Former Five Star Finance directors Marcus MacDonald and Nicholas Kirk will spend Christmas in jail for their part in the multi-million failure of the finance group.

Auckland District Court judge Roderick Joyce this afternoon sentenced MacDonald for two years and three months for charges under the Crimes, Securities and Financial Reporting Acts. Kirk received a two year, eight month sentence.

They are believed to be the first of the current crop of collapsed finance company directors before the courts to have gone to jail. Both are now in custody.

Kirk and MacDonald's sentences were reduced by 50 per cent for pleading guilty to the charges and for co-operating with the Ministry of Economic Development (MED) and the Serious Fraud Office.

But Joyce said the seriousness of the offending and the significant amount of money lost could not go unpunished, although he acknowledged the former directors' remorse.

He said investor protection was vital to the wider economy and community and those that had "breached the faith had to be held accountable."

Joyce said the investors had trusted Kirk, an accountant, and MacDonald, a commercial lawyer, with their life and retirement savings.

One company in the group, Five Star Consumer Finance lost $42 million alone.

He said the scale of the loss and the amount of investors that have been affected had left a huge impact on the investing community.

"Investors are reliant on the information they get from financial companies."

The directors pleaded guilty to issuing misleading statements and advertisement that distorted the financial position of the company.

Joyce said many prudent investors would not have invested or continued to invest in the company had they been aware of it's high risk related party lending.

Fellow Five Star Finance director Anthony Bowden was sentenced to nine months' home detention and 300 hours' community work on Securities Act charges this morning.

Most of the criminal charges the directors faced carry a maximum penalty of five years imprisonment or fines of up to $300,000.

Five Star was placed into receivership on 29 August 2007 owing investors about $18 million.

The Companies Office laid the criminal charges against Kirk, Bowden, MacDonald and Williams in July, 2008.

The charges relate to securities being offered and allotted to members of the public without a registered prospectus, investment statement or trustee appointed.

According to the Companies Office, MacDonald and Kirk were on the board of Five Star Debenture Nominee, in liquidation, and MacDonald, Kirk and Bowden were also on the board of Five Star Consumer Finance, in receivership.

All four directors were banned in April 2009 by the Registrar of Companies from holding board or management positions in New Zealand companies for five years.

In August the Serious Fraud Office announced it had laid more than 100 charges against the four concerning related party lending that took place between 2003 and 2007.

It was alleged they acted dishonestly and breached obligations under the trust deed.