John Christensen ■ Directors’ duties and tax avoidance: a view from the U.S.
Last year we obtained a legal opinion from Farrer’s & Co which concluded that it was not possible to construe a director’s duty to maximise benefits to a company to include a positive duty to avoid tax. This opinion has helped to nail the urban myth (widely propagated by tax planners to their clients) that failure to engage actively in tax avoidance would constitute a breach of fiduciary duties.
Our attention has now been drawn to a blog by an influential U.S. lawyer noting the UK legal opinion and asking whether the same applies in the United States. The article addresses the issue of whether the business judgement rule, would inhibit directors from taking positive action to comply with prevailing tax rules or to not comply. He concludes that the BJR would do neither:
As I read the US cases, the answer is that the BJR would in fact protect either decision from judicial review.
Useful to have this view on the US position.