Jersey: Implied Indemnity When Acting As A Director Of A Client Company

Last Updated: 6 March 2018
Article by Ogier  

Most Read Contributor in Jersey, December 2018

A recent decision of the High Court in England should be carefully considered by corporate service providers in Jersey. In First Names (Jersey) Limited v IFG Group PLC [2017] EWHC 3014 (Comm) Knowles J held that there is an implied term in the contract of employment that an employee required to serve as a director of a client company, and acting in good faith, would be indemnified against costs, losses and liabilities incurred in the course of that directorship.

Although the case was heard in England, it specifically related to contracts of employment governed by Jersey law. Therefore the decision is likely to be highly persuasive if a similar issue arises before the Royal Court in Jersey and we anticipate this decision is likely to be followed to imply this term into contracts of employment here.

In summary, the facts of the case are as follows:

  • Three employees of First Names Jersey were, in the course of their employment, appointed to act as directors of a client structure. Their contracts made express provision for these employees to act as directors. However, there were no express indemnities from First Names Jersey to the employees in respect of their conduct whilst acting on behalf of any client companies.
  • The relevant client company entered into summary liquidation in Jersey. The liquidator issued a claim against the three directors. It was not in dispute that the directors had acted in good faith to First Names Jersey. As a result, First Names Jersey felt that it was obliged to indemnify the employees against the costs and potential damages in relation to the claim by the liquidator.
  • There was a third party that may have had to reimburse First Names Jersey in relation to any expenditure in defending the claim, due to indemnities in an earlier share purchase agreement. This third party, IFG, disputed that there was an implied indemnity in the contracts of employment so as to require First Names Jersey to support their employees. They argued that as there was no express indemnity and that there was no basis for implying an indemnity into the employment contracts, that their obligations to First Names Jersey were not engaged.

Under Jersey law, a term will only be implied into a contract where it is necessary to ensure that the contract is not rendered futile, inefficacious or absurd. Knowles J held "I respectfully regard as absurd the proposition that [an employer], having contracted to provide directors to [a client], instructed its employees to serve as directors for [that client], and arranged to charge [the client] for the work of those employee as directors, did not have an obligation to indemnify those employees in relation to the work undertaken, always assuming good faith towards [the employer]."

First Names also argued that without an implied indemnity, the employment contracts would be commercially unworkable as employees would not be prepared to act as directors for client companies. There were other factors such as the employer holding insurance to cover the client's liabilities arising from breach by the employees, which suggested that the employer accepted that it would be responsible for these breaches.

Therefore, the judge held that there was an implied term in the contracts of employment that the employer would indemnify employees, acting in good faith, as directors of client companies in respect of costs and liabilities arising out of those directorships.

The points for corporate service providers to take away from this decision are:

  1. Employers can provide an express indemnity to employees within the contract of employment. The advantage of an express indemnity is that it can be tailored by the employer to define and limit the extent of indemnity. This is preferable to the general indemnity that will otherwise be implied;
  2. In the absence of an express indemnity, the Royal Court is likely to imply an indemnity for employees acting as directors of client companies.   It should be noted that it is possible to avoid this implied indemnity by including an express term in the contract that clearly states that there is no indemnity for employees acting as directors of client companies. Commercially, this may not be an attractive stance for employers to take as it may limit or restrict talent retention;
  3. This judgment does not affect the restrictions on companies providing indemnities to their own directors or officers. This is expressly prohibited by article 77(1) of the Companies (Jersey) Law 1991. This prohibition does not apply to situations where employees are required to act as directors of client structures or companies, as the indemnity is not being provided to the employees by the client company.
  4. Corporate service providers should consider their contracts of employment and review any insurance policies, including applicable directors and officers insurance, to ensure that they are adequately protected in the event of a claim being made on either an express or implied indemnity.  

Finally, there was a passing comment made by the judge in relation to corporate governance. He noted that although it is common for corporate service to provide directors to its clients, "it can have…implications for the nature of the governance that is brought to a company but here is not the place to debate that." With increased scrutiny on corporate governance in Jersey, this comment is worth bearing in mind as it is a sharp reminder to ensure that directors provide robust, independent advice to client companies, notwithstanding they remain employees of the corporate service provider.

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
Related Topics
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions