The purpose of this thesis is to analyze the legislation on liability for the Board of Directors (”BoD”) in banks centered around the current case law that has been formed in the past few years. Compared to the BoD’s in an ordinary limited liability company (”LLC”), the BoD’s of Danish banks are regulated by a significant number of rules and laws that are governed in both the Danish Companies Act (Selskabsloven), which prescribe the general duties of the Board, but also the Danish Financials Business Act (Lov om finansiel virksomhed), which specify these general duties in more detail. In addition to this, any person that wishes to take on a position as a Board member of a bank has to comply with the Fit & Proper rules that are regulated in the Danish Financial Business Act. Given the burden of being substantially more regulated it could be argued that the standard of liability for the BoD’s in banks is tightened compared to the BoD’s in ordinary LLC’s. However, based on the case law this is not the case, and the BoD’s of banks are viewed under the same standard of liability as ordinary BoD’s. Additionally, it is found that the standard of liability is an individual matter meaning that the test of negligence is done for each individual. The case law suggests that the test of negligence is based on matters such as previous case law, special insight, the providing of additional information if viewed necessary, warnings, etc. from the Danish Financial State Authority, the time of dispositions and the business judgment. Another goal of this thesis is to examine liability and public regulation as means of controlling the risk of wrongful conduct by BoD’s. This will be done in order to conclude on how the optimal form of regulation for the BoD’s of banks shall be formed. Based on four determinants that value the desirability of both liability and public regulation, it is argued neither provides benefits that are better than the other. Instead, it is concluded that the joint use of the two instruments forms the optimal form of regulation as they provide BoD’s with the incentives of reducing the risk of wrongful conduct, thus being socially advantageous. Finally, the idea of tightening the standard of liability for the BoD’s of banks is under review - both from a legal and economic perspective. It is concluded that such an intervention does not entail any positive incentives for BoD’s and a tightening of the standard of liability are therefore deemed inappropriate.
|Educations||MSc in Commercial Law, (Graduate Programme) Final Thesis|
|Number of pages||90|