BERMUDA Law and Practice Contributed by: Ian Stone and Leo Shaw, Wakefield Quin Limited
3.6 Legal Duties of Directors/Officers Directors’ duties under Bermuda law are derived prin - cipally from common law and equity, as the Compa - nies Act does not contain a comprehensive statutory code of directors’ duties. The principal duties are as follows. • Duty to act honestly and in good faith with a view to the best interests of the company: directors must exercise their powers for the purposes for which they were conferred and for the benefit of the company as a whole. • Duty of care, diligence and skill: directors must exercise the care, diligence and skill that a reason - ably diligent person with the general knowledge, skill and experience of that director would exercise. • Duty to avoid conflicts of interest: unless author - ised by the company, directors must not place themselves in a position where their personal inter - ests conflict with their duties to the company. Officers owe analogous duties commensurate with their office. 3.7 Responsibility/Accountability of Directors Under Bermuda law, directors owe their fiduciary duties to the company as a separate legal entity, not to individual shareholders. This is consistent with the established common law position derived from Eng - lish common law. In an insolvency scenario, directors must have regard to the interests of creditors, as creditor interests may become paramount where the company is unable to pay its debts as they fall due. There is no general statutory obligation for directors to consider the interests of employees, the commu - nity or the environment, though these considerations may be relevant to the determination of what is in the best interests of the company in appropriate circum - stances. 3.8 Breach of Directors’ Duties As fiduciary duties are owed to the company, the right to bring an action for breach is primarily the compa - ny’s. In practice, this means that the board of directors will authorise the commencement of proceedings.
A member of a company may bring proceedings on behalf of the company (a derivative action) where it can show that there is: • fraud on the minority; and • those taking advantage of the fraud control the company. The high bar will make it difficult to establish such claims in practice. A member of a company can bring a claim when they allege wrongdoing against them in a personal capacity. This may occur, for example, where there is a breach of the bye-laws, which are effectively a contract between the members and the company. In the course of winding up a company, a receiver, liquidator, creditor or contributor (shareholder) may bring proceedings against an officer for misapplica - tion of funds, breach of trust or misfeasance (Section 247 of the Companies Act). The court is afforded wide powers to award compensation. The Minister on their own volition or upon application by a proportion of the members of the company (as determined by the Minister) may investigate the affairs of a company (Section 110 of the Companies Act). As an alternative to remedy winding-up, a shareholder may petition for relief under Section 111 of the Com - panies Act on the ground that the affairs of the com - pany are being conducted, or have been conducted, in a manner oppressive or unfairly prejudicial to the interests of some part of the shareholders. The court has discretion as to the relief it may grant. Otherwise, general remedies are available for breach of directors’ duties. These might include damages, rescission of contracts entered into in breach of duty or injunctive relief. 3.9 Other Claims/Enforcement Against Directors/Officers In addition to common law claims for breach of fiduci - ary duty, directors and officers may face the following:
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