Bestyrelsens forsvarlige beslutningsgrundlag

Studenteropgave: Kandidatspeciale og HD afgangsprojekt

  • Nicholas Harild Ayotte
4. semester, Jura, Kandidat (Kandidatuddannelse)
This master thesis researches board members liability for a sufficient basis for decisions.

According to the business judgement rule, courts will not review business decisions board members have taken in “(1) good faith, (2) with the care that an ordinarily prudent person in a like position would exercise under similar circumstances; and (3) in a manner the board members reasonably believe to be in the best interests of the corporation.”
A sufficient basis for decisions is a part of the care that a ordinarily prudent board member should have.
The master thesis defines a sufficient basis for decisions as the sufficient knowledge and information an ordinary prudent board member should have when making a decision .

The master thesis examines what the basis of liability is for a board member. The general rule is that a board member’s liability should be judged individually and with the general rule of fault (Culpa) (the standard of the ordinarily prudent person and not a professional standard) cf. the Danish Company Act (selskabslovens) § 361. The general rule of fault however is very relative and can therefore be applied more or less strictly. This is necessary in regards to the large variety of board members, companies and decision situations.

In regards to a board member’s knowledge the master thesis examines the required knowledge of the board members. It finds that there are no legal requirements for the education of board members in the Danish Company Act (Selskabsloven) and that the general rule of fault therefore in general must be applied mildly when judging the knowledge of board members.
The Law about Financial Companies (Lov om finansielle selskaber) § 64 has a ‘fit and proper’ requirement which means that the board members of a financial company must have adequate experience to be able to perform their duties as board members of the financial company. There are no standards for these requirements and it must be judged in relation to the financial company the board member leads. The requirements can lead to a more strict appliement of the the governing principle of fault but not to a liability standard of a professional. cf. the Capinnordic judgement.
The professional board member (e.g. the lawyer or the accountant), the family board member and the employee representative are also judged in general with the governing rule of fault - even though they may have different knowledge in regards of the work of board members. The professional board member can sometimes be judged with a more strictly applied general rule of fault if the disposition to be judged is one within the scope of the professional board members profession. The professional board member can only be said to have a strickend responsibility to inform the other board members about the problems, not necessarily to solve them in a professional way.
Once the basis of liability has been established, case law has previously demonstrated a willingness to reduce the compensation burden on family members and employee representatives. The examination of newer supreme court case law however shows that this willingness is decreasing to a lesser extent, and therefore one can say that board members on a hole are judged a like.
The master thesis finds that although the Danish Companies Act (Selskabsloven) doesn't say anything about the knowledge requirement or informations requirements of the board member, § 115 about the board members task and duties, here within board members obligation to keep authority of the company, including risk management and secure that the companies financial resources are prudent - constitutes a lower limit for the board members knowledge of the company.
Knowledge of the information in companies financial statements is a must for board members and a lot of case law statuating liability for board members is reasoned with board members being passive and not acting on information they could have gathered in the company's financial statements.
The master thesis analysis risks influence on the sufficient basis of board members decisions. When a dessicions is risky, the company is in a risky situation ( e.g. financial difficulties) the requirements of the sufficient basis for decisions is sharpened. However this can be offset by the companies shareholders and creditors accepting the higher risk and/or by ‘risk managing’ the decision (e.g. higher requirements for collateral when giving loans).
The master thesis finds that some decisions are so frequently discussed in case law that general guidelines for the sufficient basis of the decision can be derived. When deciding upon selling real estate the reasonable board member will have gathered a valuation report of the real estate. When a bank decides on lending money a credit rating of the borrower will be a sufficient basis for the decision.
Finally the master thesis examines and evaluate the credibility of the information that board members receive from its most important sources of information (directors, accountant and external advisers). In general these sources of information are credible.
Udgivelsesdato11 jun. 2019
Antal sider69
ID: 305601385