Jersey: Powers To Remunerate Directors Of Jersey Companies

Last Updated: 30 December 2013
Article by Mark Temple and Robert Hickling

AI Airports International Limited and PI Power International Limited v Pirrwitz [2013] JCA 177 (12 September 2013)

In a helpful judgment the Jersey Court of Appeal has upheld the decision of the Royal Court in Pirrwitz v AI Airports International Limited and PI Power International Limited [2013] JRC 017. The case raised questions regarding the remuneration of directors and in particular the scope of provisions in articles of association under which directors may be remunerated. An important point highlighted by the decision is that directors have no entitlement to remuneration out of company funds unless this is set out in the company's articles of association or approved by the company's members (the members being the shareholders in the case of a company having shares).

This Briefing considers the decision in relation to issues raised regarding the remuneration of directors. The judgment is also important in clarifying the duty of a director under Article 74(1)(a) of the Companies (Jersey) Law 1991 to "act honestly and in good faith with a view to the best interests of the company". That aspect of the case is considered in a separate Briefing.


Mr Pirrwitz was a director of two Jersey companies, AI Airports International Limited and PI Power International Limited, which held substantial investments in the airport and power sectors. Under his written terms of service he was entitled to certain payments in the event of his being removed from office or resigning on three months' notice. These exit payments were €600,000 and €700,000 respectively. The directors were expected by the hedge fund investors, who had procured their appointment, to realise the companies' investments and return cash to shareholders as soon as possible. The role was difficult and the board was unsupported by employees. Relations between the directors and the hedge fund investors became increasingly strained. Mr Pirrwitz was in due course removed by the investors as a director of both companies. As a result, he claimed the two lump sum payments. The companies resisted. They argued that the agreements were invalid and unenforceable because (a) neither company's articles of association contained power to agree to exit payments of this nature; (b) the terms of the payments had not in fact been authorised by either board; and (c) the agreements to make the exit payments had not been in the best interests of the companies and were therefore unenforceable. The Royal Court rejected the companies' defence on each of these points and gave judgment in favour of Mr Pirrwitz.

The companies appealed. Christopher Nugee QC, sitting with the Hon. Michael Beloff QC and Robert Logan Martin QC, gave the Court of Appeal's judgment dismissing the appeal.

The Court of Appeal's decision regarding the power of the board to agree remuneration of directors

The articles of both companies were materially identical and contained separate powers of remuneration for non-executive and executive directors.

Upholding the approach of the Royal Court, the Court of Appeal considered firstly a specific power of the board, set out in the articles, whereby they could agree that "extra remuneration by way of salary, commission or otherwise" could be paid to any director "who does not hold executive office" but who nevertheless serves on a committee of the board or who otherwise performs special services outside the scope of a director's ordinary duties.

Assuming Mr Pirrwitz could be classed as a non-executive director, the Court of Appeal held that the exit payments fell within this provision. Mr Pirrwitz had indeed served on committees of the board. He had also performed special services outside the scope of a director's ordinary duties. Moreover, the exit payments were a form of "remuneration": referring to Currencies Direct Ltd v Ellis [2002] EWCA Civ 779 and Guinness v Saunders [1990] 2 AC 663, the Court of Appeal noted that remuneration includes any form of consideration in return for services and can in particular include a one-off lump sum payment at the end of a director's term and indeed payments generally for services which have already been rendered.

If, on the other hand, Mr Pirrwitz was an executive director, the board still had the requisite power under a separate provision in the companies' articles of association.

This provision enabled the board to arrange for a director to be employed by the company, or to provide services outside the scope of ordinary duties, and this "on such terms, including without limitation terms as to remuneration, as the board determines".

It was therefore unnecessary to decide whether Mr Pirrwitz was in fact an executive or non-executive director. The board had power to agree the exit payments either way.

Nor was it necessary to decide whether a power to remunerate directors was implicit within the general power to manage the business of the company which was set out in standard terms as Article 123 of their articles of association. The general principle is that directors, being fiduciaries, are not entitled to remuneration out of the company's funds, unless authorised by the articles: Guinness plc v Saunders. Article 123 merely conferred on the board the power to manage the company's business, without express reference to the remuneration of directors. The Court considered that there was "some force" in the submission that what was needed was not just a power to manage the business of the company but a specific release of a director's fiduciary obligations. It was, however, unnecessary to decide the point; it was thus left open whether Article 123 would have alone sufficed. The Court doubted whether the point was significant in practice, given that articles of commercial companies usually, if not always, contain express provisions authorising directors to be remunerated.

Whether the agreement for the exit payments was authorised in fact by the board

The Court noted that the scope for a court of appeal to interfere with a conclusion of fact reached by the trial court is limited: only the latter will have had the advantage of observing the witnesses. Thus a decision of the trial court based on the trustworthiness of witnesses cannot be interfered with unless the appellate court is convinced that it is wrong, nor can the appellate court ignore facts which the trial court has found on its impression of the credibility of witnesses: Pell Frischmann v Bow Valley Iran Ltd [2008] JCA 146, [2008] JLR 311; Powell v. Streatham Manor Nursing Home [1953] A.C. 243 (England and Wales). This was particularly so under the Jersey legal system, where facts in a civil case (and criminal cases if there is no jury) are found by two or more Jurats sitting together with a judge of law and fact: Jones, Jones and Bedell Cristin Trustees Limited v. Plane [2006] JLR 438.

These principles made it impossible to overturn a finding of fact by the Royal Court that there had been a consensus at the relevant board meetings to authorise the chairman not only to determine the amount of the exit payments but also to sign Mr Pirrwitz's service contracts on behalf of the companies.


An important point made in this decision is that directors, being fiduciaries, have no prima facie right to be remunerated out of company funds. A right of remuneration requires either clear authority under the company's articles of association or the approval of the company's members.

The Court of Appeal left open the question whether a general power, in standard terms, authorising the board to manage the company's business included a power to agree to a director's remuneration.

It seems doubtful that it could, especially where the remuneration of directors is dealt with more specifically under other provisions in the articles.

Many Jersey companies have articles which either consist of the Standard Table articles (set out in the Companies (Standard Table) (Jersey) Order 1992) or track the relevant provision regarding remuneration of directors. Article 73 of the Standard Table deals with the ordinary remuneration of non-executive directors. (Article 75 deals separately with the remuneration of executive directors and remuneration for special services).

Article 73 of the Standard Table provides:

"73 Remuneration of directors

The directors shall be entitled to such remuneration as the company may by ordinary resolution determine..."

Clearly, under this provision any remuneration paid out of company funds to a non-executive director for services which are within the ordinary scope of a position on the board should be determined in the envisaged manner, that is to say, by ordinary resolution of the members of the company. Whilst an informal agreement between all the members might have the same result (under the principle in Re Duomatic Ltd [1969] 2 Ch. 365) this would be very much a fall-back position and dependent on establishing such an agreement on the precise facts.

The point is illustrated by the recent Scottish case of Tayplan Ltd (in administration) v Smith [2012] B.C.C. 523. The relevant provision of the company's articles was in the same form as Article 73 of the Jersey Standard Table. The Court of Session held that, since the members had neither passed a resolution approving the remuneration nor informally agreed to it under the Duomatic principle, the directors were not entitled to remuneration, even on the basis of quantum meruit (fair reward for services rendered under an implied contract).

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.