In 2009, the company underwent a re-domestication process in which the place of incorporation of the parent company changed from a Caribbean country to a European country. The newly formed company acquired all shares in the Caribbean company. Through a share exchange agreement, the shareholders acquired shares equal to their Caribbean company shares.
The European country’s law does not permit asserted shareholders of the company to bring claims for directors and officers liability against its officers or directors based on alleged conduct pre-dating the re-domestication, nor do they have standing to bring derivative claims on behalf of the Caribbean company. From the perspective of the European country’s law, the new company is not the legal successor of the Caribbean company; it is a newly established parent company. Therefore, the companies are two separate legal entities in a parent-subsidiary relationship. Board members of the European company may not be made liable for alleged acts or omissions that occurred prior to them having been put in office.
The European company strictly follows a separate legal entity approach, under which each entity in a corporate group is considered as a separate legal entity. To the extent that the asserted breach of duty was committed before the re-domestication, it was committed by officers and directors of the Caribbean company, and thus by a different group company. Under the European country’s law, in conformity with the separate legal entity approach, the individual defendants are not subject to D&O liability for the asserted breach of duty.
Therefore, only acts or omissions of the individual defendants after the re-domestication could be relevant in this case. However, under the European country’s law, the general meeting of shareholders may discharge officers and directors from liability for their acts or omissions following approval by a majority of the shareholders. Shareholders who did not vote for the discharge must bring any claims within six months after approval by the majority, or their right to bring such claims is forfeited and expires.
At each of three consecutive annual general meetings, the shareholders approved the discharge of its board members and executive officers from liability under the European country’s law. In my view the shareholders were provided with sufficient facts concerning the then-pending government and internal investigations to render the releases effective as to the acts and omissions alleged in this petition. Therefore, even if plaintiffs did not vote in favor of the releases, their rights to bring claims against the individual defendants expired six months after each of those respective resolutions were approved.
The expert is a partner in a commercial law firm in the European country and has expertise and numerous publications in the field of law regarding corporate liability and directors’ liability.