21 Aug 2015

Ministry may target rogue company directors

12:10 pm on 21 August 2015

The Ministry of Business, Innovation and Employment is looking to increase its powers to target rogue company directors.

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Photo: 123rf.com

Manager of the northern labour inspectorate David Milne said they were seeing more and more cases of businesses escaping fines and debts owed to staff through the practice of phoenixing.

A phoenix company is a commercial entity which has emerged from the collapse of another through insolvency.

At the moment labour inspectors can impose fines but Mr Milne said MBIE was considering the option of banning badly-behaved directors from being able to run companies.

"What we're focusing on doing is trying to take those employers out of the market and stop them being directors, banning them from being directors, stopping them from running companies again and therefore stopping the problem perpetuating," Mr Milne said.

Academics say phoenix companies are most common in the construction sector amongst contractors.

The sector group Civil Contractors New Zealand has a membership of about 600 contracting firms. Executive officer Malcolm Abernethy said non-payment of bills had a domino effect within the industry, and meant firms were not able to invest in equipment and staff.

He said some developers have used the legal system to delay, and then escape making payments.