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Liabilities of Directors of an Investment Fund

August 2010 - Finance. Legal Developments by Noble & Scheidecker.

The current turmoil in the investment fund industry has particularly drawn the attention of professionals, including "Directors", to the liabilities they may incur in the framework of their duties as director of an investment vehicle.

Currently, a predicable forecast is that an increase in the number of lawsuits against Directors brought by investors will be experienced by the fund industry in Luxembourg. Directors are being named or will be named as parties to lawsuits, potentially exposing all of their personal assets to satisfy a claim.

By "Directors" we mean the board of directors and its members in the case of an investment company (SICAV, SICAF, SICAR) incorporated under the form of a S.A. assuming that this form is the most frequent one in practice (the rules applicable to the general partner of a S.C.A. and the managers of an S.àr.l. being quite similar) and the management company and its directors in the case of a common fund (FCP).

To adequately protect themselves, Directors should be aware of their duties and familiar with the obligations imposed upon them. Directors are subject to various duties, not defined as such by the commercial law, but resulting from the execution of their mandate as directors of a company.

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Liabilities of Directors of an Investment Fund