Companies Act reform needs to address environmental and social issues - academics

Proposed reforms of the Companies Act do not go far enough to address pressing issues such as environmental and social considerations in corporate governance, say academics.

Among the government's key proposals for change was the introduction of unique identifiers for company directors, a move aimed at combating phoenixing - the practice of directors closing failing companies only to relaunch under a slightly different name.

But Auckland University senior lecturers Peter Underwood and Lynn Buckley said the proposed reforms focused too heavily on straightforward fixes while side-stepping opportunities for greater change.

"The removal of the express reference to the ability of company directors to consider environmental, social and governance (ESG) factors in their decision-making is a backward step," Auckland Law School lecturer Underwood said.

"The government seems focused on tidying up some archaic bits of the Companies Act but has missed the bigger picture: responsible capitalism. We're in the midst of an economic and environmental crisis, and the reforms fall short of addressing broader challenges."

Business School lecturer Buckley said a decision to scrap a proposed beneficial ownership register would have increased transparency and accountability of shareholders involved in companies.

"This was a golden opportunity to shine a light on the often-opaque structures of corporate control," she said.

"It seems strange that while we're pushing for unique identifiers and upping the use of business numbers, we're not addressing who influences corporations. Dropping this proposal also feels like a step back."

Buckley and Underwood were organising an all day conference of a broad cross-section of interested groups to discuss the issues, to take place at the Auckland School of Law on 4 December.

Underwood said there was a need to ask hard questions about the reforms, which had so far been limited primarily to small, interested parties.

Buckley said a massive shift in company law was underway.

"We've seen it with the collapse of Mainzeal and other companies, where some of the creditors get totally shafted, so we have to make the landscape fairer for our creditors, and that is hopefully one of the good things that will come out of looking at those directors' duties and insolvency," she said.

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