BERMUDA Law and Practice Contributed by: Natalie Neto, Rachel Nightingale and Marah Smith, Walkers
8.2 Special or Ad Hoc Committees Under Bermuda law, there is no requirement to establish board committees. However, where there are potential conflicts of interest, it is cus - tomary for a committee of disinterested directors to be established. Accordingly, such committees are often appointed in M&A transactions involv - ing shareholders who have nominated directors to the target board. A special committee of disinterested and/or independent directors can be important for the board of the target to demonstrate they have discharged their fiduciary duties when evaluat - ing the transaction. 8.3 Business Judgement Rule While no formal “business judgement rule” is adopted by Bermuda courts, directors of Ber - muda companies are required to act in the best interests of the company, which necessarily involves the exercise of business judgement. As long as the directors have exercised skill and care when reaching a decision considered to be in the best interests of the company, a Bermuda court would be reluctant to question the busi - ness judgement of the board. If there is a claim that a director 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 con - text of an M&A transaction, a board of directors would typically seek one or more fairness opin - ions 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 follow decisions of the English courts with respect to cases involving conflicts of interest, and there have not been any recent notable decisions in Bermuda on the subject. Directors have a duty to avoid conflicts of inter - est and should not put themselves in a posi - tion 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 meet - ing 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 commit - tees of their own independent legal counsel and advisers) is common in the context of M&A transactions because of concerns among direc - tors that they may be the subject of claims for breach of their fiduciary duty to avoid conflicts of interest with the company. 9. Defensive Measures 9.1 Hostile Tender Offers Hostile bids are permitted under Bermuda law but are still relatively rare in Bermuda.
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