A Bad Defence Can Be Costly
Overview Of Wrong And Missing Company Records Do Not Assist A Director’s Defence
The following are extracts from the case of NZ Natural Therapy Ltd (in liquidation) v Little [2018] NZHC 2164 which was a case related to wrong and missing company records. It is a textbook case for a Director, perhaps on how to lose a claim brought by a Liquidator.
The failure to keep proper company books and records and the attempt to avoid acceptance of the records that did exist was not seemingly helpful to the Director.
The liquidators then seek to recover balance-sheet debts from people associated with the company. For good measure, the liquidators seek compensation from the sole director of the company for breaches of his duties as a director: a common enough proceeding….
Mr Little defends the liquidators’ claims by saying:
(a) The balance sheet is wrong. It does not record what actually happened. No money is owed. In any event, the company was a corporate trustee for a trust, and the balance sheet is the Trust’s…ultimately it was Mr Little’s duty to keep proper records. Such records would have assisted with this inquiry but he failed to keep them. He should not now be allowed to take advantage of the resulting uncertainty….
If, as he says, there was a dispute over accounting fees, then it was his obligation to ensure the records were preserved.
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Disclaimer: Wrong And Missing Company Records Do Not Assist A Director’s Defence
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