Formal legal opinion: company directors have no fiduciary duty to avoid tax
This morning the Chief Executives of every company in the UK's FTSE100 index will be receiving a letter from Tax Justice Network drawing their attention to a legal opinion prepared for us by the prestigious law firm Farrer & Co.
The opinion provides an unequivocal and authoritative view on whether or not company directors have a duty to their shareholders to avoid tax: no such duty exists in English law. The legal opinion is available here. A press release accompanying this legal opinion is available here. The Guardian newspaper has written about this here.
Although this legal opinion in itself only directly applies to the UK, it potentially has wide international relevance, as we have noted before.
The text of our letter to the Chief Executives is as follows:
9th September 2013
Dear (Chief Executive)
It is often asserted that UK company directors have a fiduciary duty to their shareholders to avoid tax. The Tax Justice Network has now obtained a firm legal opinion from prestigious law firm Farrer & Co that provides an unequivocal and authoritative answer to this question: no such duty exists in English law.
The legal opinion is attached . . . We are sending the opinion to a wide range of UK media organisations and to the leaders of every company in the FTSE100.
There is a duty, say the lawyers, to promote the success of the company, but this should not be misunderstood as requiring blinkered attention solely to maximising distributable profits. “It is not possible to construe a director’s duty to promote the success of the company", say the lawyers, "as constituting a positive duty to avoid tax”.
The opinion goes on to explain that company directors have a wide discretion to act with a view to the social impact of their decisions, and if they chose to pay tax responsibly rather than structure around tax they would in fact be protected by the applicable law rather than at risk of liability.
Tax justice campaigners, academics, legal experts and many mainstream commentators already know this, but a formal legal opinion is something more: it is authoritative and in this case unequivocal.
There is no fiduciary duty to avoid tax.
Yours sincerelyJohn ChristensenDirectorTax Justice Network