Directors' duties — acting with a view to the best interests of a Jersey company

In a helpful judgment, the Jersey Court of Appeal has upheld the decision of the Royal Court in Pirrwitz v AI Airports International Ltd and PI Power International Ltd [2013] JRC 017. In the process, the Court of Appeal has clarified the duty of a director under article 74(1)(a) of the Companies (Jersey) Law 1991, which is to ‘act honestly and in good faith with a view to the best interests of the company’. This, the court confirmed, is a subjective duty: the best interests of the company is a matter for the directors to determine, not the court.

The court noted, however, that directors are subject to other duties and, in particular, they must exercise their powers for the purposes for which they were conferred. In contrast to the duty under article 74(1)(a), this is an objective duty — so that a director can be in breach of it notwithstanding his or her honest belief that that what was done was in the company’s best interest.

This briefing considers the decision in relation to the duties of directors. The judgment is also of interest for its discussion of the remuneration of directors and in particular the scope of provisions in articles of association under which directors may be remunerated. That aspect of the case is considered in a separate briefing…

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