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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.
Where there is any doubt, they should seek professional advice as to whether they can proceed with the transaction and, if so, the procedures to be followed. Procedures once a potential conflict of interest is recognised The law tries to strike a balance between the businessman’s freedom to pursue his own interests and the strict nature of a director’s fiduciary relationship with the company. In doing so, it allows for a director to obtain an advantage despite any conflict, but only in a very controlled and defined manner. Basically, a director may keep such an advantage if: • He fully discloses the conflict • He abstains from involvement in the appropriate mechanism by which the company may permit him to obtain the advantage • The company ratifies the relevant transaction In relation to contracts with the company where a director is directly or indirectly interested in the other party to, or the benefits arising from, the contract, the director is required to disclose the nature and extent of his interest. He must do so either in writing to the company or by requesting that it be entered in the minutes of meetings of directors. The Act requires the full disclosure of a director’s interest to be made: • At the first board meeting at which the contract is considered; or • If the director becomes interested thereafter, at the first meeting after he becomes so interested; or • If the contract is one that, in the ordinary course of the company’s business, would not require approval by the directors or shareholders, immediately after the director becomes aware of the contract or proposed contract. These rules apply, with certain necessary modifications, to contracts in which officers who are not directors have an interest. In relation to other types of transactions, it may be necessary for the full disclosure of the director’s interest to be made to the shareholders and ratification obtained either at a general meeting or by unanimous shareholder agreement as disclosure to the board will not be sufficient. Disclosure by a director A director must disclose the nature and extent of his interest. However, there is no exact formula to determine how detailed this disclosure must be as this depends in each case on the nature of the contract and the particular circumstances in which it arises. A director should be conscious that because of the fiduciary nature of the duty involved, his disclosure should be sufficient to allow the decision-makers to be fully knowledgeable of the real state of things. This will usually involve letting them know at least what his interest is and how far it extends. Where there is any doubt, directors should either err on the side of providing more detail than may be strictly necessary or obtain professional advice on the issue before proceeding. Insider Trading Insider trading involves a transaction in a share or debenture of a company or any of its affiliates by an insider who makes use of any specific unpublished information for his own benefit or advantage that, if generally known, might reasonably be expected to affect materially its value. It is only if the knowledge of the facts has attained the quality of constituting specific confidential information that an insider making use thereof for his own benefit attracts liability for insider trading. It may come as a surprise to many that insider trading applies to all companies and not simply public companies. Indeed, the Canadian Corporations Act, on which the Trinidad and Tobago Companies Act is based, only applies to the type of corporations which under the local Act are referred to as public companies. An insider includes a wide range of persons, namely: • A director or officer of the company • A company that acquires shares issued by it or its affiliates • A person who owns or controls more than 10% of the shares of the company • An associate or affiliate of any of the foregoing categories • A person who, whether or not he is employed by the company, receives specific unpublished information from any such person as described above and either has knowledge that the person is an insider or has access to specific unpublished information. An associate includes partners, trustees of trusts or estates, a spouse or child of a person and a relative living in the same household. The category of persons who are deemed to be insiders is therefore very wide indeed. A Guide to Investing in Trinidad and Tobago (2011) 69
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A Guide to Investing in Trinidad an
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Reasons To Invest In Trinidad And T
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Seaports The main seaports are loca
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Trade and Investment Approvals and
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