CAYMAN ISLANDS Law and Practice Contributed by: Daniel Lee, Sophia Scott, Kimberly Robinson and James Turner, Maples Group
Limited Liability Companies LLCs are typically managed by their members, or by non-member managers appointed by the members, who shall undertake and have exclu - sive responsibility for the management, opera - tion and administration of the business and affairs of the LLC, subject to the terms of its LLC agreement. Exempted Limited Partnerships The management and operation of an ELP will typically be set out in its ELP agreement between its general partner and limited partner(s). An ELP must have at least one general partner who is responsible for the management and operation of the ELP. Limited partners are typically pas - sive investors and may lose the benefit of their limited liability if they engage in the conduct of the business of the ELP (subject to certain “safe harbour” exceptions, which expressly state that certain actions taken by a limited partner will not be construed as taking part in the management of the partnership). 3.5 Directors’, Officers’ and Shareholders’ Liability The main rules regarding the liability of directors and officers are found in the Companies Act and common law, include: Directors’ Duties As a matter of Cayman Islands law, a director of a Cayman Islands company is in the posi - tion of a fiduciary with respect to the company. Accordingly, directors and officers owe the fol - lowing fiduciary duties: • to act in good faith in what the director or officer believes to be the best interests of the company as a whole;
• to exercise powers for the purposes for which those powers were conferred and not for a collateral purpose; • directors should not improperly fetter the exercise of future discretion; • to exercise powers fairly as between different sections of shareholders; • to exercise independent judgement; and • not to put themselves in a position in which there is a conflict between their duty to the company and their personal interests. However, the latter duty above may be varied by the company’s articles of association, which may permit a director to vote on a matter that the director has a personal interest provided that the director has disclosed the nature of interest to the board of directors. In addition, under Cayman Islands law, directors also owe a duty of care that is not fiduciary in nature. This duty has been defined as a require - ment to act as a reasonably diligent person having both the general knowledge, skills and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company and the general knowledge, skills and experience that that director has. A director (even where appointed by individual shareholders) is obliged to act in a manner that the director believes to be in the best interests of the company as a whole (even though it may not be in the best interests of the appointing shareholder). Breach of Duty In the event of a breach of duty, directors may be personally liable to account to the company. Companies often indemnify their directors and officers against any liability incurred in carrying
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