Directors' Duties - Law Reform Commission
Directors' Duties
Description
The issue of clearly defining directors’ duties first arose during the Law Reform Commission’s (“the Commission”) review of corporate insolvency law, when the Honorable Chief Justice recommended that the Commission consider whether an updated Companies Law should explicitly set out these duties to provide greater legal certainty.
In response to these concerns, the Commission began examining the matter in 2013, specifically considering whether the common law fiduciary duties of directors should be codified.
Terms of Reference
The Commission’s research included an examination of:
- who qualifies as a director under Cayman Islands law;
- the different categories of directors (e.g. executive, non-executive, de facto, shadow, alternate and nominee);
- to whom directors owe their duties; and
- whether those fiduciary and statutory duties should be formally set out in legislation.
Outcomes
The Commission published an issues paper for consultation entitled “Directors’ Duties – Is Statutory Codification Needed?” on 16 January, 2014.
The consultation period commenced on 16 January, 2014 and concluded on 24 March, 2014.
The significant feedback received during the consultation period informed the Commission’s final report entitled “Directors’ Duties – Is Statutory Codification Needed?”, dated 30 March, 2017. The Commission concluded that codifying directors’ fiduciary duties and the duty of care, skill and diligence was not necessary or appropriate, given the clarity and flexibility already provided under common law, and the broad stakeholder consensus opposing codification.
However, the Commission acknowledged that, should the common law prove inadequate in clarifying or enforcing these duties to ensure accountability within corporate structures in the Cayman Islands, the option of introducing legislation may need to be revisited in the future.
