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The Shareholders Association wants to punish ex-directors of failed carpet-maker Feltex by having them banned from company boards for five years.
If successful, the move could have financial repercussions for the former Feltex board members, who would be forced to resign from other lucrative directorships.
Association chairman Bruce
Sheppard said an application had been made to the High Court at Auckland to move Feltex into liquidation, with a hearing due on November 30.
Liquidating the company is a technical move that would not affect the carpet business or brand, which Godfrey Hirst has agreed to buy. Feltex would then become an empty shell company.
If successful, the association would then apply to the Ministry of Economic Development to bar the former Feltex directors from acting as directors or in management positions in any company for five years.
"If we can actually put the company into liquidation we can then immediately lay a complaint with the MED to make all of those guys who resigned as directors' lives really miserable by having the MED bar them as directors of any company. That makes their life pretty darn difficult," Sheppard said.
Chairman Tim Saunders and directors Michael Feeney, John Hagen and David Hunter resigned on October 19, while former chief executive Peter Thomas, who was also a director, resigned when receivers were appointed on September 22.
A search of the Companies Office website showed Saunders remained on a number of boards including Contact Energy, Solid Energy and Calan Healthcare Properties.
Saunders declined to comment yesterday.
A provision in the Companies Act meant anyone being barred would have to have been a manager or a director of two companies that had fallen into insolvent liquidation, Sheppard said.
However, Feltex and its subsidiary businesses would all be moved into liquidation and therefore count as at least two companies, he added.
The association could apply to have the directors barred under Section 385 of the Companies Act 1993, which gives the Registrar of Companies the power to prohibit someone from involvement as a director, manager or promoter for up to five years.
Chris Parke, senior associate at legal firm Kensington Swan, said applying under section 385 was the most likely route but such a move would be difficult.
The registrar would have to be satisfied that someone was wholly or partly responsible for Feltex's failure and had been involved in two or more companies that had failed, Parke said.
"It's not the type of decision that I think the registrar would take lightly," he said.
"It's likely there would need to be some other form of action taken against those directors which indicated they had been responsible for the downfall of the company."
An action showing the directors had breached directors' duties was an example of what could be required, he said.
"It's unlikely, I would imagine, that they [the registrar] would take that step unilaterally without there being some fairly strong evidence."
The association could be correct in counting Feltex as more than one company but this could also come down to interpretation, Parke said.
Other Auckland lawyers contacted yesterday also thought the association's plans could prove difficult.
Sheppard said liquidation could also lead to a litigation fund and subsequent litigation could target a wide variety of people, he said.
"Directors, the promoters, the vendors, the auditors, stockbrokers, anyone that looks like they've got money and have done something wrong - we'll be after them."