Overview of Directors' Duties and Obligations unde Bermuda Law | Conyers
conyers.com Every Bermuda exempted company is required to have at least one director which may be an individual or other legal person. A director of a Bermuda exempted company need not necessarily be resident in Bermuda, so long as the company otherwise meets the residency requirement under the Companies Act 1981 (the “Companies Act”). Bermuda law does not impose an all-embracing code of conduct on directors. A company’s memorandum of association and bye-laws comprise its constitution and together with the Companies Act prescribe the ambit of the directors’ powers. Accordingly, if the directors act ultra vires the company’s constitution, they are answerable to the company. The function of the substantive law is to supplement the internal constitutional checks on a director’s powers and to deal with areas where the company’s constitution may be silent. Directors are personally appointed and their appointment may not be generally delegated or assigned. Many of the duties and obligations of a director are statutory; others are found only in common law. The Companies Act contains numerous provisions relating to the duties of directors and prescribes penalties for breach of such duties. Those to Whom Director’s Duties are Owed Directors are responsible to the company and not, in the absence of special circumstances, to the members as individuals. For the purposes of describing directors’ duties, the company is generally defined with reference to the interest of both present and future members of the company as a whole. Overview of Directors’ Duties and Obligations under Bermuda Law | Bermuda Common Law Duties of Directors At common law a director owes two types of duty to the company: fiduciary duties and duties of skill and care. Fiduciary Duty While the directors act collectively as a board, each individual director must act in good faith in his or her dealings with or on behalf of the company and must exercise the powers and fulfil the duties of the office honestly. Duty of Skill and Care A director’s fiduciary duty imposes a largely negative obligation to do nothing which conflicts with the company’s interests. However, when a director is acting in the company’s interests she or he is expected to exercise whatever skill she or he possesses with reasonable care. Consequences of Breach Adirector may be personally liable to the company in damages for breaching fiduciary duties or duties of skill and care. All directors who participate in the breach will be held jointly and severally liable but as between them, they will have rights of contribution. Statutory Duties and Obligations The general principles governing a director’s conduct set out above are augmented by a range of specific duties imposed by statute. Some of these duties are imposed not on the directors in their own right but on the company. However, since the directors are responsible for the performance of the statutory duties imposed on the company, it is they who must ensure that the company does everything that is required of it.