The duties of a director of a Cayman Islands Exempted Company are deeply rooted in English common law, emphasizing loyalty, care, and independent judgment.
Fiduciary Duties (Owed to the Company)
Directors owe their fiduciary duties to the company itself, not to individual shareholders (with very narrow exceptions). The core duties include:
- Duty to act in good faith: The director must act honestly in what they consider to be the best interests of the company.
- Duty to exercise powers for a proper purpose: E.g., issuing shares to raise capital, not to dilute a hostile shareholder.
- Duty to avoid conflicts of interest: A director must disclose any personal interest in a transaction with the company.
Duty of Care, Skill, and Diligence
Historically subjective, Cayman courts increasingly apply an objective baseline. A director must exercise the care and skill that a reasonable person looking after their own affairs would exercise, elevated if the director possesses specific professional qualifications (e.g., a CPA).
Indemnification
Cayman allows broad indemnification of directors in the Articles of Association, covering negligence or breach of duty. However, public policy forbids indemnification for fraud, willful default, or dishonesty.
| Duty Type | Standard | Can be Indemnified? |
|---|---|---|
| Negligence | Objective/Subjective mix | Yes (if in Articles) |
| Fraud / Dishonesty | Strict | No (Void by public policy) |
| Willful Default | Intentional breach | No |