Jersey Joint Ventures And Nominee Directors: A Deep Dive Into Pender v CGH

• Published date: 29 March 2024
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Directors and Officers, Corporate Governance, Shareholders
• Law Firm: Walkers
• Author: Mr Jonathan Heaney, Tatiana Collins, Richard Holden, Kevin McQuillan, Ruth Donnellan, Angharad Prescott, Dilmun Leach and Christopher Reed

Jersey companies are widely used for setting up joint ventures, particularly in a private equity context - further information on why Jersey entities are popular for private equity structures can be found here . It is a common feature of the constitutional documents of a joint venture company in Jersey (and elsewhere) for shareholders to have the right to appoint a director, known as a nominee director. A nominee director bears the responsibility of balancing the interests of the appointing shareholder with the broader obligations owed to the company itself and this note will explore some of the key considerations that a nominee director should consider when acting in such a role.

Jersey's approach to corporate governance is based on the Companies (Jersey) Law 1991, a piece of legislation that mirrors the English Companies Act 1985. In practice this means that when there isn't a specific authority on a point of law in Jersey, the Royal Court in Jersey may have regard to any relevant English authorities.

This was the case in Pender v CGH (Jersey) Limited and Ors [2023]. Here, the Royal Court considered the concept of nominee directors and their directors duties in the context of an unfair prejudice claim brought under Article 141(1) of the Companies Law. The findings of the Royal Court on this point in Pender offer helpful clarification to nominee directors in the discharge of their role and specifically as to whom they owe their duties.

Directors' Duties

In Jersey, directors' duties arise under both the Companies Law and customary law. Under Article 74 of the Companies Law, directors are expected to act with honesty, good faith and in the company's best interests. They're also required to demonstrate the care, diligence, and skill expected of a reasonably prudent individual in comparable situations.

Article 75 of the Companies Law provides that a director must disclose to the company any direct or indirect interest that may conflict with the company's interests. This provision of the Companies Law may also be supplemented by extra terms in the company's articles of association.

As mentioned above, a director will also owe general duties to the company by virtue of Jersey customary law. We've set out below some of these duties and how such duties could give rise to some practical difficulty in joint venture arrangements:

• Duty to act in good faith: A director will have a duty to act bona fide in the best interests of the company (as reflected in the...