MinterEllison Partner Notes Key Mainzeal Lessons

Over 80 percent of New Zealand’s directors have never experienced a major corporate collapse—making the Mainzeal case a critical wake-up call for governance professionals nationwide. The Mainzeal case was a landmark case resulted in directors being personally liable for $40 million plus interest, fundamentally reshaping how boards must approach financial oversight.

Janine Stewart, Auckland-based construction and infrastructure specialist at Minter Ellison Rudd Watts, witnessed firsthand how Mainzeal’s 2013 receivership transformed legal practice in the construction sector.

The company’s collapse left unsecured creditors with a staggering $110 million shortfall, triggering litigation that culminated in the Supreme Court’s 2023 decision holding directors personally accountable for insolvent trading.

“You must be cognisant of these specific features of construction companies if you are on these types of boards,” Stewart says, noting that construction businesses typically lack substantial assets beyond “their goodwill, their people, and/or in their pipeline and projects.” This asset-light structure demands heightened vigilance around cash flow and solvency testing.

The New Director Imperative

The Mainzeal case exposed critical governance gaps that extend far beyond construction:

Question Everything
Directors needn’t be forensic accountants, but must have “that confidence to call for external expert help when you need it,” Stewart advises. The court’s decision made clear that accepting financial information without proper scrutiny is no longer a viable defense.

Board Composition Matters
“The Mainzeal case highlighted the importance of skill sets around the board table and the need for succession planning,” Stewart notes. The directors’ failure to seek expert advice or consider stepping down significantly impacted their liability exposure.

Combat Groupthink Actively
Stewart identifies groupthink as a major board risk, especially when established members dismiss concerns raised by newer directors. “You have to think about how you might create a board culture that reduces the risk of that happening,” she emphasizes.

The Continuous Development Mandate

Stewart, who serves on both the Minter Ellison Rudd Watts and Mercy Ships boards, likens directorship development to physical training: consistent effort is required. Her participation in the Institute of Directors’ advanced courses reinforced the importance of critical thinking and self-reflection.

“There is a risk in people staying too long and holding onto their board roles,” she cautions, while acknowledging the balancing act with maintaining institutional knowledge. Her prescription for better governance? “More listening” and taking time to respond rather than react.

Why This Isn’t Just Boardroom Gossip

The Mainzeal decision has permanently altered the governance landscape across all sectors. The word ‘liability’ now resonates more forcefully in boardrooms nationwide, regardless of industry. As construction companies continue facing tight margins and payment challenges, the lessons from this case provide a crucial framework for directors navigating similar high-risk environments.

The courts have raised the bar on director duties, and the cost of governance failures has never been higher.