Do directors' duties change for a foreign-owned company?

The duties themselves do not. What changes is the likelihood that the person holding the office was appointed for reasons unrelated to the role, and that the instructions come from outside the jurisdiction. Both make it more likely that the duty is tested, not that it is different.

What does a review of directors' duties require in practice?

The register of directors, the appointment documents, the insurance schedule and the minutes of recent decisions. From those the review establishes who holds the office, who in fact directs it, and whether the documents the director would rely on say what the director believes they say.

Who inside the company is responsible for directors' duties?

Each director personally. A board can organise how the duties are discharged, and a shareholder can indemnify a director against some consequences, but neither moves the duty off the individual. That is the point most appointment letters get wrong.

When does a director's exposure become personal?

Under most systems, from the moment the company can no longer meet its obligations as they fall due, or from the moment a conflict is acted on without disclosure. The timing differs by jurisdiction and is one of the first things the review fixes, because it decides which decisions can still be taken safely.

What happens if directors' duties are not addressed?

Nothing, until something goes wrong. The exposure then sits with the individual, at a time the company does not choose, with documents that were drafted for a different purpose. Reviewing the position earlier does not remove the duty; it removes the surprise.

Directors' duties and personal liability across 40 jurisdictions

Directors' duties and personal liability are the part of a cross-border structure that cannot be delegated away: whoever holds the office answers for it personally, under the company law of the place of incorporation, whatever the private arrangement with the shareholder says. This practice maps what those duties are in each jurisdiction, when exposure attaches to the individual rather than to the company, and what a board can put in place before the question is asked by a liquidator, a regulator or a counterparty.

A group appoints a finance director of the parent to the board of a foreign subsidiary because someone has to sign. Two years later the subsidiary is loss-making, a supplier has not been paid, and local counsel explains that the director may have been obliged to act differently from a point in time nobody at the parent noticed. The appointment letter says the director acts on the shareholder's instructions. The local statute says that is not a defence.

What follows sets out what the practice covers and where it stops, the axis on which jurisdictions differ, and how a board identifies which position applies to its own structure.

What this practice covers, and where it stops
The axis on which jurisdictions differ
How to identify which position applies to your structure
Services in this practice

What this practice covers, and where it stops

The practice advises on the content of a director's duties in a given jurisdiction, on the point at which those duties shift from the shareholders to the creditors, on conflicts of interest and related-party dealings, on the terms of appointment and resignation, and on whether the insurance a group believes covers its directors actually responds to the exposure they carry. The output is a written position a board can act on: what the office requires, what the individual is exposed to, and what evidence shows the duty was met.

The advice stops at a defined boundary, and the boundary is a licensing one, not a preference. The practice does not supply, appoint, source or arrange a director, a company secretary, a nominee shareholder or a trustee for a client structure, and it holds no licence that would permit it to. Where a structure needs a person to fill one of those roles, the work is to identify the requirement precisely and set the criteria the appointment has to meet; finding and installing that person is a separate, regulated step that the client takes with a licensed provider of its own choosing.

Nor does the practice give assurances about outcome. A duty that has already been breached cannot be reviewed into compliance; what the practice can do in that situation is establish what the record shows, what remains open, and what the director and the board should do next.

The axis on which jurisdictions differ

The duties themselves look similar on paper almost everywhere: act in the interest of the company, exercise care, avoid undisclosed conflicts, keep proper records. The divergence is in three places, and a board that understands them can read any jurisdiction's position quickly.

The first is the trigger for creditor-facing duties. Under the company and insolvency law of some jurisdictions the shift happens at a defined event; under others it is a facts-and-circumstances test that a court applies after the fact. Which model applies decides whether a director can know, on the day, that the duty has changed.

The second is who may be treated as a director. A number of jurisdictions extend the duties to a person who was never appointed but whose instructions the board followed, which is why the arrangement between a nominator and an appointed director matters more than either side usually assumes. The exposure attaches personally once the pattern of instruction is established, and resigning afterwards does not reverse it.

The third is the register. Where appointments, resignations and representation authority are public, a director's period in office is visible to any counterparty, and a date on the register is the date from which a claim is measured. Where the register is private or kept at the registered office, the same facts have to be proved rather than looked up.

The practices on board composition and director requirements and on shareholder disputes and minority protection sit on either side of this one: the first governs how a person comes to hold the office, the second what happens when the shareholders fall out over how it was exercised.

How to identify which position applies to your structure

Three questions settle most cases. Where is each entity incorporated, because the duties follow the place of incorporation and not the place where the director sits. Who in the group gives instructions to the board of each entity, because that person may carry the duties without holding the office. And what does the appointment letter say about instructions, indemnity and resignation, because that document is what the director will rely on first and what a court will read second.

A board that cannot answer the second question from its own records has the exposure this practice exists to identify. The point at which it becomes fixed is the point at which the subsidiary can no longer meet its obligations, and from then on the remedies available to the director narrow quickly.

Before an assessment starts, the following are worth having to hand:

The current register of directors for each entity, with appointment dates
Every appointment letter, indemnity and side letter in force
The D&O policy schedule and the entities it names
Minutes showing who attended, and who instructed, the last four board decisions

A director who has been told the appointment is a formality is the person with the most to lose from that assumption. The practice starts from the opposite premise: the office is real, the duties are personal, and the question is only what they require here.

Assess your director exposure. Write to info@hreithlaw.com with the jurisdiction and the structure.

Services in this practice

Six services make up the practice. Their individual pages are being published in sequence; until each one is live, the scope is set out here and enquiries are taken through the contact page.

Director duties mapping for international holding structures
Director exposure check for international holding structures
Conflicts and related-party protocol for multi-jurisdiction boards
Director resignation and exit protection for foreign-owned companies
D&O cover gap review for private company boards
Insolvency-zone duties review for cross-border groups

Frequently asked questions

Do directors' duties change for a foreign-owned company?: The duties themselves do not. What changes is the likelihood that the person holding the office was appointed for reasons unrelated to the role, and that the instructions come from outside the jurisdiction. Both make it more likely that the duty is tested, not that it is different.
What does a review of directors' duties require in practice?: The register of directors, the appointment documents, the insurance schedule and the minutes of recent decisions. From those the review establishes who holds the office, who in fact directs it, and whether the documents the director would rely on say what the director believes they say.
Who inside the company is responsible for directors' duties?: Each director personally. A board can organise how the duties are discharged, and a shareholder can indemnify a director against some consequences, but neither moves the duty off the individual. That is the point most appointment letters get wrong.
When does a director's exposure become personal?: Under most systems, from the moment the company can no longer meet its obligations as they fall due, or from the moment a conflict is acted on without disclosure. The timing differs by jurisdiction and is one of the first things the review fixes, because it decides which decisions can still be taken safely.
What happens if directors' duties are not addressed?: Nothing, until something goes wrong. The exposure then sits with the individual, at a time the company does not choose, with documents that were drafted for a different purpose. Reviewing the position earlier does not remove the duty; it removes the surprise.