Mainzeal’s and Dame Jenny Shipley’s recent fall from grace should serve as a wake-up call to all who hold governance responsibilities, regardless of industry or organisational size. 

Many people in governance roles are oblivious to the nature and scope of their duties, or assume liquidators will only pursue big-name leaders of multi-million-dollar corporates when things go belly-up.

Mainzeal collapsed in 2013 owing $110 million to unsecured creditors. The liquidators sued four former directors – including Dame Jenny, who was Chair. In his finding, the Judge ruled against the defendants, determining they should pay $36 million in total.

If you’re in any type of governance role and you play your cards wrong, this could happen to you. Just recently, liquidators investigated the directors of another collapsed construction company. The losses in question? Well under a million. 

That might not seem much in a commercial context but it’s a lot if you have to pay it out of your personal coffers. That’s exactly what many people who take on governance roles don’t appreciate – if things turn to custard and losses are incurred, you can be liable to pay any shortfall.

Organisations should check they have liability insurance and understand the policy. Make sure the cover is commensurate with any risk and review your insurance regularly. One day, your life savings might depend on it. The Charities Services’ website – charities.govt.nz – has some great information for officers of not-for-profits.

Before you sign up for a governance role, make sure you are clear on the duties and potential personal risk you are signing up for. If in doubt, now’s the time to check it out with your legal adviser.

Janice Hughes is a Director of Aspiring Law. Please remember this information is designed as a general guide, and should not replace specific legal advice on a particular issue. If you have questions or feedback about this article, please contact Janice on 03 443 0900, or email [email protected].