Mainzeal – The “Perils” of Shareholder Support
29 November 2024

Lawyers and business people have now had a month to digest the Supreme Court’s decision in Yan v Mainzeal Property and Construction Limited (In Liquidation) (Mainzeal).  [1]


The Supreme Court (Court) upheld the Court of Appeal’s decision that the Mainzeal directors were liable for insolvent trading and ordered that the directors contribute $39.8 million plus interest to the assets of the company. The liability of three of the four directors was capped at $6.6 million plus interest.


The Mainzeal decision is perhaps unsurprising. It reinforces the Supreme Court’s existing position in Madsen-Ries (as liquidator of Debut Homes Limited (In Liquidation)) and Othersv Cooper and Others (Debut Homes)[2]. The decision also provides extensive guidance on the approach directors should take to their statutory duties under sections 135 and 136 of the Companies Act 1993.


In summary, the Court ruled that, at the point at which company is insolvent, or nearing insolvency, it is incumbent upon the directors to take stock of the situation and seek independent advice if necessary. At this point, there needs to be a plan for continued trading that mitigates a substantial risk of serious loss to creditors and means that obligations incurred will continue to be honoured. A lack of capital should be addressed by recapitalisation or shareholder support which could be reasonably relied upon. Liquidation, or some other form of insolvency protection, becomes the alternative if continued trading cannot be justified on this basis.


This result has been roundly criticised by lawyers and business people as providing too much focus on creditor protection, at the expense of allowing directors to exercise their business judgment. This outcome has prompted numerous calls for a review of the Companies Act.[3]


Perhaps, the most interesting aspect of the decision is shareholder support. On a balance sheet basis, Mainzeal had been trading insolvent for some time. The Richina Pacific group ostensibly provided support through letters of support and “contra” arrangements for the supply of goods. Assurances of support were also given by Richard Yan, the managing director, often in unconditional terms. Issues of legal enforceability, extracting money from China, and lack of capitalisation of some group members put question marks next to this support. Ultimately, the Court decided it was “distinctly uncertain” whether Richina Pacific would provide money to meet Mainzeal’s liabilities. As such, going forward, the directors did not have reasonable grounds for believing the company would honour its obligations.[4]


In our view, this finding places directors of foreign owned subsidiaries in an invidious position. They are being asked to test the effectiveness of shareholder support but will likely lack the means do so. In many cases, they will be employees who are ultimately responsible to the offshore business.


Questioning the legal enforceability or lack of intent behind support arrangements may be seen as a lack of good faith. Historically, letters of comfort from a parent company were given great weight; although, not legally enforceable. Often, these letters would support an auditor’s finding of solvency. Now, directors are being asked to apply a much higher degree of scrutiny to these arrangements.


We agree the law needs a serious review. The pool of directors in New Zealand is already too small. This is unsurprising given the consequences of taking too much business risk and getting it wrong.

[1] [2023] NZSC 113


[2] [2020] NZSC 100


[3] See in particular National Business Review, Companies Act ‘long overdue a rethink’: lawyers react to Mainzeal, 25 August 2023, https://www.nbr.co.nz/law/companies-act-long-overdue-a-rethink-lawyers-react-to-mainzeal/


[4] [2023] NZSC 113 at paragraph [267]


For more information contact Mark Hopkinson or Mike Roberton.


26 November 2025
Proposed Plan Change 120: What You Need to Know What is PC120 and why does it matter? Auckland Council has proposed a change to the Auckland Unitary Plan called Plan Change 120 (PC120) . This change is about two main things: Rezoning areas of residential land to allow more housing intensification in and around urban centres and transport hubs. Making communities safer from natural hazards like flooding and landslides. Why is this happening? By way of background, PC78 (Auckland’s former intensification plan change, as required by the National Policy Statement on Urban Development 2020) incorporated the Medium Density Residential Standards that were required at the time. Generally, this allowed three dwellings of up to three storeys to be built on most residential sites without the need for resource consent. In August 2025, the Government amended the Resource Management Act 1991 to allow for greater intensification in town centres and around existing and planned transit routes. As a result, PC78 was withdrawn in part by Auckland Council and PC120 was notified. What will PC120 do? Increase housing density within and around town centres and transport hubs. Allow taller buildings: At least 6 storeys within walkable catchments of the city/town centre zone and around existing and planned train and bus routes. At least 10–15 storeys around certain train stations listed in the Resource Management Act 1991. These heights and densities must be enabled unless a ‘qualifying matter’ applies to a site which makes that level of development inappropriate. Natural hazard rules PC120 also introduces stricter rules to manage natural hazards such as flooding, landslides, and coastal erosion. This is a response to recent severe weather events like the 2023 Auckland floods caused by Cyclone Gabrielle. The updated rules and hazard mapping re-classify hazard areas and their risk level and require mitigation measures to be implemented that avoid creating or worsening natural hazard risks. What does this mean for property owners and developers? Expect more multi-storey and apartment-style housing near town centres and transport hubs, and an increase in shared spaces and communal assets. Intensification may lead to issues concerning: Boundary and airspace rights. View and sunlight obstruction. An increase in easements and restrictive covenants in already built-up areas. New subdivision and land uses may only be allowed where the natural hazard risk is considered tolerable or acceptable. Coastal development will become more difficult. The impact of a proposed development on existing floodplains and overland flow paths will be scrutinized. Maintenance or upgrade works may be required to ensure stormwater runoff and flood waters are adequately conveyed. Why should you care? These changes could affect your property rights, development plans, and legal obligations. If you’re buying, selling, or developing land, it’s important to understand how PC120 impacts you. Please get in touch with our property team if you’d like to discuss how these proposed changes could affect your property or future plans. https://www.glaisterkeegan.co.nz/our-expertise/property#CommercialProperty
26 November 2025
Sole v Hutton – disclosure obligations for apartment sales and the importance of thorough due diligence when purchasing In Sole v Hutton [2025] NZHC 430, the High Court dealt with a dispute over undisclosed weathertightness issues in an apartment complex and delivered a strong reminder about vendors’ disclosure obligations. In 2019, the Purchasers (the Soles) purchased an apartment in Mount Maunganui for $1,495,000. Less than a year after settlement, they discovered major weathertightness issues affecting the entire building. The Body Corporate embarked on an extensive remediation project, and the Purchasers were hit with more than $1,300,000 in special levies for their share of the work. The Court found that the Vendors (the Huttons) had attended Body Corporate meetings in 2014 where multiple expert reports highlighted significant leaks and recommended re-roofing and re-cladding of the building. Despite this, the Vendors told their agent that there were no known weathertightness issues and this information was passed onto the Soles. The Court held that:- · The Vendors breached the warranty in clause 11.2(7) of the Agreement for Sale and Purchase of Real Estate, which requires disclosure of any facts that may give rise to liabilities under the Unit Titles Act 2010; · The failure to disclose the reports and the assurance that there were “no issues” amounted to misrepresentation. The Soles were awarded $926,806.48 plus interest in damages, including their share of remedial costs (after a 30% betterment reduction, as the remedial works increased the value of the property), alternative accommodation and general damages for stress and inconvenience. Key takeaways:- · Vendors : Always disclose all known issues including historic reports and AGM minutes, even if you believe the matter has been dealt with or is no longer significant. · Purchasers : Buying a unit title property comes with shared risk. Ensure you complete thorough due diligence including reviewing all Body Corporate records, reports and minutes to understand potential liabilities and future levies. · Risk management : Non-disclosure can lead to expensive litigation, while thorough due diligence can prevent nasty surprises. Thinking of buying a unit title property? Our property team can guide you through a thorough due diligence process so you have a clear picture of any potential liabilities before you buy. This can save you from unexpected costs and disputes down the track. Selling a unit title property? Full and accurate disclosure is not just a legal requirement, it’s the best protection against expensive claims after settlement. If you’re unsure what must be disclosed or how the warranties in the Agreement for Sale and Purchase apply to your situation, get in touch with our property team. We can help you prepare clear, compliant disclosure statements and minimise the risk of future disputes. https://www.glaisterkeegan.co.nz/our-expertise/property#ResidentialConveyancing
26 November 2025
In a significant move to ease housing pressures, the New Zealand Government has passed legislation allowing homeowners to build granny flats—up to 70 square metres—without needing building consent. This change, part of the Building and Construction (Small Standalone Dwellings) Bill, is expected to take effect in early 2026, following the removal of resource consent requirements by the end of 2025. The exemption applies to standalone dwellings that are simple in design, comply with the Building Code, and are constructed by authorised building professionals. While formal building consent is no longer required, homeowners must still notify their local council before starting and after completing the build. This reform aims to increase housing supply, reduce costs, and boost productivity in the construction sector. It offers practical benefits for multigenerational families, rural communities, and those seeking affordable housing options. For clients considering adding a granny flat to their property, now is the time to begin planning. Engaging qualified designers and builders early will ensure compliance with the exemption criteria and avoid delays once the regulations come into force. https://www.glaisterkeegan.co.nz/our-expertise/property#ResidentialConveyancing
Show More