GIBRALTAR Law and Practice Contributed by: Adrian Pilcher, Stuart Dalmedo and Louise Anne Turnock, ISOLAS LLP
ciary relationship with the company and there - fore 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 company 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 rath - er than to the shareholders, creditors or other directors of the company. A director may, how - ever, owe duties to the creditors of the company rather than to the shareholders in an insolvency scenario. 4.8 Consequences and Enforcement of Breach of Directors’ Duties As directors’ duties are owed to the compa - ny, 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 established in the lead - ing case of Foss v Harbottle (1843) 2 Hare 461, where it was held that a wrong done to the com - pany may be vindicated by the company alone. The Companies Act does, however, establish an exception to this rule. See further detail in 5.4 Shareholder Claims . 4.9 Other Bases for Claims/Enforcement Against Directors/Officers In addition to a claim for breach of duty, as pre - viously discussed, directors may be held liable
for breaches of their statutory duties and obliga - tions, such as those imposed under the Com - panies Act, the Insolvency Act and the financial services regulations (if applicable) which may, in certain instances, result in criminal penalties being imposed. Under the previous Companies Act 1930, any provision in the articles of the company, or in any contract with the company, or otherwise, exempting any director, manager, officer or auditor of the company from, or indemnifying them against, any liability which would other - wise 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 com - pany, 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 indemnify 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. 4.10 Approvals and Restrictions Concerning Payments to Directors/ Officers The Companies Act does not require any spe - cific 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 obli - gations to the company. Failing to obtain proper approval for such actions would result in the rel - evant appointments not taking effect.
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