Section 97 of Bermuda’s Companies Act 1981 imposes a statutory duty on every director to: (a) act honestly and in good faith with a view to the best interests of the company; and (b) exercise the care, diligence, and skill that a reasonably prudent person would exercise in comparable circumstances. The test is therefore an objective one using the reasonably prudent person as a comparator (see Focus Insurance Co Ltd v Hardy [1992] Bda LR 25 which appears to suggest that an element of subjectivity may also be considered in Bermuda. See also Intercontinental Natural Resources Ltd v Dill [1982] Bda LR 1.)

The Companies Act does not provide in express terms that a breach of section 97(1) will give rise to a cause of action, but this is implicit in section 98A, which materially provides that:

“A company may purchase and maintain insurance for the benefit of any officer of the company against any liability incurred by him under section 97(1)(b) in his capacity as an officer of the company.” See Peiris v Daniels [2015] SC Civ (Bda) 13 where it was held that the duty is not fiduciary in character as it is concerned with competence rather than honesty and loyalty.

One also looks to the common law for further duties owed by directors to the company.

Pursuant to section 91 of the Companies Act 1981 the affairs of the company must be managed by at least one director. Section 97(5A) of the Companies Act 1981 provides that an officer is not liable for breach of duty if he relies in good faith upon financial statements of the company represented to him by another officer of the company; or a report of an attorney, accountant, engineer, appraiser, or other person whose profession lends credibility to a statement made by him.

There is a scarcity of case law on directors’ duties in Bermuda. This is changing and we predict more director duty cases will be prosecuted in the Bermuda Supreme Court. Perhaps combined with an aggressive use of the assistance provisions of other jurisdictions, for example, under section 426 of the Insolvency Act 1986 the English Court with jurisdiction in relation to insolvency is required to assist the Courts having the corresponding jurisdiction in any other part of the United Kingdom “or any relevant country or territory” (including Bermuda). An order for examination of directors may be made under this section in aid of a foreign liquidation.