Chapter 3. Duties and Responsibilities of Directors and Officers

• Pages: 66-81

CHAPTER 3

DUTIES AND RESPONSIBILITIES OF

DIRECTORS AND OFFICERS

S F-G

INTRODUCTION

Much of the emphasis on increased corporate governance standards in the

Commonwealth Caribbean region has focussed on the role and responsibilities of

directors and o cers of the company. This is no doubt due to the fact that there is

general consensus that many of the corporate failings worldwide have been due,

in some part, to poor management and accountability. This is true of the corpo-

rate collapses in the Commonwealth Caribbean, in particular, the fi nancial crisis

in Jamaica in the early 1990s1 and fi nancial debacles in Trinidad and Tobago in

the early 2000s.2 Where much of the Commonwealth Caribbean has adopted the

Canadian style company law model, they have also incorporated a greater degree of

director and o cer responsibility and liability. With the increased exposure of direc-

tors and o cers in Companies Acts in the region there has also been an introduction

of varying degrees of protection, including a due diligence defence, and director

and o cer indemnifi cation. The legislation also permits the availability of insurance

protection which was previously unavailable. The business judgment rule has also

emerged through Canadian case law as a defence for directors’ breach of duty and

arguably could therefore form a part of the Commonwealth Caribbean corporate

law jurisprudence.

The corporate governance responsibilities of directors and o cers may be found

in a wide range of legislation, including legislation and rules regulating fi nancial insti-

tutions and environmental legislation. This chapter focusses on the Companies Acts

and Corporate Governance Codes in the region. The duties and responsibilities of

directors and o cers as a part of public sector governance, are discussed elsewhere in

this publication.

FIDUCIARY DUTY – COMPANIES ACTS

The Companies Acts in the Commonwealth Caribbean typically provide that:

(1) Every director and o cer of a company in exercising his powers and discharging

his duties must/shall;

(a) act honestly and in good faith with a view to the best interests of the com-

pany; and

1 Wilberne Persaud, Jamaica Meltdown: Indigenous Financial Sector Crash 1996 (iUniverse, Inc.

2006) 25–26.

2 Hindu Credit Union Report by the Hon Sir Anthony Colman, July 2014 [K35].

Chapter 3: Duties and responsibilities of directors & o cers 67

(b) exercise the care, diligence and skill that a reasonably prudent person would

exercise in comparable circumstances.3

Section 1(a) refl ects the fi duciary duty of the company and, arguably, is a codifi ca-

tion of the common law which includes the duty not to have a confl ict of interest, the

duty not to make a secret profi t and the duty to act in the best interest of the corpora-

tion and not for an improper purpose.4 A confl ict of interest is technically a breach of

fi duciary duty, however, it may be cured by appropriate disclosure.5

Subsection (2) widens the scope of the fi duciary duty to ‘take into account’ the

interests of employees in general as well as the interests of shareholders and most

Commonwealth Caribbean Companies Acts typically state:

(2) In deter mining what are the best interests of a company, a director must/shall

have regard to the interests of the company’s employees in general as well as to the

interests of its shareholder.6

(Emphasis added)

although the fi duciary duty is to the company alone. The wording in the Jamaica stat-

ute di ers and states that:

In determining what are the best interests of the company, a director or o cer may

have regard to the interests of the company’s shareholders and employees and the com-

munity in which the company operates.7

It is submitted that directors and o cers of companies ‘must’ consider a number

of stakeholders including employees and shareholders in most of the Commonwealth

Caribbean territories, however in Jamaica, the directors and o cers of companies

‘may’ take into account an even wider group including the community in which the

company operates. While these provisions appear to incorporate corporate social

responsibility into the duties of directors and o cers, the fi duciary duty is owed to the

company alone. Further, the various legislation reminds us that the fi duciary duty of

directors and o cer s is to the company alone. Most of the Commonwealth Caribbean

territories refer to subsection (2) above by stating that:

The duty imposed by subsection(2) on the directors of a company is owed by them to

the company alone; and the duty is enforceable in the same way as any other fi duciary

duty owed to a company by its directors.8

3 Antigua and Barbuda Companies Act 1995 (A&B), s 97(1); Barbados Companies Act- Cap 308

(Bds), s 95(1); Dominica Companies Act 1994 (Dom), s 97(1); Guyana Companies Act 1994-

Cap 89:01 (Guy), s 96(1); Jamaica Companies Act 2004 (Ja), s 174(1); St Christopher and Nevis

(StKitts) Companies Act 1996 (St Kitts), s 75 (1); St Lucia Companies Act 2008- Cap 13:01

(StLucia), s 97(1); Trinidad and Tobago Companies Act 1995- Cap 81:01 (T&T), s 99(1).

4 S Ffolkes-Goldson, ‘The Reform of the Law Relating to Duties of Directors in the Commonwealth

Caribbean’ (2002) The Company Lawyer 378–384.

5 A&B, ss 91–93; Bds, ss 89–91; Dom, ss 91–93; Guy, ss 90–92; Ja, ss 193–194; St Kitts, ss 75;

StLucia, ss 89–93; T&T, ss 93–95.

6 A&B, s 97(2); Bds, s 95(2); Dom, s 97(2); Guy, s 96(2); St Kitts, s 75(2); St Lucia, s 97(2); T&T, s 99(2).

7 Ja, s 174(4).

8 A&B, s 97(3); Bds, s 95(3); Dom, s 97(3); Guy, s 96(3); St Lucia, s 97(3); T&T, s 99(3).