but it carries hidden risk.

If you are in one of these roles, in some circumstances, you can be treated as a director, even if you never formally agreed to the appointment. If this happens, it can expose you to personal liability.

Directors vs advisers: What’s the difference?

Directors are responsible for the overall governance and strategic direction of the business.

Directorship also comes with legal compliance under the Companies Act 1993. There are significant consequences for directors if things go wrong.

On the other hand, advisers and board observers typically provide strategic, non-binding guidance for the directors to take into consideration when making decisions.

In theory, this is a clear distinction. The line, however, can become blurred. What matters is what you do in practice, rather than your title.

How do people become accidental directors?

This is common in startups, where governance structures are still evolving and roles are often informal. Having said that, this is still a real risk for any company. Courts tend to focus on how you are fulfilling your role as an adviser or observer in practice. Warning signs include:

The board of directors regularly following your instructions or directions
Being involved in decision-making on the same level as directors, and/or
Exercising authority normally reserved for directors.

If these patterns develop, you may be seen as a deemed director.

Personal liability

Directors’ duties are personal. If a company gets into financial trouble, the directors are exposed to personal liability, and in some instances may be required to personally contribute to company debts. This risk doesn’t just apply to those formally appointed. If you are treated as a director in substance, you may carry this risk without even realising you’ve taken it on.

A risk area

Board observers and startup advisers are particularly exposed because their role sits very close to the line. For example, an observer may:

Attend meetings and receive board papers
Provide input on strategy or decisions, and/or
Represent investor interests.

That’s fine, but the risk increases where:

You participate in decision-making on significant matters
The board tends to follow your recommendations
Your role is not clearly recorded as ‘observer only,’ and/or
You (or your investor) have significant control or approval rights.

Over time, what starts as ‘advice’ can start to look like decision-making.

This is one of those areas where things can drift without anyone noticing. Everyone is acting in good faith, wanting the business to succeed, but the legal position gradually shifts. If you are involved in a startup as an adviser, investor or observer, it’s worth asking yourself:

Am I just advising, or am I influencing decisions?
Does the board treat my input as optional or as direction?
Is my role clearly documented and understood?

Small changes in how you operate can make a big difference.

Be careful

Being an adviser or board observer is often valuable and rewarding, and is of great benefit to startups. However, there are real risks with these roles that are not always obvious. If your involvement crosses the line into decision-making or control, the law may consider you as a director, exposing you to all the responsibility and possible personal liability that comes with that title.

It pays to be clear about your role from the outset and to keep checking that your involvement hasn’t crept further than intended. If you’re not sure where that line sits in your situation, it’s a good time to get legal advice to help avoid unintended consequences.

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2026. Editor: Adrienne Olsen. E-mail: [email protected] Ph: 029 286 3650

Modern Slavery Bill

August 5, 2026

Business Law, Employment Law, Human Resources, Human Rights, Legislation, Supply Chains, Workplace Law

Implications for business

The introduction into Parliament of the Modern Slavery Bill has brought awareness of how modern slavery has manifested itself into New Zealand businesses. Modern slavery can rear its ugly head in a range of ways from forced labour in supply chains, exploitation (or coercion) of workers and various forms of trafficking.

The Bill has also made history as it is the first time a bill has been introduced through Standing Order 288. This allows a Private Member’s Bill to bypass the random ballot (or ‘biscuit tin’) process if it is supported by two-thirds of non-executive MPs.

This Bill was co-sponsored by Labour MP Camilla Belich and National MP Greg Fleming. This bi-partisan effort shows the importance of the Bill not only to our parliamentarians, but also to New Zealand society.

What is modern slavery?

Modern slavery is often seen as a global matter and, for many New Zealanders, it probably feels like an issue away from our shores. Unfortunately, this is far from the truth. World Vision currently estimates that the average Kiwi spends around $77 a week on goods linked to various forms of modern slavery.^[1] Walk Free’s 2023 Global Slavery Index estimated that in 2021, there were 8,000 individuals on any given day, living in modern slavery in New Zealand.^[2]

In a high-profile case in the modern history of slavery in New Zealand, Joseph Matamata was convicted of 13 charges of slavery and 10 charges of human trafficking involving labourers working in orchards. After bringing the labourers to New Zealand with promises of a better life, Matamata retained their income, restricted communication and movement, and used threats of violence to ensure the labourers stayed in their jobs.^[3]

The Bill

The Bill is both broad and extensive in defining modern slavery. It is defined as:

Crimes already understood in the Crimes Act 1961:
– Dealing in slaves, as well as debt-bondage or sefdom
– Dealing in people under 18 for sexual exploitation, removal of body parts, or engagement in forced labour
– People trafficking, and
– Coerced marriage or civil union

The ‘worst forms of child labour’ under Article 3 of the International Labour Organisation Convention No. 182
Trafficking as defined by Article 3 of the United Nations Protocol
Forced or exploitative labour
Servitude, and
Sexual exploitation.^[4]

Outside of the definition of modern slavery, the Bill requires the Minister to report annually on modern slavery matters, to publish guidance and to direct the Chief Human Rights Commissioner to designate modern slavery as a ‘priority area’ if necessary. The Bill will lead to the creation of a Modern Slavery Statement Register to be publicly accessible. All this will be overseen by the proposed independent Anti-Slavery Commissioner.

What does this mean for business?

The Bill currently states that ‘reporting entities’ are required to:

Prepare and publish annual modern slavery statements that describe their structure and supply chains
Identify modern slavery risks (both real and potential)
Outline what steps the entity is taking to deal with the identified risks, and
Lodge these statements on the Modern Slavery Statement Register.

A ‘reporting entity’ in the Bill is defined as a business with a consolidated annual revenue that exceeds $100 million. These entities not only refer to New Zealand entities, but also any overseas company carrying on business in New Zealand. These entities can be both public and private organisations, with government agencies also being captured under this regime.

How this affects New Zealand businesses

If your business is considered a reporting entity under the Bill, non-compliance with the regime could carry a strong penalty. Offences will be committed if entities fail to comply with their reporting obligations, or if they knowingly make false or misleading statements in their reports. These offences could amount to reporting entities being liable on conviction to a fine of up to $200,000.

From a civil point of view, the maximum pecuniary penalty for a contravening reporting entity is $600,000.

This also imposes personal liability for directors and individuals involved in management. If an offence occurs with the permission, knowledge or presumed knowledge of these individuals, they will be found guilty. This is particularly important if the director or management should have known it was occurring but failed to take reasonable steps to prevent it from happening.

The final important note for businesses is that if they are found to be non-compliant, both the name of the business and the individuals responsible will be published on the Register for three years.

Preparing for the Bill to become law

Many affected by the reporting obligations of this Bill may already be familiar with its obligations, considering there are similar laws in other jurisdictions. However, potential ways to prepare for the implementation of the modern slavery legislation in New Zealand could be in the form of preparing policies and governance, reviewing supply and procurement contracts (and being particularly diligent about who your suppliers are), and potentially establishing internal whistleblowing procedures.

Other steps could involve identifying risk factors that may facilitate the exploitation of workers, and developing management plans to mitigate them. The Ministry of Foreign Affairs and Trade has a range of specific resources all targeted towards combatting modern slavery.^[5]

A positive development

This Bill is widely seen as a positive development in New Zealand law. While there may be concerns on the extent of obligations imposed on entities, the benefits to victims undoubtedly outweigh the costs. If you are concerned that this proposed legislation may affect the way you do business, please don’t hesitate to contact us.

^[1] https://www.worldvision.org.nz/about/media/parliamentary-rule-modern-slavery-act-for-nz/

^[2] https://www.walkfree.org/global-slavery-index/country-studies/new-zealand/

^[3] Joseph Auga Matamata v R [2020] NZHC 1829.

^[4] https://www.legislation.govt.nz/bill/members/2026/242/en/latest/#LMS1569519

^[5] https://www.mfat.govt.nz/en/trade/nz-trade-policy/combatting-modern-slavery

When Workplace Conflict Hits

July 3, 2026

Business Law, Employment Law, Human Resources, Legal Guidance, Small Business Advice, Workplace Regulation

Lately, Sally had noticed that Emilio seemed a little distant and distracted. She asked him what was troubling him.

“Mi vida, I am so stressed. Work is so busy. We have orders to fill and my sales manager is having an argument with my chief mechanic!”

Emilio explained that his agritech business was in its peak season and orders were pouring in, but this issue meant the sales team and mechanical team could not communicate. That led to serious delays, angry customers and frustrated suppliers.

Sally suggested that Emilio might need some employment advice about New Zealand employment law.

Emilio called his lawyer the next morning. He learned that employers had obligations to act in good faith. He did not realise that employers could raise concerns with employees about their performance or workplace conduct, investigate the facts, and make decisions – provided these were decisions a fair and reasonable employer could make in the circumstances.

With guidance from his lawyer, Emilio raised the concerns with the sales manager and the chief mechanic. Quickly, the argument cooled off. Emilio met with each of the employees, and asked them for their side of events. He learned that the manager and mechanic were old friends that had different opinions about the best kind of coffee for the tearoom. The manager had asked office staff to get his favourite Kopi Luwak coffee, and had made a cup for the mechanic, telling him it was something different. The mechanic learned about the prank and was extremely upset.

Concluding the investigation, Emilio decided that he would give a written warning to the manager about the prank due to the effect it had on the mechanic, and gave a verbal warning to both employees about allowing the argument to affect the workplace. Since Emilio had caught it early and gave the employees plenty of opportunity to participate, they accepted the outcome and made amends, although the mechanic now brings a thermos to work.

Emilio went on to have his best sales season yet, meaning he could afford a holiday to Spain to take Sally to visit his abuela.

Jadin Hooper

To Share and Share alike

April 15, 2026

Business Law, Contracts and Agreements, Due Diligence, Legal Guidance, Shareholder Agreements

It was just another Monday, as Simon entered his law office, looking forward to slaking his thirst with a comforting cup of tea. He shrugged off his suit jacket and hung it up. While he waited for his computer to wake itself for the day ahead, he made himself a cup of tea.

He was just about to have a sip, when the phone rang. He put the tea down. Reception told him that someone was here to see him, no appointment in place, but it was apparently urgent. Taking a last look at his untouched drink, he went downstairs and shook hands with Reggie, who was flustered, Sally’s cousin.

“I’m joining someone in an engineering business, it’s all got to be done by tomorrow for some reason, and I’ve got all this paperwork to sign. In fact, I’ve already signed it and was going to hand it over, but Lory said I better come and see you first. Well, she demanded it.”

Simon sat Reggie down in an office, and had a look at the papers provided. Reggie was joining two other people in a company which ran the engineering business, he was going to take over from a current owner, and this all had to happen by 31 March for tax reasons. Simon went back to his room, grabbed his favourite pen, ignored the cold cup of tea on his desk, and returned to an expectant Reggie, who said: “We’re all good to go, aren’t we, can I just pay the money and get on with it?”

Simon put down the documents, looked at Reggie, and took a deep breath. “Reggie, there are some really important things to think about first:

Due Diligence – how well do you know the people you are going into business with? Do they have experience in the industry, in this company, do they have a good reputation? Are they financially sound, can they help bail the company out of trouble if necessary, have they had money problems in the past?

Shareholder Agreement – it is essential that you and the other owners sign an agreement which sets out expectations of each other, whether you will need to put more money into the business, who makes decisions, and when do you all have to agree.

You should commit to a timeframe where no one can pull out of the business, and if they do they must offer the shares to each other.”

Reggie’s eyes were wide open. “Thanks for this, I’ll have a good chat with the others, I won’t sign anything, and I’ll come back and see you shortly.”

Simon waved him goodbye, and poured himself a cup of tea. He knew that was not the end of this story.

Simon Brdanovic

Protecting Your Business Name: Bob’s Story

August 15, 2025

Brand Identity, Business Law, Business Protection, Commercial Law, Entrepreneurship, Intellectual Property, Legal Disputes, Small Business Advice, Small Business Challenges, Trademarks & Branding

Bob was beyond happy, he now felt as though he had the stability he had been searching for. This feeling lasted only a few minutes though as Bob was about to receive a call in relation to his business that would change everything…

Things were going so well for Bob, until he got the call about his business.

“Uh…yes, this is he” Bob said, his ear to the phone.

“Bob, of Bob’s Burger Bar?” the caller repeated.

“Yes, I said” Bob replied, irritated.

“Thanks”, the voice said. “Just confirming”

“Who is this?” Bob demanded.

“My name is James Crane, of Shatner, Bergen and Miller. I’m calling on behalf of my client, who shall remain nameless. Unfortunately, your business is infringing on my client’s intellectual property rights.”

“WHAT?!” Bob exclaimed.

James Crane continued. “The name of your business, Bob’s Burger Bar, is very similar to the name of my client’s business, Bob’s Barbeque, in a way that is likely to deceive or confuse others into thinking they are related. That needs to change.”

“That’s ridiculous, the business is named after me!” Bob protested.

“Be that as it may, Bob” James Crane said, patronisingly. “Intellectual property is no joke and my client is now registering the name Bob’s Barbeque. This is just a friendly call to let you know to change the name of your business before you get a cease-and-desist letter and our client commences formal court action. Good day”. James Crane hung up the phone, leaving Bob’s head spinning.

He had ALWAYS been Bob’s Burger Bar, ever since he had operated out of a rusty little truck, doing the food market circuits. He had built his business from the ground up on word-of-mouth and goodwill alone. People would queue for miles to get a taste of Bob’s burgers. He couldn’t believe that now he was finally in a brick-and-mortar premises, some imposter he had never heard of was trying to claim his name. His own name!

Bob wouldn’t stand for this. He went to see the lawyer his brother Luke had recommended at Edmonds Judd.

First, his lawyer had a look at the Intellectual Property Office website to check if “Bob’s Barbeque” was a registered trademark and found that it wasn’t. Bob and his lawyer also discovered that Bob’s Barbeque was in a completely different part of the country to Bob’s Burger Bar, and that they didn’t even sell burgers, meaning that there was a very low likelihood of confusion.

Edmonds Judd wrote a letter to Shatner, Bergen and Miller politely explaining that there was no infringement on their client’s intellectual property rights that they could see.

“That’s a relief!” Bob said. “Do you think I could trademark the name Bob’s Burger Bar?”

“You might be able to” his lawyer said. “The name is quite distinct. Furthermore, your logo of the bright red B, entwined with the burger motif and the old man holding a spatula, is very distinct. You might want to register that as a trademark.”

Bob’s lawyer referred him to a firm specialising in trademark registration and Bob put a bit of his inheritance money into sprucing up the place with nice new signage. After all, why not display his nice new registered trademark?

Bob called his brother Luke to share the good news, but what Luke had to say rocked Bob’s very core….

Jamie Graham

Business Law