Bermuda: On Board: Liability And Indemnity

Last Updated: 21 May 2018
Article by Janine Carey

Now more than ever, company directors must understand and appreciate not only the duties and obligations that accompany their role but also the exoneration and indemnity mechanisms available to them and the limits to such provisions.

That is because international standards of corporate integrity and transparency are growing features of cross jurisdictional financial initiatives. The result is an increased level of legal and regulatory compliance and accountability for companies, which must adapt their practices in response to the added responsibility.

In connection with the global effort to support effective levels of managerial transparency, the Bermuda Proceeds of Crime Amendment Act 2016 was amended recently resulting in the insertion of a provision for a register of directors in the Companies Act 1981 (Companies Act). The amendment requires that a Bermuda registered company file with the Registrar of Companies (Registrar) a list of its directors to be maintained by the Registrar and kept available for public inspection.

A company's register of directors must reflect a complete and current record of its directors and will include the full name and address of individual directors or the company name and registered office address in the case of corporate directors. The amendment is in connection with Bermuda's compliance with the current Financial Action Task Force (FATF) requirements and recommendations. FATF is an inter-governmental body that aims to set regulatory standards and develop procedural measures to counter money laundering, terrorist financing and other misuses of the international financial system.

Ultimately, directors have certain duties that are owed to the company as a whole. In exercising such duties, directors are responsible for, among other things, ensuring that the company operates soundly and within its applicable legal framework. In doing so, directors must be fully informed and free from conflicts (unless otherwise disclosed and where they may continue to act in accordance with a company's bye-laws) when making decisions in respect of the company so as to avoid being held liable for not satisfying their duty of care or acting with an improper motive. The Companies Act provides for certain circumstances where directors can be liable for civil and criminal penalties and the increased scrutiny on companies and their operational responsibilities makes it vital that directors be aware of and understand these statutory liabilities.

Statutory liabilities under the Companies Act include loss suffered by subscribers of shares in connection with untrue statements made in a prospectus; loss, damages or costs suffered by a prospective shareholder where a director knowingly contravenes, permits or authorises the contravention of provisions of the Companies Act relating to the allotment of shares; and receiving loans from a company without the approval of the shareholders.

Certain other statutory liabilities apply to companies in liquidation including failing to disclose or deliver assets to a liquidator; falsification of books and records; and knowingly conducting business with the intent to defraud creditors. 

Statutory protections can be afforded to directors in limited circumstances via indemnity provisions and insurance. The Companies Act permits a company to exempt and indemnify its directors by including in the company's bye-laws or in any contract or other arrangement between the company and the director a provision for exemption from, or indemnification in respect of, any loss arising or liability attaching to the director arising in respect of any negligence, default, breach of any duty or breach of trust.

However, such indemnity provisions are limited and will not apply to any liability attaching to a director arising in respect of any fraud or dishonesty.  Subject to the limitation above, this exemption will cover all liabilities, loss, damage or expense and may also cover any liabilities that the director incurs defending any proceedings where relief is granted, where the director is acquitted or where the director is awarded a favourable judgement. 

Additionally, companies are permitted to purchase a policy of insurance for directors providing protection against any liability incurred as a result of a director's conduct and in particular for failure to exercise their duties of care, diligence and skill as well as any liability arising from any negligence, default, breach of duty or breach of trust of a director with the exception of contraventions connected to fraud or dishonesty. Any supplementary limitations on the scope of the insurance will be found within the policy.

Although such protections and safeguards are available to directors, it is important to note that they are not limitless. Further, given the increased initiative on a global level to implement sound corporate and financial policies and procedures, there is a greater public demand for good corporate governance, transparency and responsibility on the part of management.

Directors should therefore take a proactive approach to exercising their duties given the current impact of international standards of governance on financial centres and companies. 

First Published in The Royal Gazette, Legally Speaking, May 2018 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions