Director exposure check for international holding structures

A director exposure check establishes, jurisdiction by jurisdiction, what a named office holder is personally answerable for inside a cross-border structure, and where that exposure has never actually been tested. Groups typically commission one at a specific moment: a director resigning from several boards at once, a new subsidiary joining the group, or a restructuring that moves decision-making without moving the paper trail behind it. The output is a written position a board can act on, not a general commentary on governance risk.

A holding company adds a fourth subsidiary in a new jurisdiction and appoints the same two people as directors of all four entities. Nobody has confirmed whether the duties attaching to each seat are identical, whether a resignation from one entity affects standing in another, or whether the group's insurance actually follows the director rather than the company that pays the premium. The question tends to surface only once something has gone wrong, by which point several of the answers are no longer capable of being changed.

What follows sets out when the check is triggered, what it produces and in what sequence, where the answer necessarily differs by jurisdiction, and what the engagement does not cover.

The situation this work addresses

The check is not a periodic audit run on a fixed calendar. It is commissioned because a specific fact pattern has appeared and someone on the board, or someone advising it, has noticed that the answer is not obvious. The most common pattern is the multi-seat director: one person, or a small group, holding office across every entity in a cross-border structure, on the assumption that a duty owed in one place is the same duty owed everywhere. It rarely is. A second pattern is the group that has just added an entity in a jurisdiction none of its existing directors know well, and has not asked whether the seat carries different obligations from the ones already familiar to them.

A group operating a single-jurisdiction check can commission it for one seat only, rather than the whole structure. The exposure test carried out for a seat on the board of an entity in the Abu Dhabi Global Market follows the same method as the wider check, applied to one office rather than several.

A third pattern, less obvious but more common than groups admit, is the director who has resigned from a subsidiary in writing but never confirmed whether that resignation has actually taken effect against third parties, or only against the company internally. The gap between the two is where personal exposure tends to sit longest, because nobody is actively looking at it.

What triggers it, and why the timing matters

Three moments most reliably prompt the request. A director resigns from several group entities at once, and the group wants to know whether the resignations take effect on the same date across each entity or on different dates set by different registers. A new investor nominates a director to a board seat, and the group wants to know what that director is personally answerable for before the appointment is confirmed, not after. A group restructuring moves the entity that actually takes decisions, without moving where the paper record of those decisions is kept, and someone notices the mismatch late.

Once a subsidiary is added to a group's filing and the new director's name is entered on the corporate registry, the record is fixed from that date. Correcting it afterwards requires a further filing, which itself becomes part of the public record and does not remove the first entry. The window in which the entry can be corrected without a visible trail closes the moment it is submitted.

Timing also governs whether the group's directors' and officers' cover actually responds. A policy written around the parent company does not automatically extend to a director's personal exposure at subsidiary level, and confirming whether it does is a separate question from confirming that a policy exists at all. Where the group has never tested this, a directors' and officers' cover gap review is the natural companion piece to the exposure check, run before a claim rather than after one. The same question, approached from the indemnity side rather than the insurance side, is set out in the comparison of what an indemnity can lawfully cover against what the policy actually pays.

The deliverables: what the work produces, in sequence

The check does not produce a single document. It produces a sequence, and each step depends on the one before it having been answered rather than assumed.

The written position is the document a board actually relies on: it states, seat by seat, what the director is answerable for and on what basis. The marked-up constitutional documents matter because a duty stated in general terms and a duty stated in the entity's own articles do not always align, and the gap between them is usually where a dispute later starts. The board pack that follows sets out the specific resolutions needed, in the order they need to be passed, a sequence discussed in more detail in the note on the resolutions a director exposure check typically produces.

Before any of this is useful, the board needs to have assembled a small set of items rather than rely on memory:

• the register entry currently showing for each seat held
• the constitutional documents in force for each entity in the structure
• the wording of any insurance policy that names the director personally
• the date of appointment or resignation for the seat in question

Assembling this list before the first call shortens the mapping stage considerably, because the questions that follow can be put against documents rather than recollection.

Where this differs by jurisdiction

The company law of the jurisdiction in which an entity is incorporated sets the baseline duty a director owes to that entity, and that baseline does not travel automatically to a seat held in a different jurisdiction, even within the same group. Some jurisdictions attach personal liability to a narrow set of statutory triggers; others extend it further into ordinary management decisions. Some require a registered office to be maintained at an address distinct from any director's home address; others tie the director's own address to what appears on the public file. Neither position is stated here as a rule for any named jurisdiction, because the answer depends on the register the entity in question actually sits on, and that has to be confirmed against the specific entity, not assumed from the group's home jurisdiction.

Where a director's resignation is recorded on a public register before a successor is confirmed, the office falls vacant from the date of that entry. The gap becomes visible to any counterparty who searches the register, and it stays visible until a later filing closes it, which does not happen automatically and does not happen retroactively.

The same caution applies to how far a constitution can restrict or expand a director's exposure. Some jurisdictions permit the constitutional documents to narrow certain duties; others treat the underlying duty as one the constitution cannot touch. The position on how far a set of articles can restrict dealings in shares illustrates the same general point from a different angle: what a constitution says and what a court will actually enforce are two separate questions, and a group that has only read the constitution has only answered one of them.

For a structure spanning several jurisdictions, the exposure check does not assume uniformity. It states, for each entity, what has been confirmed and what remains open, and it says so plainly where a jurisdiction's own registry does not answer the question at all.

What this service does not include

The exposure check does not include acting as a director, secretary, nominee shareholder or trustee for any entity in the structure, and it does not include supplying, sourcing or arranging for anyone else to take up such an office. Both of those activities require a trust or corporate service provider licence in a number of the jurisdictions a group of this kind is likely to touch, and this practice does not hold one. The boundary is not a matter of preference. A firm that both tests a director's exposure and supplies the director being tested has removed the independence the test depends on, and the licensing position exists precisely to prevent that overlap.

What the engagement produces instead is the requirement mapped against the entity actually holding it, the criteria a proposed appointee should meet stated in writing, the terms of an existing appointment reviewed against what the constitution and the applicable company law actually permit, and the exposure itself assessed and recorded so the board has a position to act on rather than a name to fill a seat.

• the seat's duties mapped against the entity's own constitution
• the appointment terms reviewed against what is enforceable
• the gap between policy cover and personal exposure identified
• a written position the board can minute and act on

A group whose board is uncertain whether the same two names sitting on four boards actually carry four identical sets of duties is not asking a theoretical question. It is asking whether the next resignation, filing or investor appointment will close a gap that is still open today, or open one that nobody has checked.

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

A group that has never tested whether its indemnity and its insurance actually meet in the middle is relying on an assumption rather than a position. Once a claim is made, the terms in force on that date are the terms that apply, and no later resolution changes what the policy already excluded.

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

Frequently asked questions

Who inside the company is actually responsible for commissioning a director exposure check?

Responsibility for raising it usually sits with the board as a whole, since the exposure being tested is the board's own, but the group secretary or general counsel typically assembles the documents and coordinates the mapping stage. Waiting for a single director to raise it tends to delay the work until the trigger event has already occurred.

What evidence should the board keep once a director exposure check has been carried out?

The written position, the marked-up constitutional documents and the minuted resolutions should be kept together and dated, not filed separately across different advisers. A board that can produce this set on request has a materially stronger position than one that can only describe having discussed the issue.

What happens if a director exposure check is never carried out?

Nothing happens immediately, which is exactly the risk. The gap sits unexamined until a resignation, a claim or a regulatory filing forces the question, at which point several of the answers that would have been available earlier are no longer available to change.

How often should the check be reviewed once it has been done?

It should be revisited whenever an entity is added to or removed from the structure, whenever a director's seat count changes, and whenever the group's insurance is renewed or restructured, rather than on a fixed annual cycle regardless of whether anything has changed.

Does the position change for a director of a foreign-owned subsidiary rather than the parent?

Often, yes. A director appointed to a subsidiary board on the instruction of a foreign parent still owes the duty that the subsidiary's own jurisdiction imposes, and that duty does not soften because the instruction came from outside the entity. This is one of the most common misconceptions the check corrects: a seat is not a formality because someone else chose the person sitting in it.

Author: Halvorsen & Reith director duties practice.
Anders Halvorsen, expert author, specialisation in board structure and cross-border director liability.
Anders advises on the personal exposure directors carry across multi-jurisdiction group structures, with a focus on where duty, disclosure and insurance obligations diverge between entities in the same group. He works primarily on structures spanning common-law and civil-law jurisdictions within the same holding chain. His writing for the practice concentrates on the sequencing of governance decisions rather than on any single jurisdiction's statute book.