GIBRALTAR Law and Practice Contributed by: Adrian Pilcher, Stuart Dalmedo and Louise Anne Turnock, ISOLAS LLP
3.9 Other Claims/Enforcement Against Directors/Officers In addition to a claim for breach of duty, as previously discussed, directors may be held liable for breaches of their statutory duties and obligations, such as those imposed under the Companies Act, the Insolvency Act and the financial services regulations (if applica - ble) which may, in certain instances, result in criminal penalties being imposed. Under the previous Companies Act 1930, any provi - sion in the articles of the company, or in any contract with the company, or otherwise, exempting any direc - tor, manager, officer or auditor of the company from, or indemnifying them against, any liability which would otherwise attach to them in respect of any negligence, default, breach of duty or breach of trust of which they may be guilty in relation to the company, was void. However, the Companies Act now clarifies that only indemnities provided by the company itself are void and further allows a company to purchase insurance for any director against any such liability. The Companies Act also allows companies to indem - nify their directors against any such liability incurred in defending any proceedings, whether civil or criminal, in which judgment is given in their favour or in which they are acquitted. 3.10 Payments to Directors/Officers The Companies Act does not require any specific approvals in relation to a director’s service contract. A director’s service contract must therefore be approved in the same manner as any other commercial matter – ie, approved by the board, having regard to their duties and obligations to the company. Failing to obtain proper approval for such actions would result in the relevant appointments not taking effect. Under the Listed Companies (Members’ Rights) Regu - lations 2011, a listed company (that is, a company which has its registered office in Gibraltar and whose shares are admitted to trading on a regulated market situated or operating within the EU) must establish a remuneration policy as regards its directors, which must be approved at a general meeting and may only remunerate its directors in accordance with the remu - neration policy.
imposes a statutory duty on directors and officers to file certain returns with the Registrar of Companies (as further discussed in 5.1 Financial Reporting and 5.3 Incorporation and Registration ). 3.7 Responsibility/Accountability of Directors As discussed in 3.6 Legal Duties of Directors/Offic - ers , directors’ general duties are largely derived from equitable principles as well as common law rules. The duties of directors have therefore evolved though decisions of the courts, which have held directors to be in a fiduciary relationship with the company and therefore to owe it fiduciary duties. The courts have considered directors to be in a special position of trust in relation to the company, similar to that of trustees. While directors’ duties are owed to the company, that is not to say that directors are not required to take into account the interests of anyone other than the com - pany when discharging their duties. For instance, in order to act in the best interests of the company as a whole, directors should have regard to the interests of key stakeholders, such as employees, suppliers and customers. Directors owe their duties to the company rather than to the shareholders, creditors or other directors of the company. A director may, however, owe duties to the creditors of the company rather than to the sharehold - ers in an insolvency scenario. 3.8 Breach of Directors’ Duties As directors’ duties are owed to the company, this means that the company itself (acting through the board of directors) must take action against a director for breach of these duties, as any wrong is committed against the company itself. This principle was estab - lished in the leading case of Foss v Harbottle (1843) 2 Hare 461, where it was held that a wrong done to the company may be vindicated by the company alone. The Companies Act does, however, establish an exception to this rule; see further detail in 4.4 Share- holder Claims .
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