The Settlement: A Blueprint for Liability
A €268 million fine for a French bank is a direct warning to every director in New Zealand. The law does not respect borders.
The Context
On 8 January 2026, the Paris court approved a settlement of €267.5-268 million (approx. $313 million) against HSBC France. The French financial prosecutor, Pascal Prache, confirmed the payment would resolve an investigation into “aggravated tax fraud.” The scheme, operational from 2014 to 2019, involved intra-group dividend arbitrage—a variant of the notorious “cum-ex” dividend stripping practice. The bank avoided formal conviction under Article 41-1-2 of the French criminal code, a procedural mechanism that extinguishes criminal liability upon payment. This is not an exoneration. It is a transaction. The documented knowledge of the scheme from 2014 creates a permanent evidentiary record of institutional failure.
The Risk
Directors, your duty is indivisible from the entity’s conduct. The HSBC settlement demonstrates a critical liability hook: a pattern of deliberate, revenue-generating misconduct sanctioned over years. Under the New Zealand Companies Act 1993, directors have a duty to act in good faith and in the best interests of the company. A sustained, profitable scheme that violates foreign tax law may indicate a failure of that duty. More critically, section 138A of the Act imposes personal liability for reckless trading. If a New Zealand subsidiary or branch engaged in similar arbitrage, knowingly exploiting regulatory gaps, directors may be personally liable for the debts incurred—including monumental fines. The Health and Safety at Work Act 2015 principle of due diligence applies by analogy: a proactive duty to understand and manage material financial crime risks across the group. Ignorance is not a defence. The French prosecutor’s characterisation of the dealings as “aggravated” fraud underscores the severity regulators will attach to systematic, designed non-compliance.
The Control
Governance must be weaponised against complexity. The board must mandate and receive forensic assurance that intra-group transactions, especially those generating ‘arbitrage’ profit, are scrutinised for substantive compliance, not just technical form. This requires a direct line of sight from the audit committee to tax and treasury functions in all operational jurisdictions. Treat tax strategy as a principal risk, not a technical footnote.
The Challenge
These are the critical questions you should be raising at the board table:
| Can our audit committee demonstrate, with evidence, that all intra-group transactions are reviewed for substantive economic purpose and compliance with both local and international tax law, not just accounting treatment? | |
| Where does our group’s profit contain an element of ‘regulatory arbitrage,’ and what is our documented, board-approved rationale for accepting that specific legal and reputational risk? | |
| If a foreign prosecutor offered us a €268 million settlement to avoid a criminal trial, on what legal grounds could we defend our collective due diligence to avoid personal liability under the Companies Act? |