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Tax and directors’ fiduciary duties

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The question of whether directors have a fiduciary duty to avoid tax is more complicated than is suggested by the recent statement by the Tax Justice Network. Directors have a duty to act in good faith and in a manner which they consider to be likely to promote the success of the company. The tax consequences of any proposed course of action is just one of the many considerations which directors should take into account when deciding whether or not to pursue that course of action. Directors who take a course of action which produces a worse tax result than an alternative course of action would not be open to criticism if there were good non-tax reasons for reaching their decision but might be exposed if they did so in circumstances where there were not.

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