BERMUDA Law and Practice Contributed by: Natalie Neto, Rachel Nightingale, Hannah Tildesley and Marah Smith, Walkers
• to act in good faith and in what the director consid - ers to be the best interests of the company; • to exercise his or her powers for the purposes for which they are conferred; • to avoid conflicts of interest and of duty; • to disclose any personal interest in contracts involving the company; • not to make secret profits from the director’s office; and • to act with skill, care and diligence. The duty of care, skill and diligence comprises three main elements: • degree of skill – a director must exercise a degree of skill that a reasonably prudent person, with his or her knowledge and experience, would exercise in similar circumstances; • attention to the business of the company – in exercising his or her duties, a director must exhibit the “reasonable care an ordinary man may be expected to take in the same circumstances on his own behalf”; and • reliance on others – a director has the ability to rely on his or her co-directors and other company offic - ers, and is not liable for their acts, provided that Under Bermuda law, there is no requirement to estab - lish board committees. However, where there are potential conflicts of interest, it is customary for a committee of disinterested directors to be established. Accordingly, such committees are often appointed in M&A transactions involving shareholders who have nominated directors to the target board. A special committee of disinterested and/or inde - pendent directors can be important for the board of the target to demonstrate they have discharged their fiduciary duties when evaluating the transaction. 8.3 Business Judgement Rule No formal “business judgement rule” is adopted by Bermuda courts. the reliance is honest and reasonable. 8.2 Special or Ad Hoc Committees As long as the directors have exercised skill and care when reaching a decision considered to be in the best
interests of the company, the Bermuda court would generally be very reluctant to question the business judgement of the board. If there is a claim that a direc - tor has breached his or her duties as set out in 8.1 Principal Directors’ Duties , then the court may be called upon to examine the decisions of the board of the target. 8.4 Independent Outside Advice Directors are not required to obtain independent advice. However, they are entitled to rely on the advice of professional advisers and, in the context of an M&A transaction, a board of directors would typically seek one or more fairness opinions as to the valuation of the shares, in order to demonstrate that they have properly discharged their duties and have objective evidence as to the basis for such valuation. 8.5 Conflicts of Interest Bermuda courts will generally follow the decisions of English courts with respect to cases involving con - flicts of interest; there have not been any recent nota - ble decisions in Bermuda on the subject. Directors have a duty to avoid conflicts of interest and should not put themselves in a position where their duties to the company and personal interests conflict. A director who fails to disclose his or her interest in a transaction at the first opportunity (in writing or at a meeting of the board) is presumed not to be acting honestly and in good faith, and would therefore be in breach of his or her statutory duty. In this case, any contracts entered into by the company might also be voidable. As noted in 8.2 Special or Ad Hoc Committees , the establishment of special committees of the board (and the engagement by such committees of their own independent legal counsel and advisers) is common in the context of M&A transactions because of con - cerns among directors that they may be the subject of claims for breach of their fiduciary duty to avoid conflicts of interest with the company.
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