Cayman Law - fiduciary duties22 Dec 2018 08:09
From : https://www.solomonharris.com/news-updates/the-duties-of-a-cayman-islands-director-part-1-fiduciary-duties
..Who benefits from the duties?
A director's fiduciary duties are owed to the company as a separate legal entity, and not to any individual shareholder. However, a director discharging his or her duties to the company will need to have in mind the interests of the shareholders of that company. If the company is insolvent then the director needs to give priority to the interests of the creditors. When there is any uncertainty as to the current or continuing solvency of the company, then the directors must balance the possibly competing interests of shareholders and creditors.
How do you work out if the duty has been fulfilled?
The duty or good faith relates only to the honesty and integrity of the director and not to their commercial competence. This means that if a director genuinely believed that he or she was acting in the best interests of the company at the relevant time, then the director will be held to have complied with his or her fiduciary duties, even if the decision itself turns out to have been a bad one from a commercial point of view. That would not be the case, however, if it is clear that at the relevant time no reasonable person would have considered that the decision that the director took to have been made in good faith and in the best interests of the company. In that instance the director may have breached their fiduciary duty to the company.
What happens when it goes wrong?
The fiduciary duties owed by a director cannot be excluded by an exemption clause contained in a company’s Articles of Association or in the director’s employment contract. This means that if a director breaches his or her fiduciary duties and the company suffers a loss as a result, then that director may find themselves personally liable to the company for the loss. That said, there is nothing in Cayman Islands law to prevent a company from indemnifying its directors against personal liability for any loss they may incur and many companies include such an indemnity in their Articles of Association. Case law has established that a fiduciary cannot contract out of liability for the ‘irreduciable core’ of their duty and on that basis this type of clause may act to protect directors for breach of their duties, but only up to a point – it will not protect them against their liability for fraud or any willful default.
Other duties
The fiduciary duties of a director are not the only duties that a director has to comply with, and elsewhere we look at statutory duties and a director’s duty to act with care and skill. If you are considering accepting the directorship of a Cayman Islands registered company, or you have a company that needs to appoint new independent directors, then make sure that you take local advice on the various duties owed by directors....
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