The Cayman Islands Monetary Authority (CIMA) has recently imposed USD365,000 in administrative fines on an asset manager for breaches of the AML Regulations, serving as a timely reminder on the value of effective compliance and the importance of registered entities having effective anti-money laundering policies and procedures in place.
Scrutiny faced by directors of companies for possible breaches of their fiduciary duties has been further clarified by the Privy Council in a case involving actions of a director leading up to the insolvency of the company. Key takeaways regarding duties are: Ultimate responsibility for the actions of a company rests with the directors. The Privy Council dealt with the following questions regarding the actions of the director in question, Ms. Ningning Chen (Ms Chen), co-incidentally one of the Peoples’ Republic’s richest women. When does a director’s duties to a company end where insolvency (voluntary or otherwise) is in the mix? In an insolvency scenario, in whose interest should a director be acting? Case facts to give some context to the issues … The matter involved a payment made on a shipping contract referred to as a “freight forwarding agreement” (FFA) entered into by Pioneer Freight Forward Limited (PFF) a BVI company, at a time when PFF was trading insolvent. PFF had, under the FFA, and under the authority of Ms Chen, although not directly by her, paid the amount of USD13m to a creditor. The Privy Council found this payment to have favoured one creditor over another. The Privy Council rationalised that until PFF was formally in liquidation, and thereafter by implication until the authority over the bank accounts had been transferred to the appointed liquidators, Ms Chen had a fiduciary duty to act honestly, in good faith, and in what she believed to be in the best interests of PFF. Specifically, she had a duty to the creditors of PFF given that PFF was trading insolvent and then after being placed in liquidation, was insolvent. A director cannot prefer one creditor over another … Discover More