BAHAMAS Law and Practice Contributed by: Michelle Neville-Clarke, Lethea Carey and Stan Burnside, Lennox Paton
honestly and in good faith in the best interests of the company, exercising the care, diligence and skill that a reasonably prudent person would in comparable circumstances, with subsection (2) confirming that the duty is owed to the company as a fiduciary duty. Similarly, section 55 of the IBC Act requires directors, officers, agents and liquidators to act honestly and in good faith in the best interests of the company and with reasonable care, diligence and skill. Beyond these statutory references, the IBC Act does not enu - merate further duties and Bahamian law recognises that additional obligations are sourced from English common law as applied locally. The well-established fiduciary duties of directors can be summarised as the duty to: • exercise reasonable care, skill and diligence; • act within powers; • not accept benefits from third parties; and • declare any interest in proposed transactions. Directors also owe a duty of confidentiality in relation to the company’s information, reinforcing statutory duties to promote the company’s success and avoid conflicts. In mergers and acquisitions, these duties remain owed to the company as a corporate entity. While shareholder interests are relevant, the core obligation is to act in the company’s best interests, assessed through the statutory duty to promote the company’s success and common law fiduciary stand - ards, allowing directors to consider other stakehold - ers where relevant and to comply with all applicable • promote the company’s success; • exercise independent judgement; • avoid conflicts of interest; Under Bahamian law, it is common and often consid - ered “best practice” for boards of directors to estab - lish special or ad hoc committees, particularly in busi - ness combinations or transactions where potential conflicts of interest exist. 8.3 Business Judgement Rule Although the term “business judgement rule” is pri - marily a US concept, Bahamian law embeds similar statutory and fiduciary requirements. 8.2 Special or Ad Hoc Committees
protections within its fiduciary framework. Courts gen - erally defer to directors’ informed, good-faith deci - sions in takeovers, provided they act within their pow - ers, for proper purposes and in the company’s best interests. Intervention arises where decisions breach fiduciary duties, contravene the company’s consti - tutional documents or involve improper purposes or conflicts of interest. Directors’ duties, codified in section 81 of the Compa - nies Act 1992 and section 55 of the IBC Act, require acting honestly, in good faith and with due care, skill and diligence for the company’s benefit. Common-law duties include exercising independent judgement, act - ing within powers, promoting the company’s success, avoiding conflicts, not accepting third-party benefits, declaring interests in transactions and maintaining confidentiality. Principles such as the Purpose Test and the duomatic principle further guide proper board conduct and allow shareholder ratification in limited circumstances. Courts will intervene if takeover conduct is oppressive, prejudicial, or unfairly disregards shareholders’ inter - ests, as reflected in the Companies (Amendment) Act 2019. Personal conflicts or improper influence remove the protections of the business judgement framework. In practice, Bahamian courts assess whether direc - tors acted in good faith, for a proper purpose and in the company’s best interests, observing care, loyalty and independence. When these standards are met, courts defer to the board, even if some sharehold - ers are disadvantaged; breaches or improper conduct trigger judicial scrutiny to protect the company and its stakeholders. 8.4 Independent Outside Advice In The Bahamas, directors involved in business combi - nations such as mergers, amalgamations, or schemes of arrangement routinely obtain independent advice to fulfil their fiduciary duties of care and independent judgement. The advice is tailored to the scope of the transaction and the regulatory framework governing the target company. Legal counsel is secured to ensure compliance with statutory and constitutional requirements, assist with drafting or reviewing Share Purchase Agreements and
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