Jersey: The Duties Of Directors Under Jersey Law


The text of this briefing is limited in its application to Jersey companies. This is a complex area of law not easily summarised into short form. It follows that this briefing should in no way be regarded as exhaustive.

In accepting any directorship, a director will automatically assume a host of duties and personal obligations arising from specific legislation, common law and generally accepted standards of corporate governance. Drawing these duties and obligations together is not always an easy task, but notwithstanding this, the consequences of failure on individual directors can be severe. Recent high profile cases against individual directors (for example, the claims commenced by Equitable Life in 2005 against fifteen former directors in the sum of £3.7 billion) evidence that the stakes for individual directors have never been higher. It is therefore of paramount importance that individual directors fully appreciate and identify the risks associated with being a director and consider how these risks can best be mitigated.

Duties under Jersey law

No single piece of legislation exhaustively details or defines the duties of directors of a Jersey company. Articles 74 to 84 inclusive of the Companies (Jersey) Law 1991, as amended (the "Companies Law") collectively state some general provisions about appointment, removal, qualifications, duties and responsibilities of directors. Other more specific requirements are imposed on directors elsewhere in the Companies Law and in other legislation, notably the Bankruptcy (Désastre) (Jersey) Law 1990, as amended (the "Désastre Law"). Many of the most important features of directors' duties are, however, based on case law. To this extent, the Royal Court of Jersey will look to developed Jersey case law on the general question of directors' duties and, in the absence of such, will probably look for guidance to English common law.

Outside of the specific statutory duties, the main directors' duties are helpfully set out in Article 74 of the Companies Law, which provides that directors shall, in exercising their powers and discharging their duties:

"(a) act honestly and in good faith with a view to the best interests of the company; and

(b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances."

The general duties: honesty, diligence and others

The general statutory duties set out in Article 74 of the Companies Law reflect (though do not replace) the fiduciary and common law duties that had evolved prior to the Companies Law. The most important of these can be summarised as follows:

Honesty: Directors must not use their powers for an improper purpose, take personal advantage of the company's opportunities, misapply the company's assets, nor allow their personal interests to conflict with those of the company or, if they do, they must disclose the nature and extent of any actual or potential conflict of interest. A director holds a fiduciary position and the court will apply very stringent tests as to what constitutes impropriety, personal advantage or misapplication.

Proper purpose: Directors must use their powers under the company's articles of association for the purposes for which they were intended. An example of an improper purpose is directors using powers to issue shares, not to raise capital needed by the company, but to forestall a takeover bid (Bamford -v- Bamford [1970] Ch 212). In general, as soon as it is demonstrated that a company's asset has been applied by the directors for an improper purpose, the directors become perso

Secret profits: If a director makes a personal profit through the use of the company's property without such use or profit being disclosed to the company, that profit is due to the company and the director is under a duty to account for it to the company. In the case of uncertainty, full disclosure to the board, followed by a resolution of shareholders ratifying the directors' actions, may help the situation. However, this may not assist in the event of insolvency or if a minority shareholder objects. Directors should consider taking legal advice before acting upon any opportunity that arises as a result of their position as directors.

Conflicts and declaration of interest: Directors are agents of the company and must use their discretion, but whatever decisions they take must be in the interests of the company and not for any collateral purpose, nor for a personal motive. Article 75 of the Companies Law requires disclosure by directors of the nature and extent of any interest they may have in a transaction which to a material extent conflicts or may conflict with the interests of the company. Pursuant to Article 76 of the Companies Law, where a director fails to disclose an interest or a conflict, the company itself or a shareholder may apply to the court to set aside the transaction. Individual directors may also have to account for any profits made, though not if the transaction is approved by special resolution of the shareholders.

Diligence: Subject to the constitutional documents of the company, the directors will be responsible for the conduct of the business of the company. Breach of a director's duty of care owed to the company may cause the director to be liable in damages to the company for any loss suffered as a result of such breach. As a general duty of care, it is essential that directors be kept fully informed as to the financial position of the company (for example, by the finance director or the company's accountants). Directors should endeavour to attend all board meetings and to participate

Specific duties arising from the Companies Law

It is the responsibility of all the directors of a company to ensure that a company meets its specific statutory obligations. In practice, the company secretary will often be appointed to ensure compliance with most of these obligations albeit the directors must ensure that the performance of the company secretary is duly monitored. These specific duties can be summarised as follows:

Disclosure of information: Companies are required to disclose information in a number of ways, such as filing annual returns, making available registers and documents, circulating reports and accounts to the shareholders etc.

Letterheads and stationery: Companies must include the company's name on all business letters, statements of account, invoices and other forms as well as details of the company's registered office address on all business letters and order forms.

Returns and filing with the Registrar: For a company to be incorporated in Jersey, the memorandum and articles of association, statement of particulars (giving the company's registered office) and completed control of borrowing ("COBO") application form (pursuant to which consent to issue the company's authorised share capital is granted) must be filed with the registrar of companies (the "Registrar").

In addition, all annual returns, special resolutions of shareholders, agreements between shareholders having the same effect as resolutions, all unanimous resolutions/agreements and notice of any change of the company's registered office must be filed with the Registrar.

Duties in relation to the company's accounts: A Jersey company is required to keep accounting records. Directors should ensure that this obligation is complied with. As part of a general duty of care, directors should always have a reasonably accurate idea of the financial position of the company, particularly in circumstances where the company is in financial difficulties.

Directors should also ensure that the accounts are prepared in accordance with Article 104 of the Companies Law (i.e. they must be prepared in accordance with a set of generally accepted accounting principles, show a true and fair view of the profit and loss of the company for the period, and state the company's affairs at the end of the period).

The company's annual accounts must be approved by the directors and signed on their behalf by one of them.

The directors must present the annual accounts for each financial year (together with the auditor's report where auditors are required) before the company in general meeting, within the period prescribed the Companies Law. If a private company has dispensed with the requirement to hold an annual general meeting, then the directors should lay the accounts before the next general meeting (if any) called in the next year.

There is no requirement to deliver the accounts and reports to the Registrar unless the company is a public company.

If the directors fail to comply with the Companies Law requirements, they may be guilty of a criminal offence. In addition, failure to keep and preserve proper accounting records is an offence under the Désastre Law.

Companies listed or applying for a full listing on any stock exchange must also satisfy the basic conditions for listing and comply with the relevant listing rules with which the directors should make themselves familiar.

Duties in relation to auditors: The statutory provisions relating to the appointment, removal, duties, powers and qualifications of auditors are found in Articles 103 to 113 of the Companies Law.

Auditors must be appointed where the company is a public company or its articles of association require, where a general meeting has so resolved and/or where the company is contractually bound to have its accounts audited.

The insolvency offences

The greatest risks faced by a director are likely to arise in the context of an insolvent or potentially insolvent company. As a matter of practice, individual directors face very real prospects of personal liability should they fail to perform their duties in the context of an insolvent or potentially insolvent company.

The two main risks in an insolvency context are wrongful trading and fraudulent trading. Directors could, in these circumstances, become personally liable for the debts of the company and may, in specific circumstances, commit a criminal offence, for which a fine or imprisonment may be applicable. Directors may also be sued personally for misfeasance.

There are also powers vested in the liquidator and the viscount of Jersey (the "Viscount") to challenge transactions entered into by a particular company at an undervalue. These are designed to combat the situation where a company gifts assets or sells assets for significantly less than their market value in the lead up to an insolvency scenario. There are specific time periods set out in the Companies Law and the Désastre Law with regard to transactions at an undervalue.

There are also powers vested in the liquidator and the Viscount to challenge a transaction which amounts to a preference. A preference is any act done by a company which has the effect of putting one of the company's creditors into a better position than that creditor would otherwise have occupied in the event of the company's insolvency. Again, there are specific time periods which apply. By way of example, a preference would arise in granting an unsecured creditor security or repaying one particular unsecured creditor in advance of other unsecured creditors.

The Royal Court is vested with wide powers to unwind transactions at an undervalue and transactions that amount to a preference or to make third parties pay a fair value for a particular benefit they might have received pursuant to a particular transaction.

To minimise the risks of incurring personal liability for wrongful trading, directors should ensure that they:

  • are notified of the current financial situation of the company on a regular basis by somebody upon whose statements they are reasonably entitled to rely;
  • are aware of the key factors which could, if they changed, trigger the insolvent liquidation of the company;
  • are aware at the earliest possible time of any changes which may have occurred or may be about to occur in these key factors; and
  • take appropriate action as soon as they become aware that there is no reasonable prospect of avoiding insolvency: for a trading company, this may mean immediately ceasing to trade although this is not necessarily the case; by way of example, where a company has an opportunity to complete a valuable contract and can do so without going further into debt.

Duty to participate in the company's affairs

Whilst the board of directors has collective responsibilities for taking major decisions and collectively directing a company's affairs, individual directors should be aware that all directors who accept office are under a positive and continuing obligation to participate in the company's affairs to some degree. The extent of the obligation will depend upon a number of factors, which could include:

  • the size and activities of the company;
  • the constitution of the board and the underlying management structure;
  • the role in the management of the company assumed by the director and the duties expected of a person in that role; and
  • the experience and skill of the particular director.

Nevertheless, there is a minimum requirement that directors are sufficiently informed about the company's business to enable them to perform their functions. Accordingly, those becoming a director for the first time should appreciate that claiming ignorance of directors' duties and responsibilities because they are new to the job is unlikely to be an acceptable defence in the event of difficulties. Accordingly, as a general rule, directors must be clear that they have sufficient understanding of a particular area of responsibility such that they are able adequately to discharge their duties. They must make sure that they have sufficient information to be able to make informed decisions. Fundamentally, directors should not be afraid to ask for further clarification or explanation. For example, any issues with the historical accounts might be raised with the finance director or audit committee (if any) in the first instance. If in doubt, directors should take legal advice.

Relevant considerations before accepting office

Before accepting the office of director, it is vital that an individual director carries out a thorough due diligence exercise on the relevant company. This is particularly the case for non-executive directors who may have had no involvement at all in the company prior to the offer of a directorship. The potential liabilities of a non-executive director are just as onerous as those of executive directors, but the non-executive is unlikely to have the same ability to influence, manage or direct the company's activities and performance as his executive colleagues. A prospective director needs to be vigilant before accepting an appointment.


It is essential that all directors have an understanding of their duties as a matter of Jersey law. The specifics of these duties will need to be considered in light of the role given to any particular director (for example, finance director), the terms of any service contract, and the principal activities of the company itself.

Any director currently holding the office of director or anyone considering accepting the office of director should not hesitate to contact one of the names referred to below should they require specific legal advice on their duties as a director pursuant to Jersey law.

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.