The Securities Commission has begun civil proceedings in the High Court in Wellington against listed company Nuplex.
The Statement of Claim was filed just before midday on Wednesday and alleges that the company breached the continuous disclosure rules.
Nuplex is named as first defendant, with six of its current or former directors also named as defendants.
The commission claims the resins and chemicals maker failed to inform the market of breaching a banking covenant early in 2009. It is seeking pecuniary penalties, which can be up to $1 million dollars per defendant, and compensatory orders.
The case will go before the court in June and a timetable will be set at that hearing to enable the case to proceed to trial.
Nuplex rejects the commission's claims that it failed to inform the market early enough about breaching a banking covenant.
The company says it had not breached continuous disclosure rules, as the negotiations were not complete, and it had previously informed the market about its forecast half year-operating earnings, which it had revised downwards.
It is first continuous disclosure case brought by the Securities Commission and there is likely to be great interest if the action establishes boundaries regarding when companies have to release price-sensitive information.
However, the Shareholders Association says investors may not necessarily be better off as a result of the cases. Chair Bruce Sheppard says the companies may be meeting the costs of their defence with shareholders' money.
Nuplex shares fell as much as 3% on Wednesday. The share price slumped 12 cents to $3.35 in early trading before recovering slightly. At the close of trade it was down 7c to $3.40.
Commission member facing Nuplex charges quits
Securities Commission member David Jackson, who is to face charges over his position as a director of Nuplex Industries, has resigned from his role on the commission.
Commerce Minister Simon Power says he received Mr Jackson's letter of resignation shortly after the commission announced its intention to issue proceedings.
Mr Power says he will make no further comment, as the matter is before the courts.
Mr Jackson was one of 10 members of the Securities Commission. He is also a director of Fonterra, Pumpkin Patch and the New Zealand Refining Company Ltd.
The Securities Commission says Mr Jackson had no involvement in the Nuplex case, which was made by a division of the organisation he was not part of.
NZX boss questions structure of commission
The head of the Stock Exchange says questions should be asked about the way the Securities Commission is structured.
NZX chief executive Mark Weldon told Nine to Noon the commission has about 12 part-time members who sometimes include company directors.
Mr Weldon says countries including Australia and the United Kingdom have a smaller number of fulltime commissioners.
The executive director of Milford Asset Management, Brian Gaynor, says the commission lacks transparency and needs to operate more like the Takeovers Panel.
"The (Takeovers Panel) break out into sub-committees of three or four members of the panel, they look at a particular situation and they issue a report fairly quickly afterwards. And we're all very clear who's involved from the panel, the decisions they make and why they make those decisions."
The Government is considering the creation of a single regulator from parts of the Companies Office, the Securities Commission and the New Zealand Stock Exchange.