Whose Interests Does the GP-appointed Director Serve

Makhmud Efendi

May 19, 2021 — 1 min read

Explanation

Regardless of the type of appointment, directors do not serve the interests of any particular shareholder, but act in the best interests of the portfolio company. The position of a director is a fiduciary one. A director does not act as an agent or advocate of the board that appointed him or her. Fiduciary duties are generally summarised as a duty of loyalty to the company, a duty to avoid and disclose conflicts, a duty of confidentiality, a duty of good faith, care, skill and diligence, and integrity.

Recommendation

GP-appointed director should always be aware that he/she must act in the best interests of the portfolio company and all of its shareholders. The individual may find him/herself in a personal conflict situation as he/she has duties to both GP and the portfolio company. Although there is normally a conflict of interest, GP may need to remove the director from participating in decisions made by GP in relation to the portfolio company and/or the director may need to resign from the board of the portfolio company. The GP should ensure that its board member(s) promptly disclose any conflicts of interest relating to their role as a board member when they arise and comply with the relevant legal requirements and the policies and procedures established by the GP and/or the portfolio company.

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