Time to debate directors’ fiduciary duties

Carlyle Capital Corp’s (CCC) collapse led a lengthy legal battle, covered in The NED in 2017. Now Simon Mortimer QC, in a lengthy article in South Square Digest, argues that the case has sparked a much needed debate on directors’ common law fiduciary duties. In particular, where do directors’ duties lie in common law fund jurisdictions?

Simon Mortimer’s conclusion is that ‘The Carlyle case seems to be the first time that the court has been invited to adopt a rationality test when deciding whether directors had complied with their duty of loyalty.

‘The sophisticated CCC directors were far from ideal material on which to test such a proposition and it is not surprising that the Deputy Bailiff rejected the invitation. I suggest that rationality does have a role to play, albeit a limited one, since the occasions when a director honestly considers the right matters and yet does so irrationally are probably as remote as “rabid teetotallers” becoming directors of a brewery company.

To read more on this story see the March issue of The NED.