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Interpretation of Articles of Association

July 2013 - Finance. Legal Developments by Ogier .

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Pirrwitz-v-AI, PI and Vilsmeier: Royal Court, Unreported Judgment: 24 January 2013


The case involved a claim by a former director of two Jersey companies (each a Company, and together, the Companies) for sums due under service contracts with those Companies. He claimed that under each service contract the sums of 700,000 and 600,000 Euros respectively were payable upon him ceasing to be a director (the "exit payments").

The Companies contended, inter alia, that (a) the board of directors lacked the authority under the articles of association of each Company (which were in materially identical terms) to agree the exit payments; (b) the exit payments were never properly authorised by the board of directors but were negotiated without authority from the board by the chairman of each Company; and (c) the exit payments were subject to certain preconditions which had not been met.

In dismissing the defences raised by the Companies and holding that the former director be paid the sums which he claimed were due to him under the service contracts, the court helpfully clarified its interpretation of certain provisions in the articles of association of the Companies. It is a useful judgment because the provisions reviewed by the court are similar to provisions which are found in the articles of association of many Jersey companies.