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There has been a lot of comment in the media about the responsibilities and duties of hedge and alternative investment fund directors. Although the topic had been quite a high profile for several years, the Weavering judgement in the Caymans has focussed the minds of not only the Directors themselves, but also their attorneys and, of course, investors in the funds (predominantly institutional) who have been at the forefront of this movement, says Dermot Butler (pictured), chairman of Custom House Global Fund Services…

One of the points that has been discussed in this regard, has been the number of Directorships that any one person can hold and still have the time to fulfil their responsibilities to the Board of the fund and its shareholders. This came about because many of the attorneys and professional corporate service providers, particularly in the ‘Islands’, have historically held hundreds, indeed, in some cases, thousands, of directorships. Inevitably investors queried how one person can fulfil their obligations if they have over 500 directorships, as they will only have, at best, half a day per annum to devote to each company or fund. Obviously, some inactive holding companies may only need half a day per annum, but that would not apply to most fund companies.

There have been demands to limit the number of directorships that any one person can hold to anything from 15 to 50 directorships, but it is very difficult to settle on a fair number, just because some straightforward funds may not need a lot of time, whereas a complex multi-strategy umbrella fund will need very much longer.

In my opinion, the Irish regulator’s solution to this conundrum seems to be the most logical, fair and easy to oversee. The concept that the Irish regulator has introduced is that the Board of Directors should sit round a table and discuss the amount of time that each Director will need to do his job properly (it must be remembered that Directors of Irish funds can be designated to carry out specific tasks, some of which may be more time-consuming than others).

Once the annual time requirement has been agreed, it does not take a rocket scientist to work out how many funds each Director can handle in a year, depending on the length of the Director’s average working day.

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