Directors' Duties, Liabilities And Indemnities In Guernsey

The advent of the solvency based approach to company activity in Guernsey brings into critical focus the scope and nature of the duties incumbent upon the directors of a Guernsey company. Gone are the prior capital maintenance provisions required under now superseded legislation and the need for Court approval of significant corporate actions. In its place directors have become responsible for ensuring that a company will not become insolvent as a result of such transactions, for example, in the case of a reduction of share capital. It is tempting to over-simplify the worlds in which directors operate into two of stark relief: the solvent and the insolvent. As will be seen from the analysis below, directors of Guernsey companies will be best advised to consider applying the solvency test routinely in order to understand fully both the scope of their duties at any given moment in time and the various interested parties who will benefit from the fulfilment of those duties.