This memorandum has been prepared for the assistance of our clients in connection with the provisions relevant to directors' duties and responsibilities under the Companies (Guernsey) Law, 2008 (the "Companies Law"). It is intended to provide only a summary of the main legal and general principles and it is not intended to be comprehensive in scope. It is strongly recommended that you seek specific legal advice on such matters and we would be pleased to assist in this respect. A series of briefings on other specific aspects of Guernsey companies has been produced by Ogier and is available on our website www.ogier.com. Transitional provisions have also been made (a separate briefing addresses the operation of these).

The memorandum has been prepared on the basis of the law and practice in Guernsey as at 1 July 2008.

Introduction

The Companies Law came into force on 1 July 2008.

Who is a director?

The Companies Law provides that a director includes an alternate director and any person occupying the position of director, by whatever name called. On this basis, someone who has not been formally appointed as a director may be treated by the Guernsey Courts as a director (including, potentially, a de facto director or a shadow director).

A de jure director is a person who has been legally appointed pursuant to the articles of association of the company. A de facto director is a person who though not properly appointed acts and is held out as a director of a company. A shadow director is a person in accordance with whose directions or instructions the directors of the company are accustomed to act.

Eligibility

A person is not permitted to act as a director if they are (i) a minor or (ii) disqualified from being a director under either the Companies Law, the Companies (Guernsey) Law, 1994 (as amended) or the laws of anywhere outside the Bailiwick of Guernsey. An appointment made in contravention of the Companies Law is void but any person who purports to act as a director or acts as a shadow director may still incur liability for doing so.

A director must give his written consent to be appointed as a director and must declare that he is not ineligible to be a director.

There is no requirement under the Companies Law for directors of a Guernsey registered company to be resident in Guernsey, although there may be tax reasons in other jurisdictions why it is advisable for one or more directors to be Guernsey resident. Further, where a Guernsey registered company is regulated by the Guernsey Financial Services Commission, one or more Guernsey resident directors may also be required.

Duties

The board of directors (which could comprise a sole director) is responsible for the business and affairs of a company, which must be managed by the board or under its direction or supervision.

A director is required to comply with the following common law duties and responsibilities:

  • to act in good faith;

  • to exercise powers for a proper purpose;

  • not to allow the director's duty to the company to conflict with personal interests except with the knowledge and consent of the company. Failure to disclose interests is an offence and renders transactions voidable for a 3 month period;

  • to account for profits; and

  • to conduct the business of the company in accordance with its memorandum of incorporation.

Further, the legislation provides that where an offence under the Companies Law committed by a company is proved to be committed with the consent or connivance of, or is attributable to any neglect on the part of, any officer of the company (including a director), a shadow director or any person purporting to act in any such capacity, he, as well as the company, is guilty of the offence and may be proceeded against and punished.

Accordingly, the directors should ensure compliance with, amongst other things, the following obligations of the company:

  • to maintain a registered office in Guernsey, to notify the Registrar of Companies of the location of the registered office and any changes to the registered office and to display the company name at its registered office;

  • to quote the full company name on all correspondence issued in the name of the company and its name, registration number and registered office on all order forms and formal business letters (and on its website, if it has one);

  • before the end of January in each calendar year, to complete an annual validation confirming certain information and return it to the Registrar of Companies;

  • to ensure resolutions of directors and members are passed in accordance with the Companies Law; and

  • to keep records of all members' resolutions, minutes of all proceedings of general meetings and meetings of directors and committees of directors in accordance with the Companies Law.

A director cannot be indemnified against negligence, fraud or willful misconduct but may obtain insurance. There are a number of circumstances in which express certifications need to be given by directors (e.g. in relation to the solvency test).

A director may incur personal liability in certain limited circumstances (e.g. where a distribution is made and it later transpires that the company was not solvent at the relevant time and it is not possible for whatever reason to reclaim the money back from the recipients).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.