Steering steady: Navigating directors’ fiduciary duties in insolvency

平稳前行：公司破产情形下的董事忠诚义务

In the recent case of Byers and others v Chen Nanning [2021] UKPC 4, the UK Privy Council examined the duties of a director in relation to an insolvent British Virgin Islands (BVI) company. Liquidators of Pioneer Freight Futures Ltd (PFF), an insolvent company incorporated in the BVI, brought a claim against Ms Chen, who was a director of the company, for breach of fiduciary duties.

在最近Byers and others v Chen Nanning [2021] UKPC 4 案件中，英国枢密院审查了一名董事在一家英属维尔京群岛 (BVI) 公司破产事件中的义务。 Pioneer Freight Futures Ltd (PFF) 是一家在英属维尔京群岛注册成立的公司，该公司破产后其清算人对陈女士提出告诉，理由是担任该公司董事的陈女士违反了其对公司的忠诚义务。

Ms Chen was a director and the ultimate beneficial owner of PFF, via its parent company. PFF had been experiencing financial difficulties since 2008. In May 2009, PFF borrowed US$13 million from Zenato Investments Ltd (Zenato), a company belonging to a business acquaintance of Ms Chen. PFF repaid Zenato the US$13 million loan in full with interest in November 2009 (Zenato Payments). At the time of making the Zenato Payments, PFF was insolvent. On 17 December, PFF applied for the appointment of joint provisional liquidators (which later became liquidators) in the BVI on grounds of insolvency. The liquidators subsequently brought proceedings against Ms Chen for breach of a director’s fiduciary duties for making the Zenato Payments.

A Directors' Duties

The liquidators commenced proceedings in the BVI High Court, claiming Ms Chen breached her duties as a de jure, de facto or shadow director of PFF, or as someone whose role in the affairs of PFF justified the imposition of fiduciary duties. The liquidators also sought an order against Ms Chen on the basis that the Zenato Payments constituted an unfair preference and a voidable transaction under §§.244 and 245 of the Insolvency Act 2003.

After failing to prevail both at first instance and in the Court of Appeal, the board of five judges of the UK Privy Council (the Board) eventually found in favour of the liquidators.

While Ms Chen claimed she was no longer a director of PFF in November 2009 and relied on her letter of resignation dated 29 May 2009 addressed to the board of directors of PFF, there was insufficient evidence the letter was properly delivered to the company. Ms Chen also argued that, as the ultimate beneficial owner of the group of companies to which PFF belonged, she had accepted the delivery of the resignation letter on behalf of PFF by virtue of the Duomatic principle, which allows shareholders (or the ultimate beneficial owners making decisions) to informally approve a company’s actions without needing a formal general meeting. The Board accepted the Duomatic principle, but did not accept Ms Chen’s argument, given that she appeared to act in the same way as before in relation to the business and affairs of PFF, even after her purported resignation.

The Board held that Ms Chen remained a de jure director. It also clarified that a mere purported lack of involvement in the day-to-day management of the company was not enough to demonstrate her resignation. Further, under §.109 of the BVI Business Companies Act 2004, a BVI company must have at least one director, and since there was not sufficient evidence that another director was appointed following Ms Chen’s purported resignation, this gave further support to the conclusion that Ms Chen did not resign.

Breach of Fiduciary Duties and Insolvency of a Company

Once a company is insolvent, the director’s duty is to act honestly, in good faith and in the best interests of creditors of the company. Following this principle, the Board found that the Zenato Payments had been made without justification and so were improper.

Although Ms Chen did not personally arrange the Zenato Payments, she had a fiduciary duty to prevent such payments knowing PFF was insolvent. By delegating to someone else the ability to make payments and by failing to take any action to prevent the improper payments, Ms Chen authorised and caused those payments to be made. The Board found Ms Chen liable for breach of fiduciary duties, since she was “ultimately the boss.” As for unfair preference and voidable trans-actions under §.244 and 245 of the Insolvency Act 2003, this did not need to be considered further as a parallel remedy, in light of the conclusion already reached regarding breach of fiduciary duties.

Significance of the Decision

This UK Privy Council decision is significant because it highlights the importance of a director’s duties, particularly once a BVI company is insolvent. Directors must be aware of their duty to act in the interests of creditors. Given the frequently complex factual circumstances and legal nuances, directors should consider seeking legal advice when navigating the tricky waters of their fiduciary duties of directors.

An original version of this article was first published in In-House Community Magazine, April 2021

董事义务

清算人向英属维尔京群岛高等法院提起诉讼，称陈女士违反了其作为 PFF 法律上、事实上或影子董事的职责，或者作为在PFF事务中应承担忠诚义务的重要角色违反了其职责。清算人还以偿还Zenato借款构成2003 年《破产法》第244和245节的规定下的不公平优惠和可撤销交易为由，请求法院支持其对陈女士的诉讼请求。

虽然初审和上诉法院均裁定清算人败诉，但英国枢密院五名法官组成的委员会最终裁定清算人胜诉。

虽然陈女士于2009年11月声称其不再担任PFF董事，并证明其于2009年5月 29日已向PFF董事会递交辞职信，但陈女士没有足够证据证明该辞职信已妥善送达公司。陈女士亦提出，作为 PFF 所属公司集团的最终受益所有人，其根据 Duomatic 法则代表PFF接受了辞职信，Duomatic 法则允许股东（或最终受益所有人）无需召开正式的股东大会，可以通过非正式方式批准公司的事务。委员会认可Duomatic 法则，但不认可陈女士的说法，因为即使在陈女士声称其辞去公司职务后，其在PFF业务和公司事务中扮演的角色似乎与辞职前相同。

委员会认为陈女士仍为公司法律上的董事。委员会进一步补充道，仅仅表面上不参与公司的日常管理并不足以证明陈女士辞职。此外，根据2004年英属维尔京群岛商业公司法第109条规定，英属维尔京群岛公司必须至少有一名董事，由于没有足够证据表明公司于陈女士声称辞职后任命了另一名董事，这进一步支持了陈女士没有辞职这一结论。

违反忠诚义务和公司破产

一旦公司资不抵债，董事的职责是诚实、善意行事，并为公司债权人谋求最大利益。遵循这一原则，委员会认为偿还Zenato借款是在没有正当理由的情况下进行的不当交易。

尽管陈女士没有亲自安排偿还Zenato借款，但她知道PFF已资不抵债后有责任阻止此类还款。因为陈女士将还款权力下放给其他人并未能采取任何行动阻止该不当交易，所以陈女士被视为授权并促成了该交易。因为陈女士是“最终的大老板”，董事会认定陈女士违反其董事忠诚义务且需要承担责任。对于2003 年《破产法》第244条和第245条规定的不公平优惠和可撤销交易，鉴于已经得出违反忠诚义务这一结论，无需将其考虑为平行救济措施。