The new role of the independent director: from risk supervisor to guardian of investor value
Topics: Governance, Independent Director
For decades, the governance of investment funds has been primarily understood as a control system focused on risk oversight, regulatory compliance and process verification. However, the strengthening of regulation in the European fund industry is progressively expanding this vision.
In this new context, the role of the independent director is becoming increasingly strategic. Particularly in jurisdictions such as Luxembourg—one of the leading global centres for the fund industry—this role is progressively extending towards the effective protection of the value of investments.
One of the areas where this shift is most visible concerns a topic that for years remained in the background of governance agendas: the tax efficiency of international investments.
Luxembourg and the new governance architecture
Luxembourg has established itself as one of the most influential jurisdictions worldwide for the structuring and administration of investment funds. Its ecosystem—composed of asset managers, depositaries, fund administrators and highly specialised legal and tax advisers—has enabled the development of a robust and highly regulated operational architecture.
Within this model, the board of directors constitutes the highest supervisory body of the investment vehicle. Within that board, the independent director plays a particularly important role by bringing an external perspective, free from conflicts of interest and focused on ensuring that decisions genuinely serve investors’ interests. As the industry becomes more sophisticated and the regulatory framework more demanding, this oversight function is expanding. It is no longer simply about verifying that processes exist, but about assessing whether those processes are effectively designed to protect the value of investments.
“Within this model, the board of directors constitutes the highest supervisory body of the investment vehicle. Within that board, the independent director plays a particularly important role by bringing an external perspective, free from conflicts of interest and focused on ensuring that decisions genuinely serve investors’ interests.”
Taxation is now on the strategic governance agenda
One of the areas where this evolution is most evident is the taxation of international investments. European funds typically maintain diversified portfolios with exposure to multiple markets. When portfolio companies distribute dividends or coupons, withholding taxes are often applied at source at levels exceeding those foreseen in double taxation treaties or European regulations. Although these taxes can be recovered through reclaim procedures, administrative complexity, long processing times and the absence of systematic processes have resulted in a significant portion of these amounts never being recovered.The consequence is a direct loss of return for the final investor.
Aware of this structural inefficiency, the European Union is advancing a new regulatory framework designed to simplify these procedures. The upcoming FASTER directive (Faster and Safer Relief of Excess Withholding Taxes) aims precisely to streamline the recovery of dividend withholding taxes and reduce the administrative burdens that have historically hindered such claims.
At the same time, portfolios with global exposure are beginning to uncover new tax recovery opportunities beyond the European framework. In the case of investments in the United States, certain mechanisms such as UFLI (Unjust Foreign Levy Income) allow, in specific circumstances, the recovery of amounts linked to dividends that for years were considered unrecoverable.
These developments reflect a clear trend: the taxation of cross-border investments is no longer a purely technical matter but an increasingly relevant element within the governance architecture of investment funds.
The independent director as guardian of investors’ economic interests
In this new environment, the independent director occupies a particularly relevant position. Their fiduciary duty leads them to raise questions that go beyond mere regulatory compliance, including whether the fund has effective processes to identify recoverable withholding taxes, whether the mechanisms available in each jurisdiction are being used, and whether the economic interests of investors are being fully protected.
In portfolios with significant international exposure, unrecovered withholding taxes can represent tens of basis points of lost annual performance. Over time, this cumulative impact can become material for investors.Ensuring that such inefficiencies are identified and corrected is increasingly becoming part of the responsibility perimeter of supervisory bodies.
A role that evolves alongside the industry
The European fund industry will continue to transform under the combined pressure of new regulatory requirements, increasing investor demand for transparency and the development of technological solutions capable of optimising particularly complex management and control tasks. In this context, the role of the independent director will continue to expand in scope and relevance within the governance of investment vehicles. Beyond the traditional oversight of risks and compliance, their function is increasingly oriented towards ensuring that operational structures and mechanisms are designed to fully protect investors’ interests.
Luxembourg, as one of the world’s major asset management hubs, has become the most visible laboratory of this evolution. In an industry where every basis point counts, good governance is not only about complying with rules; it also means ensuring that operational or tax inefficiencies do not erode the value of investments.
About Dividend Refund
Founded in 2011 by a strong team of tax specialists and technical experts, Dividend Refund is a Spanish company specialising in the management of international tax reclaims for investment funds, pension funds, SICAVs and other financial vehicles. With solid experience in the sector, the company focuses on the recovery of international double withholding taxes on dividends and coupons in 25 countries across five continents. These processes are based on the complex mechanisms of international tax regulation established by the Court of Justice of the European Union (CJEU) as well as indirect UFLI recoveries for Spanish collective investment schemes investing in US equities through Luxembourg or Irish funds. Its approach combines advanced technology and expert knowledge to ensure efficient, secure and results-oriented management for its clients, maximising the recovery of withholding taxes on international dividends. The company holds ISO certifications 9001, 14001, 22301, 27001 and 27701.
Dividend Refund provides services to custodian banks, collective investment scheme managers, private banks, family offices, tax advisers and individual clients.
Over the past 15 years, its team of tax, financial, legal and technology experts—dedicated to understanding regulatory frameworks and applying the most favourable solutions for investors using advanced tools—has handled thousands of claims for institutional and private clients.
In 2025, Dividend Refund consolidated its position as the leading Spanish company in the recovery of international double withholding taxes on dividends for institutional investors, achieving the strongest growth of the last decade. This success has been driven by a solid network of relationships with tax authorities and specialised law firms across different countries, a high level of service, a competitive fee structure and the expansion of its service offering.
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