A Guide to Investing in Trinidad and Tobago (2011) - Ministry of ...

for the consequences of those decisions to also be
transferred from the directors to the shareholders. In
one-man companies (which are now allowed under
the new Act) an appropriate written declaration by the
single shareholder is deemed to be a USA.
Uses of a Unanimous Shareholders Agreement
One use for a Unanimous Shareholders Agreement is
in connection with closely held companies where the
shareholders wish to direct some or all aspects of the
company’s management. In such circumstances, the
shareholders that assume the authority for the company’s
management should bear the potential liabilities
that would otherwise be borne by the directors.
This will be appropriate, for example, with many oneman
companies. Similarly, USAs may be used within
a group of companies if the subsidiaries (or certain aspects
of their management) are effectively controlled
by their parent companies.
A USA may also be particularly useful in connection
with decisions as to whether the company should engage
in one of the several types of transactions which
expose directors to personal liability, when issues as
to the company’s insolvency might arise. For example
a USA might be advisable where a company is
considering a transaction involving the provision of
financial assistance that may be challenged. Since it
is often the shareholders who are directing that the
assistance be provided, it may be fair to shift the au-
68 A Guide to Investing in Trinidad and Tobago (2011)
thority and liability to the shareholders by using this
device. Another example is the decision to declare a
dividend when there is a question regarding the company’s
solvency. Again, it may be fair to use a “USA”
to shift the authority and the potential liability for declaring
the dividend from the directors to the shareholders.
It is important to note that the mere fact that a “unanimous
shareholders agreement” is being employed to
protect the directors from potential liability does not
mean that the solvency requirements of the Act should
be ignored. However, it does mean that the complexities
of determining whether the company has passed
the necessary solvency tests can be transferred to the
shareholders that are benefiting from the transaction.
One obvious limitation is that a “unanimous shareholders
agreement” can only be used when all the
shareholders agree to do so. Another less obvious
limitation, but one that is important for directors to
recognise, is that a “USA” only provides protection in
relation to liabilities arising under the Companies Act.
It will probably not provide any protection from other
types of claims against directors, such as those arising
under tax legislation.
Shareholders who are considering a USA should
check what insurance cover is in place. Whether
shareholders that have assumed the rights, powers
and liabilities of directors under a USA can rely on
policies of insurance which have been put in place to
protect directors and officers will depend on the precise
language used in the relevant policies.
Conflicts Of Interest
Recognising possible conflicts of interest
arising out of directors’ duties
Directors are frequently businessmen with drive and
ambition that can be harnessed to the company’s advantage.
However, because directors are in a “fiduciary”
relationship with the company, they must put
the company’s interests ahead of their own ambitions
when a potential conflict arises. In most situations, it
will be perfectly clear to a director whether he faces a
potential conflict. However, sometimes the possibility
of a conflict will be less obvious.
While there are no fixed categories of conflict, directors
may wish to be particularly careful in situations
where they are considering:
• Contracts with the company where a director is
directly or indirectly interested in the other party
to, or the benefits arising from, the contract.
• Decisions where they may be accused of acting
for collateral or personal purposes rather than in
the company’s best interests, e.g. issuing shares
to defeat a takeover bid or adding new directors
to resist an attempt by other directors to establish
control.
• Entering into transactions where they may be
accused of taking personal advantage of either
some business opportunity or some information
which they become aware of as a result of being
directors.
A director should be aware that his fiduciary duties
are among the strictest known to the Trinidad and Tobago
system of law. In some situations, it is possible
for a director to become liable even if he acts honestly
and in good faith. If faced with the possibility of
a conflict, directors should exercise extreme caution.